The Issue Whether proposed rule amendments to Rule 59C- 1.033(7)(c) and (7)(d), Florida Administrative Code, published in the Notice of Change on June 15, 2001, constitute an invalid exercise of delegated legislative authority. Whether the proposed rule is invalid due to the absence of a provision specifying when the amendments will apply to the review of certificate of need applications to establish open heart surgery programs.
Findings Of Fact The Agency is responsible for administering the Health Facility and Services Development Act, Sections 408.031-408.045, Florida Statutes. The goals of the Act are containment of health care costs, improvement of access to health care, and improvement in the quality of health care delivered in Florida. AHCA initiated the rulemaking process by proposing amendments to existing Rule 59C-1.033, Florida Administrative Code, the rule for determining the need for adult open heart surgery (OHS)1 services, which currently provides, in part, that: Adult Open Heart Surgery Program Need Determination. a new adult open heart surgery program shall not normally be approved in the district if any of the following conditions exist: There is an approved adult open heart surgery program in the district. One or more of the operational adult open heart surgery programs in the district that were operational for at least 12 months as of 3 months prior to the beginning date of the quarter of the publication of the fixed need pool performed less than 350 adult open heart surgery operations during the 12 months ending 3 months prior to the beginning date of the quarter of the publication of the fixed need pool; or One or more of the adult open heart surgery programs in the district that were operational for less than 12 months during the 12 months ending 3 months prior to the beginning date of the quarter of the publication of the fixed need pool performed less than an average of 29 adult open heart surgery operations per month. Provided that the provisions of paragraphs (7)(a) and (7)(c) do not apply, the agency shall determine the net need for one additional adult open heart surgery program in the district based on the following formula: NN =((Uc x Px)/350)) -- OP>=0.5 Where: NN = The need for one additional adult open heart surgery program in the district projected for the applicable planning horizon. The additional adult open heart surgery program may be approved when NN is 0.5 or greater. Uc = Actual use rate, which is the number of adult open heart surgery operations performed in the district during the 12 months ending 3 months prior to the beginning date of the quarter of the publication of the fixed need pool, divided by the population age 15 years and over. For applications submitted between January 1 and June 30, the population estimate used in calculating Uc shall be for January of the preceding year; for applications submitted between July 1 and December 31, the population estimate used in calculating Uc shall be for July of the preceding year. The population estimates shall be the most recent population estimates of the Executive Office of the Governor that are available to the department 3 weeks prior to publication of the fixed need pool. Px = Projected population age 15 and over in the district for the applicable planning horizon. The population projections shall be the most recent population projections of the Executive Office of the Governor that are available to the department 3 weeks prior to publication of the fixed need pool. OP = the number of operational adult open heart surgery programs in the district. Regardless of whether need for a new adult open heart surgery program is shown in paragraph (b) above, a new adult open heart surgery program will not normally be approved for a district if the approval would reduce the 12 month total at an existing adult open heart surgery program in the district below 350 open heart surgery operations. In determining whether this condition applies, the agency will calculate (Uc x Px)/(OP+1). If the result is less than 350 no additional open heart surgery program shall normally be approved. Based on the issues raised by the Petitioner, Bethesda, and the factual evidence presented on these issues, AHCA must demonstrate that its proposed amendments to the existing OHS rule are valid exercises of delegated legislative authority or, more specifically, that it (a) followed the statutory requirements for rule-making, particularly for changing a proposed rule; (b) considered the statutory issues necessary for the development of uniform need methodologies; (c) acted reasonably to eliminate potential problems in earlier drafts of the proposed rule; (d) used appropriate proxy data to project the demand for the service proposed; (e) appropriately included county considerations for a tertiary service with a two-hour travel time standard; and (f) was not required to include a provision advising when CON applications would be subject to the new provisions. Rule challenges and rule development process The existing rule was challenged by IRMH on June 27, 2000, in DOAH Case No. 00-2692RX. Martin Memorial intervened in that case, also to challenge the rule. Like IRMH, Martin Memorial was an applicant for a certificate of need (CON), the state license required to establish certain health care services, including OHS programs, in Florida. Both are located in AHCA health planning District 9, as is the Petitioner in this case, Bethesda. AHCA entered into a settlement agreement with IRMH and Martin Memorial on September 11, 2000, which was presented when the final hearing commenced on September 12, 2000. Prior to the rule challenge settlement agreement, staff at AHCA had been discussing, over a period of time, possible amendments to the OHS rule to expand access and enhance competition. Issues raised by AHCA staff included the continued appropriateness of OHS as a designated tertiary service and the anti-competitive effect of the 350 minimum volume of OHS cases required of existing providers prior to approval of a new provider in the same district. The staff was considering whether the rule was too restrictive and outdated given the advancements in technology and the quality of OHS programs. The relationship of volume to outcomes was considered as various studies and CON applications were received and reviewed, as was the increasing use of angioplasty also known as percutaneous coronary angioplasty, referred to as PTCA or simply, angioplasty, as the preferred treatment for patients having heart attacks. Angioplasty can only be performed in hospitals with backup open heart services. During an angioplasty procedure, a catheter or tube is inserted to open a clogged artery using a balloon-like device, sometimes with a stent left in the artery to keep it open. Discussions of these issues took place at AHCA over a period of years, during the administrations of the two previous Agency heads, Douglas Cook and Reuben King-Shaw. In August 2000, AHCA published notice of a rule development workshop to consider possible changes to the OHS rule. Because it could not get the parties to settle DOAH Case No. 00-2692RX at the time, rather than proceed with the workshop while defending the existing rule, AHCA cancelled the workshop. As a result of the September 11, 2000, settlement agreement, on October 6, 2000, AHCA published a proposed rule amendment and notice of a workshop, scheduled for October 24, 2000. That version of a proposed rule would have changed Subsection (7)(a) of the OHS Rule to allow approval of "additional programs" rather than being limited to approval of one new program at a time in a district. The October proposal would have also eliminated OHS from the list of tertiary health services in Rule 59C-1.002(41). Tertiary health services are defined, in general, in Subsection 408.032(17), Florida Statutes, as follows: "Tertiary health service" means a health service which, due to its high level of intensity, complexity, specialized or limited applicability, and cost, should be limited to, and concentrated in, a limited number of hospitals to ensure the quality, availability, and cost-effectiveness of such service. Examples of such services include, but are not limited to, organ transplantation, specialty burn units, neonatal intensive care units, comprehensive rehabilitation, and medical or surgical services which are experimental or developmental in nature to the extent that the provision of such services is not yet contemplated within the commonly accepted course of diagnosis or treatment for the condition addressed by a given service. The agency shall establish by rule a list of all tertiary health services. With this statutory authority, AHCA adopted Rule 59C- 1.002(41), Florida Administrative Code, to provide a more specific and complete list of tertiary services: The types of tertiary services to be regulated under the Certificate of Need Program in addition to those listed in Florida Statutes include: Heart transplantation; Kidney transplantation; Liver transplantation; Bone marrow transplantation; Lung transplantation; Pancreas and islet cells transplantation; Heart/lung transplantation; Adult open heart surgery; Neonatal and pediatric cardiac and vascular surgery; and Pediatric oncology and hematology. As an additional assurance that tertiary services are subject to CON regulation, the tertiary category is specifically listed in the projects subject to review in Subsection 408.036, Florida Statutes. The October 2000 version included a proposal to increase the divisor from 350 to 500 in the formula in Subsection (7)(b), to represent the average size of existing OHS programs, but to decrease from 350 to 250, the minimum number required of an existing provider prior to approval of a new program in Subsection (7)(a)2. The definition of OHS would have been amended to add an additional diagnostic group, DRG 109, to delete DRG 110 and to eliminate the requirement for the use of the heart-lung by-pass machine during the surgery. Most controversial in the October version was a separate county- specific need methodology for counties which have hospitals but not OHS programs, in which residents are projected to have 1,200 annual discharges with a principal diagnosis of ischemic heart disease. On October 24, 2000, AHCA held a workshop on the proposed amendments. At the workshop, AHCA Consultant, John Davis, outlined the proposed changes. As a practical matter, eight Florida counties are not eligible to provide OHS because they have no hospitals. When Mr. Davis applied the county-specific need methodology, as if it were in effect for the planning horizon of January 2003, six Florida counties demonstrated a need for OHS: Hernando, Martin, Highlands, Okaloosa, Indian River, and St. Johns. Two of these, Martin and Indian River are in AHCA District 9. AHCA has already approved an OHS program for Martin County, at Martin Memorial. Mr. Davis also presented a simplified methodology for reaching the same result. In support of the proposed rule, AHCA received data, although not adjusted by the severity of cases, showing better outcomes in hospitals performing from 250 to 350 OHS, as compared to larger providers. Although the majority of heart attack patients are treated with medications, called thrombolytics, for some it is inappropriate and less effective than prompt, meaning within the so-called "golden hour," interventional therapies. In these instances, angioplasty is considered the most effective treatment in reducing the loss of heart muscle and lowering mortality. Opposing the proposed rule at the October workshop, Christopher Nuland, on behalf of the FSTCS, testified that OHS is still a highly complex procedure, that it requires scarce resources, equipment and personnel, and should, therefore, be available in only a limited number of facilities. In general, however, the opponents complained more about process rather than the substance of the proposal. Having petitioned on October 13, 2000, for a draw-out proceeding instead of the workshop, those Petitioners noted that AHCA had obligated itself to predetermined rule amendments based on the settlement agreement, regardless of information developed in the workshop. The draw- out Petitioners were the Florida Hospital Association, Association of Community Hospitals and Health Systems of Florida, Inc., Delray, Lakeland Regional Medical Center, Punta Gorda HMA, Charlotte Regional Medical Center, JFK, HCA Health Services of Florida, Inc., d/b/a Regional Medical Center Bayonet Point; Tampa General and the FSTCS. While agreeing that OHS is complex and costly, supporters of the proposed rule, particularly the declassification of OHS as a tertiary service, noted that many cardiologists are now trained to do invasive procedures. In support of fewer restrictions on the expansion of OHS programs in Florida, other witnesses at the October workshop discussed delays and difficulties in arranging transfers to OHS providers, possible complications from deregulated diagnostic cardiac catheterizations at non-OHS provider hospitals, and hardships of travel on patients and their families, especially older ones. On December 22, 2000, AHCA published another proposal, which retained most of the October provisions, continuing the elimination of OHS from the list of tertiary services, the addition of DRG 109, the deletion of DRG 110, the elimination of the requirement for the use of a heart-lung by-pass machine, and the authorization for approval of more than one additional OHS program at a time in the same district. The minimum number of OHS performed by existing providers prior to approval of a new one continued from the October 2000 version, to be decreased from 350 to 250, and the divisor in the numerical need formula continued to be increased from 350 to 500. As in the October version, the requirement that existing providers be able to maintain an annual volume of 350 OHS cases after approval of a new program was stricken. The separate need methodology for counties without an OHS program was simplified, as proposed by Mr. Davis, and was as follows: Regardless of whether need for additional a new adult open heart surgery programs is shown in paragraph (b) above, need for one a new adult open heart surgery program is demonstrated for a county that meets the following criteria: None of the hospitals in the county has an existing or approved open heart surgery program; Residents of the county are projected to generate at least 1200 annual hospital discharges with a principal diagnosis of ischemic heart disease, as defined by ICD-9- CM codes 410.0 through 414.9. The projected number of county residents who will be discharged with a principal diagnosis of ischemic heart disease will be determined as follows: PIHD = (CIHD/CoCPOP X CoPPOP) Where: PIHD = the projected 12-month total of discharges with a principal diagnosis of ischemic heart disease for residents of the county age 15 and over; CIHD = the most recent 12-month total of discharges with a principal diagnosis of ischemic heart disease for residents of the county age 15 and over, as available in the agency's hospital discharge data base; CoCPOP = the current estimated population age 15 and over for the county, included as a component of CPOP in subparagraph 7(b)2; CoPPOP = the planning horizon estimated population age 15 and over for the county, included as a component of PPOP in subparagraph 7(b)2; If the result is 1200 or more, need for one adult open heart surgery program is demonstrated for the county will not normally be approved for a district if the approval would reduce the 12 month total at an existing adult open heart surgery program in the district below 350 open heart surgery operations. In determining whether this condition applies, the agency will calculate (Uc X Px)/(OP + 1). If the result is less than 350 no additional open heart surgery program shall normally be approved. County-specific need identified under paragraph (c) is a need occurring because of the special circumstances in that county, and exists independent of, and in addition to, any district need identified under the provisions of paragraph (b). A program approved pursuant to need identified in paragraph (c) will be included in the subsequent identification of approved and operational programs in the district, as specified in paragraph (a). On January 17, 2001, a public hearing was held to consider the December amendments. Opponents complained that the proposals resulted from a private settlement agreement rather than a public rule development workshop as required by law. They noted that declassification of OHS as a tertiary service is contrary to the recommendations of AHCA's CON advisory study group and the report of the Florida Commission on Excellence in Health Care, co-chaired by AHCA Secretary Reuben King-Shaw, created by the Florida Legislature as a part of the Patient Protection Act of 2000. The risk of inadvertently allowing some OHS procedures to become outpatient services was also raised, because of the statute that specifically states that tertiary services are CON-regulated. The reduction from 350 to 250 in the annual volume required at existing programs prior to approval of new ones was criticized for potentially increasing costs due to shortages in qualified staff, including surgical nurses, perfusionists, recovery and intensive care unit nurses, who are needed to staff the programs. The potential for approval of more than one program at a time, under normal circumstances, was viewed as an effort to respond to the needs of two geographically large districts out of the total of eleven health planning districts in Florida. That, in itself, one witness argued demonstrated that more than one approval at a time should be, as it currently is, a not- normal circumstance. The combination of the district-wide and county- specific need methodologies was criticized as double counting. The district formula which relied on the projected number of OHS, overlapped with the county formula, which used projected ischemic heart disease discharges, to the extent that the same patient hospitalization could result in first, the diagnosis, and then the OHS procedure. Approximately, eighteen percent of diagnosed ischemic heart disease patients in Florida go on to have OHS. The county-specific methodology was also characterized as inappropriate health planning based on geo- political boundaries rather than any realistic access barriers. Although 500, the average size of existing programs was the proposed divisor in the formula, and 250 was the threshold number existing providers, the proposal included the deletion of any provision assuring that existing programs maintain some minimum annual volume, which is 350 in subsection 7(e) of the current rule. AHCA representatives testified that the proposal to delete a minimum adverse impact was inadvertent. The combined effect of a district-wide need methodology, an independent but overlapping county need methodology, and the absence of an adverse impact provision, created concern whether approvals based on county need determinations could reduce volumes at providers in adjacent counties to unsafe levels. Some health planners predicted that, as a consequence of adopting the December draft, like the October version, a number of new OHS programs could be coming into service at one time, seriously draining already scarce resources. One witness, citing an article in the Journal of the American Medical Association, testified that higher volume OHS providers, those over 500 cases, do have better outcomes, and that the relationship persists for angioplasties, including those performed on patients having heart attacks. Florida has 63 or 64 OHS programs. Of those, 25 to 30 percent have annual OHS volumes below 350 surgeries a year. The demand for OHS is increasing slowly and leveling off. AHCA was warned, at the January public hearing by, among others, Eric Peterson, Professor of Cardiology, Duke University Medical Center (by videotaped presentation); and Brian Hummel, M.D., a Cardiothoracic Surgeon in Fort Myers, President of the Florida Society of Thoracic and Cardiovascular Surgeons, that simultaneously easing too many provisions of the OHS rule was a risk to the quality of the programs and the safety of patients. Among other specific comments made at the January public hearing related to the December proposal were the following: This change would authorize a county- specific methodology to support approving a program on the theory that that county needs better access to open heart surgery program. Yet there is no inquiry under the proposed provision into how accessible adjacent programs are or, indeed, how low the volumes of adjacent programs are. Most blatantly, the county provision requires double counting and double need projections. (AHCA Ex. 7, p. 14, by Elizabeth McArthur). The proposed rule creates an exemption for counties that are currently without open heart surgery programs. One can only surmise that the purpose of this exemption is to improve access, and certainly improving access is an appropriate goal and it is possible that there are few situations around the state where access to open heart surgery is a concern, but the proposed rule is completely inadequate and a thoroughly inappropriate way to identify which situations those are . . . (AHCA Ex. 7, p. 26, by Carol Gormley). With the county exemption provision, the Agency has stumbled on an entirely new method for estimating need. In fact, the only good thing about this provision is that it demonstrates that the Agency actually can look at some alternative ways to estimate need, and the use of data about incidence of ischemic heart disease might be one of those. Certainly it should be explored if there is ever a valid planning process that addresses open heart surgery. However, the proposed rules cobble together the county- based epidemiology with the district-wide demand based formula, and I believe that this method is not applicable for evaluating access to care. It is not applicable because the provision only considers the population's rate of ischemic heart disease and does not even attempt to assess the extent to which county residents with ischemic disease are, in fact, already receiving open heart surgery. Therefore, a determination that county residents generate at least 1,200 ischemic heart disease discharges annually does nothing to indicate whether or not they experience any barriers to obtaining that needed service. * * * Another problem with county exemption permission [sic: provision] is that the addition of this assessment, quote "regardless of the results of the district need formula," end quote, constitute double counting of a need in districts where counties without programs are located. (AHCA Ex. 7, p. 27-30, by Carol Gormley). * * * As further evidence of the benefits of limiting open heart surgery to a few high volume programs, the Society would like to place into record the following articles. The first one you've heard on several occasions is the Dudley article, "Selective referral to high volume hospitals." The second, from Farley and Osminkowski, is, "Volume-outcome relationships and in- hospital mortality: Effective changes in volume over time," from Medicare in January of 1992. There's another article from Grumbach, et al., "Regionalization of cardiac surgery in the United States and Canada," again from JAMA. Another article from Hannon, et al., "Coronary artery bypass surgery: The relationship between in-hospital mortality rate and surgical volume after controlling for clinical risk factors," Medical Care. Hughes, et al., "The effects of surgeon volume and hospital volume on quality care in hospitals," again from Medical Care; finally, Riley and Nubriz, "Outcomes of surgeries among Medicare aged: Surgical volume and mortality." Each of these scholarly articles comes to the same inevitable conclusion: outcomes improve as the volume of cardiac surgeries in any given program and hospital increases, therefore increasing the number of hospitals in which these services are provided inevitably will lead to an increase in morbidity. (AHCA Ex. 7, p. 83-84, by Christopher Nuland). * * * On or before the January public hearing, AHCA also received the following written comments: Martin Memorial supports the exception provision for Counties that do not have an open heart surgery program and have a substantial number of residents experiencing cardiovascular disease. This provision ensures an even dispersion of programs, and that adequately sized communities are not denied open heart surgery. (Martin Memorial Ex. 6, Letter of 10/24/2000, from Richard M. Harman, Chief Executive Officer, Martin Memorial, to Elizabeth Dudek) * * * Adding new open heart surgery programs to counties that currently lack programs will increase geographic access to coronary angioplasty services as well as open heart surgery. Primary angioplasty is now the treatment of choice for a significant percentage of patients presenting in the emergency department with acute myocardial infarction (patients who would otherwise be treated with thrombolytic drugs to dissolve blood clots in occluded coronary arteries). Thus, the provision of the proposed regulations that addresses the need for open heart surgery at a county level will also increase access to life-saving invasive cardiology services. The effect of the proposed rule changes is to slightly broaden the circumstances in which the Agency would see presumed need for new programs. Initially, the increase in the number of programs presumed to be needed would be only five. These potential new approvals would be in counties which currently have no programs. This is consistent with the reasoning that supports removing open heart surgery from the list of tertiary procedures. All else equal, distributing new programs to counties where they already exist is reasonable in light of the goal of improving geographic accessibility of advanced cardiology services. As with the other draft proposed rule changes, there is no certainty that any programs will be approved on the basis of the county-specific need formula in (7)(c). These proposed programs would still have to meet the statutory and rule criteria. As discussed above, a number applications for programs have been ultimately denied even when presumed need was shown by the need formula. We recommend adoption of this additional formula for demonstrating need. (IRMH Ex. 1, p. 25, Comments of Ronald Luke, J.D., Ph.D., 10/24/2000) In what could be interpreted as an admission that the process resulting in the development of the earlier drafts was flawed, Jeff Gregg, Chief of the AHCA CON Bureau, concluded the January public hearing by saying, . . . in terms of the analysis that the Agency did about the proposed rule, I would simply have to tell you that CON staff was not involved in that analysis, and that's CON staff including myself. So I cannot elaborate on what went into it. But having said that, I do want to assure you that CON staff will be involved in further analysis and we will do our best to consider all the points that have been made and present them as clearly and concisely as we can in assisting the Agency to formulate its response to this hearing. (AHCA Ex. 7, p. 86). The December draft was also challenged by a number of Petitioners in DOAH Case No. 01-0372RP, filed on January 26, 2001, and ten other consolidated cases. In response to the criticism that the adverse impact provision should not have been deleted and because that omission was unintended, AHCA published another proposed amendment to the OHS rule, on May 4, 2001, reinstating a minimum adverse impact volume, this time set at 250 OHS operations, down from 350 in the existing rule. On May 31, 2001, AHCA and the other parties to DOAH Case No. 01-0372RP and the consolidated cases entered into another settlement agreement, which provided: that in an effort to avoid further administrative proceedings, without conceding the correctness of any position taken by any party, and in response to materials received in to the record on or before the public hearing, the Agency for Health Care Administration agrees to publish and support . . . The Notice of Change . . . (Bethesda Ex. 34, p. 2-3). In upholding that agreement, AHCA superseded or revised all prior drafts and published a notice of change on June 15, 2001. In this final version, AHCA limited normal approval of a new OHS program to one at a time, used 500 as the numeric need formula divisor, increased the required prior-to-approval OHS minimum volume at mature existing providers from 250 in the October version to 300 (down from 350 in the existing rule) and for non- mature programs from a monthly average of 21 in the October draft to 25 (down from 29 in the existing rule), retained the classification of OHS as a tertiary service, and altered the separate, independent county need methodology to make it a county preference. The June 15th version, containing Subsections 7(c) and 7(d), which are challenged in this case is as follows: Adult Open Heart Surgery Program Need Determination. An additional open heart surgery programs shall not normally be approved in the district if any of the following conditions exist: There is an approved adult open heart surgery program in the district; One or more of the operational adult open heart surgery programs in the district that were operational for at least 12 months as of 3 months prior to the beginning date of the quarter of the publication of the fixed need pool performed less than 300 adult open heart surgery operations during the 12 months ending 3 months prior to the beginning date of the quarter of the publication of the fixed need pool; One or more of the adult open heart surgery programs in the district that were operational for less than 12 months during the 12 months ending 3 months prior to the beginning date of the quarter of the publication of the fixed need pool performed less than an average of 25 adult open heart surgery operations per month. * * * Provided that the provisions of paragraphs (7)(a) do not apply, the agency shall determine the net need for an additional adult open heart surgery programs in the district based on the following formula: NN=[(POH/500)-OP]> 0.5 where: NN = the need for an additional adult open heart surgery programs in the district projected for the applicable planning horizon. The additional adult open heart surgery program may be approved when NN is 0.5 or greater. POH = the projected number of adult open heart surgery operations that will be performed in the district in the 12-month period beginning with the planning horizon. To determine POH, the agency will calculate COH/CPOP x PPOP, where: COH = the current number of adult open heart surgery operations, defined as the number of adult open heart surgery operations performed in the district during the 12 months ending 3 months prior to the beginning date of the quarter of the publication of the fixed need pool. CPOP = the current district population age 15 years and over. PPOP = the projected district population age 15 years and over. For applications submitted between January 1 and June 30, the population estimate used for CPOP shall be for January of the preceding year; for applications submitted between July 1 and December 31, the population estimate used for CPOP shall be for July of the preceding year. The population estimates used for COP and PPOP shall be the most recent population estimates of the Executive Office of the Governor that are available to the agency 3 weeks prior to publication of the fixed need pool. OP = the number of operational adult open heart surgery programs in the district. In the event there is a demonstrated numeric need for an additional adult open heart surgery program pursuant to paragraph (7)(b), preference shall be given to any applicant from a county that meets the following criteria: None of the hospitals in the county has an existing or approved open heart surgery program; and Residents of the county are projected to generate at least 1200 annual hospital discharges with a principal diagnosis of ischemic heart disease, as defined by ICD-9- CM codes 410.0 In the event no numeric need for an additional adult open heart surgery program is shown in paragraphs (7)(a) or (7)(b) above, the need for enhanced access to health care for the residents of a service district is demonstrated for an applicant in a county that meets the criteria of paragraph (7)(c)1. and 2. above. An additional adult open heart surgery program will not normally be approved for the district if the approval would reduce the 12 month total at an existing adult open heart surgery program in the district below 300 open heart surgery operations. Bethesda objects to Subsections 7(c) and 7(d) as invalid. It challenges the rule promulgation process as a sham, having resulted from settlement negotiations rather than from statutorily mandated considerations and processes. That charge was, in effect, conceded by AHCA, as related to the October draft. That version carried over into the December draft, essentially unchanged, but did gain support at the October workshop. The October and December versions are not at issue in this proceeding. The proposed rule amendments at issue in this proceeding must have been supported by information provided to AHCA before or during the January public hearing. The proposal at issue differs substantially from the terms of the September settlement agreement, but is precisely what was attached to the May 31, 2001, settlement agreement. For example, the settlement agreement of September 11, 2000, included a proposal to reduce the prior minimum volume of cases at existing OHS providers from 350 to 250, but in May and June, that number was set at 300. AHCA, in the September settlement agreement, was to eliminate any limitation on the number of additional programs approved at a time, but the May and June version retains the one-at-a-time provision of the existing rule. AHCA agreed to determine county numeric need independent of and in addition to district numeric need, in September, but that provision is, in the May 31st and June 15th version, a preference. In September 2000, AHCA agreed to delete adult OHS from the list of tertiary services in Rule 59C-1.002(41), but it is a tertiary service in the May and June version. Bethesda is correct that the records of the October workshop and January public hearing contained criticisms of the county need methodology but no specific proposal to modify it into a preference. The first draft of that concept is the May 31, 2001, settlement agreement. (See Findings of Fact 26 and 27). Statutory rule-making issues Subsection 408.034(3), Florida Statutes, provides that: The Agency shall establish, by rule uniform, need methodologies for health care services and health facilities. In developing uniform need methodologies, the agency shall, at a minimum, consider the demographic characteristics of the population, the health status of the population, service use patterns, standards and trends, geographic accessibility, and market economics. As required by statute, AHCA considered the demographics and health status of the population and examined, as a part of the rule adopting process, age-specific calculations of ischemic heart disease. AHCA relied on statistical evidence of the relationship of ischemic heart disease and OHS. In 1999, for example, there were 33,027 OHS in Florida, and 25,257 of those patients had a primary diagnosis of ischemic heart disease. Consideration of service use patterns, and standards and trends related to OHS led AHCA to increase the divisor in the numeric need formula to maintain the average size of 500 surgeries for existing providers. The availability of more reliable data than that collected when the existing rule was promulgated allowed AHCA to propose reliance on residential use rates. The trend towards the use of angioplasty, as a preferred treatment for heart attack patients, and the need for timely geographical access to care are major factors for AHCA's proposal to consider a county services within the normal need analysis or as a not normal indication of a need for enhanced access when a county has a critical mass of heart disease patients. Geographical accessibility is also addressed in the travel time standard in the existing rule, which the proposal would not change. AHCA received testimony on the issue of market economics and health status, related to care for indigent and minority patients in not-for-profit, county-funded hospitals, and related to reimbursement formulas. The record demonstrates that AHCA was provided with evidence on the effect of scare resources on the costs of operating OHS programs. County-specific need methodology in earlier drafts as compared to the county preference in 7(c) and the need for enhanced access in 7(d) Bethesda alleges that the county preference in the June version is essentially another need methodology, like the county-specific need methodology in the earlier versions of the proposed rule. Bethesda also contends that a preference for a hospital because it is in a county which does not have an open heart program over a reasonably accessible facility in an adjoining county in the same district is irrational health planning which could lead to a maldistribution of programs. The county-specific need methodology was first included in the September settlement agreement, and the preference in 7(c) and need for access in 7(d), originated after the January 17, 2001, public hearing. During the public hearing, counsel for the Florida Hospital Association complained that the county-specific need methodology precluded any inquiry into accessibility and volumes at adjoining programs. Another representative of the Florida Hospital Association surmised that the goal of the county exemption was improved access but explained that it was an inappropriate means to identify access concerns. For example, while Hernando County would qualify for need with the separate methodology, most of its residents, 97 percent receive OHS services at a hospital in another district which is only 13 miles from the population center. (See Finding of Fact 26). The preference under normal circumstances in Subsection 7(c) and finding of need for enhanced access in Subsection 7(d), must be supported by evidence that county boundaries, in general, do create valid access issues. On or before the January workshop, information provided to AHCA indicated that some special inquiry into access issues related to CON applications for programs in counties without OHS programs is warranted. See Finding of Fact 27). AHCA found correctly that counties matter for several reasons. First is the fact that emergency services are funded and organized by counties, in general, and operated by municipal and county agencies. Approximately 60 percent of heart attack patient discharges in Florida are admitted through emergency rooms. Emergency heart attack patients who live in counties with OHS programs are twice as likely to be taken to a hospital with OHS as those who live in counties without an OHS provider. Second, whether a patient is taken to an OHS provider affects the care received. The probability of having an angioplasty performed is almost 50 percent greater for residents of counties with OHS programs as compared to those in counties without an OHS program. Third, some health care reimbursement plans and health care districts are operated within counties, limiting financial access to out-of-county hospitals. AHCA has always considered whether or not a county has an OHS program as a part of access issues. The issue of greater access to OHS was the basis for AHCA's initial consideration of the possibility of easing the OHS rule. With the May and June draft, it has codified and specified when that policy will apply. AHCA's deputy secretary noted that geographic access in the absence of numeric need was the basis for approvals of OHS CONs for Marion County, and for hospitals located in Naples and Brandon. In each instance, the applicants argued a need for enhanced access. AHCA has experience in applying preferences as a part of balancing and weighing criteria from statutes, rules and local health plans, particularly to distinguish among multiple applicants. In the totality of the review process, other factors which Bethesda's expert testified should be considered, including financial, racial and other potential access barriers, are not precluded. Preferences related to specific locations within health planning areas are included in CON rules governing the need for nursing home beds and hospices. Bethesda noted that these are not tertiary services, suggesting that a county location preference is inappropriate for tertiary services, but similar preferences for OHS exist in some of the local health plans. In AHCA District 1, the CON allocation factors for OHS and cardiac catheterization services include a preference for applicants proposing to locate in a county which does not have an existing OHS program. In District 4, the preference favors an applicant located in a concentrated population area in which existing programs have the highest area use rates. District 5 is similar to District 4, supporting OHS projects in areas of concentrated population with the highest use rates. The District 8, like District 1, preference goes to the applicant located in a county without an OHS program. There is no evidence that the existing preferences have been difficult to apply within the context of other CON criteria for the review of OHS applications. In effect, the proposed amendments establish an uniform state-wide county preference which is more concrete in terms of the requirements for a potential patient base. Bethesda has questioned the rationale for standards which are, in effect, different in Subsection 7(c) as compared to Subsection 7(d). The lower requirement, according to Bethesda, 1200 ischemic heart diagnoses, in 7(d), applies when there is no numeric need. But, the 500 divisor and 300 minimum at existing providers, when combined with 1200 ischemic heart diagnoses is a heavier burden to meet in 7(c), although under normal circumstances. Bethesda did not adequately explain reasons for this objection to the proposed rule. In addition, it is not inconsistent logically for AHCA to require applicants to demonstrate lower numeric need in situations in which AHCA has determined that these will be, in general, a greater need for enhanced access. Bethesda also raised a concern for the eventual maldistribution of programs as a result of the county preference. In 1999, Palm Beach county residents received 2700 OHS, or an average of 900 cases for each of the three programs. The total for District 9 was 3800 cases in 1999. When 500 St. Lucie County resident cases, in which Lawnwood is an OHS provider, are combined with 2700 Palm Beach resident cases, that leaves only 650 resident cases from Okeechobee, Indian River and Martin Counties. If programs are approved in all three, then the total will be inadequate for each to reach 300 cases, while, presumably, the demand in Palm Beach could be increasing disproportionately and not be met adequately. Disproportionate need, the appropriate dispersion of programs, and the benefits of enhanced competition are among the factors which AHCA can consider along with county need when choosing among competing applicants. 1200 ischemic heart disease discharges The proposed amendments require a projection that residents will reach a threshold of 1200 cases of ischemic heart disease discharges as a condition for the entitlement to the numeric need preference or to demonstrate a not normal need for enhanced access. In general, ischemic heart disease, which is also known as coronary heart disease, is characterized by blocked arteries which, in turn, limit blood to heart muscles causing first the onset of angina from acute coronary syndrome, progressing on to acute myocardial infarction, or a heart attack. The use of heart disease as a proxy for OHS utilization is consistent with AHCA's use of live births in pediatric open heart surgery and pediatric cardiac catheterization rules, deaths in the hospice rule, and related diagnoses in organ transplantation rules rather than actual utilization. It was supported by information received during or before the January workshop (See Finding of Fact 26 and 27). Bethesda's criticism of the use of a proxy per se is also not well-founded because any single statistical approach could be misleading. For example, historic use rates can understate future use with a growing service or an artificially imposed access limit. Using heart disease data in a preference or a need for enhanced access as opposed to a need formula or conclusive finding allows more flexibility in determining need in conjunction with other significant factors. One of Bethesda's expert health planners was also critical of the use of 1200 ischemic heart disease diagnoses as inadequate for projecting OHS cases, and for not equating to approximately 300 annual OHS cases, the minimum required of existing providers in Subsection 7(a) and the minimum adverse impact allowed in Subsection 7(e). Based on actual historical Florida data, 1200 ischemic heart disease diagnoses on average resulted in 207 OHS in 1997, 203 in 1998, and 203 in 1999. Ischemic heart disease has approximately an 18 to 20 percent conversion rate to OHS, and results in a total of 76 to 80 percent of all OHS cases. OHS cases from other diagnoses added statistically another 54 OHS in 1997, 59 in 1998, and 61 in 1999, to those from ischemic heart disease, giving, in each year a total less than 300. Bethesda presented evidence of wide variations in the ischemic heart disease to OHS conversion ratios from county-to- county. For example, only 14 percent of Bradford County ischemic heart diseases converted to OHS, and only 11 percent of the 700 cases in Columbia County converted to OHS. In Columbia County, the average state conversion rate of 20 percent yields 140 cases but, in reality, there were only 78 OHS cases from Columbia County in 1999. Bethesda's expert concluded that conversion ratio discrepancies resulting in the approval of a program that cannot achieve 300 OHS, as required in Subsection 7(a)2. and 7 (e), of the proposed rule, could bar the approval of new programs when needed in the district and would not be of minimum required quality. Bethesda also proved that the accuracy of projected OHS cases can also be affected by patterns of patient migration for health care, particularly if in- and out-migration do not offset each other. In counties with OHS programs, the average out-migration for acute care is 10.7 percent, varying widely from 3.8 percent in Alachua County to 70 percent in Seminole County. In counties without an OHS provider, average out- migration for acute care is 44 percent, but ranges from 17.6 percent in Indian River County to 98 percent in Baker County. An average of 18 percent of the residents of Florida counties with OHS programs have their surgeries performed elsewhere. Like out-migration, in-migration for acute care, for ischemic heart disease care, and for OHS varies from county to county in Florida. Counties without OHS programs have acute care in-migration from lows of 5.3 percent for Flagler County up to highs of 40 percent for Columbia County. In counties with OHS, in-migration for acute care is as low as 8 percent for Brevard and Polk, and as high as 60 percent for Alachua County. Similarly, in-migration, as determined by ischemic heart disease discharges averages 19.4 percent in counties without OHS programs and approximately 25 percent in those with OHS. In-migration for OHS, averages 35.7 percent for the state, but that is derived from a range from 9.2 percent in Pinellas County to 74 percent in Alachua and Leon Counties. Bethesda demonstrated, patterns of migration for health care vary throughout Florida, but there are trends due to the presence of OHS programs. Average net in-migration to counties with OHS is 29 percent, and is positive in sixteen of the twenty-four counties with OHS programs. All of these differences can be considered within the regulatory scheme proposed by AHCA. The issue of whether 1200 residential ischemic heart disease diagnoses is, in fact, the critical mass of prospective OHS patients needed or is deceptive due to migration patterns, due to access to alternative providers or any other review criteria listed in rule or statutes can be considered on a case-by-case basis with the proposed amendments. Bethesda's specific concern is that Indian River with well over 1200 ischemic heart disease discharges could be approved even though that represented only 255 OHS cases, and that if Indian River is approved under the county preference provision, then Bethesda would not be approved under normal circumstances until Indian River achieved and was projected to maintain 300 OHS cases a year. That Bethesda may be delayed in meeting the requirements for normal need is likely, but that appears to be a function of its location as compared to existing providers as much as it is the result of the county preference. Bethesda is not precluded, however, under either the existing or proposed rules from demonstrating not normal circumstances in District 9 for the issuance of an OHS CON to Bethesda. Bethesda's assumption that 300 is the minimum volume required for adequate quality is not supported by studies from various professional societies. The American College of Cardiology, the American Heart Association, and the Society of Thoracic Surgeons set minimums of 200 to 250 annual hospital cases as the volumes necessary to maintain the skills of the staff. The American College of Surgeons, in 1996, published their opinion that 100 to 125 cases per hospital is sufficient for quality, while at least 200 cases a year are needed for the economic efficiency of a program. AHCA has never used the required and protected volumes as the volume which must also be projected for a new programs. In the current OHS rule, the volume required is 350 a year for existing programs but that has not been required of applicants. In the recent approval of an OHS CON for Brandon Regional Hospital, the applicant projected reaching 287 cases in the third year of operation. County preference, tertiary classification and travel time Bethesda argued that the tertiary classification, suggesting a regional approach, is inconsistent with having a county access provision. Bethesda correctly noted that the county provision first appeared in a draft which included the elimination of OHS from the list of tertiary services. But AHCA proposes to establish the county preference and to maintain OHS on the list of tertiary services under Rule 59C-1.002(41), and to maintain the two-hour drive time standard in Rule 59C- 1.033(4)(a). Substantial information, mostly from medical doctors and studies linking morbidity to low volume, supports the view that OHS continues to be a complex service. Obviously, those services in the tertiary classification range in complexity and availability from OHS at the lower level to organ transplantation at the upper level. The tertiary classification is justified to assure AHCA's continued closer scrutiny of OHS CON applications. It is also consistent with the increase in the need formula divisor to 500, which together serve as restrains on the approval of additional programs. AHCA reasonably concluded, based on case law and precedents with local health plan that it is not inconsistent to apply county preferences to OHS while it is classified a tertiary service. The two-hour travel time standard, is as follows: Adult open heart surgery shall be available within a maximum automobile travel time of 2 hours under average travel conditions for at least 90 percent of the district's population. The counties most likely qualify for the preference, based on meeting or exceeding 1200 residential ischemic heart disease diagnoses, are Citrus, Martin, Hernando, St. Johns, Highlands, Indian River, and Okaloosa. The population centers in each of these counties are well within two hours of an existing provider. Citrus County, in which there is an approved but not yet operational OHS program, is about an hour's drive from Marion County. Hernando is approximately 25 minutes from the Pasco County provider. The population center of St. Johns County is approximately 40 minutes away from Duval County OHS providers. Okaloosa County is approximately a one-hour drive away from Escambia County OHS providers. In District 9, Indian River is approximately a 30- minute drive from the Lawnwood OHS program. Martin Memorial, is an approved provider, is approximately 20 miles or 35 minutes from Lawnwood and 30 miles or 40 minutes from Palm Beach Gardens, another existing OHS provider. In the next three to five years, it is foreseeable that Okeechobee County in northwestern District 9 could qualify for the county preference. Adjacent to Okeechobee, Highlands County's population can drive either an hour and thirty minutes to a Charlotte County OHS program or an hour and twenty minutes to a Polk County facility. The evidence related to travel times, according to one of Bethesda's experts, demonstrates that the county preference is not needed to assure access which is already provided for each and every likely qualifying county. But the population centers in the entire state of Florida are all within the two- hour travel standard, and there has been no suggestion that Florida cease approval of new OHS programs. Bethesda's contention that no need exists for enhanced access if the travel time standard is met, and its claim that the rule is internally inconsistent with a county preference and two-hour drive time are rejected. Two hours is, as the rule clearly states, a "maximum" not a bar, and has never been interpreted by AHCA as a bar, to more proximate locations. Any other interpretation is an impossibility considering the numerous counties across the state with multiple programs, including Dade, Broward, Palm Beach, Hillsborough, Pinellas, Orange, Volusia, Duval, and Escambia, among others. AHCA can appropriately and consistently establish reasonable guidelines for choosing among applicants to enhance access within the maximum travel standard. There is no language in the proposed rule indicating when it will take effect. Although the issue was raised in Bethesda's petition, it failed to provide evidence or legal arguments at hearing or subsequently to support its objection to the omission. AHCA's deputy secretary testified that the agency reviews applications using need methodology rules in effect when the applications are filed. Before new rules are applied, applicants are given the opportunity to reapply to address new provisions in a rule.
The Issue Whether the second and third sentences of Rule 59C-1.033(7)(c), Florida Administrative Code, are invalid? If so, whether they may be severed from the remainder of the Rule?
Findings Of Fact Subparagraph (7)(c) of the Rule states: Regardless of whether need for a new adult open heart surgery program is shown in paragraph (b) above, a new adult open heart surgery program will not normally be approved for a district if the approval would reduce the 12 month total at an existing adult open heart surgery program in the district below 350 open heart surgery operations. In determining whether this condition applies, the Agency will calculate (Uc x Px)(OP + 1). If the result is less than 350, no additional open heart surgery program shall normally be approved. (Emphasis supplied to indicate the challenged portion of the Rule.) The first sentence sets forth the objective and intent of subparagraph (7)(c) of the Rule: unless there are "not normal circumstances," a new open heart surgery program will not be approved in a district if the approval would reduce the volume below 350 procedures annually at any existing OHS provider in the district. This is the intent and objective of the sentence despite the use of the word "an" to modify the term "existing adult open heart surgery program in the district" used toward the end of the sentence. As was testified by the Agency representative: [T]he entire notion of the rule, the entire intent of the rule is that existing providers maintain the 350 level. I mean, [there's] no question about that, so that has to be considered. (Tr. 3287). Indeed, intent that it is desirable for individual existing OHS providers to perform 350 procedures in 12-month periods is expressed elsewhere in the Rule. And that goal is so desirable, in fact, that new programs in a district are not under normal circumstances to be approved if the 350 level has not been met recently by an existing provider in the district: (7) Adult Open Heart Surgery Program Need Determination. (a) A new adult open heart surgery program shall not normally be approved in the district if any of the following conditions exist: * * * One or more of the operational adult open heart surgery programs in the district that were operational for at least 12 months as of 3 months prior to the beginning date of the quarter of the publication of the fixed need pool performed less than 350 adult open heart surgery operations during the 12 months ending 3 months prior to the beginning date of the quarter of the publication of the fixed need pool; . . . Rule 59C-1.033, F.A.C., (e.s.). Given the clear intent of the Rule as a whole and of the first sentence of subparagraph (7)(c), the formula in the challenged portion of the Rule (the "formula"), should be used to measure and determine whether the approval of a new OHS program would reduce the annual volume of OHS procedures at any existing OHS provider below 350. Under the formula, adult open heart surgeries are projected for each service district. The resulting number is divided by the number of existing OHS programs plus one new OHS program. If calculation results in a number less than 350, the third sentence of the subparagraph purports to carry out the intent of the first sentence of subparagraph (7)(c), that is, "no additional open heart surgery program shall normally be approved." For example, assume 3000 OHS are projected for a service district with five existing programs. Under the formula, 3000 would be divided by six (the existing five plus the proposed program). The result is 500, and the operation of the subparagraph does not prohibit a new OHS program. If, on the other hand, a volume for the district of 3000 were projected and there were eight existing providers, the addition of a ninth program would bring the average below 350 and, by operation of the third sentence, prohibit the approval of a new program. The challenged portion of the Rule, however, does not necessarily implement the objective of the first sentence of subparagraph (7)(c). The calculations in the challenged portion do not determine whether the volume at any specific provider would fall below 350 as the result of a new program. Instead, the calculations measure only the "average" volumes at existing programs plus one new one. A program operating slightly above 350 (such as CRMC), with the addition of a new program (such as the one proposed by Venice) in close enough proximity that their primary service areas significantly overlap, could drop below 350, even though the number of OHS procedures in the district is calculated district-wide to increase and even though the average calculated by the formula exceeds 350. Such a result increases in likelihood when one of the providers in the district (such as Memorial) is projected to have volume significantly above 350. Illustrations of the ineffectiveness of the challenged portion for achieving the clear objective set forth in the first sentence of subpararaph (7)(c) are in CRMC Exhibit no. 58. For example, in 1997, existing OHS providers in District 8 had an average volume of 716. That year CRMC performed only 369 OHS procedures. Had Venice commenced an OHS program in 1997, adverse impact analysis and service area overlap as used by Mr. Baehr in this proceeding show that CRMC would have dropped below 350 procedures in 1997, while the district average would have remained well above 350 despite the addition of a new program.
The Issue The issue in this case is whether either Mease Health Care (Mease) or St. Anthony's Hospital (St. Anthony's), or both, meet the statutory and rule criteria for a Certificate of Need (CON) to operate an open heart surgery program, and therefore, whether the Department of Health and Rehabilitative Services (Department) should approve either, or both, of their CON Applications.
Findings Of Fact The Parties Mease is a 278 bed, non-profit acute care hospital located in Dunedin, Florida, which is within the Department's Service District V. Its service area is mid-Pinellas through Pasco Counties, with mid-Pinellas to northern Pinellas being its primary service area. It has operated a special procedures room since before July 1, 1977, but that room is not a cardiac catheterization laboratory. The special procedures room has been staffed with persons trained in treating critical care patients, with special knowledge of cardiovascular medication and catheterization equipment. The catheterization team usually consists of a physician, special procedures nurse, and at least two dedicated radiographer technologists. Procedures performed at Mease in the special procedures room include renal arteriograms, pulmonary arteriograms which involve passing a catheter through a right side chamber of the heart into the lungs, as well as cerebral and femoral arteriograms. Pulmonary angiograms, right ventriculography and right atrial injections are all currently performed at Mease, with right catheterization procedures performed in the CCU and special procedures lab. The special procedures room is not used by radiologists or cardiologists at Mease to do any therapeutic or diagnostic studies of the left chambers of the heart, but rather these procedures are performed at Plant or Largo Medical Center in Clearwater. The Mease special procedures room does not have the more sophisticated equipment necessary to perform catheterizations in the left chambers of the heart, and such equipment would be found in a CCL. Mease does not have a CON for inpatient cardiac catheterization, but does have a separate pending application for such program. It has an outpatient cardiac catheterization lab which opened in April, 1989. Mease proposes to do angioplasties on an outpatient basis, which is contrary to the Department's Rule 10-5.011(1)(e)2b, which defines this as an inpatient procedure. Mease Clinic is located adjacent to Mease Hospital/Dunedin, and consists of approximately 90 physicians who have a contractual relation with Mease. Mease Clinic is a major source of referrals for Mease Hospital/Dunedin. St. Anthony's is a 434 bed, not-for-profit acute care hospital located in St. Petersburg, Florida, which is within the Department's Service District V. Its primary service area is southern Pinellas County, south of Ulmerton Road, where 80% of its patients reside. It provides a full range of services, including inpatient cardiac catheterization, with a CCL, coronary care unit, holter monitor service, and echocardiography laboratory. St. Anthony's presently has 5 cardiologists on staff, and will be adding 3 more. It offers a full array of diagnostic services including nuclear cardiography, basic electrocardiography, a magnetic resonance imaging unit. St. Anthony's is also the site of the Rogers Heart Foundation which performs research, education, and clinical diagnostic studies involving cardiovascular diseases. Plant is a 740 bed, general acute care, not-for-profit hospital located on an 11 building campus in Clearwater, Florida, approximately 3 to 4 miles south of Mease. It provides a wide range of services, including open heart surgery, medical/surgical with all subspecialties, obstetrics and psychiatry. It also operates a nursing home, ACLF, ambulatory surgery center, rehabilitation center, and arthritis center. Bayfront is a 518 bed, not-for-profit, full service acute care hospital located in St. Petersburg, Florida, adjacent to Children's. It is connected to Children's by an enclosed passageway, and operates a shared diagnostic, open heart surgery and cardiac catheterization program with Children's. The usual procedure under this shared progam is that adult patients requiring open heart surgery are admitted to Bayfront the day prior to surgery, and then are prepared and transported through the passageway by Bayfront personnel to Children's, where the actual surgery is performed. Normally the patient is kept overnight at Children's following surgery, and is then returned to Bayfront by Bayfront personnel to continue recovery, and eventual discharge. Children's is a 113 bed children's hospital located in St. Petersburg, Florida, approximately two miles from St. Anthony's. It is a full service tertiary facility, which serves as a referral center for children from throughout the State of Florida, and will have 6 operating rooms, 2 CCLs, and 13 ICU beds when construction underway is completed. It has an approved CON for 55 additional beds. Two of its operating rooms are used for open heart surgery. It has an open heart surgery program which has been in operation since the early 1970's, with 3 pediatric cardiologists and 12 to 15 adult cardiologists on staff. The Department is the state agency which is responsible for administering Sections 381.701 through 381.715, Florida Statutes, the "Health Facility and Services Development Act", under which applications for Certificates of Need (CON) are filed, reviewed, and either granted or denied by the Department. Currently, Children's/Bayfront, Plant, and Largo Medical Center, which is located near Ulmerton Road in central Pinellas County, have existing open heart surgery programs. There is an additional approved CON for an open heart surgery program at Bayonet Point Hospital in Pasco County. The 3 existing programs each have more than one operating room dedicated for open heart surgery. For every dedicated open heart surgery suite, approximately 500 open heart surgery cases can be performed per year, and thus, each of these existing programs in District V has the capacity to perform well over 500 cases each year. The Applications On or about September 28, 1988, Mease filed an application with the Department for a CON to implement an open heart surgery program at its hospital in Dunedin, Florida. This application was designated as CON Application Number 5679. The Department reviewed this application, and on October 13, 1988, forwarded an omissions letter to Mease. Mease responded to the omissions letter on November 14, 1988, and on November 15, 1988 the Department deemed its application complete. Thereafter, the Department reviewed and considered all material received from the applicant, and issued its State Agency Action Report (SAAR) on or about January 12, 1989, noticing its intent to deny CON 5679. Mease timely filed a petition for formal hearing to challenge the Department's notice of intent to deny this CON, and Plant timely intervened in opposition to this application. On or about September 28 1988, St. Anthony's filed an application with the Department for a CON to implement an open heart surgery program at its hospital in St. Petersburg, Florida. This application was designated as CON Application Number 5678. The Department reviewed this application, and on October 13, 1988, forwarded an omissions letter to St. Anthony's. St. Anthony's responded to the omissions letter on November 11, 1988, and the Department deemed its application complete. Thereafter, the Department reviewed and considered all materials received from the applicant, and issued its SAAR on or about January 12, 1989, noticing its intent to deny CON 5678. St. Anthony's timely filed a petition for formal hearing to challenge the Department's notice of intent to deny this CON, and both Bayfront and Children's timely intervened in opposition to this application. On or about May 26, 1989, Mease filed certain revisions to its CON application, purportedly by agreement of counsel. However, these revisions were not filed with, or reviewed by, the Department in the preparation of its SAAR. The applicants and intervenors in this proceeding are all located in District V, which is composed of Pinellas and Pasco Counties. There are no subdistricts within District V for purposes of open heart surgery programs, and the Department's numeric need methodology for such programs. The open heart surgery and population growth rates for northern Pinellas and Pasco Counties exceed that of southern Pinellas County, south of Ulmerton Road. However, the total population of south Pinellas exceeds that of northern Pinellas. Utilization rates are also lower in south Pinellas than elsewhere in District V. Stipulations The parties stipulated that: The licensure and accreditation of each hospital in this proceeding is not at issue and does not have to be proven; The equipment proposed by Mease and St. Anthony's is adequate, and the costs projected for that equipment are reasonable, as well as the costs associated with architectural design and construction; St. Anthony's and Mease have the ability to finance the proposed project costs; St. Anthony's, Bayfront and Children's have stipulated to each other's standing in Case Number 89-0727; Plant has stipulated that Mease renders quality care in its existing programs; and The term "case" means "admissions" or "discharges", and there can be multiple procedures performed in each case. State Health Plan Objective 4.2 of the State Health Plan applicable to this application is to "maintain an average of 350 open heart surgery procedures per program in each district through 1990." (Emphasis Supplied.) The goal set forth in the State Plan relative to open heart surgery programs is to ensure the appropriate availability of such services at reasonable costs. These applications are not consistent with Objective 4.2. If these application were to be approved, there would be 6 (3 existing and 3 approved) programs in the District. The number of procedures projected for 1990 is 1271, and if this is divided by 6 programs, the result is an average of only 212 procedures per program. If only one of these two application were to be approved, and the number of procedures projected for 1990 were to be divided by 5 instead of 6, the result of 254 would still fall below the 350 standard. Approval of either of these applications will also significantly and adversely impact the ability of the already approved program in the District, located at Bayonet Point Hospital in Pasco County, to achieve an acceptable level of service. In the State Health Plan narrative, it is recognized that "quality of patient care is a primary concern in open heart surgery programs due to the potential consequences to the patient of poorly trained and/or skilled staff." In order to ensure quality, and in recognition of the relationship between the volume of open heart surgery procedures and quality, the State Plan references the Department's requirement, set forth by rule, that a minimum of 200 adult procedures be performed within 3 years of initiation of an open heart program. The narrative also notes that a broad range of services must be provided to fulfill the requirements of an open heart surgery program. Both of these applications are partially consistent with these narrative statements in the State Health Plan since they have a record of providing quality care, and offering a complete range of services within departments at these hospitals, where a broad range of diagnostic techniques and expertise are available. However, it was not established that a minimum of 200 adult open heart surgical procedures would be performed at either Mease or St. Anthony's within three years of initiation of this program. Local Health Plan The applicable portions of the District V Health Plan recommend that in a comparative review of open heart surgery applications, preference should be given to those hospitals with a documented record as a major referral center for open heart surgery, and which serve the entire community regardless of ability to pay, using the proportion of Medicaid patient days of the planning area total as a measure. The Local Plan also recommends that future expansion of open heart surgical programs occur so as to serve population areas which will generate a minimum of 350 open heart operations annually. Finally, the Local Plan states that applicants should be able to justify the projected minimum number of 200 procedures stated in the Department's rule within three years of the beginning of service, there should be a numeric need shown in accordance with the Department's numeric need methodology for open heart surgery, existing programs should be performing the number of procedures required in the Department's methodology, and priority should be given to applicants in areas which do not have existing or approved programs. District V is not divided into subdistricts for purposes of determining the need for additional open heart surgery programs. Neither of the applicants in this case are major referral centers, and neither provides a significant volume of services to Medicaid or chronically underserved groups, as discussed further below, although they have provided services to those who are unable to pay. According to the Department's numeric need methodology, there is no need for any additional open heart surgery programs in District V. There are existing open heart programs in both north and south Pinellas County, the primary service areas of each of these applicants. The Department's Numeric Need Methodology and the "350 Standard" Rule 10-5.011(1)(f)8, Florida Administrative Code, sets forth the Department's methodology for calculating the numeric need for additional open heart surgery programs. It provides a formula by which the number of open heart procedures for the horizon year, in this case 1990, are to be estimated. (See Finding of Fact 19 for an explanation of the interchangeable use of the terms "procedures" and "cases".) Pursuant to the formula, there are projected to be 1271 open heart surgery procedures performed in 1990 in District V. This number of projected procedures is then divided by 350 procedures in order to determine the number of programs which will be needed. See Rule 10-5.011(1)(f)11b. Using this methodology, the Department has identified the need for 3.6 (rounded to 4) programs in the District in the horizon year. Since there are currently 3 existing (Plant, Bayfront/Children's and Largo Medical Center) and 1 approved program (Bayonet Point Hospital) in District V, the Department has concluded that there is no projected numeric need for either of these additional programs in 1990. The Department will not normally approve a CON for a new open heart surgery program unless a numeric need is projected under its methodology. In performing the calculations under its numeric need methodology, the Department correctly determined that the actual use rate in District V was 110.35 procedures per 100,000 population. This actual use rate properly does not adjust for outmigration of residents of District V to facilities outside the District. It has been the consistent policy of the Department in determining actual use rates to consider only the total number of procedures performed at facilities within the District since the numeric need methodology calculates the need for additional programs within the same District. As long as there are sufficient resources to serve the volume of patients needing service in a given District, it does not matter where those patients reside. Patients choose to go to another District for open heart services for many reasons other than a lack of resources within their own District, such as physician preference. Therefore, it cannot be concluded that all patients who outmigrate for one reason or another will return to their own District for services if an additional program is approved. For this reason, as well as the double counting of the same patients which would result if they were counted in determining the actual use rate in both the District in which they reside, and in the District to which they outmigrated for service, the Department's interpreptation and policy is reasonable. For purposes of applying the Department's numeric need methodology rule, the words "cases", "procedures", and "admissions" are used interchangeably. This is the result of the historical development of the rule, which preceded the development and implementation of DRG's precisely defining "procedures". Thus, while the rule states that need for open heart surgery programs shall be determined by computing the projected number of open heart surgical "procedures", the Department has consistently interpreted this rule to mean the number of "cases", and used the number of "cases" in performing the calculations under the methodology. Hospitals reporting data to local health councils generally report the number of cases or discharges, and most health planners similarly use the number of patients or discharges when calculating the need for a new program. Through the testimony of Michael L. Schwartz, an expert in health care planning, Mease erroneously attempted to inflate the need projected under the rule by using "procedures" instead of "cases" in its calculations. It applied the multiplier of 1.77 or 1.44 to reported "cases", since this represents an estimate of the number of procedures per case, and thus incorrectly projected a need for an additional program. The Mease methodology is in error because it is inconsistent with the Department's reasonable, historical interpretation and application of this rule, as well as the manner by which data is reported under the rule to local health councils. Recognizing that the numeric need methodology does not project the need for any additional programs, the applicants herein both seek to justify the approval of their applications under a "not normal" rationale, which relies primarily upon outmigration of patients from District V to Hillsborough County in District VI. In fact, outmigration is the only "not normal" circumstance raised in the Mease application. Therefore, arguments at hearing that the existence of the Mease Clinic should also constitute a "not normal" circumstance are rejected. The data demonstrates insignificant outmigration from Pinellas County. From July 1987 through June 1988, only 32 patients (5.9%) outmigrated from north Pinellas where Mease is located and only 36 (6.8%) outmigrated from south Pinellas where St. Anthony's is located. The main outmigration was from Pasco County in which approximately 85.5% of Pasco residents receiving open heart surgery (488 of 571) outmigrated from District V. However, there is now a CON approved program in Pasco County which will be located at Bayonet Point Hospital which will be available to serve Pasco residents who have been outmigrating to District VI. There is a direct relationship between the volume of open heart surgery procedures performed at a facility and the quality of care provided at such facility, with lower mortality rates generally at hospitals with higher volumes than those with low volumes. Therefore, in addition to its numeric need calculation, the Department has also developed a "350 Standard" to address patient safety and quality of care concerns by ensuring that each existing and approved open heart surgery program achieves a volume sufficient to assure quality and efficiency prior to approval of a new program. Rule 10- 5.011(1)(f)11aI, Florida Administrative Code, prohibits the establishment of new open heart surgery programs unless: . . . the service volume of each existing and approved open heart surgery program within the service area is operating at and is expected to continue to operate at a minimum of 350 adult open heart cases per year. . . Bayfront/Children's urges an interpretation and application of the 350 Standard in a manner which would require each existing and approved program to actually operate at the level of 350 cases per year. Since approved programs are not yet operational, and therefore cannot operate at the 350 level, they argue that the intent of this Standard, as set forth in the above-cited rule, is to preclude the approval of any additional programs while there are approved programs, or existing programs which are not meeting the 350 Standard. To the contrary, the Department and the applicants urge that the 350 Standard be applied by averaging the actual number of cases at existing programs, and the number of cases which are reasonably projected to be performed at approved programs. Under this interpretation, as long as the average between cases which are performed at existing, and which are reasonably projected to be performed at approved programs exceeds 350, then the further approval of an additional program is not prohibited. Having considered the testimony and evidence presented by the parties, and in particular the testimony of Sharon Gordon-Girven, who was accepted as an expert in health planning, which is found to be more credible, consistent, and reasonable on this point than the testimony of Michael C. Carroll, who was accepted as an expert in health planning and hospital administration, it is found that the Department's interpretation and application of the 350 Standard is reasonable and consistent with the terms of Rule 10-5.011(1)(f)11aI. The Department has consistently applied this 350 Standard since this rule's adoption by averaging caseloads at existing programs and reasonably projected caseloads for approved programs. To interpret this Standard as urged by Bayfront/Children's would impose a moratorium on new open heart surgery programs while there is an already approved, but not operational, program in a District, or while a newly operational program has not yet attained the 350 Standard. There is no basis for this prohibitory interpretation which would not only reduce competition, but would also be inconsistent with sound health planning and the State Health Plan Objective 4.2, as discussed above. Quality of Care Both Mease and St. Anthony's are accredited by the Joint Commission on Accreditation of Health Care Facilities and have a record of providing quality care in their existing programs. On average, hospitals performing greater than 200 open heart procedures per year have superior surgical outcomes than hospitals doing less than 200 procedures. Mortality rates are significantly lower at hospitals performing more than 200 procedures annually than at those performing less. It was established that there is a direct relationship between volume of open heart surgical procedures and quality of care at facilities with open heart surgery programs. Therefore, the existence of more open heart programs than are needed in an area may result in some existing programs not achieving sufficient volume to assure patient safety and quality of care. Rule 10-5.011(1)(f)5d, Florida Administrative Code, was adopted by the Department in order to set forth the minimum volume deemed necessary to assure quality of care, and provides, in part: There shall be a minimum of 200 adult open heart procedures performed annually, within 3 years after initiation of service, in any institution in which open heart surgery is performed for adults. Although the applicants urge that they will be able to meet this threshold level within three years, they failed to establish by competent substantial evidence that they would actually attract the patients necessary to perform either the number of open heart procedures projected in their applications, or this minimum number of 200 procedures required by the Department to assure quality of care in its third year of operation, given the current pattern of physician referrals in the area, their market share in relation to those of existing programs, and actual utilization levels for the existing District V programs. Without the assurance of sufficient volume to meet the 200 procedure threshold established by the Department by rule, the validity of which is not at issue in this case, the applicants have failed to show that they will be able to achieve and maintain a patient volume in their proposed program which will assure quality of care in their proposed open heart surgery program. St. Anthony's sought to question the quality of care provided at the Bayfront/Children's program by citing an 8% mortality rate in 1987-88, and a 5.5% rate in 1988-89, while 3% is the national standard. However, mortality rates are only one indicator of quality, and a significant number of these cases at Bayfront/Children's involved complex open heart surgery on patients whose mean age was significantly higher than would be expected in a normal case mix, which presents a greater risk potential than less complex surgery on a younger case mix. In any event, this issue was not clearly raised in St. Anthony's application. Further, the evidence that was received, including testimony of physicians on staff at St. Anthony's and Children's/Bayfront, establishes that the quality of care at the Children's program is excellent, and that scheduling problems relating to availability of operating rooms are being resolved. It was not shown that there is any adverse impact on quality from having to move patients between Bayfront and Children's for open heart surgery. The fact that Mease does not have a CON for an inpatient cardiac catheterization program adversely affects the potential quality of care of any open heart surgery program at its facility since the medically preferred practice when performing such surgery is to have inpatient cardiac catheterization available. Open heart surgery programs do not, and should not, operate without this inpatient cardiac catheterization capability. Availability and Access While the addition of these two new programs would obviously increase the availability of services in the District, open heart surgery services are already reasonably available in District V. St. Anthony's is only two miles from the Bayfront/Children's program in St. Petersburg, and Mease is located in Dunedin, approximately 3 to 4 miles north of Plant in Clearwater. The two hour travel time standard is already being met in District V, and geographic accessibility will not be appreciably or significantly increased by these proposals. There is excess capacity in existing and approved open heart surgery programs in District V during most of the year, including at the Bayfront/Children's and Plant programs. Therefore, there is ready access to, and availability of open heart surgery services to patients in the District. The applicants did not establish that approval of their applications would enhance access to open heart surgery services for the medically indigent. Despite the assertion in these applications that each program would be available to the underserved, there is no definite commitment to serve charity care patients as a percentage of total patient days or of total revenue. Bayfront and Children's exceed St. Anthony's in their commitment to indigent, charity care. As a percentage of total patient days in 1987, Medicaid patients represented 2.3% of St. Anthony's, and 2.1% of Mease's total patient days, while for Children's, Medicaid patients in 1987 represented 34.2%, and for Bayfront, they represented 8.9% of total patient days. While unstable patients who have to be transferred from one hospital to another face increased risks, it was not shown that transfers from Mease to Plant, or from St. Anthony's to the Bayfront/Children's program have actually jeopardized the safety of patients or resulted in a reduction in the quality of care received by patients. Transfer delays are exacerbated by seasonal increases in population in District V, but there continues to be a reasonable likelihood that patient transfers can be accommodated, even during seasonal population increases, without adverse impacts to patient care. However, a large majority of open heart surgery cases are non-emergency that can be scheduled for surgery after diagnosis without any compromise in patient care. Emergency patients can be given priority, and there are sufficient available beds to accommodate emergency patients, regardless of seasonal delays, and such seasonal delays do not establish that there is a lack of available beds in District V which would require the approval of either of these applications. Alternatives Considered The applicants did not fully explore alternatives, including less costly alternatives, to a new program at their facility, such as a joint or shared program with an existing provider. This would have been particularly relevant to these applications since District V already has a quality joint program at Bayfront/Children's which is operating successfully in the community. A less costly alternative to approval of either, or both, of these applications would be greater utilization of existing programs, especially where excess capacity exists, such as at the Bayfront/Children's and Plant programs, and in view of there being an already approved program in District V at Bayonet Point. Personnel Availability and Costs There has been a long-term shortage of nurses, particularly in intensive care and open heart surgery, and this shortage is present in District V not merely for nursing staff, but also for technical support staff, and is particularly acute in operating room and critical care personnel. It is not always possible to fill open heart surgery or critical care nursing positions with trained personnel. At hearing, St. Anthony's proposed a joint training program with St. Joseph's Hospital in Tampa for open heart personnel. However, this was not explicitly raised in the St. Anthony application, and therefore, it cannot be considered. The applicants will compete with existing providers in attracting open heart surgery nursing and technical staff. The implementation of these new programs would have an adverse impact on the ability of existing and approved programs to attract and retain trained open heart surgery nursing and technical staff, and can reasonably be expected to increase personnel costs for these providers. The salaries and benefits identified in these applications are generally reasonable and complete. However, Mease's estimate of the number of additional nursing positions, or FTE, which would be required throughout the hospital to accommodate the workload resulting from an open heart surgery program is incomplete and inadequate, and St. Anthony's failed to fully consider the need for additional personnel for its proposed open heart step-down unit, angioplasty recovery, open heart "stat" lab, and resperator machine operators. Financial Feasibility In their applications, Mease has projected 200 open heart surgery cases, and St. Anthony's has projected 150 open heart surgery cases, in their first year of operation; Mease has projected 240 cases and St. Anthony's projected 200 cases in their second year; St. Anthony's projected 250 cases in their third year of operation, but Mease did not include a third year projection. However, it is specifically found that these projections are not reasonable, based upon the testimony and evidence received, as well as the results of the Department's numeric need methodology calculations, performed pursuant to Rule 10-5.011(1)(f)8, the validity of which is not at issue in these proceedings. A basic assumption used by Mease in the preparation of its pro forma is flawed. The utilization projections which drive the necessary calculations in the pro forma are based upon a percentage of patients who have cardiac catheterizations who subsequently have to have open heart surgery. That percentage is 25%, but is based upon experience in which the facility at which these patients received this treatment had both inpatient cardiac catheterization and open heart surgery programs. Mease does not have inpatient cardiac catheterization, and therefore, there is a reasonable likelihood that the percentage of cardiac catheterization patients who would choose to be transferred from another facility, such as Plant, to Mease for open heart surgery would be substantially less than 25%, thereby reducing Mease's projected utilization. For example, it was shown that 75% of patients who receive inpatient cardiac catheterization remain at the same hospital for open heart surgery, if that becomes necessary and if that hospital has both programs. The pro forma which has been filed by St. Anthony's includes revenues that St. Anthony's is already receiving for treatment of patients who are subsequently transferred to Bayfront/Children's for open heart surgery. This amounts to approximately $11,000 per admission which St. Anthony's is already receiving and which, therefore, should not have been shown on its pro forma of revenues to be expected from a new open heart surgery program. The inclusion of this amount results in inflating St. Anthony's revenue projections. Additionally, St. Anthony's has incorrectly estimated its Medicare utilization at 65%, while it should have been estimated at 80% of patient mix. This error also has the effect of inflating expected revenues, and placing unjustified greater significance than there should be on its proposed fixed price discount, which is discussed later, and which applies only to non-Medicare, non-Medicaid, non-charity cases. For the July 1990, planning horizon in District V, the Department's numeric need methodology projects that there will be 1271 open heart surgery procedures. With referral patterns in place and existing providers with operational and well regarded programs, it is unlikely that either applicant would have an automatic, equal share of the District's pool of open heart patients, or even that they would perform the number of procedures projected in their pro forma for their first and second years of operation. In fact, the 3 existing providers in District V performed 1215 procedures (355 at Children's, 416 at Plant, and 444 at Largo Medical Center) between July 1987 and June 1988, leaving fewer than 56 procedures projected through the Department's numeric need methodology for the one already approved program and these applicants, if they were to be approved. It defies logic and reason to argue that the applicants will achieve their projected caseloads, given the existing levels of service at existing programs in District V, the fact there is an additional program that has already been approved, and the fact that the Department's numeric need methodology projects 1271 procedures in 1990. Since the applicants base their assessment of financial feasibility upon their unsubstantiated, inflated projections, and since the applicants have not established the reasonableness of these projections, the long-term financial feasibility of these proposed new programs has not been shown. Further, the applicants have also failed to establish that they can reasonably be expected to achieve the level of 200 procedures in their third year, and therefore, they have also failed to show that they can achieve that minimum level which the Department, by rule, requires to ensure quality of care. In other respects, the assumptions used by the applicants in their pro forma are reasonable, including their inflation factor for income, bad debt, expenses, and depreciation. Effect on Competition and Costs It cannot be determined whether there will be a significant difference between the charges proposed by each of these applicants and the actual charges at existing providers. Actual charges are dependent on case mix, Medicare percentage, payor mix and illness severity. Meaningful charge comparisons can only be made for hospitals in the same Hospital Cost Containment Board (HCCB) peer grouping based on case mix, Medicare percentage and location, and the parties in this case are in various groupings. This finding is based on the testimony of Margo Kelly, who was accepted as an expert in health care planning and finance, and Larry Ward, an expert in hospital finance and financial feasibility, and applies to both overall hospital charges and charges for specific services. There are simply too many variables to make any meaningful comparison of charges between hospitals which are in different HCCB peer groupings. A unique aspect of the St. Anthony's application is that it has proposed a fixed fee of $32,000, adjusted 6% annually for inflation, for open heart surgery for the first 3 years of the program, if approved. However, this factor is not as significant as it may appear from St. Anthony's pro forma since St. Anthony's has erroneously underestimated its Medicare mix at 65% instead of 80%, based upon actual Medicare percentages at existing programs, and thus, the mix of patients to whom this fixed fee would apply was overestimated by 15%. The fixed fee program is applicable to such a limited number of patients that the program is insignificant as a factor upon which approval of this application should be based. Additionally, based on the testimony of Sharon Gordon-Girven, it is found that while a fixed fee may be an attractive aspect of a CON application, it is not a "not normal" circumstance which can be used to approve an application notwithstanding a showing of no numeric need. It has not been shown whether there would be an appreciable positive impact on costs in the health care community if either, or both, of these applications were approved. When health care services are duplicated and associated costs are spread over the same number of patients, charges for those patients tend to increase. The evidence showns there is virtually no price competition for open heart surgery services. Mease has underprojected charges for its open heart surgery program by estimating an average length of stay of only 10 days instead of 13, which is the average at other area hospitals, and also by failing to include cardiac catherization charges, which should be included for those patients on whom both a catheterization and open heart surgerical procedure are performed in the same episode of care. As previously discussed, there would be greater competition among existing and approved programs in District V for trained open heart surgery and critical care nurses, which are in short supply, and it can reasonably be expected that greater competition for trained personnel who are in short supply will eventually result in higher salaries and health care costs. Impact on Existing and Approved Programs As discussed above, approval of these applications will adversely affect the ability of existing providers to attract and retain trained open heart surgery and critical care RNs due to the already existing shortage of personnel to fill these positions, and the fact that one already approved program would become operational prior to either of these programs, if they were to be approved. The proposed primary service area for Mease overlaps with the primary service area of Plant, and the primary service area of St. Anthony's overlaps with the primary service area of the Bayfront/Children's program. Therefore, these facilities are competing for the same open heart surgery patients. Patients referred to Plant by Mease physicians for open heart surgery account for approximately 30% of Plant's current total caseload, and if these patients are lost, the financial impact on Plant would be approximately $4.5 to $5 million in lost revenues. The same surgical group that does 90% of the surgeries at Plant is expected to do open heart surgeries at Mease, if the Mease CON is approved. The viability of the Bayfront/Children's program might be endangered, financially and programatically, if the St. Anthony's application is approved. From July 1987, through June 1988, 39% of the adult open heart surgical procedures performed at Bayfront/Children's were referred from St. Anthony's cathing cardiologists. A substantial number of these patients can be expected to be lost if the St. Anthony's program is approved, and this can reasonably be expected to significantly decrease utilization of the Bayfront/Children's program, with resulting loss in revenues. Bayfront reasonably estimates a resulting loss of $400,000 in its net income. It was also shown that Bayfront is already incurring a net loss in income from its open heart surgery program, which would only be exacerbated by the loss of a substantial number of patients to St. Anthony's. Comparision of Applicants While St. Anthony's does have an existing inpatient cardiac catheterization program, Mease does not. The Mease outpatient cardiac cath lab only opened in April, 1989, and therefore, its experience to date with outpatient cardiac catheterization is minimal. Mease proposes to do angioplasties in its outpatient cardiac cath lab, which is specifically prohibited by Departmental Rule 10-5.011(1)(e)2b, and is an unacceptable medical practice. Thus, while St. Anthony's patients would be able to receive complete and continuous care at its facility, Mease patients would still have to be transferred to another hospital for inpatient cardiac caths and angioplasties. There is already an approved open heart surgery program in the northern part of District V which will be located at Bayonet Point, and this new program will address the outmigration circumstance which has been occuring from Pasco County to Hillsborough County, upon which Mease has based its "not normal" argument in support of its application. Although population growth is greater in northern Pinellas than in south Pinellas, the total population of south Pinellas remains larger, and thus, there remains a larger population base for open heart surgery in south Pinellas than in north Pinellas. There is only one open heart surgery program in south Pinellas (Bayfront/Children's) while there are two existing programs in north Pinellas (Largo and Plant). Mease has only 5 operating rooms, while St. Anthony's has 12, and total beds at St. Anthony's exceed beds at Mease by 434 to 278. Of the two applications at issue on this proceeding, St. Anthony's is the superior application for an additional open heart surgery program in District V, if one were to be approved.
Recommendation Based upon the foregoing, it is recommended that the Department enter a Final Order which denies the application of Mease for CON 5679, and of St. Anthony's for CON 5678. DONE AND ENTERED this 29th day of November, 1989 in Tallahassee, Florida. DONALD D. CONN Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 Filed with the Clerk of the Division of Administrative Hearings this 29th day of November, 1989. APPENDIX Rulings on Proposed Findings of Fact filed by Mease: Adopted in Finding 1. Adopted in Finding 8. Adopted in Finding 1. Rejected as irrelevant and not based on competent substantial evidence. 5-6. Adopted in Finding 1. 7-8. Rejected as immaterial. Rejected in Finding 31, and otherwise as immaterial. Rejected as immaterial. Rejected in Findings 34, 35 and otherwise as immaterial. Adopted in Finding 24. Rejected in Findings 31, 46. Rejected as irrelevant and immaterial. 15-16. Rejected in Finding 43, and otherwise as immaterial. 17-18. Adopted in Finding 1, but otherwise Rejected as unnecessary, and not based on competent substantial evidence. Rejected in Finding 11. Adopted in Finding 7, but otherwise Rejected as unnecessary. Rejected in Findings 11, 49. rejected as immaterial and not based on competent substantial evidence. Rejected in Finding 40. 24-33. Rejected in Finding 38, and otherwise as immaterial and not based on competent substantial evidence. 34-35. Rejected as irrelevant and immaterial. 36. Adopted in Findings 49, 50. 37-38. Rejected in Findings 21, 26. 39-43. Rejected in Finding 17, and otherwise as irrelevant and immaterial. Adopted in Finding 38. Rejected as irrelevant and immaterial. 46-48. Rejected in Finding 32, and otherwise as irrelevant. 49. Rejected in Finding 30. 50-51. Rejected as immaterial and unnecessary. Rejected in Findings 45, 47. Rejected as immaterial. Adopted and Rejected in part in Finding 46. Rejected as immaterial and irrelevant. Adopted in Finding 40. Rejected as unnecessary. Rejected in Findings 7, 30 and otherwise as speculative. 59-62. Adopted in Finding 11, but otherwise Rejected as unnecessary and immaterial. 63-64. Rejected as not based on competent substantial evidence. Adopted in Finding 2. Adopted in Finding 11. Rejected as unnecessary. Adopted in Finding 30. Rejected as immaterial and unnecessary. Adopted and Rejected in part in Finding 51. Adopted in Findings 15, 17. Rejected in Finding 44, and otherwise as immaterial. Rejected in Finding 31. 74-80. Adopted and Rejected, in part, in Findings 12, 19. 81-85. Adopted and Rejected, in part, in Finding 20 and otherwise Rejected as immaterial. Rejected as not based on competent substantial evidence. Rejected in Finding 50, and otherwise as irrelevant. 88-89. Rejected as immaterial and irrelevant. Rejected in Findings 7, 30, and otherwise as unnecessary. Rejected as irrelevant and immaterial. Rejected as immaterial. Rejected in Findings 7, 30, and otherwise as unnecessary. Rejected in Findings 27, 49. Rejected in Findings 1, 29, and otherwise as immaterial. Rejected as unnecessary and immaterial. Adopted in Finding 24, but otherwise Rejected in Findings 1, 29. Rejected in Findings 38, 41. 99-100. Rejected in Finding 46, and otherwise as immaterial. Rejected in Finding 43. Rejected in Finding 45. Rejected in Finding 46. 104-105 Rejected in Findings 37, 38, 41. 106-107 Rejected in Findings 34-36. Rejected in Finding 38. Adopted, in part, in Finding 12. Rulings on Proposed Findings of Fact filed by St. Anthony's: Rejected as unnecessary. Adopted in Findings 12, 24. Adopted in Finding 12. 4-6. Adopted in Finding 9. Adopted in Findings 8, 9. Rejected as immaterial. Adopted in Findings 20, 44. 10-13. Adopted in Finding 2, but otherwise Rejected as unnecessary and cumulative. 14-15. Rejected as immaterial and unnecessary. Rejected in Finding 31. Adopted in Finding 7. 18-20. Adopted in Finding 40, but otherwise Rejected as 21-22. Adopted in Findings 7, 20. Adopted in Finding 2. Rejected in Finding 11. Rejected in Finding 11, and otherwise as immaterial. 26-27. Adopted and Rejected, in part, in Finding 11, and otherwise Rejected as immaterial. Adopted in Findings 4, 5. Rejected as irrelevant and immaterial. Rejected as irrelevant and not based on competent substantial evidence. Adopted in Finding 40. Rejected in Finding 20. Rejected in Finding 18, and otherwise as irrelevant. 34-36. Rejected in Findings 11, 20 and otherwise as irrelevant. 37-42. Rejected in Findings 28, 30, 31 and otherwise as not based on competent substantial evidence. 43-47. Rejected in Finding 28. Rejected as not based on competent substantial evidence. Adopted in Finding 17. Adopted in Findings 18, 20. Rejected in Finding 18. Rejected in Findings 18, 20. Adopted in Finding 40. Adopted in Finding 20. Rejected in Findings 13, 14, 16. Rejected in Findings 16, 27, 30, 31. Rejected as immaterial, unnecessary and cumulative. Adopted in Finding 11, but otherwise Rejected as irrelevant. Rejected in Findings 14, 30. Rejected in Findings 17, 18, 20. Rejected as immaterial and irrelevant. Rejected in Findings 27, 37, 40, 41. Rejected in Findings 11, 20 and otherwise as irrelevant and immaterial. 64-66. Rejected in Finding 17, and otherwise as irrelevant and not based on competent substantial evidence. 67-68. Adopted in Finding 24, but Rejected in Finding 27. Rejected in Finding 41. Adopted in Finding 36. 71-80. Adopted in Finding 44, but Rejected in Findings 43, 45 and otherwise as not based on competent substantial evidence. 81-85. Adopted in Finding 36, but Rejected in Findings 34, 35. 86. Adopted in Finding 7, but otherwise Rejected as unclear. 87-90. Rejected in Findings 17, 47-49, 51. Rejected in Findings 27, 51. Rejected in Findings 34, 35, 48. Adopted in Findings 1, 52. 94-99. Adopted in Finding 52, but otherwise Rejected as immaterial and not based on competent substantial evidence. Rulings on Proposed Findings of Fact filed by the Department: Adopted in Findings 12, 24. Adopted in Findings 8, 9. 3-6. Adopted in Finding 2. Rejected as unnecessary and immaterial. Rejected in Finding 31, and otherwise as not based on competent substantial evidence. 9-10. Adopted in Finding 5, but otherwise Rejected as immaterial and unnecessary. Adopted in Finding 31. 12-15. Adopted in Finding 4, but otherwise Rejected as immaterial and unnecessary. Adopted in Finding 28. Rejected in Finding 43. 18-19. Adopted in Finding 28. Adopted in Findings 7, 20, 52, but otherwise Rejected as immaterial and unnecessary. Adopted in Finding 1. Adopted in Finding 19. Adopted in Finding 7. Adopted in Finding 3, but otherwise Rejected as immaterial and unnecessary. Adopted in Findings 7, 30. Adopted in Finding 45. Adopted in Finding 50. Adopted in Finding 20, but otherwise Rejected as unnessary. Adopted in Findings 13, 30, 35. Adopted in Finding 40. Adopted in Finding 17. Adopted in Finding 18. Rejected as unnecessary and cumulative. Adopted in Finding 21, but otherwise Rejected as unnecessary and cumulative. Adopted in Finding 17. Adopted in Finding 18. 37-38. Adopted in Finding 20. 39. Adopted in Findings 34, 35. 40-41. Adopted in Finding 30. 42. Adopted in Findings 45, 47-51. 43-44. Rejected as unnecessary and cumulative. Rulings on Proposed Findings of Fact filed by Plant: Adopted in Finding 1. Adopted in Finding 2. Adopted in Finding 3. Adopted in Finding 4. Adopted in Finding 1. Adopted in Findings 16, 17. Adopted in Finding 11. Adopted in Findings 7, 30. Rejected as immaterial and unnecessary. Adopted in Finding 17. 11-12. Adopted in Finding 19. 13-14. Adotped in Findings 19, 20. 15-16. Adopted in Finding 1, but otherwise Rejected as immaterial and unnecessary. 17. Rejected as unnecessary. 18-19. Adopted in Findings 7, 30. Adopted in Finding 36. Adopted in Findings 35, 47, but otherwise Rejected as unnecessary. Adopted in Findings 25, 27 but otherwise Rejected as immaterial and unnecessary. Adopted in Finding 34. Adopted in Findings 37, 38. 25-26. Adopted in Finding 46, but otherwise Rejected as unnecessary. 27. Rejected in Finding 42. 28-30. Adopted in Findings 45, 50. Ruling on Proposed Findings of Fact filed by Bayfront/Children's: Adopted in Finding 2. Adopted in Finding 9. Adopted in Finding 5. Rejected as unnecessary and immaterial. Adopted in Finding 5. Adopted in Finding 31, but otherwise Rejected as cumulative. Adopted in Finding 4. Rejected as immaterial and cumulative. Adopted in Findings 4, 49. 10-13. Adopted in Finding 4, but otherwise Rejected as unnecessary and cumulative. 14-17. Adopted in Finding 28, but otherwise Rejected as unnecessary and cumulative. 18-19. Rejected as immaterial and unnecessary. 20-28. Adopted in Findings 39, 44, but otherwise Rejected in Finding 43 and as immaterial and unnecessary. Adopted in Finding 7, but otherwise Rejected as unnecessary and immaterial. Adopted in Findings 11, 49, but otherwise Rejected as unnecessary. Adopted in Findings 7, 30, 40. Rejected as unnecessary and immaterial. Adopted in Finding 17. Adopted in Finding 18. Rejected as cumulative. Adopted in Finding 21, but otherwise Rejected as unnecessary. Adopted in Finding 17. Adopted in Findings 49, 51. 39-40. Adopted in Finding 18. 41-44. Adopted in Finding 20, but otherwise Rejected as unnecessary and cumulative. Adopted in Finding 30, but otherwise Rejected as cumulative and unnecessary. Adopted in Finding 18, but otherwise Rejected as cumulative and unnecessary. Adopted in Findings 34, 35, 47, 48. Adopted in Finding 51. 49-51. Adopted in Findings 30, 31. Adopted in Findings 34, 35, 47, 48. Rejected as unnecessary and immaterial. Rejected as cumulative. COPIES FURNISHED: W. David Watkins, Esquire P. O. Box 6507 Tallahassee, FL 32314-6507 Ivan Wood, Esquire 1221 Lamar, Suite 1400 Four Houston Center Houston, TX 77010-3015 John H. Parker, Esquire 1200 Carnegie Building 133 Carnegie Way Atlanta, GA 30303 Guyte McCord, Esquire P. O. Box 82 Tallahassee, FL 32302 Cynthia Tunnicliff, Esquire P. O. Drawer 190 Tallahassee, FL 32302 Stephen A. Ecenia, Esquire P. O. Drawer 1838 Tallahassee, FL 32301 Darrell White, Esquire P. O. Box 2174 Tallahassee, FL 32316-2174 S. Power, Agency Clerk 1323 Winewood Boulevard Tallahassee, FL 32399-0700 John Miller, General Counsel 1323 Winewood Boulevard Tallahassee, FL 32399-0700 Gregory Coler, Secretary 1323 Winewood Boulevard Tallahassee, FL 32399-0700 =================================================================
The Issue Whether Certificate of Need (CON) applications 10386 and 10388 filed by South Broward Hospital District, d/b/a Memorial Regional Hospital (Memorial), to establish a pediatric kidney transplantation program at Joe DiMaggio Children’s Hospital and an adult kidney transplantation program at Memorial Regional Hospital in Broward County, both of which are proposed for organ transplantation service area (OTSA) 4, should be approved. Alternatively, do competing CON applications 10387 and 10389 filed by North Broward Hospital District, d/b/a Broward Health Medical Center (Broward Health), to establish a pediatric kidney transplantation program at Chris Evert Children’s Hospital and Broward Health Medical Center, on balance, better satisfy the applicable statutory and rule review criteria for award of a CON to establish a pediatric or adult kidney transplantation program in OTSA 4?
Findings Of Fact Background AHCA is the state health planning agency charged with administering the CON program pursuant to the Health Facility and Services Development Act, sections 408.031-408.0455, Florida Statutes. Pursuant to Florida Administrative Code Rule 59C-1.044, AHCA requires applicants to obtain separate CONs for the establishment of each adult or pediatric organ transplantation program, including heart, kidney, liver, bone marrow, lung, lung and heart, pancreas and islet cells, and intestines transplantations. For purposes of determining the need for organ transplantation services, the State of Florida is divided, by rule, into four service planning areas, corresponding generally with the northern, western central, eastern central, and southern regions of the state. “Transplantation” is “the surgical grafting or implanting in its entirety or in part one or more tissues or organs taken from another person.” Fla. Admin. Code R. 59A- 3.065. “Kidney transplantation” is defined by rule 59C- 1.002(41) as a “tertiary health service, “a health service which, due to its high level of intensity, complexity, specialized or limited applicability, and cost, should be limited to, and concentrated in, a limited number of hospitals to ensure the quality, availability, and cost effectiveness of such service.” For purposes of kidney transplantation, a “pediatric patient” is “a patient under the age of 15 years.” Fla. Admin. Code R. 59C-1.044(2)(c). The Applicants The North Broward Hospital District and South Broward Hospital District are special, independent taxing districts established by the Legislature to ensure access to needed medical services to the residents of Broward County. Both districts are governed by respective boards appointed by the Governor. BHMC has a strong and diverse medical staff, including a broad mix of pediatric and adult specialists and subspecialists who provide high quality care to all segments of the community. More than 350 physicians are on BHMC's active medical staff, with the comprehensive medical staff totaling more than 900 professionals. BHMC is a statutory teaching hospital and the flagship hospital of the North Broward Hospital District. CECH is located within BHMC and offers pediatric specialists and subspecialists, including physicians in the areas of pediatric cardiology, pediatric critical care medicine, pediatric emergency medicine, pediatric endocrinology, pediatric gastroenterology, pediatric genetics, pediatric hematology- oncology, pediatric infectious disease, pediatric intensivist, pediatric nephrology, pediatric ophthalmology, pediatric pulmonary, pediatric rheumatology, pediatric surgery, and pediatric urology. The South Broward Hospital District operates MRH, Memorial Regional Hospital South, JDCH, Memorial Hospital West, Memorial Hospital Miramar, and Memorial Hospital Pembroke. MRH is a 777-bed acute care tertiary hospital. It is the flagship facility of the South Broward Hospital District and is one of the largest hospitals in Florida. MRH offers extensive and diverse health care services, including the Memorial Cardiac and Vascular Institute, which features renowned surgeons and an adult heart transplantation program. MRH also includes the Memorial Cancer Institute, which treats more inpatients than any other in AHCA District 10, and Memorial Neuroscience Center, which provides innovative technology and world-class physicians. JDCH is a dedicated pediatric hospital physically connected to MRH. The leadership of both the North Broward and South Broward Hospital Districts were in the midst of transition at the time of the final hearing. Although there was an attempt to suggest that such transitions should be a factor in this CON proceeding, both Districts are stable, well-established providers. Personnel changes, including the replacement of chief executive officers at both Districts, were not an influential factor in this proceeding. The Applicants’ Experience with Transplant Services Broward Health has provided liver transplantation since 2004. Broward Health's liver transplantation program has had higher annual volumes in the past, but is currently offering approximately 12 liver transplantations per year. In total, Broward Health has performed more than 200 liver transplantations since beginning its program. On or about June 23, 2010, Broward Health entered into a five-year contract with the University of Miami (UM) under which UM agreed to provide Broward Health with surgical coverage for Broward Health’s liver transplantation program. Throughout its history, Broward Health's liver transplantation program has offered high quality. During the two most recent surveys, in 2009 and 2012, inspectors with the Centers for Medicare and Medicaid Services (CMS) found that Broward Health's liver transplant program had no deficiencies. Broward Health’s liver program complies with all CMS and United Network for Organ Sharing (UNOS) standards. Broward Health’s liver transplant program exceeds national standards. As of June 2014, 63.3 percent of Broward Health’s transplant patients received a liver transplant within six months of being placed on the waitlist. This is less than half of the national average of 15.3 months. Additionally, Broward Health's mortality rate for liver transplantation is far better than national standards. Memorial established a pediatric heart transplant program in 2011 and an adult heart transplant program in 2014. Memorial's adult and pediatric heart transplant volumes have been relatively low. Memorial has performed a total of 14 pediatric heart transplants over the past five years. In 2012, Cleveland Clinic Hospital (CCH) filed a letter of intent (LOI) and application to establish an adult kidney transplant program. Broward Health submitted a grace period LOI and competing application, No. 10152. Both applications were initially approved and neither was challenged. Accordingly, both programs received final approval by AHCA. After receiving the adult kidney transplant program approval, Broward Health attempted to amend or supplement its liver transplantation agreement with UM to include UM surgical and medical support for Broward Health’s adult kidney transplantation program. Broward Health also applied to UNOS for approval of the adult kidney transplantation program, and identified the UM physicians as those who would provide the necessary surgical support for the program. However, Broward Health never reached an agreement with UM to use its kidney transplant surgeons and did not otherwise recruit the necessary physicians. Broward Health's CEO at that time, Mr. Frank Nask, found UM's proposal to support the kidney transplantation program to be cost prohibitive and decided not to execute the contract amendment with UM. He then instructed staff to dismantle the UNOS-approved kidney transplant program they had already created. Despite the inability to negotiate kidney coverage with UM in 2012, Broward Health continued to offer its adult liver transplantation program using UM surgeons. Had UNOS known that the UM doctors were not available to perform kidney transplants, it would not have approved Broward Health’s adult kidney transplantation program. In March 2014, Broward Health notified CMS, UNOS, and its patients that it was “inactivating” its adult kidney transplantation program. Inexplicably, Broward Health never notified AHCA of this decision. On January 14, 2015, AHCA advised Broward Health that CON No. 10152 had expired and requested that Broward Health return the CON. There is no dispute that CON 10152 has been terminated. Two batching cycles passed from the time Broward Health closed its adult kidney transplantation program until the cycle at issue in these proceedings. In its application for CON No. 10152, Broward Health recognized that an applicant’s prior failure to implement a CON is a proper consideration in the award of future CONs. The application touted Broward Health’s “history of providing transplantation services compared to that of CCH. CCH had an adult kidney transplant program . . . but elected to abandon [it] . . . .” (Memorial Ex. 23, pp. MHS15031-32). Memorial was awarded a CON to establish an adult heart transplantation program at the same time Broward Health was awarded CON No. 10152. Memorial successfully recruited the necessary physicians and staff and implemented that program. The nature of the tertiary services and the two-year planning horizon in this proceeding underscore the importance of applicants being positioned to successfully implement the programs with as little delay as possible. The Applicants’ Proposals Broward Health Broward Health’s proposal relies on the experience it gained through its substantial implementation of its kidney transplantation program in 2012, as well as existing experience and resources related to their adult liver transplantation program. Broward Health acquired significant experience in establishing an adult kidney transplantation program by applying for, and receiving, UNOS approval in 2012. Broward Health's application proposed to hire two abdominal transplant surgeons, Dr. El Gazzaz and Dr. Misawa. The offer to Dr. Misawa, however, has since been withdrawn. Broward Health expects to hire Dr. El Gazzaz. Since the filing of its CON application, Broward Health decided to supplement its surgical coverage by expanding its existing contract with the Cleveland Clinic for liver transplant surgical coverage to include kidney transplantation services should the kidney program receive approval. Broward Health conditioned acceptance of a pediatric kidney transplantation CON on also receiving approval of the adult kidney transplantation CON. Broward Health prepared its financial schedules under the assumption that the adult and pediatric programs were linked, and that both would receive approval. Since livers and kidneys are both abdominal organs, there is substantial overlap in the type of care that is required for transplant patients for each organ. Sometimes both kidneys and livers are transplanted at the same time. Historically, Broward Health has referred out 10 to 15 percent of its liver transplant patients to other providers because it could not offer combined kidney/liver transplantation. Broward Health has accumulated experienced personnel for abdominal transplants. Broward Health's existing nurses care for liver transplant patients and are therefore already prepared to care for kidney transplant patients. Broward Health's team also includes a transplant social worker, transplant psychologist, financial counselors, and quality coordinators. Broward Health plans to hire an additional financial specialist and two Registered nurses (RNs), as well as additional full-time equivalents (FTEs) for a data analyst, pharmacist, and dietician. Broward Health proposes to use the same clinical and ancillary staff for both adult and pediatric kidney transplantation. Unlike Memorial, Broward Health does not intend to perform kidney transplants using live donor organs. Rather, cadaveric organs will be used exclusively. Neither of Broward Health’s applications includes the expense of hiring or contracting for the surgeons needed for its proposed programs. Indeed, there was no evidence that Broward Health’s existing liver transplant surgeons would be willing to perform kidney transplants such that their presence at BHMC or CECH would give Broward Health an advantage in terms of the degree to which its existing services would support its proposed programs. Broward Health has previously developed kidney transplantation policies and procedures related to its 2012 kidney program. These policies and procedures will only require minor updates relative to its later application. Memorial The Memorial adult program would be located at its flagship hospital, MRH. Memorial asserts that it has the requisite staff and resources currently in place to provide expert care to adult patients with chronic end-stage renal disease (ESRD). Memorial points out that staff on the general nursing units and critical care units have extensive experience in the care of patients with chronic kidney disease. Memorial asserts a full range of appropriate inpatient and outpatient services for this patient population on a 24-hour basis including, but not limited to, continuous renal replacement therapy, hemodialysis, and cyclic peritoneal dialysis. Memorial points out that it developed a program to educate staff regarding specific issues related to transplant care (as part of the development of its cardiac transplant program) and that much of this education is relevant to the kidney transplant population. Memorial plans to recruit an experienced transplant surgical director, transplant surgeons, transplant nephrologists and surgical team, and all necessary staff as required. As to Memorial’s proposed pediatric program, the program would be located at JDCH, which is on the campus of, and physically connected to, MRH. JDCH has operated a pediatric nephrology and hypertension program, offering advanced care for children with acute or chronic kidney disorders since 2003. The program is headed by Dr. Alexandru Constantinescu, a board certified pediatric nephrologist. JDCH operates the only pediatric outpatient dialysis unit in Broward County. Dialysis is necessary to sustain the life of a patient with ESRD. With the exception of the actual surgical procedure, JDCH currently provides all the medical care and ancillary services required by pediatric kidney transplant patients, including pre-transplant care, transplant follow-up, and long- term post-transplant care. The only additional personnel JDCH needs in order to implement a pediatric kidney transplantation program is a transplant surgeon and a transplant coordinator, and both are identified in JDCH’s application. JDCH currently refers children who need kidney transplants to other facilities to receive the actual transplant surgery. After transplantation, the patients return to JDCH for their ongoing follow-up care. JDCH’s program also includes a cutting-edge component to transition pediatric transplant patients into the adult clinical setting. Because a transplant patient never ceases to be followed by his or her medical providers, JDCH’s program allows patients to stay within the same institution and to interact with the adult providers during the transition and adjustment period from child to adult. This existing program gives Memorial an advantage over Broward Health with respect to its pediatric and adult applications. In 2006, JDCH became one of five centers that compose the Florida’s Comprehensive Children’s Kidney Failure Center (“CCKFC”) program. JDCH is the only non-academic center approved to provide nephrology care for children with chronic kidney disease who are enrolled in the Department of Health Children’s Medical Services network. In addition, JDCH and Memorial have provided pediatric and adult heart transplantation services since 2010 and 2014, respectively. JDCH’s pediatric heart transplantation program was certified by the CMS in 2011 and was recertified in 2015. CMS certified Memorial’s adult heart transplantation program in November 2015. Memorial has committed to the development and implementation of its pediatric kidney transplant program, regardless of whether its adult program is also approved. The Review Criteria The statutory criterion for the evaluation of CON applications, including applications for organ transplantation programs, is set forth at section 408.035. In addition, AHCA has promulgated a transplantation rule, rule 59C-1.044, which governs the approval of new programs. However, the rule does not contain a methodology that predicts the future need for transplant programs. Instead, the rule sets forth a minimum volume of annual transplants for existing programs that must be met before a new program will normally be approved. The parties agree that the availability, quality of care, accessibility, and extent of utilization of existing health care facilities and health services in OTSA 4 under section 408.035(1)(a), immediate financial feasibility under section 408.035(1)(f), and costs and methods of construction under section 408.035(1)(i) are not at issue. Section 408.035(1)(a) and Rule 59C-1.044(8)(d): The need for the health care facilities and health services being proposed All parties are in agreement that there is a need for at least one new adult kidney transplant program and one new pediatric kidney transplant program in OTSA 4. However, Broward Health argues that two additional adult kidney transplantation programs could be supported in OTSA 4. Memorial disagrees with this contention. Neither applicant’s need or utilization projections, nor the Agency’s SAARs, considered simultaneous approval of two new adult kidney transplant programs. Broward Health’s applications make no mention of a need for two adult kidney transplantation programs, and do not include any analysis of the impact of approving two programs. Broward Health’s health planning expert, Mark Richardson, acknowledged that “the application basically was put forth to show there was a need for the Broward program. It was silent on whether there is a need for a second or not.” Nothing in Broward Health’s applications address the impact Memorial and Broward Health’s proposed adult kidney transplantation programs would have upon each other or upon existing providers if both were approved. The notion of approving both adult applications would have impacted AHCA’s analysis with respect to a number of review criteria, including utilization of existing programs, availability of resources such as health personnel, extent to which the proposed services will enhance access and competition, and the impact on existing providers. Stated differently, Broward Health’s position at hearing that two adult kidney transplantation programs should be approved would have altered the nature and scope of Broward Health’s adult application, as well as the Agency’s review of both the Memorial and Broward Health adult applications. Memorial’s health care planning and financial expert, Michael Carroll, assessed the applicants’ need projections as well as population growth, the incidence of ESRD in OTSA 4, volumes of existing kidney transplant providers in Florida, and availability of organs. Memorial projects that its programs will perform 30 adult kidney transplants and five pediatric kidney transplants. Mr. Carroll found the projections reasonable based on the number of kidney transplants being performed in OTSA 4, and the recent growth in procedures. No contrary evidence was presented. Mr. Carroll’s analysis confirms the need for one additional adult kidney transplantation program in OTSA 4. In part because kidney transplantation is constrained by the availability of organs, Mr. Carroll opined that only one adult program should be established at this time. Broward Health’s planning expert, Mark Richardson, also reviewed existing volumes, population and discharge data, and information gathered from meetings with Broward Health representatives. He opined at final hearing that OTSA 4 could sustain two additional adult kidney transplantation programs. Mr. Richardson’s opinion is based on the fact that each applicant forecasted 30 adult kidney transplants by the end of year two for what he interpreted as a total of 60 cases. Mr. Richardson argued that, even if two new programs were approved, these figures would satisfy the requirement in rule 59C-1.044(8)(d), that each applicant project a minimum of 15 adult kidney transplants per year by the end of year two. Mr. Richardson’s opinions assume that Broward Health will capture approximately 29 percent of Broward County kidney transplant patients, its current market share of patients discharged with certain renal failure diagnostic codes. In 2013, 97 Broward County residents received kidney transplants somewhere in Florida. Mr. Richardson assumed that if Broward Health captured 29 percent of those patients, they would account for 80 percent of Broward Health’s projected kidney transplant volume, with the other 20 percent resulting from in-migration, for a total of 35 kidney transplants. Mr. Richardson assumed that 30 of those patients would be adults, and five pediatric. The 97 patients in Mr. Richardson’s analysis received both cadaveric and living donor transplants. Broward Health will not use living donor organs at least for the first four years of its programs. Living donor transplants account for 20 to as much as 40 percent of kidney transplants. Mr. Richardson’s methodology therefore cannot be applied to a program like Broward Health’s, which would be restricted to cadaveric donors. The credible evidence of record established that there is a need for one additional pediatric kidney transplantation program and one, not two, additional adult kidney transplantation program in OTSA 4. Section 408.035(1)(c): The ability of the applicant to provide quality of care and the applicant’s record of providing quality of care; Section 408.035(1)(d): The availability of resources, including health personnel, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation; and Rules 59C-1.044(3-4) and 59C- 1.044(8)(a-c) The parties’ disagreement concerning which applications best satisfy the above criteria centered on: (1) which applicant’s existing programs provide a greater degree of support for the proposed programs; (2) the applicants’ ability to recruit the necessary physicians to implement the programs, taking into consideration Broward Health’s failure to implement the adult kidney transplantation program awarded by CON No. 10152; (3) the use of employed versus contracted physicians; (4) the use of living donor organs; (5) the “co- location” of the proposed adult and pediatric programs; and the results of a May 2015 CMS survey of Memorial’s pediatric heart transplantation program. Which applicant’s existing programs provide a greater potential degree of support Broward Health relies heavily on its existing adult liver transplantation program, and the prior approval by UNOS of its now-terminated adult kidney transplantation program, to argue that it is best-suited to operate the adult and pediatric kidney transplantations programs at issue in this proceeding. However, there was no evidence that Broward Health’s existing liver transplant surgeons will perform kidney transplants such that their presence at BHMC or CECH could give Broward Health an advantage in terms of the degree to which its existing services would support its proposed programs. Moreover, liver transplant volume at Broward Health has steadily declined since 2007. The program has never been profitable, and Broward Health has considered discontinuing it. Broward Health also asserts that its experience transplanting livers, which, like kidneys, is an abdominal organ, should be weighed more heavily than Memorial’s experience with heart transplants. According to Broward Health, many staff members from Broward's liver transplant program can simultaneously work with the kidney transplant program, because the two abdominal transplant programs require a similar skill set that is transferrable from one to the other. However, again, given the uncertainty as to the identity of the surgeons who will be performing the kidney transplants for Broward Health, this argument is unpersuasive. Given the history, size, and resources of both hospital systems, the undersigned concludes that the proposed adult kidney transplantation programs are on equal footing as to the support offered by their existing programs. However, given Memorial’s experience with pediatric heart transplant patients, Memorial has an advantage over Broward Health with respect to the pediatric kidney program. As noted by several witnesses at hearing, children are not “little adults,” and therefore a track record of working with children is crucial. The applicants’ ability to recruit the necessary physicians to implement the programs; and The use of employed versus contracted physicians Rule 59C-1.044(4) requires that applicants meet certain staffing requirements, including: ”The program shall employ a transplant physician, and a transplant surgeon, if applicable, as defined by the United Network for Organ Sharing (UNOS) June 1994.” Absent evidence that either applicant had secured the necessary physicians to support its programs, AHCA properly reviewed each applicant’s history of recruitment and establishing transplant programs. Memorial has already successfully recruited physicians and other health care professionals needed to care for ESRD and kidney transplant patients. Its existing transplant programs are operated under the direction of physicians who are employed by MRH. In contrast, for whatever reason, Broward Health was not able to reach an agreement with UM to provide the required surgical and medical support for its previously approved kidney transplantation program, resulting in the abandonment of the program. Memorial’s record of recruiting for, and implementing organ transplantation programs, compared to Broward Health’s record, gives Memorial an advantage in terms of the applicants’ history of providing, and ability to provide, quality of care in organ transplantation. Employed, as opposed to contracted physicians, are more invested in their transplant programs, and provide the hospital with more control in ensuring that the service is implemented and operational. Employing physicians also improves patient safety and outcomes. Unlike Memorial, Broward Health’s existing transplantation program is directed by contracted physicians. Broward Health’s applications state that “two kidney transplant surgeons [are] currently committed to support the proposed new adult and pediatric programs and a third surgeon [is] currently being recruited.” The “two kidney transplant surgeons” are identified in letters of intent, accepted into evidence over a hearsay objection. Neither of the physicians who purportedly signed the letters testified at the hearing. The letters of intent are not binding. Indeed, one of the letters was revoked at the instruction of Dr. Tzakis, the Cleveland Clinic surgeon who serves as medical director for Broward Health’s liver program. The second physician was being recruited for Broward Health’s liver transplantation program; his letter of intent did not address kidney transplantation. It became apparent at hearing that Broward Health’s “plan A” has now become to contract with the Cleveland Clinic to provide professional services, including surgical coverage for the proposed kidney transplantation programs. Memorial’s plan to employ physicians, rather than contract for their services, gives Memorial and JDCH an additional advantage over BHMC and CECH. The use of living donor organs Unlike Broward Health, Memorial will use living donor organs, as well as deceased or “cadaveric” donor organs, in its proposed programs, and its applications include the related costs associated with establishing a live donor program. There are significant benefits to use of living donor organs, including reduction or elimination of a patient’s time on the waiting list, improved recovery times, better patient outcomes, increased organ life, and the possibility of avoiding dialysis, which carries an increased risk of mortality for children. As acknowledged by Broward Health in its application for CON No. 10152, living donor kidney transplantation also has the following “distinct advantages:” instead of occurring on an emergency schedule based upon the availability of a suitable organ, the procedure can be scheduled so as to best accommodate the needs of both recipient and donor, and to minimize organ preservation time. In many instances, the total time from removal of the organ to restoration of blood flow in the recipient can be less than one hour. For these and other reasons, live donor transplants typically result in better quality of life and longer survival rates for recipients. (Memorial Ex. 23, p. MHS15056). Memorial’s plan to use living donor organs gives it an advantage over Broward Health in terms of its ability to provide quality of care in pediatric and adult kidney transplantation. The “co-location” of the proposed adult and pediatric programs Especially for pediatric patients nearing the transition to adult care, there are significant benefits in “co- locating” adult and pediatric transplant programs, i.e., one provider operating both programs. For example, co-location allows pediatric patients to transition into the adult setting with providers they trust, reduces the patient and family’s stress, and improves quality of care. In addition, some resources from adult and pediatric kidney transplantation programs can be shared if they are co- located, which improves the programs’ financial feasibility. These factors weigh in favor of granting both pediatric and adult programs to one provider, if appropriate. The May 2015 CMS survey of Memorial’s pediatric heart transplantation program Broward Health’s primary attack against Memorial with respect to sections 408.035(1)(c) and (d), centered on the results of a May 2015 CMS survey of Memorial’s pediatric heart transplantation program. The survey found numerous deficiencies, including deficiencies related to patient safety. CMS notified Memorial that the deficiencies were substantial enough to warrant terminating the program if not immediately corrected. CMS notified Memorial that the program would be terminated unless the deficiencies were cured within 45 days. In response to the survey, Memorial hired an outside consultant, Transplant Solutions. Transplant Solutions conducted its own survey and identified the same deficiencies noted in the CMS survey. Even after Memorial implemented its corrective action plan, CMS found additional deficiencies, though the new deficiencies were not sufficient to warrant termination of the program. Barbara Sverdlik, Director of Nursing and Transplant Administrator at BHMC, compared the lack of deficiencies in the 2012 survey of Broward Health’s adult liver transplantation program with the results of the May 2015 survey of JDCH’s pediatric heart transplantation program. As Ms. Sverdlik acknowledged, JDCH ultimately passed its 2015 survey and, in spite of the results of the initial survey, “[JDCH] could offer a good quality [pediatric kidney transplantation] program.” Although concerning, it is not entirely surprising that numerous deficiencies were found in Memorial’s relatively new pediatric heart transplant program. However, it is more significant to the undersigned that Memorial took immediate action to correct those deficiencies in order to ensure that the program continued without interruption. JDCH’s May 2015 Survey therefore does not give Broward Health any advantage or Memorial any disadvantage under the review criteria. Section 408.035(1)(e): The extent to which the proposed services will enhance access to health care for residents of the service district Three primary considerations were identified at final hearing relevant to which applicant’s proposed programs are more likely to enhance access: the commitment of each applicant to the proposed programs; the availability of donor organs at each facility; and the availability of services at each facility. Access is significantly enhanced by the use of living donor organs, not only for the living donor recipient, but also for other potential transplant recipients on the wait list. The 20 to 40 percent of kidney transplant patients who could receive a living donor transplant would not have access to kidney transplantation at Broward Health for at least the first four years of its programs, whereas those same patients would have immediate access to the needed services at Memorial. In this regard, and as acknowledged by witnesses for the Agency and Broward Health, Memorial’s programs would enhance access to needed kidney transplantation services to a significantly greater extent than Broward Health’s. In its applications and at final hearing, Broward Health touted its existing adult liver program as providing a foundation for its proposed kidney transplantation programs. However, just five percent of liver transplant recipients require a simultaneous liver and kidney transplant. Any access advantage Broward Health might claim to patients requiring dual transplantations is outweighed by Memorial’s use of living donor organs which impacts a much larger percentage of transplant patients. It is uncontroverted that Broward Health abandoned its prior adult kidney transplantation program, thereby exacerbating the access challenges that exist in OTSA 4 with regard to kidney transplant services. Also, despite a recognized need for a pediatric program, Broward Health’s pediatric application was conditioned on the award of the adult program; it “will not be developed as a stand-alone pediatric kidney transplant program.” (JE 12, p. BH83). The adult program is really Broward Health’s focus, and this is evident even in Broward Health’s financial and staffing projections. As established through the final hearing testimony of their CEOs, MRH and JDCH are steadfastly committed to establishing pediatric and adult kidney transplantation programs. It is also noteworthy that JDCH operates the only pediatric outpatient dialysis program in Broward County, again highlighting its commitment to the pediatric population suffering from kidney disease. In contrast, the proposed Broward Health program would rely on a third party, DaVita, to provide pediatric outpatient dialysis. As the applicant which is more committed to provide the needed services to both the pediatric and adult populations, and which has an unblemished track record of implementing programs, Memorial would enhance access to pediatric and adult kidney transplantation services in OTSA 4 to a greater extent than Broward Health. At hearing, Marisol Fitch, the Agency representative, explained why AHCA concluded that as between the two applicants, Memorial would be most likely to enhance access to this needed service: Q So as between these two applicants, one telling you that if you don’t give them a CON for an adult program, they are not going to implement a CON for the children’s program, versus the other one, which of these two applicants would best ensure and enhance access for residents of this area of the state? A If you are talking about all residents, including the pediatric population, then it would be the applicant that was going to do both. Q That’s Memorial; isn’t that right? A They did not condition their application on – they would do the pediatric without the adult. Q Now I will ask you the same question regarding the issue of the live donor program. One applicant is indicating they will not establish and operate a live donor program, the other one will. Of the two applicants, which would enhance access to the residents of the district that we are dealing with here? A The applicant that used live donor since a large chunk of donors for kidneys are live donors. Q That would mean Memorial; isn’t that right? A That is correct. Section 408.035(1)(f): The immediate and long-term financial feasibility of the proposal The parties have stipulated that short-term financial feasibility, the ability to fund and open the projects, is not at issue. However, the parties contested the long-term financial feasibility of each proposal. The Agency’s application review concluded that the proposed programs were financially feasible in the long-term. That conclusion presumed that the assumptions underlying the applicants’ financial figures were appropriate. In Schedule 8A of its pediatric application, Memorial projected a net loss of $1,129,885 in its second year, while Broward Health projected a net excess of revenue over expenses of $200,717 at the end of year two. In Schedule 8A of its adult application, Memorial projected a net loss of $589,691 in its second year, and Broward Health projected a net excess of revenue over expenses of $560,709 at the end of year two. According to Broward Health’s financial consultant, Tom Davidson, the primary reason Broward Health’s financial projections appear more favorable than Memorial’s is because Memorial’s applications include the costs of required transplant physicians, while Broward Health’s do not. As Mr. Davidson testified at hearing: Q How can you explain that difference? Have you analyzed the two pro formas to figure out why Broward Health projects it can make money at a lower volume than what you think Memorial Health would do to break even? A Yes, I mean it’s entirely – not only in the pro formas, but actually in the real world, it is a function of the physician expense. This is kind of an interesting case from a financial feasibility point of view because there is really only one issue that needs to be analyzed. You have two applicants in the same county, both tax- supported programs that provide a lot of charity care. They both want the same service, they are both projecting the same volume. Every line item in the real world, forget about what’s in the pro formas, but when the real world comes around, whatever goes on in terms of payer mix, gross charges, and in particular net revenues with Medicare and Medicaid and commercial insurers, all those numbers are just going to be what they are. They are going to have to spend the same money to take care of the transplant patient. There is nothing really that a sensible human being could bring up that would distinguish the two in terms of financial feasibility except for this one issue. Does one hospital have to hire a bunch of new doctors to get into business or do both? Broward Health represented to me and I represented in the financial projections that I prepared that they would not. Memorial represented in their forecasts that they would. And that’s the entire difference. And it’s really the only difference that there can be between these two applications. Because otherwise, if you just think about it logically – you don’t have to be a finance person – there’s no – you can’t slip a piece of paper between these two programs in terms of revenues, expenses, and other expenses, because you’ve got to take care of patients. You have to give them lab tests and things cost what they cost. So without getting into some really kind of bazaar attempts to distinguish these two, that’s the question. And I think as a health planner it is my firm opinion that that is the only thing on the financial side that Your Honor has to consider, whether or not Broward Health has to hire doctors. Originally, Mr. Davidson included approximately $900,000 in his expense projections for the cost of adding two physicians. He later eliminated those expenses by assuming that the surgeons currently performing adult liver transplants would also perform Broward Health’s adult and pediatric kidney transplants at no additional cost. Broward Health’s applications do not include any costs associated with employing or contracting for physicians needed to operate its programs and Broward Health does not know what the financial terms of either arrangement might be. As acknowledged by Robyn Farrington, Chief Nursing Officer at BHMC, Broward Health will need additional physicians beyond those who are already either employed or contracted by Broward Health in order to operate adult and pediatric kidney transplant programs. As Michael Carroll credibly testified, even assuming the surgeons performing liver transplants at BHMC also performed kidney transplants at no additional cost, it is improper to exclude the costs for those physicians from a financial assessment of the kidney program: “whatever time that liver transplant surgeon spends [performing kidney transplants] should be allocated to the kidney transplant program.” Broward Health’s pediatric application also failed to include any additional staff for the proposed project. This is because, unlike Memorial, the financial and staffing projections in Broward Health’s applications are interdependent: the staffing and expenses in Broward Health’s pediatric application assume that Broward Health is awarded the CON for an adult program and that, in large part, the adult program would support the pediatric program without the need for additional resources. Accordingly, no expenses associated with adding staff is reflected on Schedule 8A of Broward Health’s pediatric application. However, since children are not simply small adults, additional staff would, in fact, be required for Broward Health’s pediatric program. If its pediatric application is approved, Broward Health will then evaluate what additional staffing it might need for its program. However, as of now there is no way to determine from its applications what staff Broward Health will need for its pediatric program or what the additional cost of that staff will be. In short, there is no way to forecast the cost of either of Broward Health’s proposed programs. The uncertainty regarding the ultimate cost of the Broward Health programs contrasts with Memorial’s applications, which were presented as “stand-alone” projects with regard to projected costs. All resources necessary to operate the adult and pediatric kidney transplantation programs are included in each application. Notwithstanding the stand alone financial presentations, it is reasonable to assume that some resources will be shared if Memorial receives final approvals for both programs. As pointed out by Broward Health, Memorial’s applications contained four mathematical errors that impacted its financial projections. Specifically, Memorial included an incorrect number of adult transplants to be performed prior to CMS certification, improperly calculated Medicare reimbursements, overstated organ procurement costs, and included too many post-transplant follow up appointments. Memorial prepared corrected financial schedules to account for these errors. Revised Schedule 8A for Memorial’s adult application showed a net excess of revenue over expenses of $745,434 at the end of year two. Revised Schedule 8A for Memorial’s proposed pediatric program showed a net loss of $1,026,422 at the end of year two. The combined net loss at the end of year two for both programs totals $280,988. The errors did not affect Memorial’s volume projections, the programs’ scope, orientation, philosophy, accessibility, or need assessment. Memorial has the financial ability to absorb the losses for its proposed pediatric program, even if operated as a stand-alone program. If Memorial’s adult and pediatric programs are co- located, some resources will be shared, and the combined programs will approach break even by the end of year two. In this case, long-term financial feasibility is not accorded as much weight as it might be in other CON determinations, because there is an established need for these tertiary services, and both applicant organizations have the ability, if they so choose, to subsidize operational losses in order to maintain the programs. Stated differently, the projected long-term financial feasibility of both applicants’ proposals is not a basis for distinguishing between them. Rather, the commitment of the applicants to their proposals, as addressed above, is the more critical consideration. Section 408.035(1)(g): The extent to which the proposal will foster competition that promotes quality and cost- effectiveness The Cleveland Clinic is an existing provider of adult kidney transplantation services in OTSA 4. If Broward Health’s “plan A” is implemented, a contract with the Cleveland Clinic for surgeons to operate an adult kidney transplantation program in the same county and OTSA is less likely to foster competition that promotes quality and cost-effectiveness than approval of Memorial’s independent programs. Broward Health’s proposals will not foster competition for pediatric or adult living donor transplants. These considerations weigh in favor of Memorial with respect to the ability of both its proposed adult and pediatric kidney transplantation programs to foster competition pursuant to section 408.035(1)(g). Section 408.035(1)(i): The applicants’ past and proposed provision of health care services to Medicaid patients and the medically indigent Consistent with their missions, both applicants provide substantial services to Medicaid patients and the medically indigent. Mr. Richardson was critical of Memorial’s applications because they do not include Medicaid in their projected payor mix. However, Mr. Richardson’s data showed a miniscule percentage of Broward County residents who received a kidney transplant and are Medicaid-eligible. And although Medicare makes up a far larger portion of the payor mix, Broward Health’s pediatric application included no Medicare in its payor mix assumptions. As Mr. Davidson testified, it is improper to draw any conclusions from an applicant excluding Medicaid as a payor source or from the fact that Broward Health did not include any bad debt or charity care in its applications. As Mr. Richardson agreed, Memorial provides a large volume of Medicaid care and the pediatric applications are on equal footing on this criterion. Mr. Richardson also correctly agreed that the applicants are the same in terms of their history of serving Medicaid and medically-indigent adult patients. There is no evidence that either applicant has a greater commitment to providing kidney transplantation services to Medicaid patients and the medically indigent than the other. Accordingly, neither applicant is entitled to preference under this criterion.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered approving CON Application Nos. 10386 and 10388 filed by the South Broward Hospital District, d/b/a Memorial Regional Hospital, subject to the conditions contained in the applications, and denying CON Application Nos. 10387 and 10389 filed by the North Broward Hospital District, d/b/a Broward Health Medical Center. DONE AND ENTERED this 4th day of May, 2016, in Tallahassee, Leon County, Florida. S W. DAVID WATKINS Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 4th day of May, 2016.
Findings Of Fact The Agency For Health Care Administration ("AHCA") is the state agency responsible for the administration of certificate of need ("CON") laws in Florida. On February 5, 1993, AHCA published a need for one additional adult open heart surgery program in District 9. AHCA defines open heart surgery as a "tertiary health service" which, due to complexity, cost, and the relationship between volume and quality of care should be concentrated in a limited number of hospitals. Rule 59C-1.002(66), Florida Administrative Code. District 9 is located generally along the southeast coast of Florida and includes Palm Beach, Indian River, Martin, St. Lucie, and Okeechobee Counties. Palm Beach is the county at the southern end of District 9. The parties have referred to the counties other than Palm Beach, as the four northern counties. Martin County is north of Palm Beach, and St. Lucie, Okeechobee, and Indian River are further north. The applicants in this proceeding, seeking to establish an additional District 9 adult open heart surgery program, are Lawnwood Medical Center, Inc., d/b/a Lawnwood Regional Medical Center, Inc. ("Lawnwood"), St. Mary's Hospital, Inc. ("St. Mary's"), and Martin Memorial Medical Center, Inc. ("Martin Memorial"). Lawnwood Regional Medical Center Lawnwood is a 335-bed for-profit hospital located in Ft. Pierce, in St. Lucie County. Lawnwood has CON approval for the construction of an additional 18 skilled nursing beds and 10 level II NICU beds. In addition to the 335 licensed beds, Lawnwood has 16 unlicensed bassinets for a total of 351. Lawnwood's 335 licensed beds include 60 psychiatric beds, located one and a half blocks away from the main Lawnwood building, at a facility called Harbor Shores. Lawnwood has 260 general acute care beds. When Lawnwood filed its application, its parent corporation was HCA, Inc., a subsidiary of the Hospital Corporation of America. HCA was also the parent corporation of the Medical Center of Port St. Lucie, the only other hospital in St. Lucie County, and of Raulerson Hospital in Okeechobee County. After the application was filed and prior to hearing, a subsidiary of Columbia Health Care Corporation merged with HCA. As a result of the merger, the administrator of Lawnwood also serves as the market manager assigned to coordinate the services offered at the three hospitals. Lawnwood is classified by the State as a disproportionate share provider of Medicaid-reimbursed services for financially needy patients. In 1993, 21 percent of its total patient days were attributable to Medicaid and 4 percent to charity. Lawnwood operates an outpatient cardiac catheterization ("cath") laboratory and, in 1992, received CON approval to perform inpatient cardiac caths in a lab which was scheduled to open in October 1994. The outpatient lab opened in 1988 at Lawnwood. In 1989, 561 cardiac cath lab procedures were performed at Lawnwood, 494 in 1990, 362 in 1991, and 468 procedures in 1993. Although 602 procedures were reported to the local health council in 1993, these were performed on 468 patients, which is the number consistent with reporting methods of other cath labs. As a result of the diagnostic caths, 45 patients were referred for open heart surgery, and 98 for angioplasties. Of the 45 patients referred for open heart surgery, 26 were actually scheduled for the procedure. Lawnwood proposes to establish an adult open heart surgery program for a total project cost of $4.99 million. The project includes construction of two dedicated operating rooms, renovations to provide a 4-bed dedicated recovery room, and conversion of 12 acute care beds to construct a 12-bed cardiovascular intensive care unit ("CVICU"). St. Mary's Hospital St. Mary's is a 430-bed not-for-profit hospital, which has been operated 55 years by the Franciscan Sisters, currently through a parent organization called the Allegheny Health System. St. Mary's is the largest hospital in District 9, and the largest provider of womens' and childrens' medical services in the district. St. Mary's is a designated regional perinatal intensive care center with level II and III neonatal intensive care units, and is the designated level II trauma center for the northern area of Palm Beach County. Like Lawnwood, St. Mary's is recognized by the State as a disproportionate share provider of services to Medicaid reimbursed and indigent patients. It is approximately sixth in the state in the provision of services to financially needy patients. St. Mary's cardiac cath lab began operation in February 1988. There were 267 inpatient and 116 outpatient cardiac caths at St. Mary's lab in 1991, 240 and 118 respectively in 1992, and 171 and 115 respectively from January to November 1993. St. Mary's operates a 10-bed coronary care unit. St. Mary's proposes to establish an adult open heart surgery program for a total of $2,166,351, funded by private donors. The project will include renovations to two existing operating rooms and to a recovery room area. Martin Memorial Medical Center Martin Memorial is a 336-bed not-for-profit acute care hospital, with an additional 17 nursery/bassinets which are not required to be in the total licensed beds. The ultimate parent corporation for the Martin Memorial facilities and its foundation is Martin Memorial Health Systems, a not-for- profit corporation with a volunteer community board of directors. Martin Memorial's beds are divided between two campuses, with 236 beds in Stuart, and 100 in Port Salerno. The Port Salerno hospital opened in September, 1992 and is approximately 8 miles south of Stuart. Included in the 236 beds at Martin Memorial in Stuart are 5 level II neonatal intensive care beds, 23 intensive care unit beds, 45 ventilator, telemetry or other monitored beds, and 134 medical/surgical beds. Martin Memorial's existing cardiac services include a cardiac cath lab which opened in 1989 and, that year, reported 250 procedures. Caths at Martin reached the highest volume, 905 in 1991, followed by 799 in 1992, and 867 in 1993. Martin Memorial proposes to establish an adult open heart surgery program in Stuart for a total project cost of $3,594,720. Martin's project includes a newly constructed open heart surgery suite adjacent to the cardiac cath lab and, as a back-up, renovation of an existing operating room. As a part of an approved, separate CON application, Martin proposes to renovate and expand to accommodate a 13-bed surgical intensive care unit ("SICU") with four private rooms dedicated as a cardiovascular intensive care unit ("CVICU"). The expenses associated with the four CVICU rooms are included in the total open heart surgery project costs. Existing Open Heart Surgery Providers In Or Adjacent To District 9 All of the existing adult open heart surgery programs in District 9 are in Palm Beach County, at Delray Community Hospital ("Delray"), JFK Medical Center, Inc. ("JFK"), and AMI Palm Beach Gardens Community Hospital, Inc. d/b/a Palm Beach Gardens Medical Center ("Palm Beach Gardens"). The same services are also available in the adjacent districts to the north in District 7 at Holmes Regional Medical Center in Brevard County, and to the south in District 10 at AMI North Ridge General Hospital in Broward County. In addition, established referral patterns exist from District 9 to Miami Heart Institute in Dade County and Holy Cross Hospital in Broward County. All residents of District 9 have access to open heart surgery within two hours average drive time, which exceeds the geographic access standard of Rule 59C-1.033(4)(a), Florida Administrative Code. Delray is located in southern Palm Beach County and is a level II trauma center for that area. JFK is a 369-bed not-for-profit hospital located in Atlantis, Florida, approximately midway between Boca Raton and West Palm Beach, in north central Palm Beach County. The corporation which owns and operates JFK, also is the parent of a fund-raising foundation, and other subsidiaries, some of which are for-profit corporations. JFK has had an open heart surgery program since 1987. JFK's two operating rooms are equipped and sized identically, and located in close proximity to the two room cardiac cath lab and the intensive care unit. JFK has the capacity to perform up to 1000 cases annually, while actual annual volumes at JFK have ranged from 350 to 370 cases. Palm Beach Gardens is a 204-bed for-profit hospital located in the northern part of Palm Beach County. It operates the oldest open heart surgery program in the district, having started in 1982 or 1983. In fiscal year 1992- 1993, there were 477 open heart surgery patients at Palm Beach Gardens, of which 173 resided in the four northern counties of the District. Palm Beach Gardens has 11 operating suites, 7 capable of being used for open heart surgeries, and 4 dedicated solely to open heart surgeries. The current capacity of Palm Beach Gardens is 900 open heart procedures a year. By adding staff, Palm Beach Gardens could reach a volume of 1100 cases a year. While Palm Beach Gardens has excess capacity in its operating rooms, at the peak of its seasonal demand, delays occur in scheduling non-emergency surgeries due to inadequate capacity in its 24-bed intensive care unit. Occupancy levels in the 24 beds were 112.5 percent in 1993, according to Treasure Coast Health Council data. Although Palm Beach Gardens also suggested that an 8-bed overflow unit supplemented the 24 beds, accounting reports do not reflect billings for their use as intensive care services. Comparison of Applicants and Applications Subsection 408.035(1)(a) -- need in relation to state and local plans The 1989 state health plan, Healthy Floridians, includes six preferences for the review of open heart surgery applications. The first preference favors applicants establishing programs in counties with a population over 100,000 and a higher percentage than statewide average of 18.8 percent elderly persons. All the experts in health planning testified that the term "elderly" in this preference means persons 65 years of age and older, which is consistent with the age group with the greatest demand for open heart surgery. St. Mary, Lawnwood, and Martin meet the preference. The 1993 population of Palm Beach County was 900,000, St. Lucie's was 162, 598, and Martin's was 108,089. The population age 65 and over as a percentage of total population was 24 percent in Palm Beach, 21.2 percent in Lawnwood, and 27.5 percent in Martin County. The second state preference is for applicants who can demonstrate the ability to perform at least 350 annual procedures within 3 years of initiating an open heart program. Lawnwood reasonably projected a total of 314 open heart surgery procedures in year one, 350 in year two, and 386 in year three. Lawnwood's utilization projections are conservatively based on the assumption that, by the third year, 70 percent of its open heart patients will come from St. Lucie and Okeechobee Counties, which are already in its primary service area. Martin Memorial's expert questioned Lawnwood's projected open heart volumes from Martin and Indian River Counties, based on its acute care and cath lab patient origins. In addition, traditional referral patterns show Indian River patients going north to Brevard and Orange Counties, while Martin County patients go south to Palm Beach, Broward, and Dade Counties. Considering the acute care and cath lab competition within the four northern counties, the absence in that area of any competition for an open heart surgery program, the relative success of Lawnwood's outpatient cath lab despite its limitations and competition, and its affiliation with Port St. Lucie and Raulerson hospitals, Lawnwood established the reasonableness of its projected utilization. Lawnwood also reasonably expects to reverse some of the 73.5 percent out-migration for open heart surgery by residents of the northern four counties. See, Findings of Fact 27, infra. Martin Memorial's projections of 249 cases in year one, 317 in year two, and over 350 in year three are also reasonable. Martin Memorial's underlying assumptions, that its open heart surgery market share will at least equal that of its acute care, that it will keep some patients previously referred from its cath lab, and that, it, like Lawnwood, would reverse some district out-migration, are also reasonable. Martin Memorial referred 172 patients from its cath lab for open heart surgery in 1993, in contrast to 45 from St. Mary's, and 41 from Lawnwood. Martin Memorial's projections are based on 1991-1992 use rates which declined in 1993. Despite the one year decline and some expert predictions of a continuing downward trend in use rates, Martin Memorial's projections are bolstered by the fact that its open heart surgery primary service area includes Port St. Lucie, which contains 40 percent of the population of St. Lucie County and is the fastest growing area of District 9. That area, which is closer to Stuart, but is located in the St. Lucie County community in which Lawnwood has an affiliate hospital, supports both the projections of Lawnwood and Martin Memorial, and could be served by an open heart surgery program at either facility. Although Martin Memorial's projected volumes are higher than and inconsistent with other projections made by Martin Memorial, the reasonableness of the projections was established. St. Mary's projected 171 open heart surgeries in year one, 265 in year two, and 363 in year three. The projections are based on the use of a gravity model designed to determine potential volume "attracted" to the program by using the size of the hospital and the proximity of patients as factors. The model used a zip code level analysis to take into consideration the fact that St. Mary's expects a sub-county primary service area, as a result of sharing the county with the three existing District 9 providers. The projected utilization was reduced, by St. Mary's expert, to take into consideration an expected start- up factor. There is, however, substantial expert testimony that the variables and/or the weight attributed to each variable included in this gravity model are inadequate to explain actual or potential volumes. There is substantial evidence that the size of a hospital is not reliable enough to be one of only two variables in a model. For example, JFK although larger than Palm Beach Gardens, only exceeded 350 cases in 1991-1992 by 16, when smaller Palm Beach Gardens with an older open heart surgery program reached 499 cases. The model also fails to consider actual physician referral patterns. St. Mary's projections and its ability to exceed 350 cases also depend on its ability to attract Medicaid patients over and above the patients projected by the gravity model. See, Findings of Fact 35, infra. The volume of diagnostic cardiac caths at St. Mary's is low and has declined over the past three years. In part, the volume is low because there is no open heart surgery back-up available in the event the diagnostic cardiac cath indicates that need. Cath patients suspected of needing more invasive procedures are diverted by referring physicians to hospitals with angioplasty and open heart programs. But that explanation of St. Mary's volumes apparently is incomplete, since, by contrast Boca Raton Community Hospital and Martin Memorial, which also have no open heart surgery back-up, have had more steadily increasing cardiac cath volumes. The fact that St. Mary's cath volumes are low and its open heart surgery projections unreliable is also attributable to the fact that St. Mary's is located 11 miles north of JFK and 5 1/2 miles south of Palm Beach Gardens, therefore, at a competitive disadvantage with these established programs. The third state health plan preference applies to proposals, for improving access for persons currently leaving the district. With almost half of Palm Beach County open heart surgery patients receiving the service outside the county, St. Mary's claims to be in the best location to reverse that trend if geographical access is the problem. St. Mary's also points to the convenience of access to its hospital, which is 2 miles from Interstate 95, the main north-south transportation corridor through the district. Approval of St. Mary's proposal will not, however, reverse out-migration to the extent that it is attributable to factors such as seasonal residency, established physician referral practices from northern areas of District 9 to providers in adjacent districts, and managed care contractual arrangements. Lawnwood is located in the largest, fastest growing, and most centrally located county of the northern four counties. St. Lucie County is adjacent to each of the other three northern counties, with Martin to the south, Okeechobee to the west, and Indian River to the north. The level of "out-migration," defined as those patients leaving the district to receive the service, increases dramatically from south to north in District 9, from 55 percent in Martin, 70 percent in St. Lucie, 80 percent in Okeechobee, to 100 percent in Indian River County. Considering growth in western St. Lucie County, the needs of St. Lucie and Okeechobee County residents, and the alternative to out-migration provided for both Indian River and Martin County residents, the Lawnwood location is superior to that of Martin Memorial in terms of the ability to improve access to the service. See, also Findings of Fact 23-24, supra. The fourth state preference for applicants with a history of providing disproportionate share Medicaid and charity care favors the applications of St. Mary's and Lawnwood, in that order. Martin Memorial argues that it also meets the disproportionate share criteria, which the preference requires, although it has not been designated by the State, which the preference does not require. Relying on the criteria in subsection 409.911(2), Florida Statutes, Martin claims to meet or exceed the disproportionate share requirements for 1990, despite the agency's reliance on 1989 data. Assuming, arguendo, that Martin is entitled to the preference, the comparative ranking of St. Mary's first, Lawnwood second, and Martin third remains the same. In addition, the preference looks at a history of disproportionate service, as does subsection 408.035(1)(n), in part, which Martin failed to establish. For 1991, St. Mary's provided 15.8 percent of total District 9 Medicaid, Lawnwood provided 11.7 percent, and Martin Memorial, 1.7 percent. Martin Memorial established that it treated a larger number of Medicaid patients with circulatory diseases as a proportion of Medicaid patients in Martin County, as compared to St. Lucie County residents treated at Lawnwood. However, the absolute number of circulatory disease Medicaid patients treated at Lawnwood was approximately two and half times the number treated at Martin Memorial. Statistical indicators, including per capita income and low income patients diagnosed with circulatory diseases, demonstrate that residents of St. Lucie and Okeechobee Counties are less affluent, and more medically needy than those in Palm Beach and Martin Counties. The fifth state preference favors the applicant offering a service with the highest quality of care at the least expense. The preference includes an explanation that larger facilities usually have more available resources to meet the preference. As the largest hospital with the lowest cost per case by the second year of the program, $22,659, St. Mary's best meets the preference. Martin's projected cost is $26,909 and Lawnwood's is $27,085. Martin Memorial's expert calculated total expenses per case at $23,221 for Martin Memorial, $22,615 for St. Mary's, and $23,645 for Lawnwood. St. Mary's projected charges of $50,600 in year one and $53,100 in year two. Lawnwood projected charges of $55,199 in year one, and $58,133 in year two. Martin Memorial projected charges of $55,594, in year one, $58,955 in year two. Total project costs were estimated at $2,166,351 for St. Mary's, $3,594,720 for Martin Memorial, and $4,995,039 for Lawnwood. Using either set of cost data or the projected charges, St. Mary's best meets this preference based on size, the lowest total project costs, and the lowest projected charges for open heart surgery services. Martin Memorial and Lawnwood have, as described by one expert, remarkably similar costs, and the same is true of projected average charges per case. The final state preference favors applicants who will include protocols for the use of innovative therapeutic alternatives to surgery for appropriate patients, including streptokinase and tissue plaminogen activator therapies. Lawnwood and Martin Memorial currently use streptokinase. St. Mary's performs emergency angioplasties, and uses streptokinase therapy. All three applicants meet the preference for providing and/or planning to provide alternative therapies to open heart surgery. The first District 9 local health plan allocation factor gives a priority for established cardiac cath programs. Based on expert testimony, a cardiac cath program exceeding 150 annual procedures is established. All the applicants exceed the minimum volume and, therefore, comply with the allocation factor. Martin Memorial has the highest volume in an operational inpatient and outpatient lab and, meets the allocation factor better than Lawnwood and St. Mary's. The other District 9 factor favors applicants with a documented commitment to provide services regardless of patient's ability to pay. Lawnwood projects 2.51 percent Medicaid and 1.5 percent charity care in year two. St. Mary's projects providing 5 percent Medicaid and 3.5 percent charity care in year two. Martin Memorial projects 2 percent Medicaid and 1.9 percent charity care in year two. St. Mary's best meets the factor, followed by Lawnwood, and then Martin Memorial. More Medicaid residents live in the primary service area of Lawnwood than that of Martin Memorial. Martin has filed CON compliance reports demonstrating difficulty in meeting prior CON Medicaid conditions due to the demographics of its service area. Subsections 408.035(1)(b) - availability, quality of care, efficiency, accessibility, extent of utilization of like and existing programs; 408.035(2)(b) - appropriate and efficient use of existing inpatient facilities; and 408.035(2)(d) - serious problems in obtaining care without proposed new program(s). With the exception of seasonal excess demand for Palm Beach Gardens' ICU beds, the evidence demonstrates there is excess capacity in existing District 9 providers. Geographic access to existing providers in or adjacent to the district is also reasonable. The quality of care at existing providers is excellent. St. Mary's asserts that its proposal will best assist in alleviating access barriers to open heart surgery for low income persons with limited geographic mobility. One expert estimated that 38 District 9 Medicaid patients needed, but did not receive, open heart surgeries in 1991, based on the use rates for commercially insured patients. In general, the highest density of population with a demand for invasive heart therapies and open heart surgeries is concentrated in southern and central Palm Beach County. However, expert testimony established that Medicaid patients are underserved for reasons, other than the policies of the existing providers. The evidence does not show that St. Mary's proposal can overcome these financial barriers. St. Mary's is a level II trauma center, and maintains that trauma patients in need of open heart surgery are at risk of death from having to wait for transfers. Transfers of patients from St. Mary's to Palm Beach Gardens or JFK for open heart surgery take from three hours to three days, averaging 8 to 12 hours, in approximately 30 percent of the cases. From May 1991 through January 1994, over 2600 trauma patients were treated at St. Mary's. Expert testimony, after review of medical records, indicates that from one to six patients needed open heart surgery, an insufficient number to constitute a not normal circumstance for the establishment of an open heart program at St. Mary's. Palm Beach Gardens' position that an additional adult open heart surgery program is not needed in District 9 is rejected. Open heart surgery use rates are not increasing nationally or in Florida. However, District 9 population is increasing, as is open heart surgery utilization for District 9 as a whole, and for Palm Beach, St. Lucie and Okeechobee Counites, while remaining static in Martin County and decreasing in Indian River. Palm Beach Gardens and JFK have demonstrated that in Palm Beach County, an additional open heart surgery program is not needed, and would be detrimental to existing programs. See, Findings of Fact 51-52. Subsection 408.035(1)(c) - quality of care The applicants, like the existing providers, are accredited by the Joint Commission on Accreditation of Healthcare Organizations. All of the applicants provide excellent quality care, as indicated by their accreditations and proposals, compromised only by their ability to achieve the projected volumes. See, Findings of Fact 23-26. Subsection 408.035(1)(d) - alternatives or outpatient facilities and 408.035(2)(a) - alternatives to inpatient services There are no alternatives or facilities other than acute care hospitals in which open heart surgeries can be performed. The criterion is inapplicable to this case. Subsections 408.035(1)(e) - economies of joint or shared facilities and 408.035(2(k) - modernization or sharing arrangements as alternatives to new construction. Martin Memorial is a part of a network of hospitals planning a more formalized affiliation to attract managed care contracts. Lawnwood is a part of a large corporate group, which can offer experience in establishing an open heart surgery program. Neither of these arrangements entitles the applicants to special consideration under the statutory criterion, as it has been construed by AHCA. In this case, each applicant is a separate acute care hospital. An alternative arrangement for a shared program was considered by Martin Memorial, but there is no showing that any proposal which improves access for the northern four counties could avoid the necessity for new construction. Subsection 408.035(1)(f) - needs for equipment and services not accessible in adjoining areas There is no evidence that any applicant proposes to provide a service not readily available in adjoining areas. On the contrary, each applicant proposes to offer an alternative within the district for residents who currently use providers in adjoining areas. See, Finding of Fact 27. Subsection 408.035(1)(g) - need for research and educational programs There is no evidence that any of the applicants will meet research or educational needs, or is a teaching hospital. AHCA has strictly construed the statutory criterion to apply to teaching hospitals. Subsection 408.035(1)(h) - availability of resources, including staff, management, and funds for capital and operating expenditures, including personnel required in Rule 59C-1.033(5)(b). The Cleveland Clinic has expressed an interest in providing surgeons for Martin Memorial's program, but no agreement has been formalized. Martin Memorial was criticized for not having a full-time infectious disease specialist, inadequate pulmonary and nephrology specialists, and for being unable to perform transesophageal echocardiology, all of which are necessary to support an open heart surgery program. St. Mary's was criticized for not planning to have nurses assigned exclusively to its open heart surgery team. Lawnwood has been unable to attract full-time coverage in thoracic, orthopedic, and neurosurgery. Despite these specific criticisms, each applicant has successful recruitment mechanisms and affiliations which will be enhanced by the presence of an open heart surgery program. The applicants' staffing and equipment proposals are reasonable. Both St. Mary's and Lawnwood are subsidiaries of larger organizations which include hospitals with open heart surgery programs. Subsection 408.035(1)(i) - immediate and long term financial feasibility St. Mary's has the ability to establish an adult open heart surgery program for a total of $2,166,351, funded by private donors. St. Mary's provided a pro forma of expected revenues and expenses to establish financial feasibility based on two factors which were challenged, the average length of stay ("ALOS") and the mix of payer classifications for patients. St. Mary's projected 10.3 days as the ALOS. JFK's experts suggested that a 13-day ALOS is more reasonable, particularly for a new program. JFK's actual experience was an ALOS of 16.1 days in 1988, 14.5 days in 1992, and 12.6 days by the year ending June 1993. Mature programs generally have lower ALOS than newer ones. Currently, ALOS in the District are 10.9 for Palm Beach Gardens, 12.5 for Delray, and 14.5 for JFK. JFK's assertion that St. Mary's initial ALOS will more likely be 13 days not 10.3 is reasonable. The fact that the ALOS will be longer than that projected in the pro forma means that expenses for the care of each patient will be greater, while revenues will not increase proportionately. Revenues are limited in fixed Diagnostic Related Group ("DRG") reimbursement categories, such as Medicare and managed care, which are the dominant payer groups, in contrast to the more flexible per diem reimbursement of commercial insurers. St. Mary's failed to include revenues and expenses for the construction period, anticipating only capital expenditures and start-up costs for implementing a new service. St. Mary's pro forma was based on a first year payer mix which includes 12.4 percent managed care and 11.6 percent commercial insurance in 1995. At JFK, the open heart surgery payor mix was 33 percent managed care and 9 percent commercial in 1993. St. Mary's underestimated the proportion of patients in the DRG-based managed care category, as compared to the per diem arrangements typical of commercial insurance. Taking into consideration increased expenses of $251,000 in year one and $409,000 in year two, due to adjustments from 10.3 to 13 days in the ALOS, and reduced revenues of $350,000 in year two, St. Mary's proposal is not financially feasible. The conclusion is also compelled by St. Mary's failure to establish the reasonableness of its utilization projections for the program. See, Finding of Fact 25. Martin Memorial has the funds necessary to establish an open heart surgery program for $3,594,720. Its pro forma shows revenues and expenses for the construction period, which are identical with or without the open heart surgery program. Martin Memorial's pro forma is flawed by double counting revenues from patients currently spending some time and revenues at Martin Memorial prior to transfers for open heart surgery. Revenues associated with pre-transfer stays must be deducted from revenues for open heart surgeries of average total lengths of stay. The amounts of over-stated revenues were not calculated by Palm Beach Gardens expert, and other criticisms of Martin Memorial's pro forma are rejected. Lawnwood, like St. Mary's, failed to include any construction period revenues and expenses in its pro forma. Lawnwood, as a separate legal entity, does not have the funds to establish its open heart surgery program, without relying on its parent, Hospital Corporation of America. The commitment of funds, represented by a letter dated April 30, 1993, indicated the source as either internally generated cash or available lines of credit. Lawnwood demonstrated its financial feasibility, in part, by showing that its open heart program's break-even point, at which expenses and revenues would be equal is 182 cases, well below projected utilization. See, Findings of Fact 23. Subsection 408.035(1)(j) - special needs and circumstances of health maintenance organizations The applicants do not propose to provide any different or special services for health maintenance organizations, nor is any applicant in this batch itself a health maintenance organization, as required by AHCA's interpretation to the statutory criterion. NME Hospitals, Inc., d/b/a West Boca Medical Center v. HRS, DOAH Case Nos. 90-7037 and 91-1533 (F.O. 4/8/92). Subsection 408.035(1)(k) - substantial, specialty services to non-residents of the service district Although the applicants propose to provide open heart surgery, which is one of the specialty services listed in the statute, they do not project that they will serve residents of other districts. The applications are not distinguishable on the basis of Subsection 408.035(1)(k), Florida Statutes. Subsection 408.035(1)(l) - impact on costs and effects of competition with existing providers. If St. Mary's proposal is approved and, as St. Mary's projects, two- thirds of its patients come from existing district providers, the program at JFK will be adversely affected. As the result of JFK's loss of approximately 106 cases, its net income could also be reduced up to $2.6 million. By contrast, programs at Lawnwood or Martin Memorial would have a negligible impact on JFK. The existing program at Palm Beach Gardens would suffer an adverse impact from the approval of programs at either St. Mary's or Martin Memorial. The adverse impact of a program at Martin Memorial is greater. Palm Beach Gardens could lose from 128 to 142 cases in the first year and from 179 to 198 cases in the third year in the worst case scenarios, depending on whether the use rate declines or remains constant. In addition, the further development of the VHA Network proposed by some District 9 hospitals, including Martin Memorial, as a means to attract managed care contracts, would enhance referrals to an open heart surgery program at Martin Memorial. Reasonable estimates of the financial loss to Palm Beach Gardens range between $2.8 and $3.1 million, although Palm Beach Gardens, with $9 million in annual income, would still be profitable. While the numeric calculations required in Rule 59C-1.033(7)(c), Florida Administrative Code, indicate that there will be enough total open heart surgeries to allow each of the existing providers to continue to exceed 350 operations, Palm Beach Gardens would be disproportionately, adversely affected by a program at Martin Memorial, as would JFK by a program at a St. Mary's. As the lowest volume provider, JFK is also at greater risk of dropping below the 350 minimum level established as indicative of the quality of care. Subsection 408.035(1)(m) - costs and methods of construction With total project costs of $4.99 million, Lawnwood's proposal to construct two new, dedicated operating rooms is the most expensive. Martin Memorial's cost of $3.59 million includes new construction of one and renovation of another operating room. St. Mary's low project cost of $2.16 reflects the fact that renovations rather than new construction is planned. The advantages of new construction, however, are that the size of the operating rooms will exceed general state requirements, and comply with recommendations developed specifically for open heart surgery. See, Findings of Fact 58, infra. Subsection 408.035(1)(n) - past and proposed service to Medicaid and medically indigent patients Based on history and proposed service, the applicants rank, in order, St. Mary's, Lawnwood, and Martin Memorial in complying with the criterion. See, Findings of Fact 28 and 32, supra. Subsection 408.035(1)(o) - continuum of care in multilevel system, including acute, skilled nursing, and home health care The applicants failed to distinguish their proposals on the basis of this statutory criterion. Other Criticisms of the Applications St. Mary's has a 16-bed intensive care unit, 4 of those beds will require no additional equipment to be used to provide post-operative care for open heart surgery patients. The 4 beds are located adjacent to the intended open heart surgery operating suite. The proposed 4-bed ICU was criticized for being too crowded, and inadequately designed to allow adequate patient observation and monitoring, and for not being dedicated solely to open heart surgery patients. The 16-bed unit has experienced over 90 percent occupancy rates, but some of those patients have required the staffing, but not the equipment available in the intensive care unit. St. Mary's acknowledged potential capacity problems, but has the ability to create additional step-down unit beds to relieve the ICU unit, when necessary. In addition, outpatient surgeries were scheduled to be performed in a separate facility beginning in July 1994. While some clinicians may prefer a separate ICU, there was no evidence of any requirements that open heart surgery patients receive post-operative care in a separate ICU, nor that the lack of a specialized unit means a lack of staff capable of caring for such patients. St. Mary's project involves the renovation of a total of 1731 square feet, 764 net square feet of that in the main operating room on the first floor. The back-up operating room at St. Mary's is 480 square feet, below the American College of Cardiologists' recommendation and 1992 Federal Guidelines of a minimum of 600 and up to 800 square feet. Despite the term "back-up," expert testimony established the need for regular use of both operating rooms, one for regularly scheduled procedures and one for emergencies which occur within the cardiac cath lab or the post-operative intensive care unit. The size of St. Mary's back-up operating room meets state requirements for operating rooms, which do not differentiate on the basis of the type of surgery. St. Mary's also demonstrated that open heart surgeries are performed in comparably sized or smaller operating rooms at JFK. The space allocated to Lawnwood's 4-bed open heart surgery recovery room was criticized as inadequate to accommodate the equipment and personnel required to monitor and, if necessary, to revive post-operative patients. The space allocated complies with state licensure requirements. Reconfiguration of the beds and equipment in the space is permissible, if necessary, in final construction documents which must be approved by AHCA. Lawnwood's proposal was also criticized because the CVICU will be located three stories above the surgical area and recovery rooms. There was no evidence that the location of the CVICU violated licensure requirements or compromised the quality of care. The use of restricted elevator access between the surgical/recovery area and the CVICU is reasonable. AHCA favored the applications of both Lawnwood and Martin over that of St. Mary's due to their locations outside Palm Beach County. Having been told by staff that it was then a "toss up" between the two, AHCA's Division Director selected Martin Memorial. The Division Director, Dr. James Howell, is a former Deputy District Administrator for AHCA District 9 and former County Health Director for Palm Beach County. In explaining his decision, Dr. Howell testified as follows: Q. Ultimately, sir, you recommended to Ms. Dudek that Martin be approved rather than Lawnwood; isn't that correct, sir? A. Yes, sir. In our mutual discussions we had a discussion about two. To be straightforward, the reason that I'd recommended Martin was that Martin is a long-term community hospital with local community responsiveness or local community board of directors, as far as I know, and that AHCA owned - now I believe, it's part of the Columbia system, was in St. Lucie County and was a newer hospital, and that, you know, I felt more comfortable with giving the first CON in the area to a group that had a long heritage and commitment to the area, even though I can tell you I can't say anything negative about AHCA in dealings with them. Q. Or Columbia? A. Or Columbia; right. I can't say anything. That's not meant to be prejudicial with them. They did a good job with us, with maternity/child health. Q. You did approach this batch, did you not, sir, with a bias towards Martin Memorial because you knew the institution had been there a long, long time and was a very stable institution; isn't that correct? A. That is quite correct, yes, sir. See, Transcript, p. 251. The court reporter's references to "AHCA" are corrected and understood, in this context, to refer to HCA or Hospital Corporation of America. The statutory and rule criteria, on balance, demonstrate that open heart surgery programs at Martin Memorial or Lawnwood are more likely to improve access, to meet projected volumes, and to be financially feasible. Of these two, however, Lawnwood is better situated to reverse district out-migration, and has to be preferred, under the state and local health plans and subsection 408.035(1)(n), Florida Statutes, for its history of providing a disproportionate share of its services to Medicaid and charity patients. Finally, the most significant distinction between the applicants is that the quality of care at existing providers, as measured by their volumes of open heart surgeries, will not be adversely affected by the approval of a new program at Lawnwood. Application Content AHCA accepted Martin Memorial's application, although two different letters of intent for mutually exclusive open heart surgery programs were filed simultaneously by Martin Memorial, one for a program shared with Indian River Memorial, and one for a separate program. Martin Memorial's application also, arguably exceeds the scope of its Board approval by including renovation of a portion of the surgical intensive care unit ("SICU"). AHCA accepted Martin Memorial's proposal to allocate the cost of 4 of 13 SICU beds to the open heart surgery project. As a practical matter, Martin Memorial's witnesses concede, the 4 beds cannot be constructed independently. The Board separately authorized the filing of an expedited CON for the SICU construction and renovations. In an Additional Motion For Summary Recommended Order Palm Beach Gardens' submitted correspondence between AHCA and Martin Memorial attempting to establish that the separate SICU CON has expired. AHCA accepted Lawnwood's application without a construction period pro forma, and without identification of the ultimate parent corporation of the subsidiary, Lawnwood Medical Center, Inc.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency For Health Care Administration enter a Final Order issuing Certificate of Need 7245 to Lawnwood Medical Center, Inc., denying Certificate of Need 7244 to St. Mary's Hospital, Inc., and denying Certificate of Need 7243 to Martin Memorial Medical Center, Inc. DONE AND ENTERED this 13th day of March, 1995 in Tallahassee, Leon County, Florida. ELEANOR M. HUNTER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 13th day of March, 1995. APPENDIX TO RECOMMENDED ORDER, CASE NO. 93-4908 To comply with the requirements of Section 120.59(2), Fla. Stat. (1991), the following rulings are made on the parties' proposed findings of fact: Petitioner, Lawnwood's Proposed Findings of Fact. Accepted in Findings of Fact 2. Accepted in Findings of Fact 3. Accepted in Findings of Fact 16. Accepted in Findings of Fact 4. Accepted in Findings of Fact 5. 6-12. Accepted in or subordinate to Findings of Fact 27. 13. Accepted in Findings of Fact 13. 14-20. Accepted in or subordinate to Findings of Fact 27. Accepted in or subordinate to Findings of Fact 16 and 19. Accepted in Findings of Fact 24. 23-39. Accepted in or subordinate to Findings of Fact 27. 40-47. Accepted in or subordinate to Findings of Fact 34. 48-61. Accepted in or subordinate to Findings of Fact 28. 62-64. Accepted in relative terms or subordinate to Findings of Fact 27. 65-70. Accepted in or subordinate to Findings of Fact 28. 71-73. Accepted in part or subordinate to Findings of Fact 24 and 28. 74-86. Accepted in part or subordinate to Findings of Fact 2, 23 and 27. 87. Issue not reached. 88-94. Accepted in or subordinate to Findings of Fact 23. 95. Rejected in part and accepted in part in Findings of Fact 24. 96-100. Accepted in Findings of Fact 23. 101-105. Accepted in general in Findings of Fact 24. 106-111. Accepted in Findings of Fact 47. Accepted in general in Findings of Fact 22-29. Accepted in Findings of Fact 22. Accepted in Findings of Fact 23. Accepted in Findings of Fact 27. Accepted in Findings of Fact 28. Accepted in relevant part in Findings of Fact 28. Accepted in Findings of Fact 29. Accepted in Findings of Fact 30. 120-122. Accepted in or subordinate to Findings of Fact 31. 123-131. Accepted in or subordinate to Findings of Fact 5, 43, and 48. 132-133. Accepted in or subordinate to Findings of Fact 43. 134-146. Accepted in or subordinate to Findings of Fact 48. Accepted in or subordinate to Findings of Fact 45, 48 and conclusions of law 66. Accepted in or subordinate to Findings of Fact 48. 139-141. Accepted in or subordinate to Findings of Fact 29. 142-147. Accepted in or subordinate to Findings of Fact 48. 148-152. Accepted in Findings of Fact 8 and 53. Accepted in Findings of Fact 43. Subordinate to Finding of Fact 53. 155-164. Accepted in or subordinate to Findings of Fact 59. 165-173. Accepted in or subordinate to Findings of Fact 43. 174. Accepted in or subordinate to Findings of Fact 38 and 43. 175-176. Accepted in Findings of Fact 7. Accepted in or subordinate to Findings of Fact 38 and 43. Accepted in or subordinate to Findings of Fact 53. Accepted in or subordinate to Findings of Fact 43. 180-181. Accepted in Findings of Fact 38. 182-187. Accepted in Findings of Fact 61. 188. Rejected in Findings of Fact 61. Petitioner, Palm Beach Gardens' Proposed Findings of Fact. 1-3. Accepted in Findings of Fact 16-19. Accepted in Findings of Fact 5 and 8. Accepted in Findings of Fact 13 and 15. Accepted in Findings of Fact 9 and 12. Accepted in preliminary statement. Accepted in Findings of Fact 3. Accepted in Findings of Fact 3 and 16. 10-15. Accepted in or subordinate to Findings of Fact 61. Rejected in conclusions of law 69. Rejected in Findings of Fact 53. Rejected in Findings of Fact 2 and 27. 19-25. Accepted in or subordinate to Findings of Fact 16 and 33. 26. Accepted in or subordinate to Findings of Fact 34. 27-44. Accepted in or subordinate to Findings of Fact 52. 45-48. Accepted in or subordinate to Findings of Fact 18-19 and 27-28. 49-52. Accepted in or subordinate to Findings of Fact 51 and 52. 53. Accepted in general in Findings of Fact 27. 54-55. Accepted in or subordinate to Findings of Fact 33. 56-60. Accepted in or subordinate to Findings of Fact 34. 61. Rejected "substantially" in Findings of Fact 52. 62-72. Accepted in or subordinate to Findings of Fact 16, 27, and 33. 73-76. Accepted in or subordinate to Findings of Fact 27. 77-84. Accepted in or subordinate to Findings of Fact 52. 85-92. Accepted in or subordinate to Findings of Fact 27,28 and 34. 93-103. Accepted in or subordinate to Findings of Fact 28. 104-105. Accepted in Findings of Fact 31. 106. Accepted in Findings of Fact 32. 107-109. Accepted in or subordinate to Findings of Fact 28 and 32. 110-111. Accepted in Findings of Fact 22. 112-125. Accepted in or subordinate to Findings of Fact 23. 126. Accepted in or subordinate to Findings of Fact 5. 127-141. Accepted in Findings of Fact 23 and 24. 142. Rejected in Findings of Fact 7 and 23. 143-145. Accepted in or subordinate to Findings of Fact 7 and 23. 146-151. Issue not reached. 152-158. Accepted in or subordinate to Findings of Fact 24. 159-160. Accepted in Findings of Fact 27. 161-162. Accepted in Findings of Fact 28. Accepted in part in Findings of Fact 28. Accepted in or subordinate to Findings of Fact 29. 165-167. Accepted in or subordinate to Findings of Fact 29. 168-169. Accepted in Findings of Fact 30. 170. Accepted in Findings of Fact 21-30. 171-172. Rejected in general in Findings of Fact 47. 173. Accepted in Findings of Fact 47. 174-184. Rejected or subordinate to Findings of Fact 47. 185-187. Rejected or subordinate to Findings of Fact 43 and 47. 188-193. Accepted in Findings of Fact 47. 194-199. Subordinate to Finding of Fact 47. 200. Accepted in Findings of Fact 29. 201-208. Accepted in or subordinate to Findings of Fact 52. 209. Rejected. 210-218. Accepted in or subordinate to Findings of Fact 52. 219. Rejected conclusion as to "substantial" in Findings of Fact 52. 220-229. Accepted in or subordinate to Findings of Fact 52. 230. Rejected conclusion as to "substantial" in Findings of Fact 52. Petitioner, St. Mary's, Proposed Findings of Fact. 1-3. Accepted in or subordinate to Findings of Fact 9. Accepted in Findings of Facts 3 and 22. Accepted in or subordinate to Findings of Fact 9. Accepted in or subordinate to Findings of Fact 12. Accepted in or subordinate to Findings of Fact 10. Accepted in or subordinate to Findings of Fact 27. Accepted in Findings of Fact 2. 10-12. Accepted in or subordinate to preliminary statement and Finding of Fact 12. 13-14. Accepted in or subordinate to Findings of Fact 58. 15-17. Accepted in or subordinate to Findings of Fact 43. 18-24. Accepted in Findings of Fact 30. 25-26. Rejected in Findings of Fact 44-46. 27-29. Accepted in Findings of Fact 30. Rejected in Findings of Facts 44-46. 31-32. Accepted in or subordinate to Findings of Fact 44. 33-35. Accepted in or subordinate to Findings of Fact 43. 36. Accepted in or subordinate to Findings of Fact 56. 37 Accepted in or subordinate to Findings of Fact 9. Accepted in Findings of Fact 38. Accepted in or subordinate to Findings of Fact 58. Accepted in or subordinate to Findings of Fact 60. 41-44. Accepted in or subordinate to Findings of Fact 56 and 57. 45-54. Accepted in or subordinate to Findings of Fact 35. 55. Rejected in Findings of Fact 35. 56-57. Accepted in or subordinate to Findings of Fact 34. 58. Conclusion rejected, although access is limited by comparison to commercially insured patients, See, Findings of Fact 34. 59-66. Accepted in or subordinate to Findings of Fact 34. 67-73. Accepted in Findings of Facts 9, 28 and 32. Accepted in Findings of Fact 9. Accepted in Findings of Fact 32. Accepted in Findings of Fact 34. Rejected as significant benefit in Findings of Fact 34. Accepted (as both interests can be better accomplished) in Findings of Fact 27. Accepted in or subordinate to Findings of Fact 25. 80-81. Rejected in Findings of Fact 25. Accepted in Findings of Fact 25. Rejected in Findings of Fact 25. Rejected in Findings of Fact 25. Rejected as valid in Findings of Fact 34. 86-88. Accepted in Findings of Facts 27 and 36. 89-91. Accepted in part or subordinate to Findings of Fact 26. Rejected in Findings of Fact 26. Rejected in Findings of Fact 25 and 26. Accepted in Findings of Fact 22. Rejected in Findings of Fact 25-26. Rejected in general in Findings of Fact 27. 97-98. Accepted in or subordinate to Findings of Fact 28. Accepted in Findings of Fact 29. Accepted in Findings of Fact 30. Rejected conclusion in Findings of Fact 35. Accepted in Findings of Fact 31 and 32. 103-104. Accepted in Findings of Fact 27. 105. Accepted in Findings of Fact 37. 106-107. Rejected in Findings of Fact 51. Accepted in or subordinate to Findings of Fact 51. Accepted in Findings of Fact 35. Rejected in Findings of Fact 47. Rejected in Findings of Fact 48. Rejected in Findings of Fact 24. Intervenor, JFK Medical Center, Inc.'s Proposed Findings of Fact. Accepted in Findings of Fact 9. Accepted in Findings of Fact 18. Accepted in or subordinate to Findings of Fact 12. 4-6. Accepted in or subordinate to preliminary statement. 7-9. Accepted in or subordinate to Findings of Fact 2. Accepted in or subordinate to Findings of Fact 16-19. Accepted in Findings of Fact 27. Accepted in relevant part in Findings of Fact 16 and 27. 13-19. Accepted in or subordinate to Findings of Fact 34. Accepted in Findings of Fact 18 Accepted in Findings of Fact 35. Accepted in Findings of Fact 19. 23 Accepted in relevant part in Findings of Fact 33. 24. Accepted in Findings of Fact 36. 25-27. Accepted in or subordinate to Findings of Fact 33. 28-31. Accepted in or subordinate to Findings of Fact 27. 32-34. Accepted in or subordinate to Findings of Fact 27 and 34. 35-44. Accepted in or subordinate to Findings of Fact 35. 45-48. Accepted in or subordinate to Findings of Fact 25. 49-50. Accepted in or subordinate to Findings of Fact 26. 51. Accepted in or subordinate to Findings of Fact 25. 52-57. Accepted in Findings of Fact 44-46. 58. Subordinate to Finding of Fact 44-46. 59-66. Accepted in or subordinate to Findings of Fact 51. 67-75. Accepted in or subordinate to Findings of Fact 59. 76-78. Rejected in Findings of Fact 59. 79-80. Accepted in or subordinate to Findings of Fact 25. 81-82. Rejected in or subordinate to Findings of Fact 57. 83-84. Accepted in or subordinate to Findings of Fact 52. 85. Accepted in Findings of Fact 43. 86-89. Accepted in or subordinate to Findings of Fact 58. Respondent, AHCA's Proposed Findings of Fact. 1. Accepted in general or subordinate to Findings of Fact 5-8. 2. Accepted in or subordinate to Findings of Fact 9-12. 3. Accepted in or subordinate to Findings of Fact 13-15. 4. Accepted in Findings of Fact 16 and 18. 5. Accepted in Findings of Fact 6 and 19. 6. Accepted in preliminary statement and Findings of Fact 2. 7. Accepted in Findings of Fact 31 and 32. 8. Accepted in Findings of Fact 31. 9. Accepted in or subordinate to Findings of Fact 7. Subordinate to Findings of Fact 7. Accepted in Findings of Fact 11 and 26. Accepted in or subordinate to Findings of Fact 14. 13,14. Accepted in or subordinate to Findings of Fact 6, 28 and 32. 15. Accepted in or subordinate to Findings of Fact 10, 28 and 32. 16,17. Accepted in or subordinate to Findings of Fact 28 and 32. Accepted in Findings of Fact 21-30. Accepted in Findings of Fact 22. 20,21. Accepted in part in Findings of Facts 23 and 24. Accepted in Findings of Fact 24. Accepted in or subordinate to Findings of Fact 25, 26 and 27. Accepted in Findings of Fact 27. Accepted in Findings of Fact 28. Subordinate to Findings of Fact 29. Accepted in Findings of Fact 5, 9 and 13. Rejected conclusion in terms of other indicators in Findings of Fact 29. Accepted in or subordinate to Findings of Fact 5, 9, 13 and 29. Accepted in Findings of Fact 29. 30-33. Accepted in or subordinate to Findings of Fact 23-26. Accepted in Findings of Fact 30. Accepted in Findings of Fact 27 and 34-37. 36-37. Accepted in or subordinate to Findings of Fact 27. 38. Accepted in Findings of Fact 35. 39-42. Accepted in or subordinate to Findings of Fact 32 and 34. Accepted in Findings of Fact 18. Accepted in Findings of Fact 51. Accepted conclusion in Findings of Fact 52. 46-48. Accepted in Findings of Fact 23-26 and 38. Accepted in Findings of Fact 14 and 24. Accepted if last line changed from "St. Mary's" to "Lawnwood" in Findings of Fact 27, 36 and 37. 51-52. Accepted in Findings of Fact 40 and 61. Accepted in Findings of Fact 42. Accepted in Findings of Fact 29. Accepted in Findings of Fact 48. Accepted in Findings of Fact 44-46. Accepted in Findings of Fact 47. Accepted in Findings of Fact 29 and 51. Respondent, Martin Memorial's Proposed Findings of Fact. Accepted in Findings of Fact 2. Accepted in preliminary statement. Accepted in or subordinate to Findings of Fact 13. Accepted in or subordinate to Findings of Fact 9. 5-6. Accepted in or subordinate to Findings of Fact 5. Accepted in or subordinate to Findings of Fact 7, 11 and 14. Accepted in or subordinate to preliminary statement and Findings of Fact 19. Accepted in or subordinate to preliminary statement and Findings of Fact 18. Accepted in preliminary statement and Finding of Fact 1. Accepted in Findings of Fact 3 and 16. Accepted in or subordinate to Findings of Fact 23 and 24. Accepted in or subordinate to Findings of Fact 20. 14-15. Accepted in or subordinate to Findings of Fact 14. Accepted in or subordinate to Findings of Fact 15. Subordinate to Finding of Fact 13. Accepted in Findings of Fact 12. Accepted in relevant part or subordinate to Findings of Fact 8 and 49. 20-21. Accepted in Findings of Fact 61. Accepted in Findings of Fact 62. Accepted in preliminary statement and Finding of Fact 2. Accepted in Conclusions of Law 74. Accepted in Findings of Fact 52. Accepted in Findings of Fact 38. 27-28. Rejected conclusion that program is superior in terms of quality of care in Findings of Fact 38. 29-30. Accepted in or subordinate to Findings of Fact 43. Accepted in general or subordinate to Findings of Fact 43. Rejected in or subordinate to Findings of Fact 59. 33-34.. Accepted conclusion in Findings of Fact 43. 35-37. Accepted in or subordinate to Findings of Fact 23-26. 38-40. Conclusion rejected in substantial part in Findings of Fact 23. 41-43. Accepted in substantial part in Findings of Fact 24. 44. Accepted in Findings of Fact 47. 45-48. Accepted in or subordinate to Findings of Fact 48. 49-50. Rejected in Findings of Fact 66 and 67. 51-52. Accepted in or subordinate to Findings of Fact 29. Rejected conclusion in part in Findings of Fact 23 and 24. Accepted in Findings of Fact 27. 55-59. Accepted in or subordinate to Findings of Fact 28 and 34. 60. Conclusion rejected in Findings of Fact 32. 61-62. Accepted in Findings of Fact 27. 63. Rejected in general in Findings of Fact 23 and 27. 64-65. Rejected as to alternatives for "residents most likely" to the extent that is inconsistent with need in relation to state plan, in Findings of Fact 27. Accepted in Findings of Fact 51 and 52. Accepted in or subordinate to Findings of Fact 52. Rejected in Findings of Fact 52. 69-70. Accepted in or subordinate to Findings of Fact 52. Accepted in Findings of Fact 22 and 30. Rejected conclusion in Findings of Fact 23 and 24. Accepted except last sentence in Findings of Fact 27. 74-75. Accepted in Findings of Fact 28. 76-77. Accepted in or subordinate to Findings of Fact 29. Rejected conclusion or subordinate to Findings of Fact 29. Accepted in Findings of Fact 32. 80-82. Accepted in or subordinate to Findings of Fact 31. COPIES FURNISHED: W. David Watkins, Esquire 2700 Blair Stone Road, Suite C Post Office Box 6507 Tallahassee, Florida 32314-6507 (Counsel for St. Mary's Hospital) Michael J. Cherniga, Esquire David C. Ashburn, Esquire Greenberg, Traurig, Hoffman, et al. Suite 2000 111 South Monroe Street Tallahassee, Florida 32302 (Counsel for Palm Beach Gardens Community Hospital) Elizabeth McArthur, Esquire 101 North Monroe Street, Suite 1000 Post Office Drawer 11307 Tallahassee, Florida 32302 (Counsel for Lawnwood Medical Center) Leslie Mendelson, Esquire Senior Attorney Agency for Health Care Administration 325 John Knox Road, Suite 301 Tallahassee, Florida 32303-4131 Byron B. Mathews, Jr., Esquire 201 South Biscayne Boulevard Suite 2200 Miami, Florida 33131 Robert A. Weiss, Esquire John M. Knight, Esquire The Perkins House, Suite 200 118 North Gadsden Street Tallahassee, Florida 32301 R. S. Power, Agency Clerk Agency for Health Care Administration Atrium Building, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Harold D. Lewis, Esquire The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303
The Issue Whether any of the applications of Oak Hill Hospital, Citrus Memorial Hospital, or Brooksville Regional Hospital for adult open heart surgery programs should be granted?
Findings Of Fact District 3 Extended across the northern half of the state with a reach from central Florida to the Georgia line, District 3 is the largest in land area of the eleven health service planning districts created by the Florida Legislature. See Section 408.032(5), Florida Statutes. Sites of the three hospitals whose futures are at issue in this proceeding are in two of the sixteen District 3 counties: Citrus County and at the southern tip of the district, Hernando County. The three hospitals aspire to join the ranks of District 3's six existing providers of adult open heart surgery programs. Three of the existing providers are in Alachua County, all within the incorporated municipality of Gainesville: Shands at Alachua General Hospital, Shands at the University of Florida, and North Florida Regional Medical Center. Two of the existing providers are in Marion County: Munroe Regional Medical Center and Ocala Regional Medical Center. The sixth provider, opened in November of 1998 as the most recently approved by AHCA in the district, is in Lake County: the Leesburg Regional Medical Center. The CON status of the two Ocala providers is somewhat unusual. Located across the street from each other in downtown Ocala, they share virtually the same medical staff. Pursuant to a Stipulation and Settlement Agreement with the State of Florida, the two have offered adult open heart surgery services since 1987 under a single certificate of need issued for a joint program that reflects their proximity and identity of medical staff. The Agency's view of the arrangement has evolved over the years. It now holds the position that Munroe Regional and Ocala Regional operate independent programs. Accordingly, AHCA lists each as separate programs on its inventory of adult open heart services in District 3. Nonetheless, the two operate as a joint program pursuant to the Settlement Agreement and under state sanction reflected in the agreement, that is, they derive their authority to offer adult open heart surgery services from a single certificate of need. Other than a change of attitude by the Agency, there is nothing to detract from the status they have enjoyed since the agreement reached with the state in 1987: two hospitals operating a joint program under a single certificate of need. The three Gainesville providers all operated at an annual volume of less than 350 procedures during the reporting period that was most current at the time of the filing of the applications by the three competitors in this case. Those competitors are: Citrus Memorial, Oak Hill, and Brooksville Regional. Citrus Memorial, Oak Hill, Brooksville Regional Citrus Memorial Health Foundation, Inc., is a 171-bed, not-for-profit community hospital located in Inverness, Florida. HCA Health Services of Florida, Inc., d/b/a Oak Hill Hospital is a 204-bed hospital located in Oak Hill, Florida. Hernando HMA, Inc., d/b/a Brooksville Regional is a 91- bed hospital located in Brooksville, Florida. Hernando HMA, Inc. (the applicant for the program to be sited at Brooksville Regional) also operates a second campus under a single hospital license with Brooksville Regional. The 75-bed campus is in southern Hernando County in Spring Hill. Citrus and Hernando Counties Citrus Memorial is in Citrus County to the south of the cities of Gainesville and Ocala, the sites of five of the existing providers of adult open heart surgery in the district. Further south, Oak Hill and Brooksville Regional are in Hernando County. Although adjacent to each other along a boundary running east-west, the county line is a natural divide, north and south, with regard to service areas for open heart surgery. Substantially all Citrus County residents, including Citrus Memorial patients, receive open heart surgery and angioplasty services at one of the two Ocala providers to the north. In contrast, almost all Hernando County residents (94 percent) receive open heart services at Bayonet Point, a provider in Health Planning District 5 to the south of Hernando County. The neatness of this divide would be disrupted by the approval of the application of Brooksville Regional. Brooksville's application includes part of south Citrus County in its designated primary service area, an appropriate choice because of Brooksville Regional's location on Route 41 with good access to Citrus County. At present, however, the divide between north and south along the Citrus/Hernando boundary remains a Mason-Dixon line of open heart surgery service areas. During the year ended September 1999, for example, 408 Citrus County residents received open heart surgery in Florida. Of these, 85 percent received them in Ocala at one of the two providers there. During the same period, 618 Citrus County residents underwent angioplasty, with 89.7 percent of them going to the two Ocala providers. During the year ended March 1999, 698 Hernando County residents underwent open heart surgery at Florida Hospitals. Of the 663 residents of Oak Hill's primary service area, 94.3 percent received services at Bayonet Point in District 5. Similarly, of the 779 Oak Hill primary service area residents receiving angioplasty, 93.8 percent went south to Bayonet Point. Brooksville Regional projects that 10 percent of its OHS/angioplasty volume will be from Citrus County. Still, 90 percent of the volume is projected to be from Hernando County. Thus, even with the threat posed by Brooksville's application to the divide at the Citrus/Hernando boundary, the overwhelming percentage of Brooksville's patients will be from south of the Citrus-Hernando boundary. In sum, there is de minimis competition between would- be-provider Citrus Memorial and the providers to the north vis- a-vis would-be-providers Oak Hill and Brooksville Regional and the providers to the south in the arena of open heart surgery services needed by residents of the district. Bayonet Point Under the umbrella of HCA Health Services of Florida, Inc., Bayonet Point is a provider of open heart surgery services in Pasco County. Only thirty minutes by road from its sister HCA facility Oak Hill and 45 minutes from Brooksville Regional, Bayonet Point captures approximately 94 percent of the open heart surgery patients produced among the residents of Hernando County. Although its location is in a county that is only one county to the south of the two Hernando County hospitals, Bayonet Point is in a different health planning district. It is in District 5 on its northern edge. The residents of Hernando County who receive open heart surgery services at Bayonet Point, a premier provider of adult open heart surgery services in the state of Florida, are well served. Operating at far from capacity, the quality of its open heart program is excellent to the point of being outstanding. Position of the Parties re: "not normal" circumstances The Agency's Open Heart Surgery Rule, Rule 59C-1.033, Florida Administrative Code (the "Rule") establishes a need methodology and criteria applicable to review of certificate of need applications for the establishment of adult open heart surgery programs. The Rule also governs a hospital's ability to offer therapeutic cardiac catheterization interventional services (i.e., coronary angioplasty). Pursuant to Rule 50C- 1.032, Florida Administrative Code, a cardiac catheterization program that includes the provision of coronary angioplasty must be located within a hospital that provides open heart services. Applying the methodology of Rule 50C-1.033 (the "Rule"), AHCA determined that a "fixed need pool" of zero existed in District 3 for the July 2002 planning horizon. Calculation under the formula in the Rule produced a fixed need pool of one. Several District 3 programs, however, did not have an annual case volume of 350 or more procedures. The Rule's methodology requires that calculated numeric need be zeroed out whenever there are existing programs in a district with a sub- 350 annual volume. (See Section (7)(a)2., of the Rule.) As required, therefore, the Agency published a numeric need of zero for the applicable planning horizon. The determination of zero numeric need was not challenged and so became final. Their aspirations confronted with a numeric need of zero, Citrus Memorial, Oak Hill and Brooksville Regional, nonetheless, each filed applications seeking the establishment of adult open heart surgery programs. As evidenced by the Agency's initial decision to grant Citrus Memorial's application and by its change of position with regard to Oak Hill's application, the Agency is in agreement that "not normal" circumstances exist to justify granting the applications of both Citrus Memorial and Oak Hill. Thus, while the parties may differ as to the precise identification of those circumstances, all agree that there are circumstances that support the approval of at least one application (and perhaps two) for an adult open heart surgery in District 3 for the July 2002 planning horizon. It is undisputed that a new OHS program in Hernando County would have no effect on the three existing programs located in Gainesville that perform less than 350 procedures annually. This circumstance is a "not normal" circumstance, as previously found by the Agency. It allows an application's approval in the face of the Rule's dictate that the Agency will not normally approve an application when an existing provider falls below the 350 watermark. It is not, however, a circumstance that compels the award of a CON to any of the parties as in the case of "not normal" circumstances typically recognized by the Agency. (An example of such a circumstance would be an access problem for a specific population.) Rather, it is a circumstance that allows the Agency to overcome the zeroing-out effect of the Rule that demanded a fixed-need pool of zero. It is a circumstance that allows AHCA to award an adult open heart surgery CON to one of the Hernando County hospitals provided there is a demonstration of need. There are no typical "not normal" circumstances that support any of the applications. There are no geographic, economic or clinical access problems for the residents of the any of the primary service areas of the three applicants that rise to the level of "not normal" circumstances. Nor would granting the applications of any of the three support cost efficiencies. In the case of Oak Hill, moreover, granting its application would both reduce the operating efficiencies at Bayonet Point and increase the average operating cost per case at Bayonet Point. Approval of an application is not compelled by the "not normal" circumstance that exists in this case. The "not normal" circumstance simply clears the way for approval provided there is a demonstration of need. Stipulated Matters The parties stipulated that all applicants have a good record of providing quality of care and that all sections of the respective applications addressing that issue be admitted into evidence without further proof so as to establish record of quality of care. Accordingly, the parties stipulated that each application satisfies Section 408.035(1)(c) as to "the applicant's record in providing quality of care." The parties stipulated that, subject to proving their ability to generate the open heart surgery and angioplasty volumes projected in their respective applications, each applicant has the ability to provide adequate and reasonable quality of care for those proposed services. Accordingly, subject to the proof involving service volume levels, each application satisfies Section 408.035(1)(c) as the "ability of the applicant to provide quality of care . . .". The parties stipulated that all applicants have available and adequate resources, including health manpower, management personnel, and funds for capital and operating expenditures in order to implement and operate their proposed projects. Furthermore, they stipulated that all sections of their respective applications relating to those proposed projects and all sections of their respective applications relating to those issues were to be admitted into evidence without proof. Accordingly, all applications satisfy that portion of Section 408.035(1)(h), Florida Statutes (1999) related to the availability of resources. The parties stipulated that all applications satisfy, and no further proof is required to demonstrate, immediate financial feasibility as referenced in Section 408.035(1)(i), Florida Statutes (1999). The parties stipulated that the costs and methods of proposed construction, including schematic design, for each proposed project were not in dispute and were reasonable, and that all sections of each application related to those issues were to be admitted into evidence without further proof. (Stip., p.3.) Accordingly, each application satisfies Section 408.035(l)(m), Florida Statutes (1999). The parties stipulated that each application contained all documentation necessary to be deemed complete pursuant to the requirements of Section 408.037, except that Section 408.037(b)3. is still at issue regarding operational financial projections (including a detailed evaluation of the impact of the proposed project on the cost of other services provided by the applicant). The parties stipulated that each applicant satisfied all of the operational criteria set forth in the Rule (those operational criteria being encompassed in subsections 3, 4, and 5). Accordingly, it is undisputed that each applicant will have the support services, operational hours, open heart surgery team mobilization, accreditation, availability of health personnel necessary for the conduct of open heart surgery, and post- surgical follow-up care required by the Rule in order to operate an adult open heart surgery program. The Hernando County Hospitals Oak Hill Oak Hill is located on Highway 50, in the southern part of Hernando County, between the cities of Brooksville and Springhill. Oak Hill's licensed bed compliment includes 123 medical/surgical beds, 24 ICU beds, 50 telemetry beds, and 7 beds for obstetrics. Oak Hill provides an array of medical services and specialties, including: cardiology, internal medicine, critical care medicine, family practice, nephrology, pulmonary medicine, oncology/hematology, infectious disease treatment, neurology, pathology, endocrinology, gastroenterology, radiation oncology, and anesthesiology. Board certification is required to maintain privileges on the medical staff of Oak Hill. Oak Hill's six-story facility is situated on a large campus, and has been renovated over time so that the hospital's physical plant permits the provision of efficient care for patients. Oak Hills's surgery department has five operating rooms, plus a cystoscopy room. The department performs approximately 7,800 surgeries annually, a figure that demonstrates functional efficiency. Oak Hill is JCAHO accredited, with commendation. Recently named one of the nation's top 100 hospitals for stroke care by one organization, it has also received recognition for the excellence of its four intensive care units. Oak Hill's cancer program is the only one to have received full accreditation from the American College of Surgeons within a six-county contiguous area. Oak Hill recently expanded its emergency department and implemented a fast track program called Quick Care. The program is designed to treat lower acuity patients more rapidly. Gallup Organization surveys reflect a 98 percent patient satisfaction rate with the emergency department, the eighth best rate among the approximately 200 HCA-affiliated hospitals. During 1999, the emergency department treated 24,678 patients. During the same period, 376 patients presented to Oak Hill's emergency department with an acute myocardial infarction, and there were 258 such patients during the first eight months of 2000. Oak Hill operates a mature cardiology program with ten Board-certified cardiologists on staff. Eight of the ten perform diagnostic cardiac catheterizations in the hospital's cath laboratory. Oak Hill's program is active with regard to both invasive and non-invasive cardiology. The non-invasive cardiology laboratory offers a variety of services, including echocardiography, holter monitoring, stress testing, electrocardiography, and venous, arterial and carotid artery testing. The invasive cardiology laboratory has been providing inpatient and outpatient cardiac catheterization services since 1991. During calendar year 1999, Oak Hill saw 1,671 diagnostic cardiac catheterization procedures and transferred 619 cardiac patients to Bayonet Point, 258 for open heart surgery, 311 for angioplasty, and 50 patients for cardiac catheterization. The volume of catheterization procedures at Oak Hill has led to the construction of a second "cardiac cath" laboratory suite, scheduled for completion in May of 2001. The cath lab's medical director (Dr. Mowaffek Atfeh, the first interventional cardiologist in Hernando County) has served in that capacity since inception of the lab in 1991. The cath lab equipment is state-of-the-art. Oak Hill's cath lab provides excellent quality of care through its Board-certified cardiologists and the dedication and experience of its well- trained nursing and technical staff. Brooksville Regional Originally a 166-bed facility operated by Hernando County, 75 of the beds at Brooksville Regional were moved in 1991 to create a second facility at Spring Hill. A few years later, the facilities went into bankruptcy. The bankruptcy proceeding concluded in 1998, with operational control of both facilities being acquired by Hernando HMA, Inc. ("Hernando HMA"). The CON applicant for the adult open heart surgery program to be sited at Brooksville Regional, Hernando HMA is a wholly-owned subsidiary of Health Management and Associates, Inc. ("HMA"), a corporation located in Naples, Florida, and whose shares are traded publicly. Under the arrangement produced by the bankruptcy proceeding, Hernando County retained ownership of the buildings and the land. Hernando HMA, in turn, operates the facilities per a long-term lease with the County. Hernando HMA operates the Brooksville Regional and Spring Hill Campuses under a single hospital license issued by AHCA. The two campuses therefore share key administrative staff, including their chief executive officer. They share a single Medicare provider number and they have a common medical staff. HMA (Hernando HMA's parent) operates 38 hospitals throughout the country, many in the State of Florida. Among the 38 is Charlotte Regional Medical Center in Charlotte County, an existing provider of adult open heart surgery and recently recognized as one of the top 100 OHS programs in the country. Charlotte Regional will be able to assist Brooksville Regional with staff training and project implementation if its application is approved. An active participant in managed care contracting, Hernando HMA is committed to serving all payer groups, including Medicaid and indigent patients. It recently qualified as a Medicaid disproportionate share provider. It also serves patients without ability to pay. In fiscal year 2000, it provided $5 million of indigent care. Under the lease agreement Hernando HMA has with Hernando County, it must continue the same charity care policies as when the facilities were operated by the County. Hernando HMA must report annually to the County to show compliance with this charity care obligation. Also under the lease, Hernando HMA is obliged to invest $25 million in renovations and improvements to the two facilities over a 5-year period. About $10 million has already been invested. If the adult open heart surgery program is granted this would nearly satisfy the $25 million obligation. The County reserves to itself certain powers under the lease. For example, the County reserves the authority to pre- approve the discontinuation of any services currently offered at these facilities. Also, if Hernando HMA seeks to relocate either of the two, the County retains the authority whether to approve the relocation. The Spring Hill facility is located in the southwest portion of Hernando County, very near the Pasco County line. It is a general acute care facility, offering a full range of cardiology and other acute care services. Spring Hill was recently approved to add the tertiary service of Level II Neonatal Intensive Care. The Brooksville facility is located in the geographic center of Hernando County. Its service area is all of Hernando County and southern Citrus County. Brooksville is a full- service, general acute care facility. It offers services in cardiology, orthopedics, general surgery, pediatrics, ICU, telemetry, gynecology, and other acute services. Brooksville Regional has 91 acute care beds. Normally, the beds are used as 12 ICU beds, 24 telemetry beds, and 55 medical/surgical beds. During its peak annual period of occupancy, Brooksville has the capability to use up to 40 beds for telemetry purposes. The hospital has ample unused space and facilities associated with its 91 beds that resulted from the move of the 75 beds to create the Spring Hill campus. Brooksville Regional offers full scope cardiology services and technologies, including diagnostic cardiac catheterization. Just as in the case of Oak Hill, the cardiac cath lab is state-of-the-art. The only cardiac services not offered at the hospital are open heart surgery and angioplasty. The quality of cardiology and related services at Brooksville Regional are excellent. The equipment, the nursing staff, the allied health professional staff, and the technology support services are very good. The medical staff is broad- based and highly qualified. Brooksville Regional offers substantial educational and training programs for its nursing staff and other personnel on staff. Brooksville Regional routinely treats patients in need of OHS or angioplasty services. Nearly 400 patients per year receive a diagnostic cardiac cath at Brooksville Regional and are then transferred for open heart surgery or angioplasty. The vast majority of these patients are transferred to Bayonet Point, about 45 minutes away. In addition to transfers of patients following diagnostic catheterization, Brooksville Regional transfers about 120 patients per year to Bayonet Point who have not had such services. These patients fall into two categories: (1) high- risk patients, and (2) persons presenting at Brooksville's emergency room in need of angioplasty or open heart surgery. The Proposals Citrus Memorial By its application, Citrus Memorial proposes to establish a program that will provide adult open heart surgery and angioplasty services. There is no dispute that Citrus Memorial has the ability to provide adequate and reasonable quality of care for the proposed project (just as per the stipulation of the parties, there is no dispute that all of the applicants have such ability.) There is also no dispute that each applicant, including Citrus Memorial, will have all of the staff, equipment and other resources necessary to implement and support adult open heart surgery and angioplasty services. The ability to provide high quality care stems, in part, from Citrus Memorial's contract with the Ocala Heart Institute. Under the contract the Institute will provide supervision of the implementation and ongoing operations of the Citrus Memorial program. This supervision will be provided under the leadership of the president of the Institute, cardiovascular surgeon Michael J. Carmichael, M.D. The contract between Citrus Memorial and the Ocala Heart Institute is exclusive. Citrus Memorial will not extend medical staff privileges to any cardiovascular surgeon not affiliated with the Ocala Heart Institute unless approved by the Institute. The Ocala Heart Institute (whose physician members include not only cardiovascular surgeons, but also cardiovascular anesthesiologists and invasive cardiologists) has similar exclusive contracts for the operation of adult open heart surgery programs at Monroe Regional Medical Center and at Ocala Regional Medical Center and at Leesburg Regional Medical Center. At these three hospitals, the Institute's physicians have consistently produced excellent outcomes. The Ocala Heart Institute produces these results not just through the skills of its physicians but also through the use of the same clinical protocols at each hospital governing the provision of open heart surgery. Citrus Memorial proposes to follow identical protocols at its facility. Excellent open heart surgery outcomes for the Institute's physicians are also the product of standardized facility design, equipment and supplies. The standardization of design, equipment, supplies, and protocols has the added benefit of clinical efficiencies that reduce costs and shorten lengths of stay. Beyond supervision of the initial implementation of the program, the Ocala Heart Institute will provide the medical directorship for Citrus Memorial's program. In cooperation with Munroe Regional, the directorship's 24-hour-a-day, 7-days-a-week coverage of the program will include scheduled case, emergency case, and backup coverage by cardiovascular surgeons, cardiovascular anesthesiologists, perfusionists, and interventional cardiologists. The Ocala Heart Institute will provide education and training to Citrus Memorial's medical staff and other hospital personnel as appropriate. The Institute's obligations will include continually working to improve the quality of, and maintain a reasonable cost associated with, the medical care furnished to Citrus Memorial's open heart surgery and angioplasty patients, consistent with recognized standards of medical practice in the field of cardiovascular surgery. The contract with the Ocala Heart Institute ensures to the extent possible that Citrus Memorial will have a high- quality adult open heart surgery program. Oak Hill Through approval of its application to establish an adult open heart surgery program at its facility, Oak Hill hopes Hernando County residents who now must travel outside the county to receive open heart and angioplasty services will be better served. In particular, Oak Hill hopes to provide these services to the residents of the six zip code area that comprise its primary service area ("PSA"). Containing 75 percent of the county's population, Oak Hill's PSA also encompasses the county's concentration of recent growth. Oak Hill's administration is committed to the proposal contained in its application. It has the support of the hospital's Board of Trustees and medical staff. Not surprisingly, the proposal enjoys a measure of popularity in the county. A petition in support of a program at Oak Hill drew 7,628 signatures from residents of Hernando County. This popularity is based in the fact that residents now must leave District 3 (albeit Bayonet Point in District 5 is close to Oak Hill and closer for many residents of south Hernando County) to receive open heart and angioplasty services. The number of affected residents is substantial. In 1999, for example, over 600 cardiac patients were transferred by ambulance from Oak Hill to Bayonet Point. A greater number of patients traveled on a scheduled basis to Bayonet Point for cardiac care. The vast majority of Hernando County residents and Oak Hill primary service area residents in need of OHS services receive them at Regional Medical Center-Bayonet Point. HCA Health Services of Florida, a subsidiary of HCA-The Healthcare Company ("HCA") holds the Bayonet Point license. It also is the licensee of Oak Hill and other hospitals in Florida including North Florida Regional and Ocala Regional. Bayonet Point (Regional Medical Center-Bayonet Point) is an acute care hospital in Hudson. Hudson is in Pasco County, the county immediately to the south of Hernando County. Although in a separate health planning district (District 5), Bayonet Point is relatively close to Oak Hill, 17 miles to the south. Bayonet Point's open heart surgery program experiences the fourth highest case volume in the state. The program is recognized as one of the top two programs in the state. It enjoys a national reputation. For example in July of 1999, it was ranked 50th in the nation in cardiology and heart surgery in U.S. News and World Report's list of "America's Best Hospitals." Oak Hill, as a sister hospital of Bayonet Point under the aegis of HCA, plans to develop its program in cooperation with Bayonet Point and its cardiovascular surgeons so as to bring the high quality program at Bayonet Point to Oak Hill's community and patients. A prospective operational plan for the adult open heart surgery program has been initiated by Oak Hill with assistance from Bayonet Point. Oak Hill, unlike Citrus Memorial, did not present evidence concerning the specific duties to be imposed on each physician group under contract. Nor did Oak Hill present evidence as to whether and how those groups would create and implement the type of standardization of protocols, facility design, equipment, and supplies that Citrus Memorial's program will rely upon for high quality and reduced costs. Nonetheless, it can be expected that the cooperation of Oak Hill and Bayonet Point, as sister HCA hospitals, will continue through the development and implementation of appropriate staff training, policies, procedures and protocols in the establishment of a high quality program at Oak Hill. Oak Hill's achieved volume in its open heart surgery program, if approved, will be at the direct expense of Bayonet Point. Its approval will increase the operating costs per case at Bayonet Point. Patients transferred from Oak Hill to Bayonet Point for OHS and angioplasty receive excellent outcomes. Patients are transferred to Bayonet Point for OHS and angioplasty smoothly and without delay particularly because Bayonet Point operates a private ambulance system for the transport of cardiac patients to its hospital. Two groups of cardiovascular surgeons are the exclusive cardiovascular/thoracic surgeons at Bayonet Point. Although, at present, there are no capacity constraints at Bayonet Point, both groups support a program at Oak Hill and are committed to participate in an open heart surgery program at Oak Hill. If approved, Oak Hill will enter similar exclusive contracts with the two groups. Raymond Waters, M.D., a cardiovascular surgeon, heads one of the groups. He has performed open heart surgery at Bayonet Point since its inception and is largely responsible for the development of the surgery protocols used there. Dr. Waters has consulting privileges at Oak Hill. In addition to consulting there, Dr. Waters presents medical education programs at Oak Hill. Forty to 50 percent of Dr. Waters' patients come from Hernando County and Oak Hill Hospital. Dr. Waters and his group strongly support initiation of an open heart surgery ("OHS") program at Oak Hill. Their support is based, in part, on the excellence of the institution, including its physical structure, cath labs, intensive care units, nursing staff, medical staff, and the state of its cardiology program. Dr. Waters and his group are prepared to assist in the development of an open heart surgery program at Oak Hill, and to assure appropriate surgery coverage. Oak Hill will create a Heart Center at the hospital to house its OHS program. All diagnostic and invasive cardiac services will be located in one area of the hospital to ensure efficient patient flow and access to support services. The center will occupy existing space to be renovated and newly constructed space on the first floor of the facility. Two new cardiovascular surgery suites, with all support spaces necessary, will be constructed, along with an eight-bed cardiovascular intensive care unit. The hospital's two state- of-the-art cardiac catheterization laboratory suites are available for diagnostic procedures and angioplasty procedures. A large waiting area and cardiac education/therapy room will also be constructed. Open heart surgery patients will progress from the OR to the new CVICU for the first 24-28 hours after surgery. From the CVICU, the patient will be admitted to a thirty-bed telemetry monitored progressive care unit, located on the second floor. Currently a 38-bed medical/surgical unit, thirty of the beds will remain as PCU beds. Eight beds will be relocated to create the CVICU. The PCU will provide continued care, education and discharge planning for post open heart surgery and angioplasty patients. Oak Hill will also implement a comprehensive cardiac rehabilitation program for both inpatients and outpatients. Brooksville Regional Like Oak Hill, part of the purpose of the Brooksville Regional proposal is to provide more convenient OHS and angioplasty services to Hernando County residents in need of them, 94 percent of whom now travel to Bayonet Point in Pasco County for such services. In addition to proposing improvements in patient convenience and access, Brooksville Regional sees its application as increasing patient choice and competition in the delivery of the services. Indeed, patient choice and competition for the benefit of patients, physicians and payers of hospital services are the cornerstone of Brooksville Regional's application. There is support for the proposed program from the community and from physicians. For example, Dr. Jose Augustine, a cardiologist and Chief of the Medical Staff at Oak Hill since 1997, wrote a letter of support for an open heart program at Brooksville Regional. Although he believes Hernando County would be better served by a program at Oak Hill, he wrote the letter for Brooksville Regional because, "if Oak Hill didn't get it, [he] wanted the program to be here in Hernando County." (Oak Hill No. 12, p. 43.) Consistent with his position, Dr. Augustine finds Brooksville Regional to be an appropriate facility in which to locate an open heart program and he would do all he could to support such a program including providing support from his cardiology group and encouraging support other physicians. But Brooksville Regional offered no evidence regarding the identity of its cardiovascular surgeons. Hernando HMA proposes to construct a state-of-the-art building of 19,500 square feet at Brooksville Regional to house its OHS program. Two OHS operating rooms will be built. Eight CVICU beds will be used for the program, to be converted from other licensed beds. A second cath lab will be added. The total project cost is nearly $12 million. Brooksville Regional proposes to serve all of Hernando County. In addition, 10 percent of its volume is expected to come from Citrus County. Brooksville Regional commits to serving all payer groups with the vast majority projected to be Medicare, Medicare HMO/PPO and non-Medicare managed care. Brooksville lists two specific CON conditions in its application. First, it commits to over 2 percent for charity care and 1.6 percent for Medicaid. Second, it commits to establishing the OHS program at Brooksville's existing facility, located at 55 Ponce de Leon Boulevard in the City of Brooksville. The second of these two was reaffirmed unequivocally at hearing when Brooksville introduced testimony that if Brooksville's CON application is approved, its OHS program will be located at Brooksville's existing facility. Need In Common One "not normal" circumstance exist that supports all three applications: the lack of effect any approval will have on the sub-350 performers in the district. Which, if any, of the three applicants should be awarded an adult open heart surgery program, therefore, is determined on the basis of need and that determination is to be made in the context of comparative review. Benefits of Increased Blood Flow Lack of blood flow to the heart caused by narrowed arteries or blood clots during a heart attack, results in a loss heart of muscle. The longer the blood flow is disrupted or diminished, the more heart muscle is lost. The more heart muscle lost, the more likely the patient will either die or, should the patient survive, suffer a severe reduction in the quality of life. The key to prevent the loss of heart muscle in a heart attack is to restore blood flow to the heart through a process of revascularization as quickly as possible. Cardiovascular surgeons and cardiologists make reference to this phenomenon through the maxim, "time is muscle." The faster revascularization is accomplished the better the outcome for the patient. Those who treat heart attack patients seek to restore blood flow within a half hour of the onset of the attack. Revascularization within such a time frame maximizes the chance of reducing permanent damage to the heart muscle from which the patient cannot recover. Achievement of revascularization between 30 minutes and 90 minutes of the attack results in some damage. Beyond 90 minutes, significant permanent damage resulting in death or severe reduction in quality of life is likely. The three primary treatment modalities available to a patient suffering from a heart attack are: 1) thrombolytics; 2) angioplasty and 3) open heart surgery. Thrombolytic therapy is the standard of care for the initial attempt to treat a heart attack. Thrombolytic therapy is the administration of medication, typically tissue plasminogen ("TPA") to dissolve blood clots. Administered intravenously, the thrombolytic begins working within minutes in an attempt to dissolve the clot causing the heart attack and, therefore, to prevent or halt damage to the heart muscle. Thrombolytic therapies are successful in restoring blood flow to the affected heart muscle about 60 to 75 percent of the time. In the event it is not successful or the patient is not appropriate for the therapy, the patient is usually referred for primary angioplasty, a therapeutic cardiac catheterization procedure. Cardiac catheterization is a medical procedure requiring the passage of a catheter into one or more cardiac chambers with or without coronary arteriograms, for the purpose of diagnosing congenital or acquired cardiovascular diseases, and includes the injection of contrast medium into the coronary arteries to find vessel blockage. See Rule 59C-1.032(2)(a), Florida Administrative Code. Primary angioplasty is defined as a therapeutic cardiac catheterization procedure in which a balloon-tipped catheter inflated at the point of obstruction is used to dilate narrowed segments of coronary arteries in order to restore blood flow to the heart muscle. Rule 59C-1.032(2)(b), Florida Administrative Code. More often now, in the wake of cardiac care advances, a "stent" is also placed in the re-opened artery. A stent is a wire cylinder or a metal mesh-sleeve wrapped around the balloon during an angioplasty procedure. The stent attaches itself to the walls of the blocked artery when the balloon is inflated, acting much like a reinforced conduit through which blood flow is restored. Its advantage over stentless angioplasty is improved blood flow to the heart and a reduction in the likelihood that the artery will collapse in the future. In other words, a stent may prevent substantial re-occlusion. The development of stent technology has led to dramatically increased angioplasty procedure volumes in recent years and the trend is continuing. Based on mortality rates, studies suggest that immediate angioplasty, rather than thrombolytic treatment, is the preferred treatment for revascularization. When thrombolytic therapy is inappropriate or fails and a patient is determined to be not a candidate for angioplasty, the patient is referred for open heart surgery. Under the Open Heart Surgery Rule, Rule 59C-1.032, Florida Administrative Code, a cardiac catheterization program that includes the provision of angioplasty must be located within a hospital that also provides open heart surgery services. Open heart surgery is a necessary backup in the event of complications during the angioplasty. The residents of Citrus Memorial's primary service area (and those of Oak Hill's and Brooksville Regional's), therefore, do not have immediate access (that is access to a hospital in their county of residence) to not just open heart surgery services but to angioplasty services as well. In addition to increased benefits to the residents of the proposed service areas, much of the need in this case is based on a demonstration of geographic access problems. For example, population concentration and historical utilization of open heart surgery services in the district demonstrate that the open heart surgery programs in the district are maldistributed. At the same time, the Bayonet Point program's service by virtue of both superior quality and proximity to Hernando County ameliorates the effect of the maldistribution of the programs intra-district particularly with regard to the residents of Hernando County. The four southernmost of the 16 counties in the district (Citrus, Hernando, Sumter and Lake) account for approximately 41 percent of the total adult population and 53.5 percent of the population aged 65 and over within District 3 as a whole. The super majority of aged 65 and over population in these counties is of great significance since that population is the primary base of those in need of adult open heart surgery and angioplasty. This same base accounts for 57 percent of the total annual open heart surgeries performed on district residents. For District 3 as a whole, 27 percent of the adult population is aged 65 and older. In comparison, 38.2 percent of Citrus County residents fall within that age cohort, 37.2 percent of Hernando County residents and 33.3 percent of residents in Lake and Sumter Counties combined fall within that age cohort. In contrast, in the northern part of the district, the counties closest to the three Gainesville open heart surgery programs (Columbia, Hamilton, Suwanee, Alachua, Bradford, Dixie, Gilchrist, Lafayette, Levy, and Union) contain a combined basis of 32.4 percent and Putnam County contains 24.7 percent of the District 3 population aged 65 and over. The overall District 3 open heart surgery use rate (number of surgeries per 1,000 population age 15 and over) is 3.47. Yet, the combined use rate for Columbia, Hamilton, and Suwanee Counties is 1.96, the combined use rate for Alachua, Bradford, Dixie, Gilchrist, Lafayette, Levy, and Union Counties is 1.55, and the Putnam County use rate is 2.05. More specifically, the northern county use rates are significantly below the use rates for the remainder of District 3 counties. Marion County is 4.12. Citrus County is at 4.26. Hernando County is at 6.41. Lake and Sumter Counties are at 4.31. Transfers Drive time is but one component of the total time necessary to effectuate a patient transfer. Additional time is consumed in making transfer and admission arrangements with the receiving hospital, awaiting arrival of an ambulance to begin transport, and preparing and transferring the patient into and out of the ambulance. Time delays that necessarily accompany hospital-to-hospital transfers can be critical, clinically. The fact that a facility-to-facility transfer is required means that the patient is at relatively high risk. Otherwise, the patient would be sent home and electively scheduled later. The need to travel outside the community carries other adverse consequences for patients and their families. Continuity of care is disrupted when patients cannot receive hospital visits from their regular and trusted physicians. Separation from these physicians increases stress and anxiety for many patients, and patients heal better with lower levels of stress and anxiety. Further, most OHS patients are elderly, and travel by their spouses to another community to visit is stressful and difficult at best, sometimes impossible. The elderly loved ones of the patient also tend to have health problems and, even when able, the drive to the hospital is stressful. District 3 Out-migration A high volume of OHS patients leave District 3 for OHS services. During the year ended March 1999, there were a total of 3,520 District 3 residents discharged from Florida hospitals following OHS. Only 2,428 of those OHS cases were reported by hospitals located within District 3. An outmigration rate of 31 percent, on its face, is indicative of a district geographic access problem. The problem is mitigated, however, by an understanding that most of the outmigration is of Hernando County residents who are able to travel or are transferred to Bayonet Point, a provider within 30 to 45 minutes driving time from the two Hernando County applicants in this proceeding. Citrus Memorial Volume Projections and Financial Feasibility Citrus Memorial reasonably projects an open heart surgery case volume of 266 for the first year of operation, 313 for the second year, and 361 for the third year. Citrus Memorial reasonably projects an angioplasty case volume of 409 for the first year of operation, 481 for the second year, and 554 for the third year. The Citrus Memorial program is financially feasible in the long term. It will generate approximately $1 million in not-for-profit income by the end of the second year of operation ($327,609 from open heart surgery cases, and $651,323 from angioplasty cases). Increased Access in Citrus County The two Ocala hospitals are approximately 30 miles from Citrus Memorial. With traffic, the normal driving time from Citrus Memorial to the hospitals is 60 minutes. The driving time from Oak Hill to Bayonet Point is normally 29 minutes or about half the time it takes to get from Citrus Memorial to one of the Ocala providers. The drive time from Brooksville Regional to Bayonet Point is approximately 45 minutes, 25 percent faster than the driving time from Citrus Memorial to the Ocala hospitals. Myocardial infarction patients for whom thrombolytic therapy is inappropriate or ineffective who present to the emergency room at Citrus Memorial, on average, therefore, are exposed to greater risk of significant heart muscle damage than those who present to the emergency rooms at either Oak Hill or Brooksville Regional. The delay in transfer for a Citrus Memorial patient in need of angioplasty or open heart surgery can be compounded by the ambulance system in Citrus County. There are only 7 ambulances in the system. If one is out of the county, the provider of ambulance services will not allow another to leave the county until the first has returned. Citrus Memorial presented medical records of 17 cases in which transfers took more than an hour and in some cases more than 3 hours from when arrangements for transfers were first made. There was no testimony to explain the meaning of the records. Despite the status of the records as admissible under exceptions to the hearsay rule and therefore the ability to rely on them for the truth of the matters asserted therein, the lack of expert testimony diminishes the value of the records. For example in the first case, the patient presented at the emergency room on June 14, 1999. Treatment reduced the patient's chest pain. In other words, thrombolytics appeared to be beneficial. The patient was admitted to the coronary care unit after a diagnosis of unstable angina, and cardiac catheterization was ordered. On June 15, the next day, at about 11:40 a.m., "just prior to going down to Cath Lab, patient developed severe chest pain." (Citrus Memorial Ex. 16, p. 1017.) Following additional treatment, the chest pains were observed half an hour later to be "better." (Id.) Several hours later, at 1:45 p.m., that day, transfer to Ocala Regional was ordered. (Id., p. 1043). The patient's progress notes show that the transfer took place at 3:45 p.m., two hours after the order for transfer was entered. Whether rapid transfer was required or not is questionable since the patient appears to have been stabilized and had responded to thrombolytics and other therapy. In contrast, the second of the 17 cases is of a patient whose "risk of mortality [was] . . . close to 100%." The physician's notes indicate that at 1:10 p.m. on August 8, 1999, "emergency cardiac cath [was] indicated [with] a view toward revascularization." (Citrus Memorial Ex. 16, p. 1093). The same notes indicate after discussion between the physician and the patient and his spouse "that transfer itself is risky, but that risk of mortality [if he remained at Citrus Memorial] . . . is close to 100 percent." Although these same notes show that at 1:10 p.m., the patient's transfer had been accepted by the provider of open heart surgery, it was not until 3:30 p.m., that the "Ocala team" (id., at 1113) was shown to be present at Citrus Memorial and not until 3:45 p.m., that the patient was "transferred to Ocala." (Id.) Given the maxim that "time is muscle," it may be assumed that the 2-hour and 45- minute delay in transfer from the moment the patient was accepted for transfer until it occurred and the ensuing time thereafter for the drive to Ocala contributed to significant negative health consequences to the patient. Whatever the value of the 17 sets of medical records, they demonstrate that transfers from Citrus Memorial on occasion take up time that is outside the 30-minute and 90-minute timeframes for avoiding significant damage to heart muscle or minimizing such damage to heart attack patients for whom angioplasty or open heart surgery procedures is indicated. Citrus Memorial also presented twenty sets of records from which the "emergent" nature of the need for angioplasty or open heart intervention was more apparent from the face of the records than in the 17 cases. (Compare Citrus Memorial Ex. No. 16 to No. 17). These records reveal transport delays in some cases, lack of immediate bed ability at the Ocala hospitals in others, and in some cases both transport delays and lack of bed availability. In 16 of the cases, it took over 90 minutes for the patient to reach the receiving hospital and in 13 of the cases, it took 2 hours or more. It would be of significant benefit to some of those who present to Citrus Memorial's emergency room with myocardial infarctions to have access to open heart surgery services on site should thrombolytic therapy be inappropriate or prove ineffective. Other Access Factors Besides time considerations, there are other factors that provide comparisons related to access by Citrus Memorial service area residents on the one hand and Hernando County residents to be served by either Oak Hill or Brooksville Regional on the other. Among the other factors relied on by Citrus Memorial to advance its application is a comparison of use rate. The use rate per 1,000 population aged 15 and over for Hernando County is 6.08, compared to 4.13 for Citrus County. "[B]y definition" (tr. 458), the use rates show need in Hernando County greater than in Citrus County. But the use rates could indicate an access problem financially or geographically. In the end, there are a lot of components that make up the use rate. One is obviously the age of the population and underlying heart disease, two, . . . is the physician practice patterns in the county. [S]tudies . . . show that [in] two equivalent populations, . . . one with a very conservative medical community that . . . hospitalizes more frequently . . . [versus] another . . . where the physicians hospitalize less frequently for the same situation or who use a medical approach versus a surgical approach. (Id.) While there may be one possible explanation for the lower use rate in Citrus County than in Hernando County that favors Citrus Memorial, a comparison of use rates on the state of this record is not in Citrus Memorial's favor. Other factors favor Citrus Memorial. In support of its open heart surgery and angioplasty volumes, for example, Citrus Memorial reasonably projects an 80 percent market share for such services from its primary service areas. In contrast, Oak Hill projected a much lower market share from its primary service area: 58 percent. The lower market share projection by Oak Hill is due to the proximity of the Bayonet Point program to Hernando County. The difference in the two projections reveals greater demand for improved access in Citrus County than in Hernando County. This same point is revealed by projected county outmigration. Statewide data reveals that the introduction of open heart surgery services within a county causes a county resident generally to stay in the county for those services. Yet with a new program in Hernando County, Bayonet Point is still projected reasonably to capture one-half of the open heart surgeries and angioplasties performed on Hernando County residents, further support for the notion that Hernando County residents have adequate access to open heart surgery services through Bayonet Point's program. As to angioplasty demand, Oak Hill projected an angioplasty/open heart surgery ratio of 1.3. Citrus Memorial's ratio is 1.5. Geographic access limitations also adversely affect continuity of care. To have open heart surgery performed at another hospital, the patient will have to travel for pre- operative, operative, and post-operative follow-up services and duplication of tests. This lack of continuity of care often results in the patient's primary and specialty care physicians not following the patient and not being involved with all phases of care. In assessing travel time and access issues for open heart surgery and angioplasty services, travel time and distance present not only potential hardship to the patient, but also to the patient's family and friends who accompany and visit the patient. These issues are of particular significance to elderly persons (be they the patient, family member or friend) who do not drive and must rely on others for transport. Financial Access - Indigent Care Consistent with its mission as a community not-for- profit hospital, Citrus Memorial will accept any patient who comes to the hospital regardless of ability to pay. In 1999, Citrus Memorial provided approximately $4.9 million in charity care, representing 3.6 percent of its gross revenues. Citrus County provided Citrus Memorial with $1.2 million dollars in subsidization, part of which was allotted to capital construction and maintenance, part of which was allotted to charity care. Subtracting all $1.2 million, as if all had been earmarked for charity care, from the charity care, the dollar amount of Citrus Memorial's out-of-pocket charity care substantially exceeds the dollars for the same period provided by Oak Hill ($1.3 million) and by Brooksville Regional ($935,000). The percentage of gross revenue devoted to charity care is also highest for Citrus Memorial; Brooksville Regional's is 1.1 percent and tellingly, Oak Hill's, at 0.6 percent is less than one-quarter of Citrus Memorial's percentage of out-of- pocket charity care. "[C]learly Citrus has a much stronger charity care credential than does either Oak Hill or Brooksville Regional." (Tr. 241). But this credential does not carry over into the open heart surgery arena. As a condition to its CON, Citrus Memorial committed to a minimum 2.0 percent of total open heart surgery patient days to Medicaid/charity patients. The difference between Citrus Memorial's commitment and that of Oak Hill's and Brooksville Regional's, both standing at 1.5 percent, is not nearly as dramatic as past performance in charity care for all services. The difference in the comparison of Citrus Memorial to the other applicants between past overall charity care and commitment to future open heart services for Medicaid and charity care is explained by the population that receives open heart and angioplasty services. That population is dominated by those over 65 who are covered by Medicare. Competition Citrus Memorial's current charges for cardiology services are significantly lower than comparable charges at Oak Hill or Brooksville Regional. A comparison of the eight cardiology-related DRGs that typically have high volume utilization reveals that Oak Hill's gross charges are 62 percent greater than Citrus Memorial's gross charges. A comparison of gross charges is not of great value, however, even though there are some payers that pay billed charges such as "self-pay" and indemnity insurance. When managed care payments are a function of gross charges then such a comparison is of more value. On a net revenue per case basis for those DRGs, Oak Hill's net revenues are 10 percent greater than Citrus Memorial's. A 10 percent difference in net revenues, a much narrower difference than the difference in gross charges, is significant. Furthermore, it is not surprising to see such a narrowing since most of the utilization is covered by Medicare which makes a fixed payment to the provider. A comparison of projections in the applications reveals that Oak Hill's gross revenue per open heart surgery cases will be 164 percent greater than Citrus Memorial's gross revenue per such case. Oak Hill's net revenue per open heart surgery case will be 32 percent greater than Citrus Memorial's net revenue per such case. A comparison of projections in the applications also reveals that Oak Hill's gross revenue per angioplasty case will be 74 percent greater than Citrus Memorial's and that Oak Hill's net revenues per angioplasty case will be 13 percent greater than Citrus Memorial's. If a program is established at Oak Hill, there will be a hospital within District 3 with a new open heart surgery program. But what Oak Hill, under the umbrellas of HCA, proposes to do in reality is to take a quarter of the volume from [Bayonet Point, a] premier facility to set up in a sense a satellite operation at a facility . . . 16 miles away . . . [when] those patients already have an established practice of going to the premier tertiary facility . . . [ and when the two enjoy] a very strong positive relationship. (Tr. 1434). Such an arrangement will do little to nothing to enhance competition. Comparing Citrus Memorial and Brooksville Regional gross revenues on the basis of the same cardiology-related DRGs reveals that Brooksville's gross charges are 83 percent greater than Citrus Memorial's charges. A comparison of projections in the applications reveals that Brooksville Regional's gross revenue per open heart surgery case will be 147 percent greater than Citrus Memorial's and the Brooksville's net revenue per open heart surgery case will be 45 percent greater than Citrus Memorial's. A comparison of projections in the applications reveals that Brooksville's gross revenue per angioplasty case will be 36 percent greater than Citrus Memorial's and that Brooksville's net revenue per angioplasty case will be 7 percent lower than Citrus Memorial's. Impact of a Citrus Memorial Program on Existing Providers Citrus Memorial reasonably projected that by the third year of operation, a Citrus Memorial program will take away 100 cases from Ocala Regional. In 1999 Ocala Regional had an open heart surgery volume of 401 cases. In 2000, its annual volume was 18 cases more, 419. This is a decline from both the immediately prior two-year period, 1997 to 1998 and the two-year period before that of 1995 to 1996. The volume decline for the two-year period 1999 to 2000 compared to the previous two-year period, 1997 to 1998 is not at all surprising because of "two big factors." (Tr. 97). First, in 1997 and 1998, Ocala Regional was used as a training site for the development of Leesburg Regional's open heart surgery program that opened in December of 1998. In essence, Ocala Regional enjoyed an increase in the volume of cases in 1997 and 1998 when compared to previous years and a spike in volume when compared to both previous and subsequent two-year periods because of the 1997-98 short-term "windfall.) (Id.) Second, Ocala Regional was a Columbia-owned facility. In 1999 and thereafter, "Columbia developed a lot of bad publicity because of some federal investigations that were going on of the Columbia system." (Id.) The publicity negatively affected the hospital's open heart surgery volume in 1999 and 2000. The second factor also helps to explain why Ocala Regional's volume in 1999 and 2000 was lower than in 1995 and 1996. There are other factors, as well, that help explain the lower volume in 1999 and 2000 than in 1995 and 1996. In any event if impact to Ocala Regional, alone, were to be considered for purposes of the prohibition in Rule 59C- 1.033(7)(c), that a new program will not normally be approved if approval would reduce 12-month volume at an existing program below 350, then the impact might result in veto by rule of approval of a program at Citrus Memorial. But Ocala Regional is but one hospital under a single certificate of need shared with another hospital across the street from its facility: Munroe Regional. Annualization for 1999 of discharge data for the 12 months ending September 30, 1999 shows that Munroe Regional enjoyed a volume of 770 cases. There is no danger that the program carried out by Ocala Regional and Munroe Regional jointly under a single certificate of need will fall below 350 procedures annually should Citrus Memorial be approved. Oak Hill Need for Rapid Interventional Therapies and Transfers A high number of residents of Oak Hill's proposed service area present to its emergency room with myocardial infarctions. Many of them would benefit from prompt interventional therapies currently made available to them at Bayonet Point. Over 600 patients annually, almost two patients every day, must be transferred by ambulance from Oak Hill to Bayonet Point for cardiac care. A significant number of them would benefit from interventional therapy more rapidly available. The travel time from Oak Hill to Bayonet Point is the least amount of time, however, of the travel time from any of the three applicants in this proceeding to the nearest existing open heart provider; Brooksville Regional to Bayonet Point or Citrus Memorial to one of the Ocala providers. The extent of the benefit, therefore, is difficult to quantify and is, most likely, minimal. As with the other two applicants, thrombolytic therapy is the only method of revascularization currently available to Oak Hill's patients because Oak Hill is precluded by Agency rule and clinical standards from offering angioplasty without on-site open heart surgery backup. The percentage of MI patients who are ineligible for thrombolytic therapy, coupled with the percentages of patients for whom thrombolytic therapy is ineffective, are extremely significant given the high number of MI patients presenting to Oak Hill's emergency room. During 1998, 418 patients presented to Oak Hill's ER with an MI, and 376 MI patients presented in 1999. During the first eight months of 2000, 255 MI patients presented to Oak Hill's ER, an annualized rate of 384. Conservatively, thrombolytic therapy is not effective for at least 10 percent of patients suffering from an acute MI, either because patients are ineligible to receive the treatment or the treatment fails to clear the blockage. Accordingly, it may be conservatively projected that at least 104 patients who presented to Oak Hill's ER between 1998 and August 2000 (10 percent of 1049) suffering an MI were in need of angioplasty intervention for which open heart surgery backup is required. Most patients are diagnosed as in need of OHS or angioplasty as a result of undergoing a diagnostic cardiac catheterization. Oak Hill performs an extremely high volume of cardiac cath procedures for a hospital that lacks an OHS program. In 1999, for example, it performed 1,641 cardiac catheterizations. This is a higher volume than experienced by any of six hospitals during the year prior to which they recently implemented new OHS programs. If Oak Hill had an OHS program, most of the patients at Oak Hill determined to be in need of angioplasty or OHS could receive those procedures at Oak Hill. Such an arrangement would avoid the inevitable delay and stress occasioned by a transfer to Bayonet Point or elsewhere. Furthermore, if Oak Hill had an OHS program then those patients in need of diagnostic cardiac catheterization and angioplasty sequentially would have immediate access to the interventional procedure. The need is underscored for those patients presenting to Oak Hill's ER with myocardical infarctions who do not respond to thrombolytics because, as stated earlier in this order, access to angioplasty within 30 minutes of onset is ideal. Oak Hill transfers an extremely high number of cardiac patients for angioplasty and open heart surgery. In 1999, Oak Hill transferred 258 patients to Bayonet Point for open heart surgery, and 311 for angioplasty/stent procedures. Of course, most OHS patients are scheduled on an elective basis for surgery, rather than being transferred between hospitals, as is evident from the fact that during the 12-month period ending March 1999, 698 Hernando County residents underwent OHS. For now, Oak Hill patients determined to be in need of urgent angioplasty or open heart surgery must be transferred by ambulance to an OHS provider which for the vast majority of patients is Bayonet Point. Approximately 17 miles south, the average drive time to Bayonet Point from Oak Hill is 30 minutes but it can take longer when on occasion there is traffic congestion. Once the transfer is achieved and patient receives the required procedure, the drive can be difficult for the patient's family and loved ones. Community members often express to physicians and hospital staff their support and desire for an OHS program at Oak Hill. Many believe travel outside Hernando County for those services is cumbersome for loved ones who are important to the patient's healing process. The community support and demand for these services is evidenced by the 7,628 resident signatures on petitions in support of Oak Hill's efforts to obtain approval for an OHS program. While a program at Oak Hill would be more convenient, Oak Hill did not demonstrate a transfer problem that would rise to the level of "not normal" circumstances. Because of Oak Hill's relationship with Bayonet Point, Bayonet Point's proximity and excess capacity, coupled with the high quality of the program at Bayonet Point, Oak Hill's case is more in the nature of seeking a satellite. As one expert put it at hearing, [Oak Hill] is, in fact, a satellite. And my question is, [']What's the wisdom of doing that if you don't have the problems that normally are being addressed when you grant approval of a program?['] In other words, if you don't have transfer issues [that rise to the level of "not normal" circumstances], if you don't have access issues, if you're not achieving any price competition, if it's not particularly cost effective, why would you [approve Oak Hill]? (Tr. 1537-38). Oak Hill's Projected Utilization Oak Hill projected a range of 316 to 348 OHS cases during its first year, and by its third year a range of between 333 and 366 cases. Those volumes are sufficient to ensure excellent quality of care from the beginning of the program, particularly with the involvement of the Bayonet Point surgeons. Oak Hill defined its primary service area (PSA) for OHS based on historic MDC-5 cardiology related diagnosis discharges from its hospital. For the 12-month period ended March 1999, over 90 percent of Oak Hill's MDC-5 discharges were residents of six zip codes, all in the vicinity of Oak Hill Hospital and within Hernando County. Accordingly, that area was chosen as the PSA for projecting OHS utilization. Out-of-PSA residents accounted for only 8.9 percent of Oak Hill's MDC-5 discharges, and of these, 1.5 percent were out-of-state patients, and 4.9 percent were residents from other parts of District 3. For the year ending ("YE") March 1999, Oak Hill had an MDC-5 market share of 40.9 percent within its PSA, without excluding angioplasty, stent, and OHS cases. If angioplasty, stent, and OHS cases are excluded, Oak Hill's PSA market share was 52.7 percent. In order to project OHS service demand, Oak Hill examined the population projections for 1999 and 2004 for District 3, and for Oak Hill's PSA. The analysis was based on age-specific resident populations and use rates, to serve as a contrast to the Agency's projections. The numeric need formula in the OHS Rule utilizes a facility based use rate derived by totaling all of the reported OHS cases performed by hospitals within a District during a given time period, and then dividing those cases by the adult population aged 15 and over. While a facility-based use rate measures utilization in those District hospitals, however, it does not measure out-migration. Nor does it reflect the residence of the patients receiving those services. On the other hand, a resident-based use rate identifies where patients needing OHS actually come from, and permits development of age specific use rates. For example, the resident-based use rates reflects that the southern portion of District 3 has a much higher concentration of elderly persons than does the northern portion of the District, and reveals extremely high migration out of the District for OHS services. Oak Hill's PSA is more elderly than the District 3 population as a whole. In 1999, 32.8 percent of the Oak Hill PSA population was aged 65 or over, as opposed to only 21.5 percent for District 3 as a whole, with similar results projected for the population in 2004, the projected third year of operation of Oak Hill's program. Based on the district-wide use rate resulting from the OHS Rule need methodology, Hernando County would be expected to generate 276 OHS cases in the planning horizon of July 2002 (use rate of 2.3 per 1000 adult population). Application of this OHS Rule use rate to Hernando County clearly understates need if resources to meet the need are considered within the isolation of the boundaries of District 3. For example, the OHS Rule based projection of 276 OHS cases in 2002, is far below the actual 664 Hernando County resident OHS discharges during YE March 1998, and the 698 OHS cases during YE March 1999. While the facility-based district-wide use rate was 2.3, the Hernando County resident-based use rate was 6.45 per 1000 population. The fact of increasing use rates with age is demonstrated by the Hernando County resident use rate of 6.95 for ages 55-64, increasing to 12.01 for ages 65-74, and increasing again to 14.95 for age 75 and over. But focusing on Hernando County use rates within District 3 ignores the reality of the proximity of an excellent program at Bayonet Point. Oak Hill reasonably projected OHS demand in its PSA by examining the age-specific use rates of residents in the southern portion of District 3, which experienced an overall use rate of 4.55 for the year ending March 1999. Those age-specific use rates were then applied to the age-specific population forecast for each of the three horizon years of 2002 through 2004, resulting in an expected PSA demand for OHS of 547 cases in 2002, 561 cases in 2003, and 575 cases in 2004. Those projections are conservative given that 663 actual open heart surgeries were reported among PSA residents during the YE March 1999. The same methodology was used to project angioplasty service demand in the PSA, resulting in an expected demand ranging from 721 cases in 2002 to 758 cases in 2004. Oak Hill then projected its expected OHS case volume by assuming that its first year OHS market share within its PSA would be the same as its MDC-5 market share, being 52.7 percent. Oak Hill next assumed that by the third-year operation its market share would increase to equal its current cardiac cath PSA market share of 57.9 percent. It further assumed that it would have a non-PSA draw of 8.9 percent, which is equal to its current non-PSA MDC-5 market share. Oak Hill reasonably expects that 91.1 percent of its OHS cases would come from within its six zip code PSA, with the remaining 8.9 percent expected to come from outside that area. Oak Hill then projected an expected range of OHS discharges during its first three years of operation by using both a low estimate and a high estimate. The resulting utilization projections reflect a low range of 316 OHS cases in 2002, 324 cases in 2003, and 333 cases in 2004. The high range estimate for the same years respectively would be: 348, 357, and 366 cases. The same methodology was used to project angioplasty cases, resulting in the following low range: 417 cases in 2002; 428 in 2003; and 438 in 2004. The expected high range for the same respective years would be: 458, 470, and 482. Oak Hill's OHS and angioplasty utilization projections are reasonable. Long-term Financial Feasibility Long-term financial feasibility is defined as a demonstration that the project will achieve and maintain financial self-sufficiency over time. Oak Hill's projected gross charges were based on Bayonet Point's charge structure. The projected payer mix was based on Oak Hill's cardiac cath experience. Projected net reimbursement by payor source was based on Oak Hill's experience for Medicare, Medicaid, and contractual adjustment history. Oak Hill's expenses were projected on a DRG specific basis using information generated by the cost accounting system at Bayonet Point. The use of Bayonet Point's expense experience is a reasonable proxy for a number of reasons. Its patient base is comprised of patients who are reasonably expected to be the base of Oak Hill's patients. Management there is similar to what it will be at an Oak Hill program. And, as stated so often, the two facilities are relatively close in location. To account for differences between Bayonet Point's expenses and Oak Hill's project costs, interest and depreciation, adjustments were made by Oak Hill as reflected in its application. As a means of compensating for fixed costs differentials between the two hospitals, Oak Hill added its salary costs projected in Schedule 6 to the salary expenses already included in Bayonet Point's costs. (Schedule 6 nursing, administration, housekeeping, and ancillary labor costs exceeded $3 million in the first year of operations.) This counting of two sets of salary expenses offsets any economies of scale cost differential that may exist between the OHS programs at Bayonet Point and Oak Hill. A reasonable 3 percent annual inflation factor was applied to both projected charges and costs. The reasonableness of Oak Hill's overall approach is supported by Citrus Memorial's use of a substantially similar pro forma methodology in modeling its proposed program on Munroe Regional Medical Center. Oak Hill reasonably projects a profit of $1.38 million in the first year of operation, and that profitability will increase as the case volumes grow thereafter. An Oak Hill program will cost Bayonet Point (a sister HCA hospital) patients and may diminish the corporate profits of the two hospital's parent corporation, HCA Health Services of Florida, Inc. It is clear from the parent's most recent audited financial statements, however, that it has ability to absorb a lower level of profit from Bayonet Point without jeopardizing the financial viability of Oak Hill. Brooksville Regional argues that the financial impact to Bayonet Point of an Oak Hill program demonstrates that the Oak Hill application is nothing more than a preemptive move to stifle competition. Oak Hill, in turn, characterizes its proposal as a sound business judgement to compete with non-HCA hospitals in District 3. Whatever characterization is applied to the Oak Hill proposal, it is clear that it is financially feasible in the long term. Other Statistics The AHCA population estimates for January 1, 1999, show a Hernando County population of 108,687 and a Citrus County population of 98,912. The same data sources show the "age 65 and over" population (the "elderly") in Hernando to be 40,440 and in Citrus to be 37,822. During the year 2000, there were 2,545 more people aged 65 and over in Hernando County than in Citrus County. By the year 2005, the difference is expected to be 3.005. The total change in the elderly population between 2000 and 2005 is projected to be 4,109 in Citrus County and 4,614 in Hernando County. Generally, the older the population, the older the OHS use rate. Comparatively, then, Hernando County has the larger population to be served both now, and in all probability, in the foreseeable future. Oak Hill has the largest cardiology program among the applicants. For the 12-month period ending September 1999, MDC- 5 discharges were 1,130 at Brooksville Regional, 2,077 at Citrus Memorial and 2,812 at Oak Hill. The combined Brooksville and Spring Hill Regional Hospital MDC-5 case volume of 2,238 is below Oak Hill's MDC case volume for the same period. Oak Hill is the largest cardiac cath provider among the applicants. For the 12-month period ending September 2000, Citrus Memorial reported 646 cardiac catheterization procedures and Brooksville Regional reported 812. Oak Hill reported 1,404 such procedures, only sixty shy of a volume double the combined volume at the other two applicants. The level of ischemic heart disease in an area is indicative of the level of open heart surgery needed by residents of the area. The number of ischemic heart disease cases by county during the 12-month period ending September 1999 were: 1,038 for Alachua; 1,978 for Citrus; 2,816 for Marion; and, Hernando, 3,336. During the 12-month period ending September 1999, 657 Hernando County residents underwent OHS at Florida hospitals, while only 408 residents of Citrus County did so. Similarly, 948 Hernando County residents had angioplasty, while only 617 Citrus County residents underwent angioplasty. For the year ending June 30, 1999, the Citrus County OHS use rate was 4.26 per 1,000 population, substantially lower than the Hernando County use rate of 6.41. A comparison of the use rates for the year ending September 30, 1999, again shows Hernando County's use rate to be higher: 4.13 for Citrus, 6.08 for Hernando. Hernando County also experiences a higher cardiovascular mortality rate than does Citrus County. During 1998, the age-adjusted cardiovascular mortality rate per 100,000 population for Citrus was 330.88 and 347.40 for Hernando. During 1999, those mortality rates were 304.64 in Citrus and 313.35 in Hernando (consistent with the decline between 1998 and 1999 for the state as a whole). The Hernando mortality rates greater than Citrus County's indicate a greater prevalence of heart disease in Hernando County than in Citrus County. Most importantly, during 1999, Oak Hill transferred 619 patients to Bayonet Point for cardiac intervention - 258 for open heart surgery, 311 for angioplasty/stent, and 50 for cardiac cath. Brooksville Regional transferred a combined 383 patients after diagnostic cardiac catheterization to other hospitals for either angioplasty or OHS. Brooksville Regional has 91 licensed beds, Citrus Memorial has 171 beds and Oak Hill has 204 beds. Although with Spring Hill one could view Brooksville Regional as "two hospital systems with 166 beds under common ownership and control" (Tr. 1544), at 91 beds, Brooksville would become the smallest OHS program in the state in terms of licensed bed capacity, Hospitals of less than 100 beds are not typically of a size to accommodate an OHS program. There might be dedicated cardiovascular hospitals of 100 beds or less with capability to support an open heart surgery program, but "open heart surgical services in [a general, surgical-medical hospital of less than beds] would overwhelm the hospital as far as the utilization of services." (Tr. 126). Oak Hill's physical plant, hospital size, number of beds, medical staff size, number of cardiologists, cath lab capacity, number of cath procedures, number of admissions, and facility accessibility to the largest local population are all factors in its favor vis-à-vis Brooksville Regional. In sum, Oak Hill is a hospital more ready and appropriate for an adult open heart surgery program than Brooksville. Alternatives As an alternative to its CON application, Oak Hill considered the possibility of seeking approval of a program to be shared with Bayonet Point. Learning that the Agency looks with disfavor on inter-district shared adult open heart surgery programs, Oak Hill decided to seek approval of a program independent of Bayonet Point but one that would rely on Bayonet Point's experience and expertise for development, implementation and operation. Bed Capacity Brooksville contends that Oak Hill lacks sufficient bed capacity to accommodate the implementation of an OHS program in conjunction with its projected-related increased admissions. Brooksville relied on an Oak Hill daily census document, focusing on the single month of January, arguing that the document reflected that Oak Hill exceeded its licensed bed capacity on 5 days that month. The licensed bed capacity, however, was not exceeded. Observation patients, who are not inpatients, and not properly included in the inpatient count, were included in the counts provided by Brooksville. Seasonal peaks in census during the winter months, particularly January, are common to all area hospitals. Similarly, all hospitals experience a higher census from Monday through Thursday, than on other days. Oak Hill has adequate capacity and flexibility to accommodate those rare occasional days during the year when the number of patients approaches its number of beds. Patients are sometimes hospitalized for "observation," and when so classified are expected to stay less than 24 hours. Typically, Oak Hill places such patients in a regular "licensed" bed, so long as such beds are available. There are other areas in the hospital suitable for observation patients, including: 12 currently unused and unlicensed beds adjacent to the cardiac cath recovery area; six beds in the ER holding area; eight beds in the ER Quick Care Unit; and additional beds in the same day surgery recovery area. Observation patients can be cared for appropriately in these other areas, a routine hospital practice. Peak season census is "a fact of life" for hospitals, including Oak Hill and Brooksville. Oak Hill has never been unable to treat patients due to peak season demands. January is the only month during the year when bed capacity presents a challenge at Oak Hill. If necessary, Oak Hill could coordinate patient admissions with Bayonet Point to ensure that all patients are appropriately accommodated. Oak Hill can successfully implement a quality OHS program with its current bed capacity. In fact, all parties have stipulated to Oak Hill's ability to do so. Moreover, should it actually come to pass in future years that Oak Hill's annual average occupancy exceeds 80 percent, it may add up to 20 licensed beds on a CON exempt basis. Brooksville Regional Factors favoring Brooksville over Oak Hill Bayonet Point is the dominant provider of OHS/angioplast to residents of Hernando County. As a non-HCA hospital, a Brooksville program (in contrast to one at Oak Hill) would enhance patient choice in Hernando County for hospitals and physicians, and would create an environment for price and managed care competition. Other health planning factors that support Brooksville Regional over Oak Hill are the locations of the two Hernando County hospitals and the ability of the two to transfer patients to Bayonet Point. Patient Choice and Competition Of the OHS/angioplasty services provided to Hernando County residents, Bayonet Point provides 94 percent, the highest county market share of any hospital that provides OHS services to residents of District 3. Indeed, it is the highest market share provided by any OHS provider in any one county in the state. The importance of patient choice and managed care competition has been acknowledged by all the parties to this proceeding. If Brooksville Regional's program were approved, Hernando County residents would have choice of access to a non- HCA hospital for open heart and angioplasty services and to physicians and surgeons other than those who practice at Bayonet Point. This would not be the case if Oak Hill's program was approved instead of Brooksville's. Price Competition Although Brooksville is not a "low-charge provider for cardiovascular services" (tr. 1347), approving Brooksville creates an environment and potential for price competition. A dominant provider in a marketplace has substantial power to control prices. Adding a new provider creates the motivation, if not the necessity, for that dominant provider to begin pricing competitively. A dominant provider controls prices more than hospitals in a competitive market. Bayonet Point's OHS charges illustrate this. Approving Brooksville's application creates an environment for potential price competition with Bayonet Point, whereas approving Oak Hill's application, whose charges are expected to be the same as Bayonet Point's, does not. Managed Care Contracting Just as competitive effects on pricing are reduced in an environment in which there is a dominant provider, so managed care contracting is also affected. Managed care competition depends not just on competition between managed care companies but also on payer alternative within a market. If a managed care company is forced to deal with one health care provider or hospital in a marketplace, its competitive options are reduced to the benefit of the hospital that enjoys dominance among hospitals. "[T]he power equation moves much more strongly in that type of environment towards the provider [the dominant hospital] and away from the managed care companies." (Tr. 1471). Managed care companies who insure Hernando County residents have no alternative when it comes to open heart surgery and angioplasty services but to deal with Bayonet Point. With a 94 percent share of the Hernando County residents in need of open heart and angioplasty services, there is virtually no competition for Bayonet Point in Hernando County. The managed care contracting for both Bayonet Pont and Oak Hill is done at HCA's West Florida Division office, not at the individual hospital level. Approving Oak Hill will not promote or provide competition for managed care. Approving Brooksville, on the other hand, will provide managed care competition over open heart and angioplasty services in Hernando County. Ability to Transfer Patients While transfers of Hernando County patients always produce some stress for the patient and are cumbersome as discussed above for the patient's loved ones, there is no evidence of transfer problems for Oak Hill that would rise to the level of "not normal" circumstances. Outcomes for patients transferred from Oak Hill to Bayonet Point on the basis of morbidity statistics, mortality statistics, length of stay, patient satisfaction, and family satisfaction are excellent. It is not surprising that sister hospitals situated as are Oak Hill and Bayonet Point would enjoy minimal transfer delays and access problems encountered when patients are transferred. Transfers between unaffiliated hospitals are not normally as smooth or efficient as between those that have some affiliation. Unlike Oak Hill's patients, Brooksville patients, for example, are never transported for OHS/angioplasy by Bayonet Point's private ambulance. Other than in emergency cases, Bayonet Point decides the date and manner when the patient will be transferred. But just as in the case of Oak Hill, there is no evidence of transfer problems between Brooksville Regional and Bayonet Point that would amount to an access problem at the level of "not normal" circumstances. Outmigration As detailed earlier, there is extensive outmigration of Hernando County residents to District 5 for open heart and angioplasty procedures. The outmigration pattern on its face is in favor of both applications of Oak Hill and Brooksville. The outmigration from Hernando County, however, is of minimal weight in this proceeding since Bayonet Point is so close to both Oak Hill and Brooksville. The patients at the two Hernando hospitals have good access to Bayonet Point, a facility that provides a high level of care to Hernando County residents in need of open heart surgery and angioplasty services. The relationship is inter-district so that it is true that there is outmigration from District 3. Outmigration statistics showing high outmigration from a district have provided weight to applications in other proceedings. They are of little value in this case. Location of the Two Hernando Hospitals Brooksville is located in the "dead center" (Tr. 1290) of Hernando County. With good access to Citrus County via Route 41, it is convenient to both Hernando County residents and some residents of Citrus County. It reasonably projects, therefore, that 90 percent of its open heart/angioplasty volume will be from Hernando County with the remaining 10 percent from Citrus. Oak Hill is located in southwest Hernando County, closer to Bayonet Point than Brooksville. Oak Hill's primary service area is substantially the same as that part of Bayonet Point's that is in Hernando County. Oak Hill does not propose to serve Citrus County. Brooksville, then, is more centrally located in Hernando County than Oak Hill and proposes to serve a larger area than Oak Hill. Financial Feasibility (long-term) Brooksville has operated profitably since its bankruptcy. In its 1999 fiscal year, the first year out of bankruptcy, Hernando HMA earned a profit of $3 million. In fiscal year 200, Brooksville's profit was $6 million. OHS programs are generally very profitable. There is no OHS program in Florida not generating a profit. Brooksville's projected expenses and revenues associated with the program are reasonable. Schedule 5 in the Brooksville application contains projected volumes for OHS/angioplasty. The payer mix and length of stay were based on 1998 actual data, the most recent data for a full year available. The projected volumes are reasonable. The projected volumes are converted to projected revenues on Schedule 7. These projections were based on actual 1998 charges generated for both Hernando and Citrus County residents since Brooksville proposes to serve both. These averages were then reasonably projected forward. Schedule 7 and the projected revenues are reasonable. These projected volumes and revenues account for all OHS procedures performed in Hernando and Citrus Counties in 1998 even though effective October 1, 1998, the DRG procedure codes for OHS procedures were materially redefined. Thus, when Brooksville's schedules were prepared using 1998 data, only 3 months of data were available using the new DRG codes. Brooksville opted to use the full year of data since using a full year's worth of data is preferable to only 3 months. Similarly, the DRGs for angioplasty both as to balloon and with stent were re-classified. Again, Brooksville opted to use the full year's worth of data. Brooksville's expert explained the decision to use the full year's worth of data and the effect of the DRG reclassification on Brooksville's approach, "We've captured all the revenues and expenses associated with these open heart procedures and just because the actual DRGs have changed, doesn't . . . impair the results because both revenues and expenses are captured in these projections." (Tr. 1651). Schedule 8 includes the projected expenses. It included the health manpower expenses from Schedule 6 and the project costs from Schedule 1. The remaining operating expenses were based upon the actual costs experienced by all District 3 OHS providers generated from a publicly-available data source, and then projected forward. As to these remaining operating costs, consideration of an average among many providers is far preferable to relying on just one provider. Schedule 8 was reasonably prepared. It accounts for all expense to be incurred for all types of OHS and angioplasty procedures. It is based on the best information available when these projections were prepared and are based on 12 months of actual data. Even if the projections of the schedules are not precise because of the re-classification of DRGs, they contain ample margins of error. Brooksville's financial break-even point is reached if it performs 199 OHS and 100 angioplasty procedures. This low break-even point provides additional confidence that the project is financially feasible. Brooksville demonstrated that its proposed program will be financially feasible.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter a final order that grants the application of Citrus Memorial (CON 9295) and denies the applications of Oak Hill (CON 9296 )and Brooksville Regional (CON 9298). DONE AND ENTERED this 4th day of October, 2001, in Tallahassee, Leon County, Florida. DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 4th day of October, 2001. COPIES FURNISHED: Diane Grubbs, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building Three, Suite 3431 Tallahassee, Florida 32308-5403 William Roberts, Acting General Counsel Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building Three, Suite 3431 Tallahassee, Florida 32308-5403 Michael J. Cherniga, Esquire Seann M. Frazier, Esquire Greenberg Traurig, P.A. East College Avenue Post Office Box 1838 Tallahassee, Florida 32302-1838 Stephen A. Ecenia, Esquire Rutledge, Ecenia, Purnell and Hoffman, P.A. 215 South Monroe Street, Suite 420 Tallahassee, Florida 32302-0551 James C. Hauser, Esquire Metz, Hauser & Husband, P.A. 215 South Monroe Street, Suite 505 Post Office Box 10909 Tallahassee, Florida 32302 John F. Gilroy, III, Esquire Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building Three, Suite 3431 Tallahassee, Florida 32308-5403
The Issue The issue is whether Winter Haven Hospital, Inc.`s application for a certificate of need to establish an open heart surgery program at its health care facility in Winter Haven, Florida should be granted.
Findings Of Fact Based upon all of the evidence, the following findings of fact are determined: Background On September 26, 1988 respondent/applicant, Winter Haven Hospital, Inc. (WHH), filed its application for a certificate of need (CON) with respondent Department of Health and Rehabilitative Services (HRS), seeking authorization to establish an adult open heart surgery program at its facility located at 200 Avenue F, Northeast, Winter Haven, Florida. According to the application, WHH proposed to implement an open heart surgery program in an existing operating room with a project expenditure of $714,000. After reviewing the application, HRS found certain items to be either incomplete or missing and requested WHH to furnish such data by November 20, 1988. After such items were timely submitted, HRS deemed the application to be complete on November 14, 1988. A further review of the application followed, and, despite noting at least ten deficiencies in the application, HRS issued its state agency action report and letter of intent to grant the application on January 13, 1989. This preliminary action was followed by a notice of intention to grant the CON published in the Florida Administrative Weekly on February 3, 1989. After notice of HRS's preliminary decision was published, petitioner, Hillsborough County Hospital Authority d/b/a Tampa General Hospital (TGH), a 947-bed acute care hospital located at Davis Island, Tampa, Florida, filed a petition for formal hearing challenging the proposed agency action. A similar petition was also filed by petitioner, Lakeland Regional Medical Center (LRMC), a 897-bed acute care hospital in Lakeland, Florida. Both petitioners contended that WHH's request, if approved, would adversely affect their existing open heart surgery programs in contravention of state law and agency rules. The parties have stipulated to the standing of petitioners. The Omissions Process When WHH filed its application with HRS on September 26, 1988, it inadvertently failed to submit (a) one page of the balance sheet of the financial statements and (b) the opinion letter of the certified public accounting firm that prepared the financial statements. During the initial review of the application, HRS noted that the financial statements were incomplete and requested WHH to file such data during the so-called omissions process. This process is authorized by statute and rule and affords an applicant the opportunity to supply missing or incomplete information after the initial application has been filed. Pursuant to HRS's request, WHH supplied the two missing documents, and other requested information, by the specified due date. After receipt of this data, the agency deemed the application to be complete. According to agency personnel, when the application was filed HRS had a policy of permitting this type of information to be routinely filed during the omissions process. Shortly thereafter, HRS changed its policy and required complete financial statements to be filed with the initial application. If complete financial statements were not initially filed, the application was deemed to be incomplete and rejected without further review or opportunity to supply the missing data. However, this policy was recently ended, and the agency has now reverted to the policy in effect at the time WHH filed its application. Thus, the filing of such data by WHH during the omissions process was consistent with then existing agency policy as well as HRS's governing rules and statutes. The Parties The Department of Health and Rehabilitative Services is the state agency charged with the responsibility of administering the Health Facility and Services Development Act, also known as the Certificate of Need (CON) law. In this proceeding, and consistent with its proposed agency action, HRS supported WHH's application. Winter Haven Hospital, Inc. is a non-profit community hospital licensed for 579 long-term and psychiatric beds. Of that total, 259 are designated as medical/surgical beds while 36 are classified as intensive care unit (ICU) beds. Established more than fifty years ago, WHH has two campuses, a 160-member medical staff with a broad range of medical specialties, and provides all major medical services with the exception of open heart surgery, comprehensive burn treatment, and Level III neonatal intensive care. In August 1988 WHH opened a cardiac catherization laboratory with the intention of later adding an open heart surgery unit. The facility treats Medicaid and Medicare patients and indigents and has contracts with local health management and preferred provider organizations and other groups. Although not disclosed in the letter of intent, WHH is a subsidiary corporation of Mid-Florida Medical Services, Inc., a holding company for WHH and various other affiliated entities. Hillsborough County Hospital Authority is a public agency created in 1980 by the Florida Legislature for the express purpose of operating Tampa General Hospital. Licensed for 947 beds, the facility serves as a major teaching and tertiary referral hospital providing a complete range of services twenty four hours per day, including open heart surgery. In addition, TGH is the primary teaching hospital for the University of South Florida medical school. By law, TGH is required to provide indigent care. Lakeland Regional Medical Center operates a large, regional referral acute care facility at 1324 Lakeland Hills Boulevard, Lakeland, Florida. Of its licensed 897 beds, approximately 700 are licensed medical/surgical and ICU beds. LRMC has historically provided a wide range of acute care services, including open heart surgery and diagnostic and therapeutic cardiac catherization, and is a major tertiary referral center. According to Health Care Cost Containment Board data, LRMC treats twice as many patients, including those acutely ill, as does WHH and has a substantially larger operating budget. District 6 Open Heart Programs The facilities of WHH, LRMC and TGH are located in district 6, a geographic area composed of Hillsborough, Polk, Manatee, Hardee and Highlands Counties and artificially created by HRS for, among other things, the purpose of determining need for new or additional health facilities within that area, including open heart surgery programs. In addition to TGH and LRMC, there are four other existing adult open heart surgery programs in district 6. These include St. Joseph's Hospital in Tampa, a well established program, and Manatee Memorial Hospital (Bradenton), L. W. Blake Hospital (Bradenton) and University Community Hospital (Tampa). The latter three programs opened in February 1988, March 1989 and June 1989, respectively. None have intervened in this proceeding. When WHH's application was reviewed, a seventh open heart surgery program within the district (Humana- Brandon) had been preliminarily approved, but that approval was subsequently withdrawn. Therefore, for purposes of this proceeding, Humana- Brandon will not be considered as an existing or approved program. According to the state agency action report made a part of this record, the programs and number of open heart procedures performed during the twelve month period ending June 30, 1988 were as follows: Program Procedures St. Joseph's 933 TGH 1230 University Community Hospital 0 L. W. Blake 0 Manatee Memorial 70 LRMC 503 Total 2736 For the twelve months ending September 30, 1988, there were 2,672 procedures performed by district 6 programs, or a decline of 64 procedures when compared to the total performed during the year ending June 30, 1988. Of that amount, 1614 procedures were performed on district 6 residents while 1058 procedures were performed on non-district 6 residents. The latter number included 541 residents from district 5 of whom 473 were Pasco County residents. The service area of TGH's open heart surgery program encompasses a nine-county area with a range of seventy miles. It receives 42% of its open heart patients from district 6, with 34% from Hillsborough County and 5% from Polk County. As to the patients from outside district 6, TGH receives 33% from district 5 and 14% from district 3. Approximately 75% of LRMC'$ open heart surgery patients are Polk County residents. Indeed, of 496 Polk County residents having open heart surgery during the year ending September 30, 1988, approximately 73% of those residents had surgery at LRMC. The remainder used facilities outside the county, such as TGH. In 1986 approximately 200 patients came to LRMC from locations outside of the City of Lakeland but within Polk County, and some 67 cases per year have been referred by WHH to LRMC. The service area of WHH is not as clearcut. In its application, WHH designated all of Polk County as its primary service area, and Highlands and Hardee Counties as the secondary service area for its proposed program. However, in its answers to interrogatories, WHH represented that its primary service area was eastern Polk County. At hearing, the service area was redesignated as eastern Polk County, Hardee County and Highlands County. Since over 90% of WHH's patients reside in Polk County, it is found that Polk County is its primary service area. For the year ending September 30, 1988 one hundred twenty-five residents of Highlands County had open heart surgery. Only 8% used LRMC while 74% went to a facility in Orlando. For the same time period, sixteen Hardee County residents had open heart surgery, of whom approximately 63% used LRMC's facility. Applicable Statutory and Rule Criteria By prehearing stipulations the parties agreed that, except for the criteria contained in Subsections 381.705(1)(g), (j), and (2)(e), Florida Statutes (Supp. 1988), all other relevant statutory criteria must be satisfied. These include subsections 381.705(1)(a)-(f), (h) and (i), (k)-(n), and (2)(a)- (d). 1/ In addition, the criteria in Rule 10-5.011(1)(f), Florida Administrative Code (1987) are in issue. Of special concern in this proceeding is the appropriate manner in which to satisfy the requirements of subpart 11.a.(I) of the rule. To demonstrate compliance or noncompliance with the criteria, the parties presented a number of expert witnesses. As might be expected, the testimony on this issue is sharply conflicting. In resolving these conflicts, the undersigned has accepted the more credible and persuasive testimony on the issue, and that testimony is embodied in the findings below. Subsection 381.705(1)(a), F. S. - The first statutory criterion requires that HRS consider "the need for the health care facilities and services . . . being proposed in relation to the applicable district plan arA state health plan." In this regard, the parties have offered into evidence copies of the relevant portions of the two plans. The 1988 District VI Health Plan has application in this proceeding. That plan requires, among other things, that (a) all existing programs in a particular service area must be operating at 350 procedures per year, (b) the proposed unit must be able to reach a level of 200 procedures within three years, and (c) the proposed program cannot reduce the average utilization in the applicant's service area below 350 procedures per year. In addition, the plan expresses a preference for applicants which have an historical commitment to the provision of indigent care and those hospitals with documented status as major regional referral centers. Finally, the plan expresses a preference for applicants from subdistricts not having existing and/or approved programs. Notwithstanding WHH's contention that the foregoing objectives apply only to comparatively reviewed applications, it is found that these objectives must be taken into account in determining whether the proposal is consistent with the plan. The evidence reflects that not all of the existing programs in the service area are operating at 350 procedures per year. Indeed, University Community Hospital, L. W. Blake and Manatee Memorial Hospital are operating at substantially below that number. The record also indicates that the applicant has not reasonably demonstrated that it will reach a level of 200 procedures within three years. Further, unless 700 procedures per year can be generated by LRMC and WHH, which is highly questionable, the requirement that the new program not reduce average utilization in the applicant's service area (Polk County) below 350 will not be met. As to the requirement that an applicant have a historical commitment to the provision of indigent care, WHH's historical commitment, while substantially less than some providers such as TGH, is marginally sufficient to satisfy this requirement. Next, even though the district is not apportioned into subdistricts for the purpose of determining open heart surgery program need, it is noted that WHH's proposed facility would lie within fifteen miles of LRMC. Finally, WHH is considered a community hospital rather than a major regional referral center and thus it falls short on that objective. Even if WHH was a step above a community hospital, it must still be recognized that open heart surgery is a specialized tertiary service which should be regionalized and performed in a limited number of institutions. Therefore, it is found that the proposal is inconsistent with the local health plan. Chapters 4 and 5 of the state health plan contain various objectives and goals for specialized services such as open heart surgery programs. Goal 1 of chapter 4 of the plan establishes an objective of developing "acute-care resources in quantity and mix which appropriately meet population needs in the most cost-efficient manner." Goal 4 of chapter 5 provides an objective of insuring "the appropriate availability of cardiac catherization and open-heart services at a reasonable cost." In addition, objective 4.2 of chapter 5 provides that its goal is "to maintain an average of 350 open heart surgery procedures per program in each district through 1990." The parties have not relied upon or cited any other applicable portions of the state plan. Since the existing programs within the district are not operating at capacity, the approval of the application would be inconsistent with goal 1 of chapter 4 which provides that acute-care resources should be developed in the most cost-efficient manner. The evidence further supports a finding that as to goal 4 of chapter 5, the approval of another program within the district will drive up costs at existing programs. The bases for this finding is set forth in findings of fact 43-46. Thus, the proposal is inconsistent with the plan in this respect. Finally, the proposal is found to be consistent with objective 4.2 of chapter 5 since an average utilization of 350 procedures per program should be maintained through 1990 even with the addition of a new program. Given the above two shortcomings, it is found that the proposal is inconsistent with the state plan. Subsections 381.705(1)(b), (2)(a),(b) and (d), F.S.- These criteria require that HRS consider the "availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care services and hospices in the service district of the applicant," whether less costly and more efficient and appropriate services are available, and whether patients will experience "serious problems in obtaining inpatient care of the type proposed, in the absence of the proposed new service." To put these criteria in perspective, it is noted that when the application was reviewed by HRS, there were four existing open heart surgery programs within the district. At time of hearing, two other approved programs had commenced operations. The areas with highest population densities, such as Lakeland, Tampa and Bradenton, all have open heart programs in the vicinity. Thus, the existing programs in the district are geographically distributed consistent with the relative population distribution within the district. There are no programs in either Hardee or Highlands Counties, but they have a very small population base. Indeed, HRS acknowledged in the state agency action report that a new program at WHH would not enhance access to residents of those two counties. According to traffic engineering studies introduced into evidence, open heart surgery services currently are available to 90% of the population of district 6 within a two hour drive time, as required by subparagraph 4.a. of rule 10- 5.011(1)(f). The City of Lakeland is only fifteen miles, or thirty minutes drive time, from Winter Haven. Therefore, the addition of a new program in Winter Haven will not materially enhance geographic accessibility. Further, there is no demonstrated accessibility problem by residents of the district. The existing facilities in the district have sufficient excess capacity to perform additional open heart surgery cases. This projected growth can be accommodated without any additional capital expenditures. Indeed, greater utilization of the existing programs would be a less costly alternative to the establishment of a new program at WHH. Also, there is no evidence that cardiac patients in the district will experience serious problems in obtaining open heart surgery services in the absence of a program at WHH. Therefore, it is found that the applicant has failed to show that the existing programs are inadequate or unavailable, that residents have an accessibility problem to existing facilities, that the quality of care, efficiency, utilization and appropriateness of other programs are less than satisfactory, that less costly, more efficient alternatives are not available, that patients will experience a serious problem in obtaining care in the absence of the proposed new service, or that existing facilities are being used in an inappropriate or inefficient manner. Subsections 381.705(1)(c) and (h), F.S. - These two criteria go hand in hand and require HRS to consider "the ability of the applicant to provide quality of care and the applicant's record of providing quality of care," and whether the applicant has sufficient resources, including manpower, to accomplish and operate the project. Petitioners suggest that WHH will be unable to offer adequate quality of care because the new program will not attract a sufficient number of patients and because of a lack of adequate planning. They also contend that WHH will not be able to recruit and hire the necessary personnel to support its program. To ensure quality of care, WHH intends to enter into a contract with The Watson Clinic in Lakeland to provide a surgical team. Since those physicians are performing surgeries at LRMC, WHH proposes that the team would split its time between the two facilities. The team now performs more than 500 procedures per year at LRMC. Thus, WHH asserts that the team can easily maintain its proficiency even if it does not meet its projected level of procedures. For that matter, WHH points to a suggested standard by the American College of Surgeons (ACS) that 150 procedures per year is a reasonable standard, a goal that WHH obviously believes it can reach. It goes on to contend that the surgical team, and not the hospital, performs the procedure, and that as long as the combined efforts of the surgical team surpasses the 500 threshold, the quality of care will be maintained. As to the resources and manpower needed to accomplish the project, WHH projected in its application the need to hire two scrub technicians, two registered nurses and one perfusionist for a single surgical team in one operating room. However, it projected no incremental staffing needs for additional ICU nurses or technicians. The applicant concedes it may "encounter some difficulty in hiring the necessary personnel" for its program but points to a good track record in hiring other personnel and the fact that the perfusionist may be provided by the surgical team from The Watson Clinic. It further posits that aside from the five positions, it is unlikely that any other personnel must be hired. This is because it already has some experienced personnel in the employ of the hospital who can be transferred to the open heart surgery program and others can be readily trained. The evidence establishes the fact that there is a direct relationship between the volume of open heart surgery performed at a hospital and the quality care afforded open heart surgery patients. In other words, as the volume of cases increases, mortality rates generally decrease. As demonstrated in studies introduced by LRMC witness Luft, hospitals performing between 20 and 100 coronary artery bypass graft procedures per year had a risk adjusted mortality rate of 5.2%. This rate decreased to 4.1% for hospitals with annual volumes of between 201 and 350 procedures, and dropped even farther for facilities performing in excess of 350 procedures per year. This measure has proven to be accurate at LRMC, for as the volume at the hospital has increased, mortality has decreased. The above statistics are accepted as being a more reliable measure than the ACS standard of 150 procedures per year suggested by WHH. The more credible evidence reflects that WHH will not be able to perform 200 adult open heart surgery procedures annually within three years of initiating its program. This level could only be achieved if WHH gains a substantial share of Highland County's market. However, the vast majority of Highland patients are currently migrating out of the district to a church sponsored facility in Orlando. This suggests that these patients are motivated by factors other than proximity since they are already bypassing the closest facility, LRMC. In addition, LRMC's cardiovasular surgeons, who WHH plans to use, receive no referrals from that county, and only 4% of LRMC's total hospital discharges come from that county. Further, there is no evidence that WHH would be able to change existing referral patterns. Finally, although WHH projected 164 procedures in its first year, 206 the second year and a minimum of 200 by year three, it made no credible market share analysis to support those projections. Indeed, existing use rates of Polk County residents, which are another good indication of the future demand for a new service, belie WHH's projections and suggest that only 30 additional open heart surgery cases will be generated in 1990 beyond current volumes. This is consistent with the fact that LRMC has experienced the smallest growth in open heart surgery volume of any district 6 program over the last three years. It is noted that HRS projects a growth in volume of less than 200 cases by 1990 for the entire district with much of that growth being accounted for at the new programs. A more credible and reasonable projection shows that by 1993 there will be 2,700 open heart procedures available for the six existing facilities in district 6, which is only 28 procedures more than performed by the four operational programs in district 6 during the year ending September 30, 1988. It should be noted here that WHH's recently initiated cardiology program has been facing slow growth, market saturation and potential decline. All parties recognize the critical shortage of nursing personnel that exists nationally, and particularly in the areas of cardiovascular surgery and intensive care. Even today, LRMC has a number of nursing vacancies, including vacancies in its intensive care unit, despite having a full time recruiter and an aggressive recruiting program. Thus, LRMC's fear of losing skilled personnel to WHH should the application be granted are well-founded, particularly since it has lost staff to WHH in the past. In addition, qualified perfusionists are extremely difficult to hire. Indeed, The Watson Clinic has been attempting, unsuccessfully, to hire an additional perfusionist for the LRMC program for almost a year. Current salaries for a perfusionist range from $70,000 to as high as $100,000 per year. This contrasts with the unrealistic projection of WHH that it could hire a perfusionist for $40,000 per year. A back-up open heart surgery operating room fully equipped and staffed will be necessary in order for WHH to assure patient safety and to be able to provide angioplasties. Additional ICU space is also required. Because WHH has made no provision for an additional operating room or ICU space, and the necessary related staffing, it is apparent that WHH has not adequately planned and demonstrated the intensive care capacity necessary to serve open heart surgery patients. The applicant must have more than one surgical team so as to allow for vacations, sick days, 24-hour coverage, and emergencies. However, table 11 of the application reflects that WHH intends to provide for only one assembled surgical team. With the proposed limitation of one operating room and one surgical team, WHH would not be able to handle emergency cases that arise during normal hours when a scheduled procedure is in progress. It should be noted here that The Watson Clinic now employs only three cardiovascular surgeons. One of those surgeons is leaving, and the clinic has been attempting, unsucessfully so far, to recruit another surgeon. Until a replacement is recruited, the clinic will have only two surgeons who ostensibly would work at both WHH and LRMC if the application was approved. The application does not provide for the additional intensive care staff necessary to care for 200 open heart patients per year. A 1:1 patient to nurse ratio for the first twenty-four hours following surgery is desirable. Even if WHH utilized a less desirable 2:1 ratio, at least four additional intensive care nurses would be required to handle the incremental patient load. During the start-up period for a new open heart surgery program, a hospital cannot be expected to perform the number of cases necessary to achieve the desired low mortality rates. This reality has been taken into acount by HRS by giving new programs three years in which to reach the 200 procedure threshold. Even with this grace period, the evidence supports a finding that WHH will not be able to reach that threshold within the required three year time period. Given this fact, and the shortcomings in applicant's planning for staff and equipment, it is found that WHH has failed to demonstrate that it can ensure the requisite quality of care required by the law. It is further found that applicant has failed to demonstrate that it will have the necessary resources, including manpower, to accomplish and operate the project. Subsections 381.705(1)(d) and (2)(c), F.S. - These criteria require a consideration of alternatives, including sharing arrangements, to the proposal under review. Except for existing facilities, there are no alternatives to open heart surgery. In this regard, HRS determined that "less costly alternatives to the proposal would be greater utilization of the existing open heart surgery programs in District VI." As noted in finding of fact 27, the existing facilities have sufficient excess capacity to handle the projected growth in the district. Although LRMC has offered to explore a cooperative, shared open heart surgery program with the applicant, WHH officials have so far declined. The Watson Clinic, from which the surgical team will be obtained, has also indicated a willingness to support such an arrangement. In light of WHH's unwillingness to consider this alternative, it is found that the statutory criteria have not been ftet. Subsection 381.705(1)(i), F.S. - An applicant for a CON is required to demonstrate the short and long-term financial feasiblility of the project. In this case, the long-term financial feasibility of the project is dependent in large measure upon the reasonableness of WHH's projections. The pro forma financial projections contained in the application are flawed and unreliable. This was borne out by WHH's own financial expert who rejected four of the five assumptions underlying the pro formas. To overcome these deficiencies, at hearing WHH's expert offered a new financial analysis which was substantially different than the pro formas submitted with the application and reviewed by HRS prior to deeming the application complete. As such, the new analysis constituted an impermissible amendment to the application. Even if it was not construed to be an amendment to the application, the projected utilization of 206 procedures by the second year of operation, and upon which the financial projections are premised, was not supported by the evidence. Because of this, it is found that applicant has not demonstrated that the project is financially feasible in the long term. Subsection 381.705(1)(1), F. S. - This criterion requires HRS to consider the "probable impact of the proposed project on the costs of providing health services proposed by the applicant". The statute also speaks of competition and its effect on the ability of the applicant's competitors to promote quality assurance and cost-effectiveness. Initially, it is noted that in recent years there has been increasing competition for open heart patients in district 6. This is because three new programs have recently become operational. In addition, a new program was just authorized in Pasco County which will reduce the inflow of Pasco County residents into district 6. Most of the Pasco County patients were utilizing the facility of TGH. The authorization of another program will inevitably draw patients from the existing facilities and the expected loss will serve to increase costs both to patients and hospitals. Although WHH intends to charge lower fees for open heart patients than do LRMC and TGH, HRS concedes that this would not likely have the effect of causing those providers to decrease their charges. At the same time, the competition between LRMC and WHH for the skilled personnel necessary to operate an open heart surgery program would have the effect of driving up costs at both institutions. If approved, the application would directly and adversely impact LRMC. This is because approximately 75% of LRMC's open heart patients are residents of Polk County. The historical overall hospital primary Service area of WHH, which is projected by WHH to mirror the primary service area of its open heart surgery program, directly overlaps LRMC'S primary service area for open heart surgery. In addition, cardiologists and surgeons at LRMC currently receive referrals of surgical, angioplasty and diagnostic cardiac catherization cases from Winter Haven physicians, and those referrals will likely be reduced with the approval of a new program at WHH. This is supported by the fact that when WHH opened its cardiac catherization laboratory in August 1988, LRMC experienced a substantial drop in cases referred from Winter Haven physicians. Further, if WHH achieves its projected level of 206 cases by the second year of operation, LRMC would likely lose 133 open heart referrals and 128 angioplasty cases. This in turn would result in an annual financial loss of $1,652,640 for LRMC. If the number of procedures reached 350, LRMC could likely lose 226 cases per year, a number that WHH's own expert conceded was reasonable given the fact that some 200 patients per year come to LRMC from points outside of Lakeland but within Polk County. Given LRMC's declining operating margins in recent years, and a projected operating margin of only $300,000 in 1990, LRMC would be forced into a deficit position thereby adversely impacting its current level of services, quality of care and ability to provide indigent care. Tampa General Hospital's indigent load is substantial, and for the current fiscal year it anticipates providing $45 million worth of indigent care net of any reimbursement. Indeed, approximately 43% of TGH's patients are in the medically needy category, and it projects a deficit in 1990 of $4.3 million. To offset these losses, TGH relies on revenues from paying patients, of which the open heart surgery program is a major source. In 1988, this source provided 15% of its net patient services revenue. The approval of a program at WHH would further reduce the availability of open heart patients to TGH. If a new program caused only a 10% loss of open heart surgery patients, TGH's gross service revenue would decrease by over $4 million per year. Even the 5% to 6% loss that WHH predicts will occur would equate to a not insubstantial sixty-two patients per year. Accordingly, it is found that the introduction of a new program at WHH would have an adverse impact on TGH, although not as profound as on LRMC. Subsection 381.705(1)(n), F. S. - This subsection requires HRS to consider the applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent. Recent data indicates that only 2.7% of WHH's total patient days were Medicaid days. Also, its total charity uncompensated care was $410,176. When the Hill-Burton compulsory contribution is excluded, WHH's net voluntary indigent and uncompensated care was only $133,950, which was two-tenths of one percent of gross revenue for the year. This contrasts with TGH's total uncompensated care in 1987 of 4.5% of gross revenue. According to Health Care Cost Containment Board data for 1988, WHH's total uncompensated care was approximately one-tenth the amount incurred by LRMC during the same time period. Also, the applicant has had a policy of requiring major surgery patients to demonstrate financial capability before being admitted. Even so, WHH has represented to HRS that it intends to dedicate 2% of open heart services to Medicaid patients which is comparable to the level historically reported by existing providers in the district. Given this representation, which was not contradicted, it is found that the application is in compliance with this criterion. The remaining statutory criteria - Petitioners have not seriously contested WHH's ability to satisfy the remaining statutory criteria. It is specifically found that the remaining relevant statutory criteria have been satisfied. To the extent the rule criteria, except rule 10-5.011(1)(f), apply, they are also deemed to have been satisfied but only where the comparable statutory criteria have been met. Rule 10-5.011(1)(f), F. A. C. - This rule sets forth additional criteria against which applications for open heart surgery programs are evaluated. Of some significance is the admonition in subparagraph 2. which states that "(t)he Department will not normally approve applications for open heart surgery programs in any service area unless the conditions of Sub- paragraphs 8. and 11., below, are met." Since WHH does not rely on "not normal" circumstances, a major controversy has arisen over the manner in which MRS has deemed subpart 11.a.(I) to have been satisfied. To determine the numeric need for new programs within a service area, HRS utilized the formula embodied in subparagraph 8. of the rule. Under this formula, a use rate was calculated for the service district based upon the number of open heart surgery procedures per 100,000 population for the year ending June 30, 1988. The use rate was then applied to the projected population for the horizon year of 1990, the year the program is expected to begin. This calculation produced a projected number of 2,914 procedures for 1990. After dividing that number by 350, MRS determined that 8.3 programs were needed in the district by 1990. Since the district already has six existing or approved programs, which must be subtracted from the projected need, the formula produced a net need of two additional programs. According to MRS's expert, the formula calculation merely provides an opportunity, and not a requirement, for MRS to approve an additional program since the applicant's conformity with other rule and statutory criteria must also be considered. It should be noted that the rule projects a need on a district-wide basis and has no provision for projecting the number of cases within various geographic areas of the district such as the service area defined in WMM's application. In this regard, WHH made no claim that it would attact patients from anywhere in district 6 other than Polk, Mardee and Highlands Counties. Subparagraph 11. of the rule reads in part as follows: There shall be no additional open heart surgery programs unless: the service volume of each existing and approved open heart surgery program within the service area is operating at and is expected to operate at a minimum of 350 adult open heart surgery cases per year . the conditions specified in Sub- paragraph 5.4, above, will be met by the proposed program. b. No additional open heart surgery programs shall be approved which would reduce the volume of existing open heart surgery facilities below 350 open heart surgery procedures annually for adults . . . The above rule was adopted in substantially its present form in February 1983. Under the plain language in subparagraph 11.a., even if a numeric need is shown, a new program shall not be established unless each existing and approved program within the district is operating at and is expected to operate at a minimum of 350 procedures per year. The agency's expert acknowledged that the plain language of the rule requires that each existing and approved program be operating at the 350 threshold before a new program may be approved. She also acknowledged that if the words "and approved" were not in subpart 11.a.(I), the agency would interpret the provision in the manner suggested by petitioners. Nonetheless, HRS interprets the rule as requiring that each existing and approved program must in the future maintain an average of 350 procedures if a new program is approved. No determination is made as to whether the existing programs are currently averaging 350 procedures annually. According to HRS's expert, this interpretation is based upon a reading of the entire subparagraph 11. Applicant's expert, who was formerly in charge of HRS's CON program, also supported the agency's practice of "averaging" and concluded that subparagraph authorized this interpretation. Even so, the word "averaging" is not found in any provision within subparagraph 11. In addition, the proponents of the averaging policy rely upon another portion of the rule to support their position. More specifically, they rely heavily upon subparagraph 7. of the same rule which provides that "(t)he provision of open heart surgery in the service area shall be consistent with the needs reflected in the local health plan and the Florida State Health Plan." One objective of the state health plan is to maintain an average of 350 procedures per program in the district through 1990. It is noted, however, that the state health plan applicable to this proceeding was adopted more than two years after the rule in question became effective, and thus could not have supported HRS's interpretation during the rule's first two years of operation. Moreover, that objective is directly at odds with the provisions in subpart 11.a.(I). Finally, the proponents argue that if the rule is interpreted in the manner suggested by LMRC and TGH, a new program could never be authorized if a district had an approved program since an approved program is not yet operational and obviously could not achieve the 350 threshold. They argue that such a construction would be illogical and absurd. However, it is noted that the rule provides that a new program can be authorized by HRS if not normal circumstances are shown even if the 350 threshold is not being satisfied. Indeed, HRS has granted at least three open heart CONs based on not normal circumstances. In November 1982 HRS was in the process of considering changes to the rules pertaining to CON applications for both cardiac catherization laboratories and open heart surgery programs. In response to a staff suggestion, HRS amended its cardiac catherization laboratory rule by changing the existing utilization provisions to require that an average of 600 adult catherizations be used as a utilization threshold for the review of applications rather than a requirement that each laboratory in the district be performing 500 adult catherizations. This amendment was made because HRS recognized that by using the word "average", the authorization of new laboratories would "not be impeded by a few or even one laboratory which is operating below the required minimum". In contrast, however, HRS chose not to amend its open heart rule to make a corresponding change. This was perhaps due to the fact that HRS initially interpreted the open heart rule to mean what it literally says and early on denied at least one application because each existing program in the service district was not performing 350 or more procedures per year. Expert testimony established good health planning reasons why the rule should be applied as written and why the incipient policy being used by HRS is improper. Given the undisputed relationship between the quality of an open heart surgery program and its volume, it is gold health planning to allow newly approved providers to become operational and reach the 350 procedure level as soon as possible and before new programs are authorized. If the 350 averaging procedure was used, new programs could be approved even though there were existing programs in the area, as here, maintaining an annual volume substantially below 350 procedures. The inevitable result would be to drive down the utilization in most or all of the programs. Indeed, HRS undertook no formal analysis in this proceeding to determine if the approval of a new program would force the utilization rate of any existing provider below the 350 threshold. In the absence of not normal circumstances, it is found that the provisions of subpart 11.a.(I) have not been met. Amendments or Updates? At issue in this proceeding is the admissibility of certain information proffered by WHH at hearing which was not contained in the original application. This includes (a) certain pro forma financial projections and (b) proposed changes to the staffing and equipment. These are discussed in greater detail below. It should be noted here that any changes to facilities, beds or staffing outlined in the application would be a "significant" amendment to the proposal from a health planning perspective as it would change the projected costs of the operation in both the long-term and short-term. Moreover, HRS's expert agreed that WHH is bound by the projections in the application and omissions response. The original application contained pro forma financial projections to justify the financial feasibility of the project. This is the same "detailed financial projection" that is statutorily required to be filed with the application. At hearing, WHH introduced into evidence, subject to petitioners' objections, new pro formas to demonstrate that the program would be financially feasible. This new analysis was substantially different than the pro formas submitted to HRS by WHH and was not reviewed by HRS prior to deeming the application complete. In the application reviewed by HRS, WHH represented that it intended to hire five additional personnel, including two scrub technicians, two registered nurses, and one perfusionist for a single surgical team. At hearing, WHH presented several proposed changes in its staffing and equipment plans. First, WHH suggested that The Watson Clinic would supply the perfusionist and certain other personnel for its surgical team, although it projected no costs for those personnel. Secondly, WHH suggested it could equip and staff a back-up operating room and could train surgical and ICU nurses currently employed at WHH to become proficient in the care of open heart patients, rather than hiring additional nurses. Again, no additional costs were submitted with these new proposals. These changes were not reviewed by HRS prior to deeming the application complete. The applicant was made aware that its proposal did not provide for adequate facilities, beds, or staffing prior to the filing of its application. This advice was conveyed to WHH by its own consultant in September 1988. For whatever reason, at that time WHH chose not to adopt the more costly recommendation of its consultant.
Recommendation Based on the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the application of Winter Haven Hospital, Inc. for a certificate of need to authorize the establishment of an open heart surgery program be DENIED. DONE and ORDERED this 7th day of December, 1989, in Tallahassee, Leon County, Florida. DONALD R. ALEXANDER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904)488-9675 Filed with the Clerk of the Division of Administrative Hearings this 7th day of December, 1989.
The Issue Whether the adult open heart surgery rule in effect at the time the certificate of need (CON) applications were filed, and until January 24, 2002, or the rule as amended on that date is applicable to this case. Which, if any, of the applications filed by Martin Memorial Medical Center, Inc. (Martin Memorial); Bethesda Healthcare System, Inc., d/b/a Bethesda Memorial Hospital (Bethesda); and Boca Raton Community Hospital, Inc. (BRCH) meet the requirements for a CON to establish an adult open heart surgery program in Agency for Health Care Administration (AHCA) Health Planning District 9, for Okeechobee, Indian River, St. Lucie, Martin, and Palm Beach Counties, Florida.
Findings Of Fact The Agency for Health Care Administration (AHCA) is the agency which administers the certificate of need (CON) program for health care facilities and programs in Florida. It is also the designated state health planning agency. See Subsection 408.034(1), Florida Statutes. For health planning purposes, AHCA District 9 includes Indian River, Okeechobee, St. Lucie, Martin, and Palm Beach Counties. See Subsection 408.032(5), Florida Statutes. AHCA published a fixed need pool of zero for additional open heart surgery programs in District 9, for the January 2002, planning horizon. The mathematical need formula in the rule, using the use rate for open heart surgery procedures in the district as applied to the projected population growth, indicated a gross numeric need for 7.9 programs in District 9. After rounding off the decimal and subtracting four, for the number of existing District 9 open heart surgery programs, the formula showed a numerical need for four additional ones. The need number defaulted to zero, however, because one of the existing programs, at Lawnwood Medical Center, Inc., d/b/a Lawnwood Regional Medical Center (Lawnwood), had not reached the required minimum of 350 surgeries a year, or 29 cases a month for 12 months prior to the quarter in which need was published. Having initiated services in March 1999, the Lawnwood program had not been operational for 12 months at the time the applications were filed in October 1999. The other existing providers of adult open heart services in District 9, in addition to Lawnwood, are Palm Beach Gardens Community Hospital, Inc., d/b/a Palm Beach Gardens Medical Center (PBGMC); Columbia/JFK Medical Center Limited Partnership, d/b/a JFK Medical Center (JFK); and Tenet Healthsystem Hospitals, Inc., d/b/a Delray Medical Center (Delray). All are intervening parties to this proceeding. In the Pre-Hearing Stipulation, the parties agreed that the Intervenors have standing to participate in this proceeding. Despite the publication of zero numeric need, five hospitals in District 9 applied for CONs to establish new adult open heart programs asserting need based on not normal circumstances. Three of those applications are at issue in this case: CON Number 9249 filed by Martin Memorial Medical Center, Inc. (Martin Memorial); CON Number 9250 by Bethesda Healthcare System, Inc., d/b/a Bethesda Memorial Hospital (Bethesda); and CON Number 9248 by Boca Raton Community Hospital, Inc. (BRCH). AHCA initially reviewed and denied all of the applications. After changing its position before the final hearing, AHCA supports the approval of the applications filed by Martin Memorial and BRCH. Martin Memorial Martin Memorial, the only hospital in Martin County, and the only party/applicant not located in Palm Beach County, operates two facilities, a total of 336 beds, on two separate campuses under a single license. The larger hospital, in Stuart, has 236 beds and is located approximately 20 miles south of Lawnwood and 30 miles north of PBGMC. Martin Memorial owns and maintains, at the hospital, its own ambulance service used exclusively for hospital-to-hospital transfers. The drive from Martin Memorial to Lawnwood averages 38 minutes. The drive time to PBGMC averages 48 minutes. By helicopter, it takes 11 or 12 minutes to get from Martin Memorial to PBGMC. The remaining 100 Martin Memorial Hospital beds are located on its southern campus, approximately six miles south of the Stuart facility. Martin Memorial is a private not-for-profit hospital, established in 1939. The parent corporation also operates an ambulatory care center, physician group, billing and collection company, and a foundation. Martin Memorial is applying to operate an open heart program at its Stuart location, where it currently offers cardiology, hematology, nephrology, pulmonary, infectious disease, pathology, blood bank, anesthesiology, diagnostic nuclear medicine, and intensive care services. Martin Memorial has a 25-bed telemetry unit, a 14-bed medical intensive care unit, a nine-bed surgical intensive care unit, and a 22-bed progressive care unit, with an identically equipped 16-bed overflow unit used only for high seasonal occupancy, from approximately December to April. If its CON is approved, Martin Memorial will dedicate four surgical intensive care unit beds and six progressive care beds for post-open heart surgery patients. Martin Memorial agreed to condition its CON on the provision of 2.4% of the project's gross revenues for charity care and 2% for Medicaid. The total estimated project cost is $6.5 million. Martin Memorial intends to affiliate with the University of Florida and its teaching facility, Shands Hospital, to assist in establishing the program and training staff. The cardiovascular surgeon is expected to be a full-time faculty member who will live and work in Martin County. Although initially opposed, AHCA now supports Martin Memorial’s application primarily because (1) it has the largest cardiac catheterization (cath) program at any hospital in this state which does not also provide open heart services; (2) it has a medium size and growing Medicare population, which constitutes the age group most likely to require open heart surgery and related services; (3) Martin County residents now must receive open heart and related services at hospitals outside Martin County, primarily in areas ranging from Palm Beach County south to Dade County; (4) emergency heart attack patients who present at Martin Memorial-Stuart could receive primary angioplasties without transfer; and (5) it is a not-for-profit hospital, while all of the existing open heart providers in the District are for- profit corporate subsidiaries. Of the applicants, Martin Memorial is also located the greatest distance from the existing providers. Bethesda Memorial Bethesda has 362 licensed beds located in Boynton Beach. JFK is nine miles north or an average drive of 18 minutes from Bethesda. Delray is nine miles south or an average drive of 17 minutes from Bethesda. Established in February 1959, Bethesda is a not-for- profit subsidiary of Bethesda Health Care Systems, Inc., which also operates some for-profit subsidiaries, including Bethesda Medical/Surgical Specialists, Bethesda Management Services, and Bethesda Comprehensive Cancer Institute. Bethesda is a disproportionate share provider of Medicaid and Medicare services. The services currently available at Bethesda include obstetrics, Level II and III neonatal intensive care, cardiology, orthopedics, pediatrics, neurological and stroke care, peripheral vascular surgery, wound care, pulmonary and infectious disease care. Bethesda recently eliminated a 20-bed unit for adult psychiatric services, and a 20-bed skilled nursing unit. Currently, at Bethesda, the sickest patients are placed in a 10-bed critical care unit. The hospital also operates a 12- bed surgical intensive care unit, an eight-bed medical intensive care unit, and 30 and 25-bed telemetry units. Bethesda was planning to open a 20-bed extension to the telemetry unit, all in private rooms, in January 2002. If an open heart surgery program is established, Bethesda, will add an eight-bed cardiovascular intensive care unit to care post-operatively for the patients. Bethesda offered to condition its CON on the provision of 3% of total open heart surgeries to Medicaid and 3% of total open heart surgeries to indigent patients. Bethesda's estimated total project cost is $4 million, $1.7 million for equipment, and $2.24 for construction. Bethesda will receive assistance from Orlando Regional Medical Center in training personnel and developing protocols for an open heart program. At Orlando Regional, a statutory teaching hospital, the number of open heart cases ranges from 1,300 to 1,600 a year. Bethesda has a contract with a physicians' group to provide a board-certified cardiovascular surgeon to serve as medical director for the open heart program. AHCA’s position is that the Bethesda application is "approvable" but, of the Palm Beach County applicants, less desirable than that of BRCH. By contrast, Bethesda's experts emphasized (1) the absence of any overlap with the Lawnwood market; (2) the greater need for a new program, based on the volume of cases, in Palm Beach County than elsewhere in the District; (3) the size, growth, and age of the population within Bethesda's market area, and (4) the ability of Bethesda to enhance access for underserved groups, particularly Medicaid patients. Boca Raton Community Hospital BRCH is licensed for 394 beds. Located in southern Palm Beach County, close to the Broward County line, BRCH is from eight to nine miles south of Delray and approximately 15 miles north of North Ridge Medical Center (North Ridge), in adjacent Broward County. On average, the drive from BRCH to Delray takes 20 minutes. The drive from BRCH to North Ridge takes about 25 minutes. Founded in the late 1960's, BRCH operates as a not-for- profit corporation. BRCH has a staff of 750 physicians and 1,600 employees. Services at BRCH include cardiology, a 10-bed Level II neonatal intensive care unit, hematology, nephrology, pulmonology, radiology, nuclear medicine, and neurology. If approved and issued a CON for adult open heart surgery, BRCH will build a new facility for the program, including two new cath labs, an electrophysiology lab and 12 intensive care beds. In the CON, the estimated construction cost was $16.5 million and the estimated equipment cost was $2.7 million of the $20 million estimated for the total project. BRCH agreed to having conditions on its CON (1) to provide 5% of open heart cases in year two to uninsured patients, (2) to establish an outreach program to increase the utilization of open heart services among the uninsured, and (3) to relinquish the CON if it fails to perform at least 350 open heart surgery procedures a year in any two consecutive years after the end of the second year of operations. AHCA determined that it should change its initial position opposing the approval of the BRCH application to one of approval because of (1) the large Medicare population in the service area; (2) the volume of emergency room heart attack patients; (3) the district out-migration for services primarily to North Ridge; (4) the large, well-developed interventional cardiology program; and (5) the not-for-profit organizational structure. When AHCA decided to support the approval of the BRCH application, it did so, in part, based on erroneous data. The cath lab volume was assumed to be approximately 1,800 caths a year, as compared to the actual volume of 667 caths for the year ending March 2001. Having considered the corrected data, AHCA’s expert described BRCH’s application as significantly less compelling, but still preferable to that of Bethesda. BRCH is the largest hospital in number of beds in Florida which does not have an open heart surgery program. AHCA also responded favorably to identified "cultural" access issues, described as underservice to demographic groups, based on race, gender, and class. BRCH presented a plan to equip a mobile unit to provide diagnostic screenings and primary care in underserved areas. Pre-Hearing Stipulations The parties stipulated that all of the applications met the statutory requirements concerning the application content and filing procedures of Sections 408.037 and 408.039, Florida Statutes (1999), and Rule 59C-1.033, Florida Administrative Code. Martin Memorial, Bethesda, and BRCH have a history of providing quality care. See Subsection 408.035(1)(c), Florida Statutes (1999). There are no existing outpatient, ambulatory or home care services which can be used as alternatives to inpatient adult open heart and angioplasty services. See Subsection 408.035(1)(d), Florida Statutes (1999). Martin Memorial and Bethesda have sufficient available funds for capital and operating expenses required for their proposed open heart surgery programs. See Subsection 408.035(1)(h), Florida Statutes (1999). Martin Memorial complied with the requirements related to costs and methods of construction, and equipment for the proposed project. Except for the contention that it omitted $1,687,180 in fixed equipment costs and that the proposed construction project is excessively large and expensive, the parties stipulated that BRCH reasonably estimated construction and equipment costs, including costs and methods of energy provision. See Subsection 408.035(1)(m), Florida Statutes (1999). The parties agreed that Subsections 408.035(1)(p), and 408.035(2)(e), Florida Statutes, related to nursing home beds, are not at issue at in this proceeding. If Bethesda, BRCH, and Martin Memorial can recruit the necessary, competent nursing and surgical staff, they will meet the requirements of Rule 59C-1.033(3), (4)(b), (4)(c), and (5)(c), Florida Administrative Code. Adult open heart surgery services are currently available to District 9 residents within the two-hour travel standard of Rule 59C-1.033(4)(a), Florida Administrative Code. Bethesda, BRCH, and Martin Memorial are accredited by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO), assuring quality as required by Rule 59C-1.033(5)(a), Florida Administrative Code. The parties agreed that if Bethesda, BRCH, and Martin Memorial can recruit the necessary nursing and surgical personnel, their programs would meet the requirements of Rule 59C-1.033(4)(b), (4)(c), (5)(b), and (5)(c), Florida Administrative Code, except that JFK and Lawnwood did not agree that the applicants satisfied the requirements related to cardiovascular surgeons. Martin Memorial will be able to obtain perfusionist services, as required by Rule 59C-1.033(5)(b)5, Florida Administrative Code. Bethesda and BRCH projected reasonable staffing patterns, in their CON schedules 6A, given projected census levels, although the ability to recruit staff and adequacy of projected salaries are at issue. The rule criteria related to pediatric open heart surgery are not applicable to this proceeding. Disputed Statutory and Rule Criteria The following statutory criteria and applicable in this case: Subsections 408.035(1)(a), (b), (c) - for comparison; (e), (f), (g), (h) - related to funding for BRCH, and related to staff recruitment and salaries; (i), (j), (k), (l), (m) - for Bethesda, and related to the size, scope, and fixed equipment cost for BRCH, (n), and (o); and Subsections 408.035(2)(a), (b), (c), and (d), Florida Statutes. The criteria in Rules 59C-1.030, and of Rule 59C-1.033(5)(b) - related to staffing, except as stipulated - are at issue. The parties have also raised the issue of whether AHCA is consistent in applying its agency rules related to open heart cases. The District 9 health plan contains two preferences for open heart applicant hospitals, the first for hospitals with established cardiac cath programs, the second for applicants with a documented commitment to serve patients regardless of their ability to pay or county of residence. All of the applicants have established diagnostic cardiac cath programs and related cardiology services. During the cardiac cath procedure, a catheter is inserted into a cardiac chamber to diagnose heart disease. During a therapeutic cardiac cath procedure, or angioplasty, the catheter with a balloon-tip is inserted into a coronary artery and inflated to open blockages. The latter requires open heart surgery back-up in case a vessel is ruptured and thus, an open heart surgery certificate of need. Martin Memorial operates the largest cardiac cath program at a hospital in Florida which does not also offer open heart surgery. At Martin Memorial, 1,885 inpatient and outpatient caths were performed in 1999, 1,770 in 2000, and 1,286 in the first nine months of 2001. Cardiac caths are only performed at the Stuart facility. Non-invasive cardiology services began in the 1970's at Martin Memorial. A CON to establish the first cardiac cath lab was issued in 1989, and a second, CON-exempt cath lab opened in 1998. Martin Memorial also offers pacemaker implants and peripheral angioplasties to eliminate clots in other areas of the body, for example, in the legs, electrocardiography, echocardiography, stress tests, and cardiac rehabilitation. Neither electrophysiology studies nor defibrillator implants are performed at Martin Memorial. Martin Memorial has an open staff of cardiologists, meaning that its cath lab is available for use by any of the invasive cardiologists on staff. The facilities include two cardiac cath procedure rooms, a control room for the laboratory, a five-bed holding room and a two-bay inpatient recovery area. Bethesda also has an established cardiac cath program with an open staff. Seventeen cathing physicians were listed on the Bethesda roster for the month of March 2001. Of those, five were also the only cardiologists allowed to perform caths at the closed lab at JFK. Some of these cardiologists are permitted to perform emergency angioplasties at Bethesda. Bethesda has, at least, two cardiovascular surgeons on staff. From 1995 to 1998, the volume of cardiac caths at Bethesda increased over 60%, from 133 to 213. For the 12 months ending August 31, 2000, Bethesda cardiologists performed 428 caths. For the 12 months ending September 30, 2001, the cath volume was 506 cases. Currently, cath procedures at Bethesda are performed in one lab with recently upgraded digital equipment. As part of the planned expansion of the hospital, the existing lab will be relocated and a second one added. Permanent pacemakers are implanted at Bethesda, but internal cardioverter defibrillator procedures, electrophysiology, and table studies are not performed. Cardiac cath services, at BRCH, started in 1987. Two cath labs with state-of-the-art digital equipment are used. In the 12 months ending March 31, 2001, there were 667 inpatient and outpatient caths performed at BRCH. Currently, cardiac services at BRCH are the largest source of admissions, approximately 20% of total admissions. The available services include echocardiography, tilt table studies, electrocardiography, stress tests, cardiac wellness and rehabilitation programs, electrophysiology studies, and internal cardioverter defibrillator implants. Each year, one or two "rescue" or salvage angioplasties are performed in extreme, life- threatening circumstances at BRCH. Forty-nine cardiologists are on the closed "invitation-only" medical staff at BRCH, 47 are board-certified and approximately half are invasive cardiologists. The staff also includes seven electrophysiologists, five of whom are board-certified, and seven thoracic surgeons, five of whom perform open heart surgeries at other hospitals. For the first two years of operating an open heart program, BRCH intends to have a closed program, by virtue of an exclusive contract with a single group of cardiovascular surgeons. Subsection 408.035(1)(a) - district health plan preference for serving patients regardless of county of residence or ability to pay; and Subsection 408.035 (1)(n) - history of and proposed services to Medicaid and indigent patients Martin Memorial, Bethesda, and BRCH will serve patients regardless of residence and, they contend, will enhance access for Medicaid, indigent, charity and/or self-pay patients. Each applicant has offered to care for patients in some of these categories as a condition for CON approval. The proposed conditions, are, for Martin Memorial, 2.4% of total project revenues for charity and 2% of admissions for Medicaid patients. Martin Memorial provides a number of services without charge, including follow-up education to former inpatients to assist them in managing diseases such as asthma, diabetes, congestive heart failure and chronic obstructive pulmonary disease. Obstetric care includes one free home visit by a nurse/midwife to check the health of newborns and mothers. Office space is provided for a free clinic for the "working poor" of Martin County, which receives approximately 10,000 annual visits from a patient base of about 2,000 patients. Over $100,000 a year is provided for an indigent pharmacy program. Combining the outreach services with other charitable contributions, including charity care, Martin Memorial valued "community benefits" at $24 million in 1998, $30.5 million in 2000. When Martin Memorial received an inpatient cardiac cath CON, it agreed to provide a minimum of 2.5% of total cardiac caths to Medicaid patients and 3% to charity care. Due to changes in state regulation, Medicaid and charity care for cardiac caths no longer needs to be reported to the state. That data, representing as it does, the base of patients from which open heart cases will come, is useful in evaluating Martin Memorial's projections. In 1999, seven-tenths of one percent of the patients in Martin Memorial's cath lab were Medicaid and four-tenths of one percent were indigent. In 2000, seven-tenths of one percent were Medicaid and two-tenths of one percent were indigent. Martin's cath lab data indicates that its projected open heart levels of Medicaid and indigent care are not attainable. Bethesda offered a commitment to provide 3% of total open heart cases for Medicaid patients and 3% to indigent patients annually. Historically, Bethesda has cared for a relatively large number of Medicaid, minority, and indigent patients. It is recognized as a disproportionate share provider of Medicaid care under the Florida program and of Medicare under the Federal program. The Palm Beach County Health Department provides approximately $1 million a year to Bethesda for charity care. As a percentage of gross revenue, Bethesda provided 8.8% Medicaid and 3.46% charity care in 1999. Approximately 54% of the charity care is attributable to obstetrics and pediatric services. Bethesda's younger patient base and the number of adult open heart Medicaid cases from Bethesda's service area, 2.4% or 7 cases in the year ending September 2000, raise the issue of its ability to generate sufficient cases to meet the proposed commitment. In 1995, 20 of the 36 total resident Medicaid open heart surgeries were performed at the three providers in District 9, Delray, JFK, and PBGMC. In 1999, when Lawnwood began open heart care, the Medicaid volume at the District providers increased to 51 of the 64 total Medicaid resident cases. In 2000, the four programs treated a net number of 56 of 60 resident Medicaid cases. A program at Bethesda also could reasonably be expected to increase the number of Medicaid and charity cases performed in the District, in volume and by reversing outmigration, but the patients must come from a base of patients with cardiac diagnoses. For the year ending September 2000, in Bethesda's service area, 4.9% of cardiac patients were Medicaid and charity patients combined, 1.6% Medicaid and 3.3% charity. Assuming that the same proportions could be maintained for open heart surgeries, Bethesda cannot achieve 3% Medicaid and, although unlikely, has a chance of reaching 3% charity only in the best case scenario. If approved, BRCH commits to providing 5% of total OHS in the second year to uninsured patients and to establish an outreach program to increase utilization by uninsured patients. BRCH has, over the past three and a half years, established outreach programs, which include having nurses and social workers in schools, providing free physical examinations to children who do not have primary care doctors, and performing echocardiograms for high school athletes, equipping police and fire rescue units with portable defibrillators, and operating mobile units for mammography screenings and vans to transport patients to and from their homes for hospital care. A free dental screening program is operated in conjunction with Nova Southeastern University. BRCH also operates a family medical center approximately seven miles west of the hospital. Recently, the Foundation for BRCH purchased, for $1.8 million, a large bus to equip as a mobile clinic. The mobile diagnostic unit is intended to reach uninsured patients to provide primary care and ultimately open heart surgery care to those who might not otherwise be screened, diagnosed and referred. No information was available and no decisions had been made about the staff and equipment, or service areas for use of the van. Because of the lack of more specific plans, it is impossible to determine whether the outreach effort has any reasonable prospects for success in meeting any unmet need. For the years ending June 1996, 1997, and 1998, BRCH provided six-tenths of one percent, and five-tenths of one percent of gross revenues for charity care. In 2000, BRCH provided one-half of one percent for charity care and, in 2001, twenty-seventh hundreds of a percent. The historical levels do not support the proposed commitment of 5% of open heart surgeries for uninsured patients in the second year of the program. Although worded to apply only to the second year, BRCH's President and CEO testified concerning the condition without limiting it to the second year. In Boca Raton Community Hospital, Inc.'s Proposed Recommended Order (Reformatted), filed on July 5, 2002, the condition is described as follows: 49. As conditions of CON approval, Boca will, beginning in the second year of operation of the program and continuing thereafter, provide a minimum of five percent each year of OHS cases to uninsured patients, and establish an outreach program to locate and provide OHS and cardiology services to uninsured patients in Palm Beach County. (Boca Ex. 3 at Schedule C; Pierce, 1899). Boca reasonably decided to focus on the needs of the uninsured, rather than Medicaid patients, because of the low volume of Medicaid patients who require OHS services. (Pierce, 1902). At BRCH, Medicaid and Medicaid health maintenance organization (HMO) care as a percent of total ranged from 1.3% to 1.4% from 1996 through 1998. BRCH projected serving 1.2% to 1.3% open heart Medicaid cases, or four patients in the first year and 1.5% to 1.6%, or seven Medicaid patients in the second year. The projections are consistent with its history although BRCH offered no Medicaid condition. Bethesda and BRCH also claimed not normal circumstances exist in District 9 due to the disparity in open heart care for uninsured and Medicaid patients as compared to the insured. For uninsured residents of Palm Beach County during the twelve months ending June 30, 2000, the use rate was 4.7 per 1000, as compared to 21.8 per 1,000 for insured open heart patients. For angioplasty patients, the insured use rate was 38.2, but the uninsured rate was only 8.9. Assuming that the use rates should not be so different, the discrepancy in access for the uninsured is significant and unfortunate but was not shown to be a not normal circumstance in the health care delivery system. The applicants' proposals, unlikely as they are to meet even the proposed conditions, are inadequate to increase access materially for the uninsured. Comparisons of the level of Medicaid provided statewide to that provided in District 9 without consideration of other factors, including age and income levels, were not useful in analyzing access. Assertions that any discrepancy in care for potential Medicaid open heart patients constitutes a not normal circumstance are not substantiated by this evidence. Subsection 408.035(1)(b) and (2)(b) - availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization and adequacy of like and existing facilities in District Nine In 2006, the population in District 9 is projected to reach 1.2 million people, of which approximately 992,378 will reside in Palm Beach County, 119,573 in Martin County, 181,406 in St. Lucie County, 106,790 in Indian River County, and 31,140 in Okeechobee County. In District 9, throughout Florida, and in the United States, heart disease is the leading cause of death. In 2000, heart disease was the cause in 522 of 1,560 total deaths in Martin County, and 4,337 of 12,795 total deaths in Palm Beach County. From 1995 to 2000, the number of Florida residents having open heart surgeries increased 15.1%. During the same period of time, the number of District 9 resident cases, regardless of where the surgeries were performed, increased from 3,119, to 3,938, an increase of 755 OHS cases, or 24%. Palm Beach County residents represented 427 of the 755 increase, and 2,633 of the total of 3,938 resident cases. The distribution of the remaining 1,305 District resident cases by county was as follows: 597 from St. Lucie, 339 from Martin, 269 from Indian River, and 100 from Okeechobee County. More recent data, however, indicates trends towards a leveling off or even decline in the number, but an increase in the complexity of open heart procedures. Some experts describe open heart volumes having reached a "plateau" in the United States, in Florida, and in District 9. Last year, the number of open heart surgeries in the United States declined 22%. The statewide volume of cases was 32,199 in 1996, 33,507 in 1997, 34,013 in 1998, and 32,097 in 1999. At District 9 hospitals, open heart volumes were 1,670 in 1994, 1,841 in 1995, 2,152 in 1996, 2,407 in 1997, 2,527 in 1998, 2,656 in 1999, and 2,650 in 2000. Cardiac Catheterizations and Angioplasties The major reason given for the stable and declining open heart volume is the increase in the utilization of angioplasty, or therapeutic cardiac cathing, an alternative which costs less and is less invasive. Angioplasty procedures increased from 1995-2000, by over 2,500 cases for District 9 residents, and over 2,600 cases in District 9 hospitals, from 2,104 cases in 1995, to 4,714 in 2000. Among the procedures generally referred to as angioplasties are percutaneous transluminal angioplasty (PTCA) or balloon angioplasty, percutaneous transluminal coronary rotational atherectomy (PTCRA), and the insertion of scaffolding- like devices, called stents, to prevent re-occlusion of coronary arteries. In Florida, diagnostic cardiac caths may be performed at facilities which do not have angioplasty and open heart surgery programs, but angioplasties must be performed, except in rare emergency circumstances, only at hospitals which are licensed to provide open heart services, in case back-up surgery is needed. Lawnwood Regional Lawnwood is located in Fort Pierce, in St. Lucie County, which is second to Palm Beach County in population and in District 9 resident open heart cases. Lawnwood is owned by a subsidiary of HCA, the Hospital Corporation of America, formerly known as Columbia. HCA is a for-profit, investor-owned corporation which owns and operates approximately 200 hospitals in the United States. A $17 million addition at Lawnwood, designed for the open heart program, includes two dedicated operating rooms and a 12-bed intensive care unit. The Lawnwood program has a full-time staff of two surgeons and one additional surgeon who divides his time between Lawnwood and PBGMC. Lawnwood, having opened its program early in 1999, is not considered a mature program. In addition, Lawnwood has had some difficulties with accreditation and disputes with cardiologists. Lawnwood reported one open heart case in the first quarter of 1999, and 143 or 144 for the year. In calendar year 2000, between 330 to 340 open heart surgeries were performed at Lawnwood. In calendar year 2001, the volume was between 333 and 336 cases. Depending on the source of the data, the volume at Lawnwood was reported to be as high as 364 for the twelve months ending September 30, 2000; in a range from 336 to 396 for the twelve months ending March 31, 2001; and up to 412 for the twelve months ending July 2001. The variances result from seasonal patient utilization, and from AHCA’s use, for the fixed need pool, of the most current available data which it receives from the various local health councils. That data is submitted on handwritten or typed forms which are not uniform across districts. Subsequently, the hospitals provide electronic data tapes directly to AHCA, which if properly decoded, should provide more accurate statistics. While there may be variances either way, in this case, the lower volumes for Lawnwood were derived from the more reliable electronic tapes. Based on that data and the testimony of the cardiac surgeon who is the director of the program at Lawnwood, the annual volume of open heart surgeries was approximately 330 in 2000, and 348 in 2001. The new rule, adopted on January 24, 2002, reduces the minimum number required for existing programs to 300 a year, or 25 adult operations a month. The number of angioplasties performed at Lawnwood increased from 465 in 1999, to 845 in 2000. Palm Beach Gardens Medical Center South of the four relatively small northern counties in District 9, PBGMC has 204 beds located in northern Palm Beach County. It is a subsidiary of Tenet Healthsystem Hospitals (Tenet). Adult open heart surgery has been available at PBGMC since 1983. The surgeries are typically performed in two or three of the 11 operating rooms, although five are equipped to handle open heart cases. PBGMC has 94 telemetry beds, and 32 intensive care beds, eight designated for cardiovascular intensive care patients. PBGMC has four cardiac cath labs and separate electrophysiology labs. The medical staff of approximately 400 physicians includes about 200 cardiologists, 24 invasive cardiologists and seven cardiac surgeons. The number of open heart cases at PBGMC was 700 in 1994, 801 in 1995, 913 in 1996, 1,028 in 1997, 1,045 in 1998, 1,124 in 1999, 940 in 2000, and 871 in 2001. The number of angioplasties increased from 552 in 1994, to 1,019 in 1997, to 1,431 in 2000. JFK JFK, which has 387 beds, is located roughly in the center of Palm Beach County, in the City of Lake Worth. Like Lawnwood, JFK is an HCA's subsidiary, having been purchased by that corporation in 1995. Open heart services and cardiac cath services began simultaneously at JFK in 1987. JFK has three open heart operating rooms. JFK, after a major expansion, has a separate entrance to its three cardiac cath laboratories, a dedicated electrophysiology suite, for treatment of arrhythmias, and 17- patient holding area. JFK provides all cardiac services, except heart transplants. The average age of patients at JFK is 74 years old. The medical staff of 504 board-certified or board- eligible physicians includes 25 cardiologists, five invasive cardiologists, two electrophysiologists, and three cardiac surgeons. JFK has recently accepted applications from but not yet extended privileges to three additional cardiovascular surgeons. Volumes of open heart cases at JFK were, with some variances depending on the data source, approximately 428 in 1994, 434 in 1995, 630 in 1996, 674 in 1997, 711 in 1998, 613 in 1999, 621 in 2000, and 610 in 2001. The number of angioplasties ranged from 709 in 1994, to 1,152 in 1997, to 1,281 in 2000. Delray Delray, with 343 beds, in Delray Beach, is the trauma center for southern Palm Beach County. Open heart care began at Delray in 1986. The surgeries are currently performed in three of ten, but soon to be a total of twelve operating rooms with shelled-in spaces set aside for two more. Patients recover in a 15-bed surgical intensive care unit. The Delray medical staff of over 600 physicians has close to 60 cardiologists, including 15 invasive cardiologists and six cardiovascular surgeons. Delray has three cath lab rooms and seven bays for holding patients pre- and post-procedure. For the years 1994 through 2001, open heart volumes at Delray were 542, 606, 609, 705, 771, 758, 759, and 738, respectively. During the same period of time, the annual number of angioplasty procedures increased from 591 in 1994, to 810 in 1997, to 929 in 2000. The existing CON-planned and approved programs in the District are well distributed geographically and allocated appropriately based on population. Considering the declining utilization, the like and existing open heart surgery programs are available and accessible. Subsection 408.035(1)(f) - services that are not reasonably and economically accessible in adjoining areas Over 30% of District 9 resident open heart cases are performed in other districts, the vast majority at North Ridge in District 10 (Broward County). The district outmigration for a service when excessive or difficult can indicate access or quality concerns and constitute a not normal circumstance for approval of a new program. In this case, with adequate available services in District 9 and its close proximity, the outmigration to North Ridge, which is 15 miles or 25 minutes from BRCH is not a not normal circumstance. There is also substantial overlap in the medical staff at both hospitals which allows continuity of care for patients despite transfers. The argument that families, particularly an older spouse, will necessarily have to drive farther to visit the patient is rejected, since that depends on where in the district the person resides not on the distances between hospitals. North Ridge has 391 licensed beds, with 260 to 270 acute care beds in use. At North Ridge, cardiovascular surgeons usually use three OHS operating rooms, although a fourth is also available. Open heart patients recover in a six-bed cardiovascular intensive care unit. The reported volumes of open hearts at North Ridge have been from 1994 through 2001, respectively, 864, 935, 893, 826, 882, 890, 905, and 795. The total number of open heart cases in District 10 has been declining since 1998. The volume of angioplasties at North Ridge increased from 793 in 1994, to 829 in 1997, to 1,155 in 2000, consistent with a rising District 10 use rate from 2.95 to 3.66 over the same period of time. The staff at North Ridge includes 107 cardiologists, 27 interventional cardiologists, and 17 cardiovascular surgeons, many of whom also regularly perform open heart surgeries at Holy Cross, which is approximately a mile south of North Ridge in Fort Lauderdale. At Holy Cross, which also has established referral networks from District 9, open heart volumes declined from a high of 753 in 1998 to 693 in 2000. All of the open heart services proposed by the applicants are reasonably available in adjoining areas, in Districts 10 and 11 to the south and in the other districts to the north. Subsection 408.035(1)(c) - comparisons of quality; and Subsection 408.035(1)(e) - joint, cooperative or shared resources; and Subsection 408.035(1)(g), (h), and (k) - need for research, educational and training programs or facilities for medical and health care professionals; and Subsection 408.035(1)(h) and Rule 59C-1.033 - recruitment, training and salaries for staff The parties stipulated that the applicants have a history of providing quality care. Martin Memorial was accredited with commendation by the JCAHO in 1997, which is now called accreditation without Type I Recommendations. That was followed, in July 2001, with a score of 93 on survey items with some follow-up improvements required related to patient assessment and nutrition. Martin Memorial offers internships, and residencies for training non-physician medical personnel from Barry University, Indian River Community College, and Florida Atlantic University. The cancer center at Martin Memorial is affiliated with the Moffitt Center. Despite the absence of an open heart program, Martin Memorial has participated in clinical trials of cardiac drugs. The Shands Healthcare System of nine affiliated hospitals, including two research and teaching hospitals, is the model for the relationship proposed with Martin Memorial. The partnerships are intended to upgrade the care available in community hospitals and to establish, for complex cases, referral networks for the Shands teaching hospitals. Shands has already satisfied itself that Martin Memorial meets its due diligence test for the quality of its existing program and philosophical compatibility. If Martin Memorial's CON is approved, Shands will assist in training staff for the program. Initially, the program will have one cardiovascular surgeon, a University of Florida medical school faculty member, in Martin County. When that surgeon is ill or on vacation, others from the University of Florida will be available. The logistics of the plan raises questions about the adequacy of coverage to meet the 24-hour requirements of Rule 59C-1.033, Florida Administrative Code. In the JCAHO survey process, Bethesda received a score of 97, as a result of its survey in June 2000, and was accredited for the maximum allowable time, three years. Personnel for a Bethesda program can be appropriately trained at Orlando Regional, a statutory teaching hospital with a high volume open heart program. In June 2000, BRCH received a JCAHO score of 96. BRCH maintains a scholarship program for new nurses making a two-year commitment, and an on-site educational department with a preceptorship for training operating room and emergency room nurses. Nursing students from Florida Atlantic University (FAU), which is located across Glades Road from BRCH, rotate at BRCH. FAU is in the process of establishing a medical school. There is a severe shortage of nurses in the United States, in Florida, and in District 9. All of the hospitals in District 9 have resorted to highly competitive and innovative recruitment and retention strategies, including international recruiting, signing bonuses, child care and, of course, rising salaries and benefits. The demand is greater and shortages more severe in highly specialized areas, such as critical care, telemetry and open heart surgery nursing. The average age of nurses has also increased to 46 or 47 years old, while enrollment in nursing schools and the number of nursing school professors have declined. All of the applicants concede that recruiting and retaining nurses for new open heart program will be a challenge. The likely results are a loss of experienced nurses from existing programs, an increase in total health care costs, an increase in vacancies, and, at least temporarily a decline in the quality of experienced nursing care in existing open heart programs. At this time, there is no evidence that declining open heart utilization will eventually alleviate the shortage of experienced nurses. It has, so far, only eased the need to resort as frequently to other extreme and expensive alternatives, including pay overtime, contracting with private agencies, and bringing in traveling nurses. Subsection 408.035(1)(m) - size, scope and fixed equipment cost at BRCH; Subsection 408.035(2)(c) - alternatives to new construction; and Subsection 408.035(1) (h) - funding for BRCH BRCH plans to construct a 74,000 square-foot cardiac care facility, which will include two open heart operating rooms and two cardiac cath labs, an electrophysiology lab, 12 cardiovascular intensive care beds, and 18 cardiac cath lab bays. Only 18,568 square feet are attributable to the open heart operating rooms and cardiovascular intensive care unit which compares favorably with Bethesda's estimate of 17,759 square feet for the same functions. It is not possible, therefore, to conclude that the size of the BRCH project is excessive as compared to that proposed by Bethesda. BRCH underestimated the cost for fixed equipment for the open heart project by approximately $1.6 million. That omission resulted in understated estimates of depreciation by approximately $275,000. The total project cost for BRCH is approximately $2.2 million when almost $2 million in omitted equipment costs is added to the original estimate of $20 million. All pending capital projects, as shown on Schedule 2 of the BRCH application, total $54 million. With combined cash and investments of $160 million, the BRCH foundation has sufficient funds for the hospital's projects. Although BRCH earned profits of $6.6 million and $7.3 million in 1998 and 1999, respectively, the hospital lost $30 million from operations due to billing and collection errors in 2000. BRCH has a donor who has stated a willingness to donate $20 million for the cardiac care center. BRCH has the funds necessary to build the facility. With Medicare capital cost reimbursement completely phased out, there is insufficient evidence of a direct impact on health care costs based on this proposed capital expenditure. Subsection 408.035(1)(i) - short and long term financial feasibility Martin Memorial initially projected that its program would perform 360 open heart surgeries in year one and 405 in year two. As a result of changes in the use rate, Martin Memorial lowered its second year projection to 375 surgeries while increasing staffing levels. Even if projected open heart surgery revenues of $264,000 in the second year decline in proportion to expected lower utilization, estimated angioplasty revenues of $468,000, are sufficient to make up the deficit and to keep the combined program financially feasible in the short and long term. Bethesda projected volumes of 165 open heart surgeries in the first year and 270 in the second year. Assuming Bethesda's revenues are 90% of the district average, the combined net profit for open heart and angioplasty services is reasonably expected to be approximately $750,000 in the second year operations. The project is profitable, therefore, financially feasible in the short and long term. BRCH's expert projected volumes of 308 open heart surgeries and 289 angioplasties in the first year, and 451 open heart surgeries and 422 angioplasties in the second year. If utilization projections are correct, then BRCH will receive incremental net income of $1.6 million from the open heart surgery program and $825,000 from the angioplasty services. Factoring in claims that the Medicare case weight was overstated and depreciation underestimated, the BRCH project is, nevertheless, financially feasible for the short and long term. Typically, any open heart surgery program that can reach volumes in the range of 200 to 250 cases, will be financially feasible. The establishment of an open heart program also has a "halo effect," for the hospital, attracting more patients to the cardiac cath labs and other related cardiology services. Open heart surgery and angioplasty tend to be profitable, generating revenue which hospitals use to offset losses from other services. Subsection 408.035(1)(j) - needs of HMOs All of the applicants will enter into contracts with, but none is a health maintenance organization. Subsection 408.035(1)(l) - probable impact of fostering competition to promote quality assurance and cost-effectiveness Hospitals with higher volumes of open heart surgeries and angioplasties usually have higher quality as measured by lower mortality rates and fewer complications. The open heart surgery rule, in effect at the time the applications were filed, established a minimum volume of 350 annual admissions for existing providers. In the rule as amended on January 24, 2002, the minimum volume for existing programs was reduced to 300. The divisor in the formula for determining need, which represents the average size of a program in the district, was 350 prior to amendment and 500 subsequently. The minimum and average volumes in the rule set, in effect, the protected range for existing programs, not the optimal size, or "cut point" at which outcomes are worse below and better above. According to the American College of Cardiology and American Heart Association (ACC/AHA) the evidence is clear that outcomes are better if an individual performs at least 75 procedures at a high volume center with more than 400 cases. The ACC/AHA guidelines indicate, although more controversial and less clearly established, that acceptable outcomes may be achieved if the individual operator performs at least 75 procedures in centers with volumes from 200 to 400 cases. Because the relationship between higher volumes and better outcomes is continuous and linear, and because research showing the benefits of primary angioplasty with or without open heart surgery back-up is preliminary and limited, the position of the ACC/AHA is, in summary, as follows: The proliferation of small angioplasty or small surgical programs to support such angioplasty programs is strongly discouraged. (Journal of the American College of Cardiology, Vol. 37, no. 8 June 15, 2001, pp. 2239xvii (Tenet Exhibit 5)) An open heart program at Martin Memorial will redirect cases that would otherwise have gone to Lawnwood, PBGMC, and JFK. The proposed Martin Memorial Service area overlaps that of Lawnwood in southern St. Lucie County, an area which generates one quarter of the open heart cases at Lawnwood. Lawnwood is reasonably expected to lose 56 open heart cases a year with total volume going down below 300, resulting in loss of $1.8 million, or 20% of its total revenues. Lawnwood would have unacceptably low volumes threatening the quality of the open heart program. PBGMC, as a result of a new program at Martin Memorial, will lose approximately 170 and 180 open heart cases annually and an equal number of angioplasties reducing its open heart volume to approximately 700 a year. The financial loss would range from $4 to $5 million a year, as compared to total net income which was between $20 and $30 million a year for past three years. PBGMC would not suffer an adverse impact sufficient to threaten either the quality or the financial feasibility of the open heart program or total hospital operations. JFK, which currently receives most of the angioplasty referrals from Martin Memorial, is expected to lose from 25 to 30 open heart cases, and 65 to 70 angioplasties each year during the first two years of a Martin Memorial program. The estimated financial loss to JFK is $1.7 million, a significant detriment when compared to $2.8 million in net income from operations in calendar year 2000. Approval of open heart program at Bethesda will adversely affect case volumes at JFK and Delray. Bethesda projected that, in its first year, 75% of its cases would have gone to Delray and 25% to JFK, and that by the third year, the split would be even at 50% from Delray and 50% from JFK. JFK, depending on the approach to the impact analysis, will lose from 40 to 60 open heart cases in the first year, from 90 to 110 in the second year, and from 115 to 170 in the third year of a program at Bethesda. The volumes of lost angioplasties is expected to be slightly higher. The resulting combined open heart and angioplasty financial loss is $6.6 million, far greater than the significant detriment expected from a Martin Memorial program alone. The annual volume of open heart cases at JFK would be approximately 400 to 500, assuming flat not continued declining utilization. If Bethesda offered the service, Delray's open heart volumes would decline by 124 cases in the first year and by 248 cases in the third year of operations, decreasing total volume to 500 or 600 annual surgeries. Delray had a net income from operations of approximately $24.7 million in 2000, which would indicate that neither quality nor financial stability would be significantly adversely affected. If an open heart program is approved for BRCH, the volumes of cases at Delray and North Ridge will decline. Delray would be expected to lose 163 open heart cases and 235 in years one and two, respectively, and equal numbers of caths and angioplasties, resulting in annual open heart cases reduced from the low 700s to approximately 500 cases. Delray's pre-tax revenue was $39 million in 2001. In terms of quality and financial stability, Delray can withstand the adverse impact of a new program at BRCH. North Ridge would lose approximately 124 open heart cases in year one and 178 in year two, and similar numbers of caths, reducing open heart volumes from the upper 700s to approximately 600 annual cases. North Ridge's pre-tax income was $21 million for the year ending May 31, 2001. It appears that North Ridge could, even with the adverse impact of BRCH, maintain a quality, financially viable open heart program. Subsection 408.035(l) - probable impact on costs The applicants, all not-for-profit corporations, contend that the fact that District 9 has only for-profit open heart hospitals affects charges and is a not normal circumstance for the approval of one or more not-for-profit. District 9 is the only district in Florida in which all open heart providers are for-profit corporations. Statewide, not-for-profit open heart hospitals charge 31% less than for-profit. Martin Memorial's CON proposal includes a charge structure below that at existing programs. Bethesda's planned charges are 10% less than the District 9 average for open heart and angioplasty services. BRCH is the applicant which is most likely to increase competition in District 9, based on the Herfindahl-Hirschman Index (HHI). The HHI's measurement of competition in a market used by economists frequently to analyze anti-trust issues. Charges are not a factor in up to 75% of open heart/angioplasty cases reimbursed by payors, such as Medicare, at set flat rates. In approximately 10% of cases, including complex "outlier" cases exceeding the range for flat rate reimbursement and for other payors on a percent-of-charges basis, charges are not irrelevant. But, the evidence to demonstrate lower charges were applicable to patients of the same severity was questionable. Subsection 408.035(1)(o) - continuum of care There is insufficient evidence the any applicant is preferable based on its ability to promote a continuum of care in a multilevel system. Subsection 408.035(2)(a) - alternatives to inpatient services There are no alternatives to inpatient services for open heart surgery and angioplasty patients. Subsection 408.035(2)(d) - patients who will experience serious problems in the absence of the proposed new service The applicants and AHCA determined that new open heart surgery programs are needed mainly to provide emergency or "primary" angioplasty to patients suffering heart attacks (acute myocardial infections). Primary angioplasty is an alternative to "clot busting" medications, or thrombolytics, and to open heart surgery. Performed on an emergency basis, the three different treatments are used to restore blood flow before heart muscle dies. Because "time is muscle," patients benefit only if treated within a relatively short time after the onset of symptoms. The goal is 90 minutes from door-to-balloon for angioplasty. The decision to treat a patient with a particular therapy is based on a number of factors assessed during triage. Paramedics in consultation with ER doctors at the receiving hospital frequently begin triage and administering medications and oxygen in ambulances equipped with sophisticated diagnostic equipment. As the statistical data demonstrates, angioplasty, whether scheduled or emergency, is increasingly becoming the preferred therapy. Some studies have shown improved outcomes, higher survival rates and fewer complications, from primary angioplasty as compared to thrombolytics. Comparisons have not been made over extended periods of time, and the apparent benefits of angioplasty have not been duplicated in community hospitals as compared to clinical trials in high volume research centers. Estimates of the number of people who could benefit from the availability of angioplasty services at the applicants vary based on the number of elderly in the service area, the number of non-traumatic chest pain ER visits, delays in transfers of emergency patients, and the number of patients being transferred to existing providers for angioplasties or open heart surgeries. Martin Memorial selected five patients as examples of those who could be served in an open heart program at Martin Memorial. The anecdotal evidence of transfer "delays" is insufficient to demonstrate bed unavailability or capacity constraints. Martin Memorial-Stuart and Martin Memorial South transferred 240 heart attack patients to open heart surgery hospitals. Only 18 of the emergency heart attack patients who presented at the Martin Memorial ER were transferred from the ER. Approximately ten patients a year are so unstable that an intra- aortic balloon pump is required during transfer. Martin Memorial presented evidence of delays of two hours or more in transfers of 84 patients from its cath labs to open heart surgery hospitals. The transfer records, created for subsequent certificate of need litigation, were of questionable probative value. The case studies were inadequate to establish whether "delays" were reasonable or not. Factors such as physician consultation time, time to stabilize a patient for transfer and the assumed travel time seem to have been included in the time periods. Bethesda transferred 270 patients for cardiac care from October 1999 through September 2000. Thirty patients were transferred, from November 2000 to July 2001, for angioplasties or open heart surgery after having cardiac caths at Bethesda. Bethesda failed to establish that transfers were delayed due to capacity problems at existing hospitals because emergency patients were not classified separately, and the causes of the time lapses were not identified. Of the applicants, BRCH has the busiest ER, with 50,000 to 52,000 annual visits compared to approximately 48,000 at the two Martin Memorial locations combined. BRCH admitted 439 heart attack patients through its ER during the year ending June 30, 2000. The majority of patients are treated with thrombolytics at BRCH. BRCH transfers approximately one emergency heart attack patient a week on average, or from 30 to 50 a year, for interventional cardiac procedures. BRCH's presentation of evidence of delays in transfers was flawed. The data was collected and used only for litigation, and was incomplete. Some patient records were lost and others were deleted due to inaccurate data. Of the applicants, BRCH is located in an area with the largest percentage of the population age 65 and older, approximately 35%, as compared to 24% in Martin Memorial's service area. Agency Consistency Martin Memorial, through expert witness testimony, compared its situation to that of Brandon, a hospital in AHCA District 6, which was issued an open heart surgery CON in 2001. The expert noted that Martin Memorial and Brandon are both in five county health planning districts, and that they are 19 and from 15 to 17 miles, respectively, from the nearest open heart provider. Three of the counties in District 6 have open heart programs, including Hillsborough County where Brandon is located, as compared to two District 9 counties, St. Lucie and Palm Beach, but not Martin. The Martin Memorial primary service area projected population is 238,861 for 2004, 24.1% aged 65 and older. The Brandon service area population projection is 309,000 for 2004, with 10.5% aged 65 and older. Brandon has 255 beds, Martin Memorial-Stuart has 236. Brandon had 53,000 emergency room visits, and Martin Memorial, at both locations, had 48,503 in 1999. Before defaulting to zero, the numerical formula yielded a need for 3.27 additional open heart programs in District 6 as compared to 3.9 in District 9. Other specific comparisons favorable to Martin Memorial included the number of heart attack patients presenting at its ER, cath lab volumes, patient transfers for open heart and angioplasty procedures. Among others, there are several significant distinguishing facts in Florida Health Sciences Center, Inc. v. Agency for Health Care Administration, Case No. 00-0481CON, (R.O. Mar. 30, 3001, F.O. Oct. 17, 2001) aff'd per curiam sub nom, University Community Hospital v. Agency for Health Care Administration, Case No. 1DO1-3592, et al. (Fla. 1st DCA Sept. 19, 2002), the Brandon case. In that case, the two existing providers performing fewer than 350 cases a year, Blake Medical Center, and Manatee Memorial Hospital, both in Manatee County, were mature programs located 40 miles from Brandon with no service area overlap. By contrast, Lawnwood which is not a mature program and, therefore, has not reached its potential volume, is 20 miles from Martin Memorial, and has an overlapping service area. Martin Memorial's ER volume and the number of transfers from its ERs are the combined experience from two locations. The more accurate comparison is 27,000 ER visits at Martin Memorial-Stuart to 53,000 at Brandon. Emergency heart attack patients presenting at Martin Memorial South would continue to require transfers for primary angioplasty. Finally, the decision in Brandon was based, in large part, on transportation difficulties, inadequate interfacility ambulances and traffic congestion, which are not factors in District 9. Factually, the case of Halifax Hospital Medical Center, d/b/a Halifax Medical Center v. Agency for Health Care Administration, et al., Case No. 95-0742 (AHCA Jan. 14, 1997) is also distinguishable. The applicant could have no effect on the low volume providers located 80 miles to the north. That was one not normal circumstance. Need existed because of another not normal circumstance, i.e., capacity constraints at the only other provider in the same primary service area. In Oak Hill Hospital v. AHCA, Case No. 00-3216CON (R.O. Oct. 4, 2001, F.O. Jan. 22, 2002), appeal dismissed sub nom Hernando HMA, Inc. v. HCA Services of Florida, Inc., Case No. 1DO2-854 (Fla. 1st DCA June 6, 2002), the two approved applicants were in separate counties which constituted entirely separate health care markets. Neither applicant would adversely affect the low volume providers. After the Administrative Law Judge recommended approval of the Citrus County applicant, AHCA, engaging in what appears to be a comparative review of the two remaining applicants from Hernando County, approved a second applicant from the same district at the same time. Some facts are similar to those in this case: The average drive time between hospitals was 30 minutes; transfers and admissions procedures required additional time; there was a recognition of increasing preferences for reperfusion of heart muscle using primary angioplasty; patients and families experience stress and anxiety as a result of transfers. Institution-specific issues included the transfer of 600 cardiac patients by ambulance from Oak Hill, the size of the cardiology and cardiac cath programs (1,641 caths in 1999), the larger elderly population in the service area, and the hospital's size.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter a final order denying Certificate of Need Application Number 9248 filed by BRCH, Certificate of Need Application Number 9249 filed by Martin Memorial, and Certificate of Need Application Number 9250 filed by Bethesda. DONE AND ENTERED this 11th day of November, 2002, in Tallahassee, Leon County, Florida. S ELEANOR M. HUNTER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 11th day of November, 2002. COPIES FURNISHED: Lealand McCharen, Agency Clerk Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403 Valda Clark Christian, General Counsel Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403 Gerald L. Pickett, Esquire Agency for Health Care Administration 525 Mirror Lake Drive, North Sebring Building, Suite 310K St. Petersburg, Florida 33701 Lori C. Desnick, Esquire Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403 Stephen A. Ecenia, Esquire David Prescott, Esquire Rutledge, Ecenia, Purnell & Hoffman, P.A. 215 South Monroe Street, Suite 420 Post Office Box 551 Tallahassee, Florida 32302-0551 W. David Watkins, Esquire R. L. Caleen, Jr., Esquire Watkins & Caleen, P.A. 1725 Mahan Drive, Suite 201 Post Office Box 15828 Tallahassee, Florida 32317-5828 H. Darrell White, Esquire William B. Wiley, Esquire McFarlain & Cassedy, P.A. 305 South Gadsden Street Post Office Box 2174 Tallahassee, Florida 32316-2174 Paul H. Amundsen, Esquire Amundsen, Moore & Torpy, P.A. 502 East Park Avenue Post Office Box 1759 Tallahassee, Florida 32302 Robert D. Newell, Jr., Esquire Law Firm of Newell & Terry, P.A. 817 North Gadsden Street Tallahassee, Florida 32303-6313 C. Gary Williams, Esquire Michael J. Glazer, Esquire Ausley & McMullen 227 South Calhoun Street Post Office Box 391 Tallahassee, Florida 32302 Seann M. Frazier, Esquire Michael J. Cherniga, Esquire Greenberg Traurig, P.A. 101 East College Avenue Tallahassee, Florida 32302
