The Issue BAMI and VENICE filed competing applications for a certificate of need to construct a 100-bed acute care hospital in Englewood, Florida. The sole issue is which application should be granted, and which should be denied.
Findings Of Fact DHRS is the state agency empowered to review, issue, deny, and revoke certificates of need for health care projects. 381.494(8), Fla. Stat. (1981). In January, 1982, VENICE and BAMI separately applied to DHRS for a certificate of need to construct a 100-bed acute care hospital in Englewood, Florida. When the applications were filed, Florida law required the appropriate health systems agency to initially review applications for certificates of need. On March 10, 1982, the Project Review Committee of the South Central Florida Health Systems Council, Inc.--the appropriate health systems agency--considered the competing applications, then voted to approve the proposal submitted by VENICE, and deny the proposals submitted by BAMI and a third applicant (not involved in this proceeding). On March 27, 1982, the Board of Directors of the South Central Florida Health Systems Council, Inc. disagreed with the Project Review Committee's recommendation and voted to recommend (to DHRS) approval of the BAMI proposal and disapproval of the VENICE proposal. DHRS then independently reviewed the two competing applications. On April 30, 1982, it issued a (free-form) certificate of need to BAMI to construct a 75,000 square foot, 100-bed acute care hospital in Englewood. Conversely, it denied VENICE's application, asserting: (1) that the interest and depreciation expense per projected patient day for the first two years of operation of the BAMI proposal was less than that projected for the VENICE proposal; (2) that the estimated labor and materials cost per square foot for the BAMI proposal was lower than the amount estimated for the VENICE proposal; (3) and that the provision for 30 semiprivate rooms in the BAMI proposal offered patients an alternative unavailable in the all-private room hospital proposed by VENICE. VENICE thereafter requested a formal hearing to contest DHRS's action, which request resulted in this proceeding. Bami BAMI seeks a certificate of need to construct a new 100-bed acute care hospital in Englewood, Florida, to be known as Englewood Community Hospital. BAMI proposes to relocate and merge its existing Englewood Emergency Clinic and Primary Care Center into the proposed Englewood Community Hospital. The service area for the BAMI proposal includes the following communities in Sarasota, Charlotte, and Lee counties: Englewood, North Port, Warm Mineral Springs, El Jobean, Grove City, Rotunda West, Placida, Cape Haze, and Boca Grande. The proposed hospital contains 92 medical/surgical beds and 8 intensive care unit (ICU) beds. The 92 medical/surgical beds contain a mix of 32 private be and 60 semiprivate beds. The hospital will provide ambulatory surgical services, diagnostic and special procedures, radiology services, nuclear medicine, ultrasonography, cardio-pulmonary, emergency room, and clinical laboratory services. The following services would be shared with its affiliate, Fawcett memorial Hospital in Port St. Charlotte, Florida: business office, medical records, data processing, materials management, personnel, education, public relations, administration, dietary, bio-medical engineering, laboratory, sterile processing, vascular laboratory, and occupational therapy. The proposed hospital will be a wholly-owned subsidiary of BAMI, and will have its own board of directors, board of trustees, and medical staff. BAMI is an experienced health care provider. Its principals have been in the health care business since 1964, and have built and operated 25 health care facilities in the mid-western United States. BAMI owns and operates several health care facilities in Florida: the 400-bed Fort Myers Community Hospital in Fort Myers, Florida; the 254-bed Fawcett Memorial Hospital in Port Charlotte, Florida; the 120-bed Kissimmee Memorial Hospital in Kissimmee, Florida; the Englewood Emergency Clinic and Primary Care Center in Englewood, Florida; the Ambulatory Surgical Center in Tampa, Florida; and the Emergency Clinic and Primary Care Center in Bonita Springs, Florida. BAMI also owns two smaller hospitals, one in Georgia and the other in Alabama. It is experienced in building and opening new hospitals, having built both the Fort Myers Community Hospital and the Kissimmee Memorial Hospital. It also expanded Fawcett Memorial Hospital from 96 beds to 254 beds. BAMI has financial assets of approximately $63,842,400 and a net worth exceeding $13.5 million. Venice VENICE seeks a certificate of need to construct a 100-bed satellite acute care hospital in Englewood, to be known as the Englewood-North Port Hospital. The service area for this proposed hospital consists of Englewood, North Port, Rotunda West, Placida, Warm Mineral Springs, Boca Grande, and Cape Haze. VENICE's proposed hospital contains 96 medical/surgical beds and four ICU beds. No semiprivate rooms will be available. All of the 96 medical/surgical beds will be placed in private rooms. The proposed satellite hospital will share the following services with VENICE's existing 300-bed "mother" hospital in Venice, Florida: specialized laboratory services, physical therapy, nuclear medicine, pulmonary functions, and specialized radiology services. For specialized and more sophisticated services, patients will be transported from the Englewood hospital to the larger hospital in Venice. The following support services will also be shared with the "mother" hospital: purchasing, bulk storage, laundry, dietary management, data processing, financial management, personnel recruitment, and educational services. In order to share these services, the existing Venice Hospital will be required to operate a transportation system. For many years, VENICE has owned and operated Venice Hospital, a fully licensed and accredited 300-bed general acute care hospital at 540 The Rialto, Venice, Florida. Venice neither owns nor operates any other hospital, although it has applied for a certificate of need to construct a 50-bed psychiatric hospital. The present management of Venice Hospital is inexperienced in the construction and opening of new hospitals. II. COSTS AND METHODS OF CONSTRUCTION Construction costs for the competing BAMI and VENICE proposals are broken down into categories and depicted in the following table: COMPARATIVE CONSTRUCTION COSTS CATEGORY BAMI VENICE Total Project Cost $13,355,000 $18,170,000 Total Project Per Bed Cost 135,500 181,700 Total Direct Construction Equipment Cost for and Fixed 11,670,190 13,874,516 Gross Square Feet 75,327 75,000 Construction Costs 155 173 Per Square Foot Number of Stories One Two Expansion Potential 100 additional 200 additional EQUIPMENT Movable 3,500,000 2,272,444 Bami Construction of the BAMI hospital can begin by September 1, 1983, and be completed by December 31, 1984. The new hospital can be opened by January 1, 1985. The BAMI hospital will be a one-story building, a design which is efficient for a hospital of this size. It will consist of a steel structure with curtain walls. The building is functional and economical, and can be expanded horizontally to 200 beds with minimum disruption to existing services and staff. The design of this hospital is similar to the 120-bed Kissimmee Memorial Hospital built by BAMI in 1979. BAMI's cost estimates are based on the actual costs of constructing the Kissimmee Memorial Hospital. BAMI proposes to construct the hospital by using an affiliate, F & E Community Developers of Florida, Inc. The use of an in-house contractor will allow BAMI to build the hospital in a short time period, at less cost and with higher quality. BAMI's proposal contains both active and passive energy conservation elements. The passive elements include overhangs, shaded glass, and movable windows. Active elements include the selection of quality equipment and a computerized control system for the electric reheat heating/ventilation/air conditioning ("HVAC") system. The architectural and construction plans for BAMI's proposed hospital are virtually complete. Schematic drawings were submitted and approved by DHRS in August, 1981. Preliminary plans have also been approved by DHRS. DHRS approval entailed a review of architectural, electrical, and mechanical preliminary drawings. Venice If the VENICE proposal is approved, construction could begin between April and July, 1984. The hospital could open for occupancy on January 1, 1986, a year later than BAMI's proposal. VENICE's architectural and construction plans are at an early stage, consisting only of a program summary and block design. Architectural, electrical, and mechanical preliminary drawings have not yet been submitted to DHRS and approved. The construction cost estimates submitted by VENICE are less reliable than those submitted by BAMI, since they were derived from less developed plans and were based on assumptions presented by persons who did not testify at hearing. VENICE's proposed hospital consists of a reinforced concrete structure with a modular precast concrete exterior. Although it will consist of two stories, the building will be stressed for the subsequent addition of two stories. When and if it is expanded to four stories, it would be a 300-bed hospital. The planned vertical expansion increases the initial cost of the building by approximately ten percent. Because of the extensive sharing of medical and support services between the proposed satellite hospital and the "mother" hospital in Venice, the ancillary medical and support facilities of the satellite have been down-sized. The VENICE proposal will also require horizontal expansion in the future. Areas such as radiology, laboratory, and emergency rooms will require immediate expansion as beds are added to the facility. It has not been shown at what point, in the planned expansion, VENICE's proposed hospital would become a free-standing hospital--when it would no longer be required to rely on its "mother" hospital in Venice. VENICE proposes an energy efficient facility. The multiple-story design minimizes site use and roof coverage. The relatively narrow wings provide for optimum use of daylight. VENICE contends that its HVAC system is more cost effective than the system proposed by BAMI. This contention is not substantiated by convincing evidence. The VENICE witness who testified on this question was an architect, not a mechanical engineer. He was unfamiliar with the computerized energy control system proposed by BAMI and used assumptions made by others who did not testify at the hearing. Bami III. HOSPITAL EQUIPMENT BAMI's proposed movable hospital equipment will cost approximately $3,500,000. Included are three radiology rooms: one general radiographic room, one standard R and F room, and one R and F room with angiographic capability. Also included are 8 ICU beds, four operating "rooms--two major and two minor-- nuclear medicine, and ultrasound capability. Venice The equipment cost for the VENICE proposal is $2,272,444. Included are 3 operating rooms, one with cystographic capability; four ICU beds and two radiology rooms--one R and F, and one general radiographic. More sophisticated diagnostic procedures, such as nuclear medicine and specialized radiology, will be provided at the "mother" hospital in Venice, not at the proposed Englewood satellite. To utilize these procedures, patients will be transported from Englewood to Venice. VENICE acknowledges that its proposed hospital will utilize less sophisticated diagnostic equipment than BAMI's. VENICE's equipment cost would have to be increased approximately $700,000 if it were to provide eight ICU beds and specialized radiology and nuclear-medicine to match BAMI's proposal. The equipment cost differential indicates the different levels of care proposed by the two hospitals. The VENICE proposal requires the development of a transportation "shuttle" system between the "mother" hospital in Venice and the satellite in Englewood. The system would consist of two trucks in addition to vans or ambulances. The plans for this essential transportation system are, however, not fully developed. The need for van or ambulance transportation between the two facilities has not been fully considered. Further, the transportation plan estimates a 25-minute one-way driving time between Englewood and Venice year- round. During the busy winter months, it is likely that the driving time will increase. Although VENICE proposes to lease the necessary trucks, neither the leasing costs nor associated costs have been fully taken into account. IV. FUNDS FOR OPERATING AND CAPITAL EXPENDITURES Bami BAMI will finance the $13,555,000 required to open its proposed hospital with bond proceeds, an equipment lease, and an equity contribution. It will obtain $7,905,000 from taxable bonds with a maturity of 25 years, and an interest rate of 12.5 percent. There will be a 2-year holiday on principal payments. BAMI will finance the $3,500,000 equipment cost pursuant to a lease agreement with Financial and Insurance Services, Inc., with an eight-year term and an interest rate of 15 percent. BAMI will make an equity contribution of $2,150,000. This will be in the nature of a contribution of capital from a parent corporation to a subsidiary corporation. As of September 30, 1982, BAMI had a net worth exceeding $13,500,000. BAMI will provide up to $1,000,000 in operating capital to cover initial start-up costs of the proposed hospital. In addition, BAMI has obtained a $5,000,000 line of credit which will be available to cover any potential cash shortages occurring during the start-up phase of the hospital. Venice VENICE will obtain the $18,170,000 required for its proposal from tax- free bond financing and an equity contribution. The bonds, which will have a maturity of 30 years and an interest rate of 10.52 percent, will be an obligation of the Venice Hospital. A debt service reserve fund of $1,900,750 will be required in order for the bonds to obtain an "A" rating. In unrelated applications, VENICE has proposed a major renovation of its existing hospital and the construction of a new free-standing 50-bed psychiatric hospital. These projects, if undertaken, will require additional equity contributions of $1,221,000 and additional bond financing in the amount of $10,370,000. To obtain the bond financing, VENICE will be required to maintain a one-to-one historical debt coverage ratio. VENICE has not convincingly established that it will be able to carry out all three projects and still maintain the required one-to-one debt coverage ratio. VENICE proposes to locate its proposed hospital on 15 acres of land costing $135,000. But the land sales contract provides only for the sale of 250 acres at a cost of $2,250,000. (The present owners wish to sell the entire 250- acre parcel and not lesser amounts.) The source of the $2,250,000 needed to acquire the property has not been identified. The bond proceeds could not be used. To purchase the 250 acres and fund the equity for its three proposed health care projects, VENICE will require $4,311,000. The source of these funds has not been identified. VENICE contends that one possible source would be Board Designated Funds. However, VENICE's audited financial statements for the period ending September 30, 1982, suggest otherwise. PROPOSED SITES Bami BAMI, through a subsidiary, has contracted to purchase approximately 12 acres as a site for its proposed Englewood hospital. The 12-acre site is part of a 60-acre parcel of land that is zoned OPI, a zoning classification which will permit the construction of a hospital. The 12-acre site is located on Morningside Drive, an access road to Pine Street. Although Morningside Drive is a dirt road, it will be paved. Under the contract, the current owner will pay all paving costs in excess of $65,000. The initial $65,000 in paving costs will be borne by BAMI and has been included in BAMI's estimated construction costs. Pine Street, a major north- south transportation artery in the Englewood area, is currently being resurfaced in both Sarasota and Charlotte counties. A second access to Pine Street has been acquired by the current owner. A watermain is available at the BAMI site. The current owner of the property will construct a sewage treatment plant and provide sewer service to the proposed hospital at prevailing rates. The sewage treatment plant will be located on a 7.5-acre portion of the 48 contiguous acres retained by the current owner. The BAMI site is located in an A-11 flood zone with an elevation of ten feet. Fill dirt will be used to raise it to an acceptable elevation of twelve feet. A current owner of the BAMI site envisions the entire 60 acres as an Englewood medical center. If necessary he will allow BAMI to purchase an additional 12 acres contiguous to the site. BAMI has not yet, however, obtained a legally enforceable right to purchase additional property adjoining its 12- acre site. Although the 12-ace site will permit the planned 100-bed future expansion, the site would be crowded with little space remaining for future improvements. Venice The VENICE site is an undesignated 15-acre portion of a 250-acre parcel of land located off State Road 777, also known as South River Road. It is uncertain whether the hospital will have one or two access roads to State Road 777. A watermain is available at the VENICE site. Sewage treatment will be provided by a nearby privately owned sewage treatment plant until the hospital, eventually, constructs its own. The zoning classification of the VENICE site will not permit construction of a hospital. Before the hospital could be built, Sarasota County would be required to rezone the property to OPI. Use of the property for a hospital is also inconsistent with Sarasota County's comprehensive land use plan, adopted October 31, 1981. Such a rezoning process would take a minimum of three or four months, and perhaps longer. Approximately 100 individual steps are involved. Hearings would be held by the Sarasota Planning Commission and the Sarasota County Commission. VENICE has not yet filed an application to rezone either the 15 acres or the entire 250-acre parcel. Neither has it shown that it is likely to succeed in having the property rezoned to a classification permitting hospital use. Bami VI. EFFICIENT AND ALTERNATIVE USES OF HEALTH CARE RESOURCES As part of its application, BAMI proposes to merge its existing Englewood Emergency Clinic and Primary Care Center into its proposed Englewood hospital. If the BAMI application is denied and VENICE's granted, BAMI will continue to operate the Emergency Clinic and Primary Care Center. As a result, the Emergency Clinic and VENICE's Englewood hospital would be providing duplicative emergency services. The costs resulting from this duplication would be approximately $894,800 in 1985; $975,300 in 1986; and $1,063,100 in 1987. For cost effectiveness, BAMI's proposed hospital will share some ancillary and support services with Fawcett Memorial Hospital in nearby Port Charlotte. Fawcett Memorial will also provide tertiary level services, such as renal dialysis and CAT scans to patients of the proposed Englewood hospital. BAMI operates a multi-hospital system, with subsidiaries which provide ancillary and specialized support services. These services include physical therapy, inhalation therapy, cardiopulmonary function, speech therapy, data processing, and collection services. Corporate level expertise in accounting, property management, pharmacy management, personnel, and marketing, is also available. The multi-hospital system allows BAMI to obtain favorable purchasing contracts and capital for future expansion. Venice Venice Hospital, the only hospital in south Sarasota County, has a high rate of occupancy. Although presently a 300-bed facility, it has an ultimate capacity of 400 beds. It recently applied for a certificate of need to add 24 ICU/PCU beds and additional beds, beyond that, are needed. It has a shelled-in fourth floor that will accommodate an additional 45-bed nursing unit. Completing the fourth floor at Venice Hospital would be a more cost-effective alternative way to add beds than constructing a new hospital in Englewood. As already mentioned, the "mother" hospital in Venice will share numerous ancillary and support services with the proposed satellite hospital in Englewood. VENICE proposes to share, among other things, its present laboratory with the proposed Englewood satellite. As a result, the laboratory in the satellite hospital has been reduced to a minimal size. It has not been convincingly established that the Venice Hospital laboratory, even if expanded as proposed, can process the additional laboratory work-load arising from an Englewood satellite. The laboratory at the existing Venice Hospital presently operates 24-hours per day, seven days a week. Even if its application to expand its laboratory is granted, the total area of the laboratory would be less than the accepted space guidelines required for a 324-bed hospital. VII. AVAILABILITY, APPROPRIATENESS, AND ACCESSIBILITY OF PROPOSED HEALTH CARE SERVICES Scope of Services Although both proposed hospitals would share services with affiliated hospitals, BAMI proposes more of an autonomous, full-service and free-standing hospital than that proposed by VENICE. BAMI will equip its hospital with a more complete and sophisticated range of diagnostic services and, unlike VENICE, has not down-sized its ancillary and support services. For the VENICE proposal to become a free-standing facility comparable to BAMI's, the space devoted to ancillary medical services and support services would have to be expanded by 30 percent and 50 percent, respectively. The costs of such an expansion have not been determined. Economic Access Both parties will enter Medicaid contracts covering their proposed hospitals. BAMI projects that .1 percent of its patients will be Medicaid; VENICE projects .2 percent. BAMI hospitals treat all emergency patients, regardless of ability to pay. Third party payment is accepted. On elective admissions, self-pay patients are requested to make reasonable deposits and sign promissory notes. In specific instances, patients can be admitted without making financial arrangements in advance. Patients are not referred to other hospitals because of inability to pay. If an indigent is defined as "one who cannot pay," Fawcett Memorial Hospital provided between $600,000 and $700,000 in indigent care during 1982. This figure represents approximately 3.9 percent of gross revenue. Similarly, Venice Hospital treats emergency patients regardless of their ability to pay. Promissory notes are obtained from self-pay patients if necessary. The credit policies of Venice Hospital are similar to BAMI's. Venice Hospital had a bad debt or charity to gross receipts ratio of between 2.5 percent and 3.0 percent in 1982. Venice Hospital also has a Hill-Burton requirement to provide indigent care in the amount of approximately $125,000 per year. This requirement stems from a federal grant awarded in 1970. Access to Osteopathic Physicians BAMI's proposed hospital will have an open medical staff, including licensed medical doctors and osteopathic physicians. BAMI has a practice of allowing osteopathic physicians on its medical staff. For several years, osteopathic physicians have been included on the staff of all BAMI hospitals. Fort Myers Community Hospital, a BAMI hospital, is one of two hospitals in the Fort Myers area with osteopathic physicians on its staff. Kissimmee Memorial Hospital, also owned by BAMI, has the only two osteopathic physicians in Kissimmee on its staff. Fawcett Memorial Hospital has the only osteopathic physician in Port Charlotte on its staff. In contrast, VENICE has not added osteopathic physicians to its staff with similar enthusiasm. It granted staff privileges to its first osteopathic physician six to nine months prior to hearing. Two months before the hearing, staff privileges were granted to a second. Venice Hospital has, however, changed its bylaws to comply with the law prohibiting discrimination against osteopathic physicians. Geographic Access The geographic locations of the sites for the two proposed hospitals, as described above, provide equal access to the service area. The BAMI site is closest to the existing population concentrations of the Englewood area, while the VENICE site is closer to Interstate 75. Both sites will require the paving of an access road to major traffic arteries. No significant advantage in access is afforded to either. VIII. COMPETITION The existing Venice Hospital currently serves the hospital needs of approximately 64 percent of the people in the greater Englewood area. These patients comprise approximately 26.8 percent of Venice Hospital's total patient days. BAMI's existing Fawcett Memorial Hospital in Port Charlotte currently serves between ten and twelve percent of the hospital needs of the people in the greater Englewood area. These patients account for approximately 11.3 percent of Fawcett Memorial's total patient load. In addition, BAMI's Englewood Emergency Clinic and Primary Care Center has treated over 20,000 patients since it opened in February, 1980. The existing Venice Hospital holds a dominant market share in the greater Englewood area. It is only twelve miles north of Englewood and is the only hospital in south Sarasota County. The closest competitor in Sarasota County is Sarasota Memorial Hospital, approximately 20 miles north of the Venice Hospital. Venice Hospital has been in operation for approximately 30 years. In contrast, Fawcett Memorial Hospital is approximately 21 miles east of Englewood. In the mid-1970s, it was converted from a nursing home to a 96-bed hospital, and in 1976, it was expanded to 254 beds. Approval of BAMI's proposal will enhance competition among hospitals serving the greater Englewood area. The competition will not, however, adversely affect Venice Hospital's long-term viability. The construction of either hospital in the Englewood area will change existing hospital utilization and physician referral patterns. New referral patterns will form and an increasingly autonomous group of physicians will develop. Local physicians will utilize the Englewood hospital, whether it is owned by BAMI or VENICE. Bami IX. PROJECTED COSTS OF PROVIDING HEALTH CARE SERVICES BAMI forecasts an occupancy rate of 60 percent at its proposed Englewood hospital in 1985; 75 percent in 1986; and 80 percent in 1987, with an average length of stay of 8.5 days. These figures are credible in view of the population growth in the Englewood area, the undisputed need for a new hospital, and the elderly population. To project total cost and gross revenue per patient day, various calculations are made. BAMI's employee salary expenses are based on its experience at nearby Fawcett Memorial Hospital, adjusted by an inflation factor. Non-salary expenses are derived from its experience at Kissimmee Memorial Hospital, a hospital of similar size with a utilization rate similar to that projected for the Englewood hospital. Depreciation of plant and equipment is calculated using the straight-line method. Revenue projections are derived using the American Hospital Association's Monitrend median inpatient revenue, inflated at 9 percent per year. An indigent/bad debt deduction of four percent of total patient revenue is used. These assumptions provide a credible basis from which total cost and gross revenue per patient day can be calculated. Using these assumptions, total costs per patient day is forecast to be $482.00 in 1975; $479.60 in 1986, and $510.32 in 1987. Gross revenue per patient day is forecast to be $552.00 in 1985; $601.68 in 1986; and $655.83 in 1987. These forecasts are credible and accepted as reasonably reliable. Venice VENICE's primary contention is that its proposed hospital, although costing more to build, will--in the long run--result in lower costs to patients and increased savings to the community. This contention was not substantiated by convincing evidence. In forecasting its costs and revenues, VENICE projected an occupancy rate of 65 percent in 1986; 80 percent in 1987; and 80 percent in 1988. The 1986 projection is unreasonably high; it envisions a 70.4 percent utilization rate during the opening month. VENICE's projected salary expenses are derived from its current experience at Venice Hospital, adjusted for inflation. Although this figure is reliable, the projected non-salary expense per patient day is not. The nonsalary expense is not based on Venice Hospital's most recent 1982 expenses, and is not adjusted by the requisite inflation factor. The depreciation schedule and assumptions used by VENICE in forecasting its revenues and costs are also questionable. Discrepancies went unexplained. The testimony of Deborah Kolb, Ph.D., an expert in health care financial and need analysis, is considered more credible. She concluded that VENICE understated 1986 depreciation expense for its proposed hospital by approximately $300,000, an error which would have increased its projected patient costs per day by $13.70. VENICE also projects room charges at its proposed hospital which are significantly lower than those projected for its "mother" hospital in Venice. This difference in room charges was not adequately explained or justified. Although VENICE's controller attributed the difference to cost savings resulting from the satellite hospital concept, these savings were not meaningfully itemized or identified in VENICE's revenue and cost projections. VENICE also failed to identify, and reflect in its projections, increased costs resulting from use of its satellite concept. For example, in 1986, 532 Englewood patient are projected as requiring sophisticated nuclear medicine tests at the "mother" hospital in Venice; 141 Englewood patient are projected as requiring special radiology tests at Venice Hospital. When asked who would absorb the costs of transporting patients between the satellite hospital in Englewood and the "mother" hospital in Venice, VENICE's controller responded that Venice Hospital would. However, those costs have not been quantified. Moreover Venice Hospital does not currently pay for ambulance transportation of its patients and does not have vans which transport patients on 24-mile round trips. This amounts to a significant and additional cost of operation, which has not been fully considered in the financial forecasts. Moreover, VENICE utilized cost per patient day based on Venice Hospital's 1981 costs rather than the higher 1982 costs. (Revenue per patient day increased 23.8 percent, in 1982.) In addition, projected revenues at VENICE's proposed Englewood satellite were not adjusted downward to take into account the less-sophisticated medical services which would be provided. As a result, VENICE's projected revenues per patient day are questionable and lack credibility. Venice Hospital received funds from three philanthropic organizations: Venice Hospital Blood Bank, Venice Hospital Auxiliary Volunteers, and Venice Health Facilities Foundation. Without the infusion of these funds, charges to Venice Hospital's patients would be higher. Venice Hospital's own fund raising literature states that patient charges, alone, do not cover the full costs of providing medical services. These community-raised funds, then, pay part of the costs of providing medical care. But in calculating cost savings to the community from its proposed Englewood hospital, VENICE has not identified or taken into account these additional funds raised from the community. VENICE's comparison of its projected patient charges with those of BAMI's is, accorded little weight. The two proposed hospitals are significantly different, one providing more extensive and sophisticated medical care than the other. This difference was not adequately taken into account in the financial comparison. Additional costs to Venice Hospital resulting from the Englewood satellite hospital were not fully considered. Comparisons based on historical charges by Venice Hospital and Fawcett Memorial Hospital are also misleading since these hospitals are different in size and occupancy rate--and the proposed Englewood hospital will duplicate neither. Moreover, Venice Hospital historical room rates used for the comparison were selectively chosen. VENICE also relies on projected HVAC life cycle savings, which, as already mentioned, were not convincingly established. Finally, the costs of acquiring VENICE's site-- necessitating a 250-acre purchase--were not fully reflected in the comparison. X QUALITY OF CARE The parties stipulated that both proposals will provide high quality medical care. The only question is whether bed-configuration will affect the quality of care provided. BAMI proposes a mix of 32 private and 60 semiprivate medical/surgical beds, with an additional 8 ICU beds. In contrast, VENICE proposes 96 private medical/surgical beds and 4 ICU beds. BAMI's mix of private and semiprivate rooms will allow consumers a choice and is preferable to VENICE's all private-room proposal. Private and semiprivate rooms confer various benefits. BAMI's proposed 32 private rooms will be adequate to serve those patients requiring private rooms while, at the same time, affording patients a choice between private and semiprivate. The VENICE proposal will not allow such a choice. It has not been shown, however, that bed configuration will affect the quality of medical care rendered patients. XI. COMPARISON: BAMI'S PROPOSED HOSPITAL IS PREFERABLE TO VENICE'S Both proposed hospitals would provide necessary and quality medical care to people in the Englewood area. On balance, however, BAMI's proposal is preferable. BAMI's free-standing hospital will provide more complete and sophisticated medical care, with less need to transport patients between "mother" and satellite hospitals. VENICE's satellite hospital will require extensive transporting of patients, food, linens, equipment, lab samples, and medications between the "mother" hospital in Venice and the satellite hospital in Englewood. BAMI, a multi-hospital system, is more experienced in constructing and operating new hospitals. The BAMI proposal will cost approximately $2,000,000 less to build, yet be of comparable quality and equipped with more sophisticated diagnostic equipment. While VENICE's construction plans are preliminary, BAMI's are detailed and virtually complete. VENICE's site requires rezoning, BAMI's does not. If BAMI's application is approved, its hospital could be opened by January 1, 1985,a year earlier than VENICE's. BAMI is financially able to begin construction immediately while VENICE--because of other projects simultaneously undertaken--may not be. Apart from zoning, both hospital sites are equally acceptable, although BAMI's 12-acre site is minimally sufficient for the anticipated future expansion to 200 beds. BAMI's financial ability to purchase is assured, while VENICE's is not. BAMI's proposal would avoid a duplication of emergency medical services in Englewood, while VENICE's would cause it. For patients preferring osteopathic physicians, BAMI's hospital would, most likely, be preferable. For patients preferring semiprivate rooms, BAMI's proposal would be preferable. Competition between hospitals serving the Englewood area would be enhanced with the BAMI proposal and decreased with VENICE's. Although VENICE argued that the costs to its patients would, over the long run, be less than BAMI's, this proposition was not convincingly proved.
The Issue Whether there is need for a new hospital in AHCA Acute Care Subdistrict 5-2 (eastern Pasco County)? If so, whether AHCA should approve either CON 9975 or CON 9977?
Findings Of Fact The Applicants and Background Pasco-Pinellas Pasco-Pinellas, the applicant for CON 9975, is a joint venture between two nonprofit healthcare organizations: University Community Hospital, Inc. (UCH) and Adventist Health System Sunbelt Healthcare Corporation (Adventist). A not-for-profit healthcare system, UCH has served the Tampa Bay area for the last 40 years. It owns and operates two hospitals in Hillsborough County and one in Pinellas County. UCH has approximately $100 million available for capital expenditures to fund the hospital proposed by CON 9975. One of its Hillsborough County facilities, University Community Hospital, is located on Fletcher Avenue in northern Hillsborough County, AHCA Health Planning District VI. Across the street from the main campus of the University of South Florida (USF) and its College of Medicine, University Community Hospital has an agreement with USF for GME. University Community Hospital at present serves the Wesley Chapel area in eastern Pasco County. The other member of the joint venture, Adventist, is a financially successful not-for-profit healthcare organization. It operates 17 hospitals in the state of Florida. As of December 31, 2007, Adventist's cash on hand, including investments, exceeded $3.6 billion and net revenue for 2007 was approximately $368 million. The joint venture between UCH and Adventist was formed to establish a hospital to serve the Wesley Chapel area of Pasco County and to provide other healthcare services in the county. At present, the two members of the joint venture compete to serve the Wesley Chapel area through University Community Hospital and Adventist's Florida Hospital Zephyrhills (FHZ), a 154-bed general acute care hospital in Pasco County. The collaboration of competing hospitals in seeking approval for a new hospital through Florida's CON process is unusual. But by bringing the similar missions, strength in community interests and capable leadership of UCH and Adventist together, the Pasco Pinellas joint venture poses potential healthcare benefits to eastern Pasco County. BayCare The Applicant for CON 9977, BayCare of Southeast Pasco, Inc., is a not-for-profit corporation formed to develop the hospital proposed in the application. The sole member of BayCare is BayCare Health System, Inc. ("BayCare System"). BayCare System is the largest full-service community- based health care system in the Tampa Bay area. It operates 9 nonprofit hospitals and 11 ambulatory/outpatient centers in Hillsborough, Pasco and Pinellas counties. Initially organized in 1997 under a joint operating agreement between several hospitals, BayCare System's purpose has been to compete effectively in managed care operations in order to reduce the expenses of the individual organizations that are its members. In the first 5 years of operation, BayCare System saved its members a total of $90 million because of the enhanced cost efficiencies it achieved through business function consolidations and group purchasing. Its members are all not-for-profit hospitals. BayCare System's focus is on the treatment of one patient at a time. Its mission is to improve the lives of people in the community it serves, to operate effectively as a group of not-for-profit hospitals, and to provide high quality, compassionate healthcare. BayCare's application, because it provides potential for its proposal with its teaching aspects, draws significant and considerable support from USF, a national research university. USF has a College of Medicine, a College of Nursing, and a College of Public Health, collectively "USF Health." USF Health will collaborate with BayCare in the development of the hospital BayCare proposes, should it be approved and should its teaching functions come to fruition. The Agency The Agency for Health Care Administration is the state agency that administers the CON program pursuant to Section 408.034, Florida Statutes. It will make the final decisions to approve or deny the two CON applications at issue in this proceeding. Community Community Hospital is a general acute care for profit hospital with 386 beds. It is located within the City of New Port Richey in western Pasco County, Acute Care Subdistrict 5-1. With the exception of neonatal intensive care, open heart surgery and organ transplantation, Community is a full- service community hospital. It provides OB services. It is licensed for 46 adult psychiatric beds. It offers a variety of outpatient services including outpatient surgery, endoscopy, and outpatient procedures and lab testing. Its medical staff consists of approximately 400 physicians. Community serves patients without regard to ability to pay, and does not discriminate in any manner. Accredited by the Joint Commission on Accreditation of Hospital Organizations, it has received numerous awards and recognition for the quality of its health care services. Community's hospital facility is over 30 years old. Access to the campus from US 19, the closest major thoroughfare approximately 1.5 miles away, is gained via a two-lane street through a residential area. Land-locked but for the two-lane street, the campus is sandwiched between the residences and a high school. There are no medical office buildings ("MOB") owned by Community on the campus; less than 20 acres in size, it is completely built out. Community's Replacement Hospital Community has a replacement hospital facility currently under construction in Acute Care Subdistrict 5-2. Approximately five miles southeast of Community's New Port Richey location, the replacement facility is located at the intersection of Little Road and State Road 54. Expected to open in late 2010 at a cost in excess of $200 million, it is to be known as Medical Center of Trinity ("Trinity"). All current Community services will be offered at Trinity. At the same time, the new hospital will offer many advantages over the old facility. Trinity will initially be five stories in height, with fewer licensed beds, but constructed with the ability to expand. It will offer new medical equipment with the latest technology. Situated on 52 acres, with a new three-story MOB adjacent to the hospital, Trinity has plans to add a second MOB at some time in the future. Unlike existing Community Hospital, Trinity will have all private rooms. Its more efficient layout among service areas will improve efficiencies and patient satisfaction. Trinity's location is more accessible than Community's current location in New Port Richey. It is on State Road 54 (SR 54), a six-lane highway that runs east/west through Pasco County. The road has recently undergone major construction and expansion which was nearly complete at the time of hearing. Suncoast Parkway (a/k/a Veterans Expressway), furthermore, is an expressway toll road system that runs north/south from Hernando County through Pasco County to Tampa airport. From the intersection of Suncoast Parkway and SR 54, it takes approximately seven minutes to reach Trinity. Little Road runs north/south along the Trinity site, and north through Pasco County to Regional Medical Center Bayonet Point ("Bayonet Point"). Community's poor financial performance in recent years is expected to improve after the opening of Trinity. The Proposals Although both applicants propose a new hospital in roughly the same location in Subdistrict 5-2, the two are different both in scope and approach. Pasco-Pinellas' Proposal Pasco-Pinellas proposes to build an 80-bed acute care hospital on Bruce B. Downs Boulevard in the area known as Wesley Chapel in eastern Pasco County. If approved and constructed, the hospital will include 36 medical/surgical beds, 8 labor/delivery/recovery/post partum beds, 12 critical care beds, and 24 progressive care beds. The project would involve 184,000 gross square feet of new construction, at a total estimated cost of $121 million. Pasco-Pinellas proposes a typical primary service area (PSA). Five and one-half zip codes comprise the PSA; Pinellas- Pasco reasonably projects 82% of its admissions will come from the PSA. Two and one-half zip codes comprise the secondary service area (SSA). The zip code that is shared by the PSA and the SSA (33559) is split roughly in half between Pasco County and Hillsborough County. The half that is in Pasco County is in Pasco-Pinellas' PSA. The five full zip codes in the PSA are 33541, 33543, 33544, 34639, and 33576. The two full zip codes in the SSA are 33549 and 33647. Pasco-Pinellas' in-migration from outside its proposed service area (the PSA and the SSA) is forecast by Pasco- Pinellas's health planner at 12%. For a community hospital in the Wesley Chapel area without tertiary services, the in- migration percentage projected by Pasco-Pinellas is reasonable. BayCare's Proposal BayCare proposes to establish a general acute care hospital with 130 beds. The application proposes that it be collaboratively developed by BayCare System and USF Health so as to provide teaching functions associated with the USF College of Medicine and other health-related university components of USF Health. Consisting of approximately 476,000 square feet of new construction at an estimated total project cost of approximately $308 million, the hospital will have 92 medical/surgical beds, 24 critical care beds, and 14 post-partum beds. Like Pasco-Pinellas' proposal, BayCare's proposed hospital will be located on Bruce B. Downs Boulevard in the Wesley Chapel area of southeastern Pasco County. BayCare's proposed PSA is circular. The center point of the PSA is the proposed BayCare hospital site in the Wesley Chapel area. The circumference is along a series of seven-mile radii so that the diameter of the circular PSA is 14 miles. The seven-mile radius was chosen to approximate a fifteen-minute travel time by automobile from the outer edge of the circular PSA to the hospital site. BayCare's PSA includes some part of seven zip codes. Two are Wesley Chapel zip codes: 33543 and 33544. Two are Lutz area zip codes: 33549 and 33559. Two are Land O'Lakes zip codes: 34639 and 34638, and one is a zip code in Hillsborough County: 33647. Relative to typical PSAs for most proposed hospitals, the PSA proposed by BayCare's application was described at hearing by BayCare's health planner as "small." See Tr. 1855. For calendar years 2013 and 2014, BayCare projects that 19,0976 and 20,008 patient days, respectively, will be generated from within the PSA. These projections constitute a projection of 60% of all patient days projected for the two years, a percentage substantially lower than would be generated from a typical PSA. The remaining 40% of projected patient days is roughly double what would be expected from beyond a PSA under a more typical proposal. The high number of projected patient days for patients originating outside the PSA was explained at hearing by BayCare's health planner. The involvement of the USF Physician's Group and the "teaching" nature of the proposal "pumps up and provides an additive level of in-migration that would not be experienced without the USF combination with BayCare in [the] project." Tr. 1856-7. Pasco County Hospitals There are five hospitals in Pasco County. Two in western Pasco County will continue to remain in Subdistrict 5-1 in the near future: Regional Medical Center Bayonet Point, located in northwest Pasco County and Morton Plant North Bay Hospital, located in New Port Richey. Two are in eastern Pasco County, Subdistrict 5-2: Pasco Regional Medical Center in east central Pasco County, and FHZ, located in southeast Pasco. The fifth is Community/Trinity. No Need for Both Hospitals None of the parties contends there is need for both hospitals. Nor would such a contention be reasonable. Indeed, the record does not demonstrate need for both a new 80-bed community hospital as proposed by Pinellas-Pasco and a new 130- bed hospital that BayCare denominates a "teaching" hospital, each with an intended location on Bruce B. Downs Boulevard in the Wesley Chapel area of southeastern Pasco County in Subdistrict 5-2. The question remains: is there a need for one new hospital? If so, which of the two applications, if either, should be approved? Need for a New Hospital; Access Enhancement Among the counties in the Tampa Bay area, Pasco County has been the fastest growing in recent years. From 1990 to 2000, its population grew 22.6%. Three times higher than the state average, this represents tremendous growth for any locale. The Wesley Chapel area of south Pasco County roughly coincides with the PSAs of the two applicants. Dramatic growth over the last 20 years has marked the Wesley Chapel area's transformation from an agricultural area to a suburban community. North of Hillsborough County and its largest city, Tampa, improvements in the transportation network has made south Pasco County and in particular, the Wesley Chapel area, a bedroom community for workers commuting to Tampa. Claritas, a national demographic data service, is a generally accepted population projection source for CON applications. Claritas projects the growth in Pasco County to continue. For example, the projected population for Pasco- Pinellas' proposed PSA, which substantially overlaps with BayCare's proposed PSA, is 113,397 in 2011 and 118,505 in 2012. The Claritas projections are based on the most recent decennial U.S. Census, that is, 2000, and do not take into account data of impending population growth, such as new housing starts and new schools. Claritas, therefore, may understate projections in areas that have experienced more recent, rapid growth. The University of Florida Bureau of Economic and Business Research ("BEBR") also provides reliable population data by county. In the year 2000, the census for the Pasco County population was 344,765. By 2030, that population is projected by BEBR to grow to 526,100 based on low projections, 681,100 based on medium projections, and 876,900 based on high projections. For the high projection rate, this would constitute a 154% increase in population. Even assuming the low growth rate, the population would increase by 53%. According to BEBR data, the county can be expected to grow at a rate of 4.71% per year. Another source of population data relied upon by population experts is Demographics USA. The Demographics USA data shows a substantial growth in population for Pasco County. According to Demographics USA, the population for Pasco County can be expected to grow from 343,795 in the year 2000 to 440,527 in the year 2010 and then to 504,277 by the year 2015. Based on the Demographics USA data, the county can be expected to grow at a rate of 3.11% per year. The Wesley Chapel area is considered to be the area of Pasco County with the most development and development potential now and in the future. Of 175 major projects actively undergoing development in Pasco County, 76 are in the Wesley Chapel area. Between 2010 and 2012, the population in the area is projected to grow by 5,000 persons per year. With the increase in the general population in the area comes an expected increase in the need for schools. Of 37 schools identified by the Pasco County School Board to be built in the near future, 19 are to be located in the Wesley Chapel area. Whether the historic growth rate of the last few decades will continue for sure is an open question with the downturn in the economy and the housing market that commenced in Pasco County in mid-2007. Absent a major recession, however, it is reasonable to expect growth in the Wesley Chapel area to continue even if not at a rate as rapid as in the recent past. Whatever the future holds for Wesley Chapel's growth rate, there is clearly a demand for inpatient general acute care services in the Wesley Chapel area. The total non-tertiary discharges from the Pasco-Pinellas service area was 15,777, excluding newborns, for the 12-month period ending June 30, 2006. As a result, AHCA found the existing and growing population in the Wesley Chapel area warranted a new hospital. Along with significant growth in the Wesley Chapel area comes resulting traffic and healthcare and hospital access issues. Drive time analysis shows the average drive time from each of the Pasco-Pinellas PSA six area zip codes to the eight area hospitals in 2007 to be 46.11 minutes. The analysis shows that future drive time is expected to be lengthier, strengthening the need for a hospital in the Wesley Chapel area. In 2012, the average time increase is expected to 57.68 minutes. A Drive Time Study Report prepared by Diaz Pearson & Associates compared drive times to the proposed site for Pasco- Pinellas hospital to eight existing hospitals: UCH, Pasco Regional, FHZ, Tampa General, University Community Hospital on Dale Mabry in Tampa, St. Joseph's North, St. Joseph's in Tampa, and the site for Community's replacement hospital. The study concluded: The results of this travel study demonstrate that the vehicular travel times for access to the proposed PPHCHS Hospital [Pasco- Pinellas' Hospital] are consistently LESS for residents within the six Zip codes of the Primary Service Area for years 2007, 2011, and 2012 than for comparable trips to any of the eight area hospitals for alternate choice. Pasco-Pinellas 36, p. 27. Of particular note are the travel times from each of the six zip codes in Pasco-Pinellas' PSA to UCH, FHZ, and Tampa General. For example, a patient driving from the centroid point in zip code 33559 to UCH would take 24.28 minutes and to FHZ would take 37.97 minutes in 2007. This increases to 29.55 minutes and 50.94 minutes in 2012. Another example, the time it takes a patient to travel from zip code 33541 to Tampa General was 75.51 minutes in 2007. In 2012, the travel time is projected to increase approximately 20 minutes to 95.33 minutes. In contrast, a new hospital in the Wesley Chapel area would decrease travel times significantly for patients in the six zip code areas of the Pasco-Pinellas PSA. For example, in 2007, it would only take a zip code 33559 patient 11.41 minutes to reach the proposed site for Pasco-Pinellas. This represents a time savings of 12.87 minutes compared to the average driving time to UCH and 26.56 minutes compared to the average driving time to FHZ. In 2012, the reduction in time to drive to Pasco- Pinellas' proposed hospital site instead of UCH is 18.34 minutes and for FHZ, it is 39.53 minutes. The time savings for patients from the 33541 zip code traveling to Tampa General for non- tertiary services is even greater. Using Pasco-Pinellas' site in the Wesley Chapel area would save the patient 52.67 minutes in 2007 and is projected to save 63.88 minutes in 2012. Anecdotal evidence supports the need for a new hospital in the Wesley Chapel area. Dr. Niraj Patel practices obstetrics and gynecology in the Wesley Chapel area. A drive for him in good traffic is typically 20 minutes to UCH (the only hospital at which he practices because the distance between area hospitals is too great). In morning traffic during "rush" periods, the drive can exceed 40 minutes. Caught in such a drive in January of 2008, Dr. Patel missed the delivery of a patient's baby. He was required to appear before the UCH Medical Staff's credentials committee to "explain the situation . . . [because it] was the third or fourth [such] episode." Pasco-Pinellas 47, p. 11. As Dr. Patel explained in a pre- hearing deposition, "it doesn't fare well for me . . . credential and requirement wise but it doesn't fare well for the patient [who] had to be delivered by the nursing staff which [without a physician present] increases patient risk and [the chance] of complication[s]." Id. A new hospital in the Wesley Chapel area will provide residents of the Pasco-Pinellas PSA or the BayCare PSA with shorter travel time to a hospital compared to the time necessary to reach one of the eight existing hospitals in the region. In 2007, residents of the six zip codes in the Pasco-Pinellas' PSA could be expected to access Pasco-Pinellas' proposed hospital in a range of 10.9 to 21.8 minutes. For the year 2012, the time can be reasonably predicted to range from 17 to 31.4 minutes. In comparison the drive times to the eight hospitals in the region for residents of Pasco-Pinellas' PSA are significantly longer. In 2007, it took a resident in zip code 34639 approximately 55 minutes to get to UCH and 73 minutes to get to St. Joseph's Tampa. By 2012, those drive times are reasonably projected to increase to 64 minutes and 83 minutes, respectively. Simply put, travel times are expected to increase as the population increases in coming years. The site of Pasco-Pinellas' hospital is approximately one mile from the site of the proposed BayCare hospital. The travel times suggested for the residents of the Pasco-Pinellas PSA to the proposed Pasco-Pinellas hospital can be expected to be similar to travel times to the proposed BayCare hospital. Given the proximity of the two proposed sites, either will significantly reduce travel time to hospitals for patients in the Wesley Chapel area. The existence in the Wesley Chapel area of a community hospital with an emergency room and primary inpatient services will benefit doctors, patients and their families. Heightened driving concerns among elderly patients and traffic congestion and inadequate roadways that delay Emergency Medical services support the need for a Wesley Chapel area hospital. The support is based not only on 2007 travel times but also on the reasonable expectation that travel time will be greater in the future. Existing hospitals are capable of absorbing the increased need for acute care hospital services that result from the increased growth that is reasonably projected to occur in Subdistrict 5-2. If there is to be a new hospital in the subdistrict, the Wesley Chapel area is the best location for it. A new hospital in the Wesley Chapel area will enhance access to acute care services for residents of Subdistrict 5-2. Preliminary Agency Action; the SAAR The Agency determined that there is a need for a new hospital in the Wesley Chapel Area when it issued its State Agency Action Report on CONs 9975 and 9977. The Agency also determined that between the two applications, Pasco-Pinellas was superior and should therefore be approved over BayCare's. This determination was founded primarily on Pasco-Pinellas' application being more reasonable in terms of size and impacts on existing providers. The Agency maintained at hearing the position it took in it preliminary action memorialized by the SAAR. Jeffrey Gregg, Chief of AHCA's Bureau of Health Facility Regulation received in this proceeding as an expert in health planning and CON Review explained when called to the stand to testify: The proposal by [Pasco-Pinellas] was on the smaller side and gave us more comfort [than BayCare's] . . . [W]hile we . . . agree with these applicants that there is a hospital in the future of [the Wesley Chapel area], we are more comfortable with the conservative approach, the smaller approach [of Pasco- Pinellas], particularly given that should it be necessary in the future, any hospital can add beds, acute care beds, merely by notifying us. And we were more comfortable that [Pasco-Pinellas'] approach would be able to expand access and improve services for people in this area while at the same time minimally impacting all of the competitors. Tr. 1995. As detailed below, AHCA's determination that the Pasco-Pinellas application is superior to BayCare's is supported by the record even if the basis for the determination made on the state of the record is not quite the same as the basis advanced at hearing by AHCA. Size and Cost Pasco-Pinellas proposed hospital involves about 184,000 square feet of new construction at a cost of approximately $121 million dollars. It is much smaller and less costly than BayCare's proposed hospital of 476,000 square feet of new construction for about $308 million. The Pasco-Pinellas proposal is more reasonably sized to meet the needs of the Wesley Chapel area and, in turn, Subdistrict 5-2. The difference in size and cost of the two proposals, however, is a function of a major difference in approach in the applications. Pasco-Pinellas' proposal is for a typical community hospital that would start out with a bed size within a range that includes 80 beds. BayCare, on the other hand, proposes to serve not only the Wesley Chapel area and Subdistrict 5-2, but also a substantial population of patients to be drawn to the subdistrict particularly from Hillsborough County. Patients migrating to the hospital from outside the subdistrict will for the most part be the product of BayCare's affiliation with USF Health and its service to the USF College of Medicine in its proposal denominated in the application as a "teaching hospital." Need for a New Teaching Hospital "Teaching hospital" is a term defined in the Health Facility and Services Development Act, sections 408.031-408.045, Florida Statutes: "Teaching hospital" means any Florida hospital officially affiliated with an accredited Florida medical school which exhibits activity in the area of graduate medical education as reflected by at least seven different graduate medical education programs accredited by the Accreditation Council for Graduate Medical Education or the Council of Postdoctoral Training of the American Osteopathic Association and the presence of 100 or more full-time equivalent resident physicians. The Director of the Agency for Health Care Administration shall be responsible for determining which hospital meets this definition. § 408.07(45), Fla. Stat. The Agency has not determined that BayCare's proposal meets the statutory definition as directed by the statute for it to qualify as a "teaching hospital." The record indicates that the proposal is not a typical teaching hospital. For example, teaching hospitals in the United States are usually located near indigent populations to achieve the efficiency of training future practitioners with treating people who otherwise could not afford services. BayCare's proposal in a small county with a more affluent population does not serve that purpose. BayCare contends neither that it is a "statutory" teaching hospital nor that it should be determined by the Agency to meet the statutory definition of "teaching hospital." Instead it grounds its case for need in the teaching functions its proposal would fulfill for USF Health and in particular for the GME needs of the students of the USF College of Medicine and the results those teaching functions would produce. Considerable testimony was offered by BayCare at hearing with regard to GME and the needs and aspirations of the USF College of Medicine. The Dean of the College, Stephen K. Klasko, M.D., spiritedly and eloquently related a narrative of need which was supported and amplified by other witnesses including faculty members at the college. There were many elements to the narrative. Highlights include the hybrid nature of the USF College of Medicine, "acting like a research intensive medical school . . . in a community-based body" (tr. 1132)," its on-going successful striving towards becoming an academic center for world class physicians as evidenced by this year's receipt of a research grant from the National Institute for Health, "the largest . . . given to a medical school in the last four or five years," id., and the GME challenges the college faces in the Tampa Bay area such as the recent loss of its anesthesiology residency program. BayCare's opponents point out the many ways in which the proposal is not only not a statutory teaching hospital but does not fit a nationwide model for teaching hospitals. BayCare counters that its model is one of many different models for a teaching facility. Whatever the merits of the various assertions of the parties on the point, USF's need for a teaching facility will be filled at least in part by the BayCare proposal. It is not an exaggeration, moreover, to call USF's need in this regard compelling. USF's institution-specific need, however, does not fall under any of the CON review criteria. See paragraphs 167- 8, below, in the Conclusions of Law. Perhaps not unmindful of the limits of the criteria, BayCare's presented other evidence that flows from the teaching function of the BayCare proposal. Relevant to the general criterion of "need" in subsection (1) of the Statutory CON Review Criteria, the evidence relates to physician shortages. The Physician Shortage There is a shortage of physicians in the district as there is in Pasco County. The problem has statewide dimensions. The state is not doing enough to replace aging doctors in Florida with younger doctors. Nor are aging doctors providing sufficient emergency room call coverage. The physician shortage both in general and in emergency rooms in the state is likely to increase. Residents are more likely to remain and practice in the community in which they train. Residents in the Tampa Bay area, in particular, are more likely to remain in the Tampa Bay area to practice. Even 20 residents per year in training at BayCare's proposed hospital would make a difference in existing physician shortages. Should BayCare's proposed hospital be built and operated as contemplated, the teaching functions that BayCare's application proposes to offer at the hospital would serve as a step, however small, toward meeting Florida's physician shortage as well as the shortage in District V, Pasco County, Subdistrict 5-2 and the Tampa Bay area. Nonetheless, there is a feature of this case that undermines BayCare's claim that the proposal will aid the physician shortage and its denomination in the application of the proposal as a "teaching hospital." The feature is present in the agreement between USF and BayCare (the "BayCare and USF Agreement) to make the BayCare proposed hospital a University Hospital. The BayCare and USF Agreement The BayCare and USF Agreement contains a section devoted to implementation and termination. The following is excerpted from the section's six separately numbered paragraphs: The Parties [the University of South Florida Board of Trustees or USF and BayCare Health System, Inc.] shall negotiate in good faith all other terms and conditions relating to the execution and implementation of this Agreement, including, without limitation, any revisions to the provisions of the Articles of Incorporation and Bylaws of the Hospital Corporation, the terms and conditions of the Health Affiliation Agreement, the design and layout of the University Hospital . . . [etc.] and such other documents and instruments as the Parties may find necessary or desirable to implement the terms of this Agreement. In the event the Parties are unable to agree on all such terms and conditions and all such documents required to implement the terms and provisions of this Agreement despite their good faith efforts to do so, either Party shall have the option after a period of at least twenty four months from the Effective Date or six months after the final approval of the Certificate of Need for the University Hospital is received, whichever is longer, to terminate this Agreement on the terms described in this [s]ection . . . . BayCare 2, Appendix C, BayCare and USF Agreement, Section G, p. 8. (Emphasis supplied.) For USF to terminate, the terms include payment to BayCare of $500,000 and agreement that for five years after termination it will not enter into an affiliation or other agreement with any other provider for the establishment of a university hospital in Pasco County. See id. The ability of USF to terminate the agreement is not "at will." It requires good faith efforts to have been made at implementations that fail to work. Furthermore, termination is not without consequences. But the termination provision in the agreement is consistent with the lack of a condition in BayCare's application that the BayCare proposal be a teaching hospital, "one more detail that made [AHCA officials] scratch our heads about the characterization of this hospital as a teaching hospital." Tr. 2011. It is also consistent with USF's support for "legislation that would be statewide that would allow state medical schools at some point, if they chose to, to make it easier . . . to have a hospital or research hospital on campus . . . [of which] USF would be one . . . " Tr. 1190-91. Adverse Impact Providers Outside the District Evidence was produced at hearing about the adverse impact of approval of either of the two applications on providers outside the district. Objections to the evidence were taken under advisement pending consideration of post-hearing memoranda submitted by the parties. Upon consideration of the memoranda, the objections are sustained. See paragraphs 159-66, below, in the Conclusions of Law. Providers Within the District The Pasco-Pinellas proposal will have minimal impact on Community/Trinity Medical Center. Its impact on other hospitals will be minimal with the exception of its two partner hospitals--UCH and FHZ--and of those two, only FHZ is in the District. There will be no adverse impact on Community as a result of the BayCare proposal. There is little patient flow from eastern Pasco to the western Pasco hospitals. Only about 1% of the patients in eastern Pasco travel west for services at Community, Morton Plant or Bayonet Point. It is reasonable to project that there will be no material change in Community's patient draw as a result of the new Trinity Medical Center. The projections by Community's health care and financial experts of patient days that would be lost and adverse financial impact to Community/Trinity should the BayCare proposal be approved were based on faulty assumptions. The majority of the adverse impact from BayCare's proposal, as in the case of Pasco-Pinellas' proposal, will be on UCH and FHZ. Availability of Resources Nursing and Non-Nursing Staff Pasco-Pinellas should be able to recruit and retain nursing and other staff for its hospital based on the Adventist experience at FHZ. The nursing vacancy at FHZ is 1% lower than the vacancy rate reported by the Florida Hospital Association (7.5% and 8.5%, respectively.) The turn-over rate for nurses at FHZ is 12%, significantly lower than the national rate in the 18-19% range. Recruitment of nurses has been successful at FHZ particularly in the last few years. In 2007, FHZ hired 100 nurses and reduced its use of agency nursing staff by roughly 75%. Among its different recruitment tactics have been a foreign nursing program, education and training incentives, scholarships at local colleges and specialty pay programs. Pasco-Pinellas will use many of the same recruiting techniques that have been successful at FHZ. It is reasonably anticipated that the same recruitment practices employed by FHZ will work for Pasco-Pinellas. Many members of the current nursing staff at FHZ, moreover, live in the Wesley Chapel area and have expressed an interest in working at Pasco-Pinellas. Retention programs at FHZ have been aimed at retaining better nurses. These include the magnet concept and a self- governance program with "a unit based council and nursing council so nurses . . . practicing . . . at the bedside have the opportunity to help govern the practice of nursing." Tr. 225-6. Retention programs similar to those used at FHZ will be implemented at Pasco-Pinellas. Schedule 6 in Pasco-Pinellas application reflects anticipated staffing for its new hospital. The staffing model is consistent with staffing at other Adventist facilities, specifically FHZ. The average salaries and wages are based on actual salaries inflated forward to the projected date of opening. The FTEs per adjusted occupied bed are adequate and consistent with the staffing patterns at FHZ. All necessary staffing positions are accounted for and the number of FTEs and salaries are sufficient for the hospital to operate and provide high quality of care. The registered nurse FTEs, as opposed to LPNs and lower-level nursing care, in Schedule 6 offer optimal staffing to provide high quality care and positive patient safety. The nursing salaries are adequate for the time frame in which Pasco-Pinellas will open with a one-time 5% increase and a 4% increase per year from present until opening. Schedule 6 supports the reasonable expectation that Pasco-Pinellas will be able to recruit and hire nursing staff and retain an adequate staff. The proposed staffing pattern in Schedule 6 of the Pasco-Pinellas application, which includes nursing staff, moreover, is reasonable. BayCare has a comprehensive recruitment program for recruiting and retaining nursing personnel as well. The strategies include a partnership with the nursing programs at USF and St. Petersburg College. BayCare System provides additional training to its nurses and with regard to salaries has committed to remaining competitive in the market. BayCare's recruitment and retention initiatives have been successful. In the 2008 year to date at the time of hearing, BayCare System had been able to hire more experienced nurses that it did in 2007 for the same time period. Overall, the BayCare System has a turnover rate of about 15%. The RN vacancy is 10% with a 13% turnover rate. These figures are comparable to state and national figures; in some cases they are lower. With regard to non-nursing employees or team members, BayCare System also had developed recruitment initiatives that are targeted toward those individuals. BayCare System has a positive reputation in the community as a good place to work. As an example, the three St. Joseph's hospitals (St. Joseph', Women's and Children's) and South Florida Baptist received recognition among the "Best Work Places in Health Care" for the years 2005 and 2006. The award recognizes outstanding practices related to employees. BayCare has the ability to recruit and retain the staff necessary to staff the proposed BayCare SE Pasco hospital. The staffing projections in Schedule 6 of BayCare's application, which includes nursing staff, are reasonable. Physician Support Despite the physician shortage, both applicants should be able to adequately staff their hospitals with physicians as shown by the evidence with regard to physician support for the hospitals. Florida Medical Clinic (FMC), a multi-specialty physician group practice with 85 physicians, is the primary physician group that serves the Wesley Chapel area. Thirty percent of its members are family practitioners or specialists in internal medicine. The remainder of the members cover 20 or so specialties that include both secondary and tertiary specialties. FMC has determined that it will support the Pasco- Pinellas proposal through its physicians, admissions and outpatients activity. Ninety percent or more of the clinic's patients use the UCH and FHZ facilities. FMC has a long- standing relationship with the administrators, personnel, and strategic issues of FHZ and UCH and is comfortable developing future plans for a hospital facility in Wesley Chapel with the two organizations FMC is able to meet the needs of the Wesley Chapel community both today and in the future. In addition, there are numerous other individual physicians who practice in the Wesley Chapel area who "predominantly support University Community Medical Center and Florida Hospital in Zephyrhills." Tr. 63. Having relationships with physicians already in a market when a hospital is being developed is advantageous to the new hospital. Among other advantages, it minimizes resources used to recruit and move new physicians into the area. In contrast to support for the Pasco-Pinellas proposal, FMC has not made a commitment to BayCare as to its proposal because of lack of knowledge about the structure of the facility, its strategic plans and whether or not FMC's interests align with the BayCare proposal but it has not foreclosed such a commitment. The USF physicians group will be a source of many of the physicians who will staff the BayCare proposed hospital, a likely reason for FMC's lukewarm to non-existing support for BayCare's proposal. USF emergency physicians will staff the Emergency Department. The BayCare System has approximately 28 physicians with privileges at BayCare System facilities with offices in the Wesley Chapel area. The proposed BayCare hospital will be staffed by recruited physicians and USF faculty physicians. Other physicians from the Wesley Chapel area provided testimony of their support for the BayCare proposal. It is reasonable to anticipate that some local Wesley Chapel area physicians will join the medical staff of the proposed BayCare hospital. Despite the physician shortages in the subdistrict, District V and the Tampa Bay area, both Pasco-Pinellas and BayCare will be able to staff their hospitals adequately with physicians. Charity and Medicaid; Conditions Pasco-Pinellas committed to a number of conditions of its applications. These include a 12.6% commitment to charity and Medicaid; the establishment of funding for a clinic for the underserved, provision of educational programs for the community, and two neonatal transports and funding for local fire and rescue services. BayCare projects a 6.1% level of charity care, 2.4% higher than Pasco-Pinellas' charity care commitment. It projects 10.3% of its Medicaid and Medicaid HMO patients will be attributable to Medicaid and Medicaid HMO patients versus 8.9% at Pasco-Pinellas. BayCare System has a history of providing services to Medicaid and Charity Patients. In 2006, for example, as not- for-profit entities, BayCare System facilities and related entities provided a total community benefit of $135 million in uncompensated care. Approximately 50% was pure charity care. BayCare System facilities currently serve patients from the Wesley Chapel area, including, of course, Medicaid and charity patients. BayCare System facilities provide 57% of the charity care and 31% of the Medicaid in the market. St. Joseph's Children's Hospital and St. Joseph's Women's Hospital operate at approximately 50-to-60% Medicaid and un-reimbursed care. St. Joseph's Hospital currently serves approximately 20% of the patients from the Wesley Chapel area. St. Joseph's, however, provides 36% of the total charity, Medicaid, and Medicaid HMO care rendered to patients who reside in the Wesley Chapel area. Thus, the facilities within the BayCare System have a demonstrated track record of providing care without regard to a patient's resources. In light of the record, it is reasonable to expect BayCare to carry on in the same vein under the BayCare proposal. Utilization Schedule 5 relates to projected utilization after project completion. The projections in the schedule in Pasco- Pinellas' application were developed by looking at service area population, applying a use rate growth and taking a market share by individual zip code. They are based on the expectation that the hospital would be operating at approximately 70% occupancy in its third year of operation, which equates to an average census of approximately 56 patients. The assumptions contained in the schedule are reasonable. The utilization projections in Schedule 5 in Pasco- Pinellas' application are reasonable; they indicate that an 80- bed hospital is appropriate to meet the need for a new hospital in the Wesley Chapel area of the subdistrict. BayCare will able to achieve its projected utilization from its primary service area and from the 40% of its patients it expects to receive by way of in-migration. The population forecast and market share forecast for the primary service area are reasonable. While the support among local physicians is much stronger for the Pasco-Pinellas proposal, it is likely that they will admit patients to the BayCare proposed hospital since it will be in the Wesley Chapel area, the area of the subdistrict that is most suitable for a new hospital. The 40% projected in-migration from outside of the seven mile service area is a reasonable projection. It is reasonable to expect that the bulk of these admissions will come from USF physicians located at the USF north Hillsborough campus. Projected Revenues Schedule 7A governs projected revenues. The payor mix in Schedule 7A of Pasco-Pinellas' application is based on historic admission and patient days by payor class occurring in the proposed Pasco-Pinellas service area based on the most recent available AHCA data. Gross charges and net revenues were developed based on historical data from FHZ as reported to AHCA. These figures were inflated forward using a net increase over all in revenue payments of approximately 3%. The projected revenues including net revenues in Schedule 7A of Pasco- Pinellas' application are reasonable and consistent with the marketplace. The payor mix in BayCare's Schedule 7A was based on an analysis of patient discharge data from the proposed primary service area plus an analysis of the experience of other BayCare System facilities in the same market. It is a reasonable payor mix. It allows for consideration of the experience of BayCare System, including the high level of charity care and Medicaid and Medicaid HMO services and at the same time reflects that the Wesley Chapel area is more affluent and younger than other areas of Pasco and Hillsborough Counties. BayCare's revenue assumptions were based on an analysis of gross and net revenue per patient day from another BayCare System facility, South Florida Baptist. Financial class specific projected patient days were applied to derive a gross and net revenue number for each of the three pro forma years for the proposed project denominated by Schedule 7A as "Projected Operating Year 1, 2 and 3" and ending "12/31/11, 12/31/12 and 12/31/13" respectively as indicated by BayCare in the application. See BayCare 2, pp. 133-135. The 2006 South Florida Baptist gross and net revenue per patient day were trended forward for each of the three projected operating years to reach the projected revenue figures in Schedule 7A. The projected revenues in Schedule 7A of the BayCare application are reasonable. Projected Income and Expenses Schedule 8A in a CON application contains projected income and expenses for the proposal. Pasco-Pinellas' application used a methodology in Schedule 8 that its expert had used in other CON cases. The methodology is consistent with methodologies of other health care experts and has been accepted in recommended and final orders in CON cases. The projections in Schedule 8 of Pasco-Pinellas' application are appropriate and reasonable. BayCare's methodology used to project income and expenses in Schedule 8A is also appropriate and reasonable. BayCare's healthcare finance expert asked BayCare financial analysts to look at his initial projections. They recommended that expenses be increased in physical therapy, radiology lab and pharmacy and that expense be reduced in plant operations. The recommendations were accepted; the projections were adjusted. Medicare GME reimbursement in year 3 of operations was assumed to be $1.7 million. If no addition Medicare GME reimbursement were received, BayCare's proposal would still show a profit of $2.8 million by year 3. It is virtually certain, moreover, that some portion of the $1.7 million included in calculation of BayCare's income projections will be realized. However valid criticism of the inclusion of the $1.7 million, BayCare's proposal remains financially feasible in the long- term. Financial Feasibility Pasco-Pinellas proved the immediate and long-term financial feasibility of its proposal. The schedules in its application related to financial feasibility used reasonable methodologies that yielded reasonable projections. Analysis of capital costs and funding is contained in Schedules 1 through 3. Schedule 1 presents an accurate summation of total project cost. That figure, $121 million, is a reasonable and typical cost for a new 80-bed community hospital. The $149 million on Schedule 2 reflects an accurate summation of anticipated capital costs, including the hospital project and necessary capital expenditures for the first tow or three years of operation. Schedule 3 set forth the sources of funding, a combination of equity and debt financing, discussed below. Both UCH and Adventist are financially successful systems. They will have not difficulty funding the Pasco- Pinellas proposal. As of December 31, 2007, Adventist's net revenue was approximately $368 million. About $100 million in funds were available to UCH at the time of hearing to contribute to development of the project. Due to the financial strength of its members, Pasco- Pinellas will easily be able to fund the project through a combination of equity and debt. The equity, $45 million, will be provided equally by Adventist and UCH, $22.5 million each. The remaining $76 million will be financed through tax-free bonds issued by Ziegler Securities. The project is immediately financially feasible. The Pasco-Pinellas project is also financially feasible in the long-term. Schedule 8 in the application, year 3, shows the project will generate a return of approximately $5.3 million in revenue over expenses, an amount that "more than meet[s] the test for financial feasibility in the long-term." Id. Based on the sources of BayCare System, BayCare has access to the financial resources to implement its proposed hospital. Funding for the hospital will come from BayCare System on the basis of 50% debt and 50% equity investment. As of early 2008, BayCare System had approximately $1.2 billion in unrestricted cash on hand. BayCare System's financial strength will allow BayCare to obtain the financing it needs for the project. Schedule 3 of the BayCare application sets forth an accurate and reasonable statement of the sources of funds necessary to develop the project. The immediate financial feasibility of BayCare's proposal is demonstrated by the evidence presented by BayCare. By year three of the pro forma, the BayCare proposal is reasonably projected to generate a net income over expenses in the amount of $4,498,637. BayCare demonstrated that the proposal's long-term financial feasibility. Costs and Construction Methods The costs and methods of the proposed construction of the Pasco-Pinellas project are reasonable. The facility is adequately sized and programmed for the services included in the Pasco-Pinellas application. All of the departments, including central storage, fall within an appropriate benchmark range for community hospitals. The 2,300 square feet per bed is reasonable as are the construction costs when compared to similar community hospitals. The proposed Pasco-Pinellas facility meets the codes for all of the services included in the application. The design of the Pasco-Pinellas facility enable expansion. The designed expansion capabilities are reasonable, logical and appropriate to meet the needs of the Wesley Chapel community. The drawings contained in the CON application show an efficient community hospital. The departments allow for efficient intra-department circulation and department-to- department circulation. There are adequate separation of public and staff flow corridors. All of the areas and departments as shown in the Pasco-Pinellas plans are code compliant. The layout of the patient rooms is consistent with industry standards for the design of single patient rooms. The number and size of the operating rooms are adequate and appropriate for an 80-bed community hospital not offering tertiary services. The emergency department, including the trauma room, complies with code and its layout is adequate and appropriate for an 80-bed hospital. The ambulance entrance in relation to the trauma bay allows for efficient location of patients based on acuity level. The number of treatment beds, treatment bays, including observation areas, provide adequate emergency department capacity. The Schedule 1 costs set forth in the BayCare application are reasonable. These costs include projected costs associated with necessary medical equipment. The medical equipment costs set forth in Schedule 1 are reasonable and BayCare has properly accounted for the items and costs of equipment necessary to operate the hospital. The Schedule 9 construction costs of approximately $180 million are reasonable as are the construction costs per square foot ($347 versus $325 for Pasco-Pinellas). Contingencies and escalation factors have been built into the projected costs. Facilities, Sites, Related Costs At the time the UCH and Adventist joint venture was formed, UCH had a parcel of land under contract located on State Road 54 across from the Saddlebrook Resort (the "UCH Parcel"). When it filed its application, Pasco-Pinellas hoped the UCH Parcel would serve as the site of its hospital. In fact, Pasco- Pinellas touted the location of the parcel for meeting the need of the growing population in Pasco County when it represented in the application that the UCH Parcel is the center point of the Wesley Chapel area. Close to Interstate 75, the UCH Parcel is a good location for a hospital. Pasco-Pinellas' aspiration for the use of the parcel was defeated, however, when the Pasco County denied a request to re-zone the UCH Parcel for use as a hospital. After the inability to have the UCH Parcel re-zoned, Pasco-Pinellas changed the site for the hospital to a parcel owned by FHZ (the "Pasco-Pinellas Site"). Located on Bruce B. Downs Boulevard, a major north-south corridor in the Wesley Chapel area, the site is 51.5 acres. The Pasco-Pinellas Site had been purchased by FHZ in 2001 with the intention of using it for a hospital. Subject to a height variance to allow a seven-story building, the site is zoned for special use as a hospital and related medical uses. The site has good visibility and access from Bruce B. Downs Boulevard as evidenced by its compliance with the State Road 581 (Bruce B. Downs Boulevard) access management plan. It meets other regulatory requirements such as the minimum spacing criteria for Pasco County. The Pasco-Pinellas Site is governed by a development order associated with the Wiregrass Ranch Development of Regional Impact (the "Wiregrass DRI DO"). The Wiregrass DRI DO "indicates that the phasing schedule assumed 100 hospital beds would be developed within the building phase." Tr. 597. As explained at hearing by Lara Daly, Pasco-Pinellas' expert in civil engineering and property site development, there are other aspects of the Wiregrass DRI DO, "like trade-off matrices" and "entitlement advancements" that indicate "entitlements are not limited on a parcel-by-parcel basis." Tr. 598. The assumption, therefore, does not necessarily restrict the number of hospital beds on the Pasco-Pinellas Site; rather it allows impacts associated with 100 hospital beds. The number of allowable beds may be increased following action taken under other provisions of the Wiregrass DRI DO. A significant portion of the Pasco-Pinellas Site is wetlands: some of low quality, some of high quality. The higher quality wetlands, referred to in the record as "a high quality category 1 wetland as defined by Pasco County," tr. 552, (the "Category 1 Wetland") are on the north and east perimeter of the site. The project is designed so as to have no impacts on the Category 1 Wetland. The only potential impact to these high quality wetlands is if there were a county-mandated road to be built in their vicinity. The lesser quality wetlands located in the interior of the site are herbaceous in nature or an open water feature that is "an older borrow pit that naturalized over time." Tr. 552-53. These lower quality wetlands constitute roughly 11.5 acres of the site. They will be impacted by the project but it is reasonable to expect that the impacts will be permitted. As Ms. Daly put it at hearing, "[a]fter reviewing, running stormwater models, looking at the proposed wetland impacts, coming up with appropriate mitigation ratios based on our experience elsewhere on the Wiregrass site, the site will accommodate all the necessary wetland and floodplain historic basin compensation . . . ." Tr. 550. The costs contained in Schedule 1 of the application were arrived assuming the use of the UCH Parcel as the site for the Pasco-Pinellas project. The Pasco-Pinellas Site requires expenditures for site preparation and other expenditures, such as wetland mitigation, related to the site that were not required had the UCH Parcel been used. For example, three potential foundation systems have been suggested for the hospital because of the wetland and subsurface conditions on the Pasco-Pinellas Site had the UCH Parcel been the site. Using the most expensive of the three, however, would not cause Pasco- Pinellas to exceed the construction costs contained in Schedule 1 of the CON Application. The land acquisition costs were reasonably projected to be less for the Pinellas-Pasco Site than for the UCH Parcel as reflected in the application. All told, the estimated project cost using the Pasco-Pinellas site was not materially different from the cost projected in the application and presented the possibility of being less than the $121 million reflected in the application. Likewise, the equipment cost figure shown in Schedule 1 of the Pasco-Pinellas application is reasonable and achievable. The total of the costs for the project sited at the Pasco-Pinellas Site, despite the change of site that occurred after the filing of the application, should not exceed the total of the costs listed in the Pasco-Pinellas application. The preponderance of the evidence is that the Pasco- Pinellas Site should ultimately qualify as an appropriate, developable site for the Pasco-Pinellas project. The BayCare site, north of Highway 56 and bordering I-75, (the "BayCare Site") includes two parcels of 54 and 17 acres. The 54 contiguous acres will be used for the hospital, outpatient services, and a planned medical office building. The 17 acres will be used for research space, physician office space, and academic training space necessary for the research and education function at the project. BayCare has the appropriate zoning and approvals necessary to develop the hospital. The hospital will have all private beds. It will be fully digital and will rely on electronic medical records. The BayCare Site is well suited for construction of the hospital and related buildings. The available footprint and design of the hospital, which includes shelled-in space, will readily allow for future expansion of the hospital up to 300 beds. Design of the BayCare facility is based on principles of family-centered care, flexibility to allow for change and future growth, efficiency, a quality of environment for teaching, a sustainable, green building, and patient safety. A "health building" with improved environmental quality and energy efficiency, the facility will seek LEED certification given to facilities constructed to have minimal adverse environmental impact. In keeping with the teaching function intended by the application, the facility's design includes additional work space, reading areas, sleep areas and conference rooms to facilitate teaching. Overall, the BayCare facility is twice as large as the Pasco-Pinellas facility. Size has its advantages. For example, it allows for larger treatment patient areas. But the facility is much more expensive to build. It is reasonably projected to cost more than $180 million above the costs associated with the Pasco-Pinellas facility which is more than twice as much. The high expense associated with the BayCare facility is shown by its cost per bed: in excess of $2 million-- much more than the cost per bed of the Pasco-Pinellas facility.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Agency for Health Care Administration approve CON 9975, Pasco-Pinellas' application for a new hospital in AHCA Subdistrict 5-2, and deny CON 9977, BayCare's application for a new hospital in the same subdistrict. DONE AND ENTERED this 28th day of October, 2008, in Tallahassee, Leon County, Florida. S DAVID M. MALONEY Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 28th day of October, 2008. COPIES FURNISHED: Richard J. Shoop, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Building 3 Mail Station 3 Tallahassee, Florida 32308 Craig H. Smith, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Building 3 Mail Station 3 Tallahassee, Florida 32308 Karin M. Byrne, Esquire Agency for Health Care Administration 2727 Mahan Drive, Building 3 Mail Station 3 Tallahassee, Florida 32308 Stephen K. Boone, Esquire Boone, Boone, Boone, Koda & Frook, P.A. 1001 Avenida Del Circo Post Office Box 1596 Venice, Florida 34284 Jonathan L. Rue, Esquire Parker, Hudson, Rainer & Dobbs, LLP 1500 Marquis Two Tower 285 Peachtree Center Avenue Northeast Atlanta, Georgia 30303 Robert A. Weiss, Esquire Parker, Hudson, Rainer & Dobbs, LLP The Perkins House, Suite 200 118 North Gadsden Street Tallahassee, Florida 32301 R. David Prescott, Esquire Rutledge, Ecenia, Purnell & Hoffman, P.A. 215 South Monroe Street, Suite 420 Post Office Box 551 Tallahassee, Florida 32302-0551
The Issue Whether Certificate of Need (CON) Application 10457 filed by Sarasota County Public Hospital District (SCPHD), d/b/a Sarasota Memorial Hospital (SMH), seeking approval for a new 90-bed acute care hospital to be located in Venice, Florida, zip code 34275, acute care service district 8, Subdistrict 8-6, on balance, satisfies the applicable statutory and rule review criteria. Whether CON Application 10458 filed by Venice HMA Hospital, LLC, d/b/a Venice Regional Bayfront Health, a/k/a Venice Regional Medical Center (VRMC), seeking approval to replace its existing 312-bed general acute care hospital with a 210-bed hospital to be located near Venice, Florida, in zip code 34292, acute care service district 8, Subdistrict 8-6, on balance, satisfies the applicable statutory and rule review criteria. Whether Agency for Health Care Administration (AHCA) rule 59C-1.008(4) (Rule) requires a CON application for a general hospital to contain an audited financial statement and, if so, whether the Rule is an invalid exercise of delegated legislative authority upon which the substantial interests of a party have been determined, in violation of section 120.57(1)(e), Florida Statutes.1/
Findings Of Fact The Parties Agency for Health Care Administration (AHCA) AHCA is designated as the single state agency responsible for administering the CON program under the Health Facility and Services Development Act, sections 408.031-408.045, Florida Statutes. AHCA conducts its health planning and CON review based on “health planning service district[s]” defined by statute. § 408.032(5), Fla. Stat. The service district relevant to this case is district 8, consisting of: Subdistrict 8-1, Charlotte County; Subdistrict 8-2, Collier County; Subdistrict 8-3, DeSoto County; Subdistrict 8-4, Glades and Hendry Counties; Subdistrict 8-5, Lee County; and Subdistrict 8-6, Sarasota County. Fla. Admin. Code R. 59C-2.100(3)(h). Sarasota Memorial Hospital (SMH) SMH opened in 1925 as a 32-bed community hospital. It is owned and operated by SCPHD, a special taxing district created by the Legislature in 1949. SCPHD is governed by an elected board of unpaid Sarasota County (County) citizens distributed throughout the County. Through good stewardship and capable management, SMH has grown into an 829-bed public hospital and regional medical center with 5,000 staff, 900 physicians, and 650 volunteers. SMH offers a full array of health care services including specialty heart, vascular, cancer, orthopedic, child and adult psychiatric, and neuroscience programs, as well as a network of outpatient centers, urgent care centers, long-term care, and a new, dedicated rehabilitation pavilion. SMH is a comprehensive stroke center and is home to the County’s only Level II trauma center and neonatal intensive care unit (NICU). In addition, SMH offers the only behavioral health program and is the only obstetrical (OB) provider in Sarasota County. SMH is consistently recognized for excellent patient care. It is the only Florida hospital to earn a CMS (Centers for Medicare and Medicaid Services) 5-Star quality rating. It has maintained Magnet designation, the highest standard of nursing care, since 2004. SMH is a regional tertiary and quaternary safety net provider with a mandate to provide health care to Sarasota County residents regardless of ability to pay. As a result of substantial growth in its patient population; substantial market share in southern Sarasota County; the size, complexity, and congestion of the main campus; and changing standards since SMH’s patient towers were constructed, SMH is at capacity and must expand southward to continue to care for patients at its main campus, and to meet its mission of providing care to all Sarasota County residents, regardless of ability to pay or proximity to the northerly main campus. Venice Regional Medical Center (VRMC) VRMC is a 312-bed acute care and tertiary hospital located in Venice, southern Sarasota County. VRMC sees 32,000 emergency department (ED) visits annually; admits 9,000 patients a year; and has 200 open-heart surgeries a year. VRMC has received numerous awards, including several awards for its stroke and heart programs. VRMC’s current occupancy rate is about 40 percent. VRMC has an employed multispecialty physician group, Gulf Coast Medical Group, consisting of 31 primary care physicians and 41 specialists, including physicians specializing in interventional cardiology, rheumatology, pulmonology, neurology, plastics, gynecology (GYN), podiatry, and computed tomography (CT) surgery. Gulf Coast Medical Group has 25 locations in Sarasota County, with offices in North Port and near SMH’s proposed location on Laurel Road. Gulf Coast Medical Group sees over 200,000 patients a year and is responsible for about 60 percent of the patients admitted to VRMC. VRMC has experienced growth through a “hodge-podge” of renovation and expansion projects occurring between 1951 and 1985, without any master plan. For years, the capital needs of the hospital were funded through community fundraising and donated labor. In 1951, VRMC opened with 14 beds in an old boarding house. In 1957, the community raised $376,000 to add a 30-bed wing, a laboratory, a radiology unit, and surgical areas. In 1965, the community again raised a total of $700,000 to build a 33-bed addition. Over the next two decades, the growth at VRMC was funded through fundraising efforts, where the hospital only added the space it could afford based upon donations received. There were seven major additions to VRMC between 1968 and 1985, all funded and built in this piecemeal fashion. The result is a facility that lacks a coordinated, integrated plan or design. Bayfront Health Port Charlotte (BHPC) BHPC is a 254-bed acute care and tertiary hospital located in district 8, Subdistrict 8-1, near the Charlotte/Sarasota county line. In addition to the full range of acute care services, BHPC offers open-heart surgery, interventional catheterization, pediatrics, OB services, and NICU services. BHPC handles 31,000 ED visits annually, performs 8,200 surgeries a year, and has 11,000 admissions per year. BHPC’s occupancy rate is around 54 percent. Fawcett Memorial Hospital (Fawcett) Fawcett is an HCA-affiliated hospital located in Port Charlotte, Charlotte County, Florida, close to the Sarasota County border. Fawcett serves the Charlotte County communities of Port Charlotte, Punta Gorda, and South Punta Gorda; the Sarasota County of North Port; and all of DeSoto County. Fawcett provides care to all patients without regard for their ability to pay for services, and provided $5.2 million in uncompensated charity care in 2016. It received no compensation from any sources for the provision of care to indigent or under- insured patients. Fawcett has 237 beds, including 20 comprehensive medical rehabilitation beds. Fawcett provides almost all subspecialty services including cardiac surgery services, percutaneous coronary intervention (PCI), oncology, vascular surgery, general surgery, orthopedic surgery, neurosurgery, comprehensive medical rehabilitation, general medicine, interventional radiology, and compatibility-area surgery, among other services. The only services not provided at Fawcett are OB, pediatric, and transplant services. Fawcett is a high-quality provider and enjoys an outstanding reputation in the communities it serves. Fawcett is one of two hospitals in the entire state of Florida that has been recognized as a Top 100 Hospital by Healthgrades, has been named the hospital of choice and the emergency room of choice by the local newspaper for 12 consecutive years, and has garnered numerous other quality designations and certifications. The communities served by Fawcett currently enjoy broad access to hospital services due to the fact that BHPC is located directly across the street from Fawcett; Punta Gorda Hospital is four miles from Fawcett; and the SMH freestanding ED is seven miles from Fawcett. All but 10 of Fawcett’s acute care beds are semiprivate. Fawcett has two meetings per day to ensure their semiprivate beds are appropriately staffed and patients are appropriately assigned to beds. Fawcett’s 12 observation beds are housed in a dedicated observation unit that is contiguous with the ED. Fawcett’s annual in-patient occupancy is approximately 75 percent, and it experiences approximately 32,000 ED visits per year. Englewood Community Hospital (Englewood) Englewood, which has served its community for over 32 years, is an existing licensed 100-bed hospital that currently operates in AHCA Service district 8, Subdistrict 8-6, Englewood, Sarasota County. All of Englewood’s beds are semiprivate. It does not operate a separate observation unit, utilizing its licensed acute care beds for patients in observation status. As a small community hospital, Englewood offers 24/7 emergency services, robotic surgery, nephrology, PCI services, gastroenterology, pulmonology, geriatric care, urology, orthopedic surgery, and a stroke program, among other services. Englewood also offers a robust, high-quality cardiology program, complete with general cardiology services, cardioversions, transesophageal echoes, stress testing, nuclear stress testing, cardiac catheterization, angioplasty, interventional cardiology with stents, implanting of pacemakers, and more. Englewood’s cardiology program is modeled after cardiology programs at Harvard and Emory medical schools. Englewood serves approximately 21,000 patients annually, primarily the elderly, through its ED. Admissions to the hospital have remained relatively flat. Englewood serves the Englewood, Venice, and North Port areas in Charlotte and Sarasota Counties, and its administration is very active in the community. Englewood provides care to all patients without regard to their ability to pay, and provided $2.7 million in charity care in 2016. Englewood is a high-quality provider, with excellent medical and nursing staffs. It was ranked first among HCA- affiliated hospitals for quality. Englewood has been a Leapfrog A-Rated hospital for nine consecutive years and is a CMS 4-Star facility. Englewood was named by Modern Healthcare as one of the top 100 places to work, and has garnered several other quality indicators and awards. Notwithstanding Englewood’s quality and awards, it has struggled financially, experiencing a reduction in admissions and operating at an approximate annual occupancy of only 35 percent. In 2015, Englewood lost $200,000. It does not fully staff its 100 beds due to its low census, and even with a low census it has a shortage of nurses and must rely on “travelers.” The Proposals The SMH Proposal: “SMH Laurel Road” To enhance access to south Sarasota County residents, including SMH’s existing south county patients, and address its capacity constraints, SMH proposes a new 90-bed hospital (80 adult medical/surgical and 10 obstetric beds) on a 65-acre parcel that SCPHD owns at the southwest corner of Laurel Road and Interstate 75 in the southern part of Sarasota County. The project is conditioned on SMH delicensing 90 beds from its main campus, which it will remove from semiprivate rooms, converting those to single-occupancy, increasing functional capacity, and mitigating burdens presented by semiprivate rooms. The primary service area (PSA) for SMH Laurel Road includes the following North Port, Nokomis, and Venice zip codes: 34287, 34293, 34275, 34286, 34285, 34292, and 34288. The secondary service area (SSA) for SMH Laurel Road includes the remaining North Port zip codes of 34291 and 34289 in addition to Osprey and Englewood zip codes 34223, 34229, and 34224. SMH Laurel Road will focus on adult (ages 15 and older), non-specialty, non-tertiary services and will include 10 integrated labor, delivery, recovery, and postpartum (LDRP) obstetrics beds. SMH will continue to offer tertiary services at the main campus in order to provide Sarasota County residents access to those needed services. SMH also will remain the only pediatrics, NICU, trauma, and psychiatric provider in Sarasota County, and the region’s only state-certified Comprehensive Stroke Center. To address a critical gap in services in the region, a new, comprehensive oncology center is in the planning for the SMH main campus and will consume the remaining footprint of the campus that is suitable for acute patient care space. SMH Laurel Road will serve as an enabling project for these needed services and allow patients to continue accessing tertiary and specialty services at the main campus as opposed to sacrificing that space to provide lower acuity care to south- county residents forced to travel north. The majority of SMH Laurel Road service area patients currently accessing SMH’s main campus, based on 2015 market shares and discharges, are projected to shift to the new hospital. This anticipated shift is supported by existing and historical market data and trends concerning patient choice for SMH. Thus, approval of a local SMH facility, expressly conditioned on providing “needed medical care to all patients in need, regardless of ability to pay,” and providing a higher percentage of Medicaid, non-pay, self-pay, and charity care than is now being provided by south Sarasota County providers, will significantly reduce financial access barriers in the proposed service area. The Venice Regional Proposal VRMC is seeking to build a 210-bed replacement hospital four and a half miles from its current location, offering the same services currently offered at its existing facility. VRMC’s original construction began 66 years ago, and was not done in a coherent, cohesive manner. Due to its age and piecemeal construction, the facility has significant problems, such as: VRMC is undersized and has small, semiprivate rooms, inadequate and non-ADA compliant bathrooms, and significant adjacency problems; The building’s mechanical, plumbing, and electrical infrastructure are failing; The building is under negative pressure causing its cast-iron piping system to deteriorate and causing mold problems; and VRMC’s IT infrastructure is inadequate to meet current standards of care. VRMC’s facility problems are so numerous and significant that the experts who reviewed the facility all came to the same conclusion: the hospital is at the end of its useful life, and replacing it is the only sensible option. There was no contrary evidence offered to refute this conclusion. In fact, multiple witnesses called by the other parties conceded VRMC should be replaced. Statutory Review Criteria Need for the Proposed Projects: § 408.035(1)(a), Fla. Stat.; Fla. Admin. Code R. 59C-1.008(2)(e) SMH Laurel Road Capacity Constraints at SMH Main Campus SMH has an available 6213/ licensed, acute care beds; 49 adult psychiatric and 37 child psychiatric beds; 44 comprehensive medical rehabilitation beds; and 33 Level II and III NICU beds. The majority of SMH’s licensed medical/surgical beds are in four patient towers: Northwest, Waldemere, East, and Courtyard. Northwest Tower is the oldest acute care patient space at SMH at over 50 years old. The third and fourth floors have 53 licensed beds, and 40 are semiprivate. Semiprivate rooms in Northwest Tower are 11 feet, seven inches wide. The typical hospital bed is eight feet long. Placing two of these beds in a room makes it difficult for patients to navigate, especially when attempting to access the restroom. Semiprivate rooms in Northwest typically have a toilet and a sink in the common part of the room, but no shower. Bathrooms are not Americans with Disabilities (ADA) compliant. SMH nursing personnel witnessed a patient bathing in a sink in the middle of a Northwest semiprivate room while a roommate’s spouse refused to give him privacy. Another patient used a portable commode in the doorway of his room because his roommate, who had a gastrointestinal bleed, was using the toilet and the portable commode did not fit into the room. Northwest Tower acute care patient areas have one shower per floor, which is in the hallway. Small private rooms in Northwest Tower make mobility difficult: they are essentially full once the patient bed, trashcan, chair, and small table are added, and they must also accommodate large, modern equipment and larger patients. Hallways are crowded and difficult to navigate, portable work stations and equipment are frequently in hallways due to a lack of storage, showers are used as pantry space, and the nurses’ stations are inadequate for modern nurse-to-patient ratios. Today’s patients are sicker and require more nursing staff and ancillary help than the spaces were designed to accommodate, which adds to overall congestion. The design and space constraints within Northwest Tower pose significant ergonomic challenges for staff working in the units as a result of the routine shuffling of equipment, crowding, and maneuvering to access patient headwalls. Nursing staff is embarrassed to place patients in these subpar spaces compared to patients’ expectations of SMH as a CMS 5-Star hospital. The conditions in Northwest Tower impact and challenge staff ability to provide quality patient care. East Tower is the next oldest acute patient care space, built in 1972. The fifth through eighth floors have 180 licensed beds, 121 of which are semiprivate. The ninth and tenth floors previously housed rehabilitation patients. Those units were moved to a new rehabilitation pavilion, giving SMH the rare opportunity to renovate the vacant floors to add 52 private rooms. East Tower private rooms are so narrow that beds are positioned parallel to the headwall to allow footwall clearance. This makes it difficult for staff to care for a patient who codes (experiences a life-threatening emergent condition), needs a bath, or requires fresh bed linens. Architect Charles Michelson described the configuration as “not an acceptable standard of practice of medicine” because, at any time, providers require access to both sides of a patient. At least one cardiac unit cannot be used to full capacity because the nurses’ station is too small to accommodate the required cardiac monitors. Semiprivate rooms in East Tower are so small that chairs do not fit in the room when both beds are occupied, and the rooms do not have showers. Storage is so limited that equipment is stored in hallways and in the only shower available to patients in semiprivate rooms. The nursing station is too small to accommodate the required personnel, so nurses are forced to stand and complete their patient charting on rolling laptops. The cramped spaces in East Tower present safety concerns, and disruptions for staff and patients who must be moved in order to allow other patients to come and go, as well as navigate cords and objects placed along the footwall such as commodes, chairs, and trashcans. Waldemere Tower was built in 1985 and houses the majority of SMH’s medical patients in 188 beds on floors five through 10. It has many of the same deficiencies as Northwest and East Towers, including an abundance of small, semiprivate rooms with all of the previously described attendant problems, including narrow rooms. In one photo received in evidence, a weight dangles from the foot of the hall-side bed. The weight is attached to a pin through the bottom of a patient’s fractured leg to separate the patient’s muscles and tendons before surgery. In this semiprivate room, lab personnel, nurses with workstations, physicians, visitors, other patients, and possibly a stretcher, all must travel past that weight without bumping it. If bumped, the weight could fall off or displace the fracture. SMH provides the highest quality care possible in the cramped spaces, but they are challenged to do so every day. The Courtyard Tower was built in 2013, has only a few semiprivate rooms, and was presented at the final hearing as an example of what a modern patient tower should look like. The other towers are 40 to 50 years old and house most of SMH’s licensed acute care beds in semiprivate rooms. Problems common to the three older towers include insufficient utilities in patient headwalls; insufficient storage, forcing SMH to use needed functional space for storage; lack of patient showers; lack of sinks in patient bathrooms; lack of family waiting areas; lack of ADA-compliant bathrooms to allow for staff assistance; and aged electrical, mechanical, medical gas, and nurse call infrastructure. Semiprivate rooms at SMH range in size from 183 square feet in Northwest, to 222 square feet in East, and 239 square feet in Waldemere. Even in the mid-size East Tower rooms, this means patients sharing a room could, from their beds, easily hold hands. This contrasts with the 571-square-foot semiprivate and 226-square-foot private rooms in the modern Courtyard Tower. Semiprivate rooms in SMH’s older towers hold twice the beds, equipment, patients, nurses, and visitors in a room half the size of a modern patient room. Semiprivate rooms also present challenges to a hospital in terms of patient flow, logistics, infection control, and privacy. Before a patient can be placed in a semiprivate room, staff must consider gender because only same-sex patients may share a room. For efficient patient care, SMH’s acute care spaces are divided into condition or program-specific units. Thus, even if an appropriate roommate is identified for a new admission, SMH staff must consider whether the bed is on an appropriate unit. Staff must also consider space constraints; Patients are larger now than when the SMH patient rooms were built. They require larger beds and equipment, which takes up more space. Patients with infectious diseases cannot room with other patients. With mostly semiprivate rooms, this means isolation patients commonly occupy semiprivate rooms, thereby decommissioning the other bed. SMH treats patients with respiratory illnesses. Related equipment and noise make it difficult to place these patients in a room with another patient. Other types of patients whose conditions prevent use of all beds in a semiprivate room include those who: refuse shared rooms; have behavioral or substance withdrawal issues and are disruptive or frightening to a neighbor; have hearing difficulty; forensic patients; cancer patients with radiation seed implants; and patients with mobility constraints requiring bedside commodes. Semiprivate rooms compromise patient privacy by making each patient’s neighbor, and neighbor’s visitors, privy to conversations with caregivers. These are undesirable complications for all of SMH’s semiprivate rooms. Specific to the three older towers, the semiprivate rooms are so small that, to move a patient to or from the window-side bed, the hall-side bed must be moved. This disrupts the hall-side patient and it occurs at all times, regardless of whether the patient is sleeping, in pain, or clinically inappropriate for that type of motion. When a window-side patient “crashes,” the hall-side patient has to be moved from the room in order to get the crash cart in. Space constraints pose fall hazards to patients and make it difficult for families to visit, assist with patient care, or receive education on care for their loved ones upon discharge. Not surprisingly, semiprivate rooms do not contribute to patient satisfaction with their hospital experience. To combat problems with semiprivate rooms and cramped patient care areas, SMH launched the “private bed initiative,” seeking to host patients in a single occupancy room when possible. But even in its mostly semiprivate configuration, and despite what appears to be manageable average annual occupancy, SMH cannot meet the growing demand for acute care services at its main campus. Between 2013 and 2015, SMH experienced 16.9 percent growth in its total patient days, more than any other hospital in Sarasota County, higher than the district average, and more than five times the state rate. SMH experienced an even greater 22.6 percent increase in patient days from 2014 to 2016, again exceeding the state rate by more than five times. Much of that growth is from south Sarasota County, despite its remoteness from SMH’s northerly main campus. SMH projects this growth to continue. Semiprivate beds hamper SMH’s ability to actually use all of its beds, as described above. In addition, observation patients--who require the same level of care as inpatients-- commonly occupy licensed beds, but are omitted from publicly- reported occupancy data. They have become an increasingly significant component of assessing available bed capacity. On average, SMH cares for nearly 63 observation patients per day on acute care units while awaiting final determination of inpatient admission or discharge. In part, to comply with CMS regulations, placement decisions for observation patients are made by clinical personnel based on the appropriate level of care for each patient, rather than on assumptions that, until a patient is deemed to require admission, he or she warrants lesser care. SMH’s 52.4 percent average annual occupancy of licensed, acute care beds jumps to nearly 63 percent when including observation patients in licensed beds. In season, SMH’s observation population in licensed beds on an average day increases to 82 patients. The growth in observation status cases was unchallenged at the final hearing. Accordingly, it is reasonable to conclude that the AHCA acute care “occupancy percentage” must be viewed in context of this shift in the delivery of medical services. SMH’s opponents argue that this issue could be solved by simply adding observation units. But the evidence showed that SMH does not have the physical capacity on its campus to add new units to accommodate the segmenting of observation patients. Accordingly, the issue of “functional occupancy” (acute inpatients plus observation patients), represents a mitigating factor in assessing published “acute care occupancy” based on current medical care delivery. When SMH’s inpatient and observation patients are considered in light of the number of operational beds at SMH, occupancy increases to 66.3 percent. Considered in light of the private bed initiative, SMH’s average annual occupancy, including inpatient and observation patients during the 12 months ending March 2017, was 91.3 percent. Average occupancy of that level is problematic, not only because SMH utilization is increasing, but also because Sarasota County’s population is highly seasonal and hospital volumes increase dramatically in winter months. SMH volume during peak seasonal months of January to March 2017, measured against the number of licensed beds and including observation patients, was 71.5 percent. Considered in light of the beds actually available during those months, SMH’s bed occupancy was nearly 77 percent, and the occupancy of its available patient rooms assuming single-occupancy placement would have been 105.5 percent. For these reasons, Tim Cerullo, CEO of BHPC, criticized average annual occupancy as a metric for hospital capacity: “if you are just looking at the law of averages, you would not be able to judge whether a hospital was full on any given day ” From the patient’s perspective, congestion at SMH is first experienced during travel to the hospital on congested roadways. Once a patient arrives on campus, parking, valets, and traffic jams are a challenge. Patients take circuitous routes into the hospital from the parking garage. Volunteers are required to guide foot traffic inside the hospital. Elevators are overloaded and patients may wait five to 10 minutes for an elevator. Once a patient is admitted, SMH begins the process of identifying an appropriate room based on unit, gender matching, disease processes, and more. These issues are amplified during season, the resulting overcapacity problems being described by one SMH witness as SMH’s “burning platform.” To address the problem, SMH leadership initially spent $2,800,000 to develop comprehensive efficiency and capacity enhancement strategies. They hired two dedicated capacity managers, re-operationalized all beds decommissioned for storage or office space, and hired more staff. SMH created and fully staffed a logistics center with clinical and administrative personnel, transfer coordinators, and others to manage patient flow, transfers, and housekeeping to expedite room turnover. The logistics center is a command center for patient flow and throughput and includes real-time dashboards on monitors showing the status of capacity indicators at the hospital. SMH added a departure lounge where discharged patients awaiting a ride or other accommodation can comfortably wait without occupying a needed bed. SMH also looks for ways to improve its configuration and service lines to address capacity and efficiency, and to satisfy its mission to provide quality health care to all residents of Sarasota County. Those strategies include the planned addition of a cancer center with 30 licensed, inpatient beds to be pulled from existing semiprivate rooms; and relocation of rehabilitation services, which are less reliant on core hospital and critical care functions, to make room for 52 private, acute care patient rooms in East Tower. The 45 beds AHCA agreed to hold in abeyance when the outdated Retter Tower was demolished will fill most of the 52 rooms in the soon-to-be- renovated East Tower ninth and tenth floors. Despite these best efforts, the evidence on whole showed that SMH faces daily challenges with capacity, and does not realistically expect to have enough room to handle even the 2018 seasonal volume. Expansion of Main SMH Campus to Address the Problem? SMH’s existing bed towers are not capable of being renovated to modern and ADA-compliant standards while maintaining capacity and unit efficiency. The best options to address campus congestion and problems with semiprivate rooms would be to use existing semiprivate rooms as single occupancy by removing one of the two beds. This would help with decompression and efficiency because it would mean fewer patients per floor, fewer staff, decreased room turnover, and less shuffling of patients to troubleshoot semiprivate accommodations. But doing so would sacrifice patient beds in a hospital that already struggles with functional capacity limitations. For the reconfiguration to be possible, other space must be identified to allow for transfer of the lost patient beds. But with the exception of the projects SMH has currently proposed, the campus is saturated and SMH cannot increase its general medical/surgical capacity in a manner that will position it to meet patients’ needs into the future. Even if existing spaces could be renovated, SMH cannot afford to close units and lose beds while renovations are made. The parties opposing the SMH Laurel Road proposal advanced the argument that a new, nine-story tower could be constructed on the existing SMH campus. The new building, dubbed the “Tamiami Tower,” could be located on the northeast quadrant of the SMH campus, parallel to U.S. 41, Tamiami Trail, touching the SMH critical care tower, and bridging to the Courtyard Tower at scattered points on floors three through nine. According to SMH’s challengers, the Tamiami Tower would alleviate the overcapacity problems that now exist, and obviate the need for a new hospital on Laurel Road. However, the Tamiami Tower concept did not include a column layout for the open-air first and second floors, unit or programmatic specifics, space for mechanical and electrical systems, or elevators. The Tamiami Tower would obscure the SMH emergency room entrance, constrict the helipad servicing the SMH trauma center, and exacerbate congestion and wayfinding challenges both during and after construction. Moreover, the Tamiami Tower alternative is impractical from an operational perspective in that it invites public traffic into the most sensitive units of SMH, including labor and delivery, NICU, and mother/baby units, and cannibalizes needed spaces within those newly-constructed units. There were numerous caveats and assumptions noted in the Tamiami Tower architectural report offered by the Fawcett/Englewood architect. For example, the report assumes that “existing infrastructure would be sufficient or that new infrastructure could be included in the expanded construction.” The reasonableness of that assumption was not persuasively established at hearing. What is clear is that the practicality of the Tamiami Tower proposal would require extensive additional study in order to determine its feasibility. Even then, no evidence was presented to counter the operational, congestion, adjacency, and other problems the project would present. In short, the evidence failed to establish that the Tamiami Tower concept would be a reasonable and practicable solution to SMH’s functional space limitations and capacity constraints. Venice Regional Replacement Hospital VRMC is Undersized and Outdated Like many older hospitals in Florida, VRMC was not designed for the modern health care environment, where patients are larger, sicker, and require more medical equipment and staff to care for them. VRMC’s inadequate size is demonstrated by its total hospital square footage per bed, which is almost half the size of VRMC’s proposed hospital. The existing hospital has 983 square feet per bed, compared to 1,900 square feet per bed in the proposed hospital. The majority of VRMC’s existing patient rooms are semiprivate, and about half the size required by current codes. VRMC has 113 semiprivate rooms that are 160 square feet: EDmeaning patients treated in 226 of its 312 licensed beds have less than 80 square feet per bed. The private rooms are only 130 square feet, compared to today’s minimum code requirement of 300 square feet per private room. The patient bathrooms are woefully undersized, with only 10 percent being ADA compliant. Kristen Gentry, VRMC’s chief operating officer, testified that given the elderly nature of VRMC’s patients, all the bathrooms should be ADA compliant so that staff can assist patients in the bathrooms and patients can use walkers and other equipment, which is currently impossible. The surgical intensive care unit (SICU) has “swivette” toilets that swing out of cabinets, which are problematic and not code- compliant. Due to the “hodge-podge” construction, there are adjacency and patient flow issues. For example, postoperative open-heart surgery patients are transported via a small public elevator to the ICU on a different floor, increasing the risks of adverse incidents. The elevator is too small to allow the appropriate medical personnel to accompany the patient on the elevator, and balloon-pump patients must have the balloon pumps placed on their stretchers to fit in the elevator, which increases the risk of dislodging their cannulas. The operating rooms at VRMC are inadequate. All but one is less than 400 square feet, whereas today’s code requires over 600 square feet. The operating room that meets the current minimum code requirements for size is being evaluated as the place to implement a transcatheter aortic valve replacement (TAVR) operating room. However, it is undersized for that purpose, as a TAVR operating room should be 1,000 to 1,200 square feet, due to the numerous personnel in the room during the procedure. The ED is undersized and frequently relies upon hallway beds in season because there are not enough treatment bays. The ED ancillary areas are undersized and inadequate. There is no electronic tracking system to expedite the patient flow process. Mechanical, Electrical Plumbing Systems Failures VRMC’s mechanical, electrical, and plumbing systems are failing. VRMC has experienced numerous disruptions in patient care related to its deteriorating building, including: sewer and fresh water pipes breaking and exhibiting signs of rust, a rodent infestation, and mold and asbestos issues. VRMC presented experts in the fields of electrical engineering, mechanical engineering, roofing, architecture, industrial hygienic engineering, and hospital physical plant operations. The universal consensus from these experts was that VRMC’s current facility has so many problems that renovating it is not a viable option. Many of these experts testified VRMC’s physical plant was one of the worst they had seen in their careers. In 2015, VRMC had two very highly publicized concurrent incidents that resulted in a significant market shift of health care services: a sewer pipe rupture and discovery of a rodent infestation. These issues directly relate to the aged hospital facility, and are illustrative of some of the ongoing and future potential infrastructure challenges VRMC faces. The sewer pipe rupture was caused by disposable towels being flushed down the toilets and getting caught on the rusty, corroding sewer pipes, causing blockages and raising the pressure in the pipes. Unbeknownst to VRMC, a prior owner had replaced sections of the cast iron sewer piping in the interstitial space with polyvinyl chloride (PVC) piping and a PVC cap. The pressure buildup caused the PVC end cap to burst off, sending a tremendous amount of sewer waste into the interstitial space. The sewer waste seeped down through the old gravel roofing (which was the floor of the interstitial space), through the ceiling, down the walls, and onto the second story hallway floor. The sewer waste flowed down the hallway until nurses could divert its flow to an elevator shaft. VRMC hired a licensed, independent contractor specializing in cleanups of this nature to do the cleanup. Upon completion, there were no obvious signs of the sewer leak inside the hospital. However, an AHCA complaint survey conducted a month after the initial cleanup revealed that the cleanup was inadequate, leaving sewer waste that had soaked into the gravel roofing material in the interstitial space, and a small amount of sewer waste remnant in the elevator shaft. The uncleaned sewer waste was not readily detectable from the patient care areas inside the hospital. Ultimately, the entire gravel roof on the interstitial space had to be removed to thoroughly clean the sewer waste. VRMC’s investigation of the sewer pipe incident revealed additional facility problems: the vertical stacks in the North Tower were cracking and had to be replaced. The stacking project and gravel roof removal were major disruptions to VRMC’s ability to care for patients, with constant shutdowns of significant portions of the hospital, including the operating rooms at one point. The remediation impacted patients and physicians, including: unavailable operating rooms, constant vibrations due to construction, noise issues, and sewer smells. The sewer pipe cleanup, consisting of entirely removing the gravel roofing material, sealing the floor of the interstitial space, and replacing the vertical stacks in the North Tower, cost VRMC $10 million (excluding business interruption damages and consequential damages), and took two years to complete. Unfortunately, during this remediation process, there was a fresh water pipe break, which led to the discovery that the subsurface sewer drainage pipes in the South Tower also had to be replaced because the pipes had completely disintegrated, leaving only the built-up sludge in the pipes as the conduit for the sewage to flow through. With the operating rooms shut down and other facility interruptions caused by the remediation, and with patients raising concerns about the safety of the hospital (predominantly based upon the media sensationalism), many of VRMC’s general surgeons and orthopedic surgeons began taking elective cases to other hospitals. Elective surgery, and particularly orthopedic surgery, is a very profitable service line for a hospital, so this had a significant adverse financial impact on VRMC. In the aftermath of the sewer pipe incident, VRMC’s open-heart surgeon, Dr. Fong, moved his practice to SMH. After Dr. Fong left, VRMC’s open-heart surgery cases dropped from around 350 cases a year to 200 cases a year. Open-heart surgery is also a profitable service line for hospitals, and this also had a severe negative financial impact on VRMC. VRMC also lost several neurologists around this same time, including Dr. Coleman, who is now employed by SMH. Despite replacing the vertical sewer pipes in the North Tower, VRMC has continued to experience plumbing issues throughout the hospital, including in the North Tower. Many of the horizontal pipes cannot be accessed without literally tearing the entire hospital apart, and because of the deteriorated condition of the pipes, it is not appropriate to use other methods to clean out the pipes, such as jetting or rotoring, since that could cause further damage to the pipes. The rodent infestation discovered during the same AHCA complaint survey as the inadequate sewer clean up, is also indicative of the aged facility. The surveyor removed a ceiling tile in the kitchen area to check for additional sewer waste remnants in the crawlspace between the second-floor ceiling and the interstitial space floor. When he put his head into the crawlspace ceiling area, he saw and heard rodents. VRMC’s administration was not aware of the rodent infestation prior to the survey; and if they had known about it, they would have taken steps to correct it. It is likely the rodent infestation went unnoticed because of the thickness of the ceiling tiles, which are designed as fire and moisture barriers. The rodent infestation resulted in the kitchen having to be shut down, and a temporary mobile kitchen being put into place while the cleanup was done. It was subsequently discovered that the rodents were entering the kitchen ceiling through an abandoned sewer pipe that had either not been capped off at its termination or where the cap had come off over time. The rodents entered the pipe through the uncapped termination end, and because the pipes were so deteriorated, were able to eat their way through the pipes above the kitchen ceiling to gain access to the crawlspace. The rodent infestation in the kitchen has been fully remediated; however, due to the aged building, preventing future rodent infestations from occurring is a constant battle. VRMC has hired a pest control contractor to do daily rounds of the facility; searching for signs of rodents and eliminating any that are found. In addition to the serious plumbing and vermin issues at the hospital, there are also significant electrical and mechanical issues at VRMC. Hugh Nash, VRMC’s expert in hospital electrical engineering, walked through numerous problems with the mechanical and electrical systems at VRMC, and pointed out several components that were well beyond their expected useful life, some dating back to the hospital’s original construction. For example, he explained that a hospital’s transfer switches are critical components of a hospital’s electrical system because they control the generator power coming on in a power outage. A transfer switch typically has a useful life of 25 years. Many of VRMC’s transfer switches are over 30 years old. They also lack important safety features, such as being grounded or requiring manual operation to initiate the switch (something Mr. Nash testified he had never seen before in any hospital). The generators that were installed in 1969 do not have appropriate ventilation, and are located below the 100-year floodplain. Mr. Nash has rarely seen generators in hospitals that are over 30 years old; VRMC’s are 48 years old. He also testified that any significant renovation to the electrical system at VRMC would require the generators be moved above the floodplain, which would be very costly. Mr. Nash explained that one reason hospitals wait so long to replace transfer switches is because of how disruptive it is to the hospital’s operations. He also testified that given the lack of available space in the conduits and ceilings, it would be nearly impossible to make the necessary renovations to VRMC’s electrical systems; and even if it were possible, the exorbitant costs to do so would make it impractical. VRMC’s facility infrastructure problems are a constant source of irritation to the physicians that care for patients at VRMC. For example, Dr. Dreier testified: It’s falling apart around us. * * * It seems like every few weeks there is a pipe that's broken. The medical ICU has flooded several times. The surgical ICU has flooded several times. Water is not available because the water is being shut down because it's been contaminated from broken pipes. Dr. Landis compared fixing the problems at VRMC to trying to fix an old car: The damage is extensive in this hospital, and the wearing of this hospital is – as I said, it's a case of original sin. It was the way this hospital was constructed. It's not going to get any better. And you can put good money after bad, but the fact of the matter is, is that it's just not going to happen. You would have to reconstruct this entire building from the inside. And then when all is said and done, the space that this hospital has and the way it was built and what is expected by patients in 2017 this hospital doesn't have. So why would you do that? I mean, it gets to the point where you replace the trannie, you replace – you replace the alternator, you replaced the battery, but the motor sucks. And the bottom line is that's what we have here. Dr. Joseph Chebli, a bariatric surgeon, recounted having to interrupt a surgical procedure that was about to start when a sewer pipe leak occurred outside his operating room. This was after the vertical stack remediation had been completed. He summarized his frustrations saying the hospital is a “constant embarrassment” to him and his patients. The Negative Pressure Problems Prior to HMA purchasing VRMC, the prior owner, the Bon Secours Health System, identified a significant moisture intrusion problem. In 2005, HMA attempted to address the moisture intrusion problem by coating the building with an elastomer paint that would act as a barrier to moisture coming into the building. However, the hospital has severe negative pressure, which causes it to suck moisture into the building. Once the moisture gets under the coating, whether it is through roof leaks, window leaks, cracks in the elastomer coating, internal plumbing leaks, or just evaporation caused by temperature changes, it cannot escape and creates mold issues. VRMC experienced a recent mold issue in its SICU that closed the unit for several months for remediation. Nick Ganick, a mechanical engineer, testified that the “severe” negative pressure situation and moisture intrusion has been “disastrous” for the hospital, and could have caused the deterioration of the cast-iron pipes, resulting in the numerous system failures: One of the things that I look at as a mechanical engineer in healthcare is negative pressure. Building negative pressure is disastrous to hospitals. It's bad for the envelope, it's bad for mold down here in Florida, it carries bad things into the hospital that are unfiltered. * * * The reason for the condition of the pipe could have been negative pressure, it could have been some of the moisture in the building. Charles Cummings, an expert in industrial hygienic engineering, testified that negative pressure in a hospital raises safety concerns: You have to control the environment in a hospital, and the inability to do that allows humidity to run rampant, it allows airborne diseases and other infectious – mold spores, for instance, other bacteria, other things that just live inside and outside of any building, much less a hospital building, it gives them a fertile ground to grow. VRMC has attempted to correct the negative pressure issues, but this is a daunting task with such an old, porous building. The situation is compounded by the fact that there are 20 to 30 heating, ventilation, and air conditioning (HVAC) units in the interstitial space, some the size of dump trucks, that are old and not able to keep up with the porous building; however, replacing them requires disassembling the old equipment (by cutting them into small pieces with a blow torch) just to get them out, disassembling the new pieces of equipment to get them into the interstitial space, and reassembling them in the interstitial space before they can be installed. This dramatically increases the complexity and costs of replacing the HVAC equipment, and there is no guarantee that replacing the HVAC equipment would resolve the negative pressure problem. Information Technology (IT) Problems Not surprisingly, VRMC needs a complete IT overhaul. It does not have an integrated electronic medical record (EMR) system, which is the current standard of care for hospitals. Implementing an EMR system at VRMC has been considered on multiple occasions, but the building has raised such substantial obstacles it has proven nearly impossible. One significant obstacle is the lack of space to incorporate computers into the end-user work spaces--patients’ rooms, nurses’ stations, and other patient treatment areas. Some of the other problems, such as cabling or storage and charging of computers on carts, individually might be surmountable, but collectively and in light of the inability to get the computers where clinicians can access them at the points of care, becomes somewhat moot. The IT limitations of the facility go beyond the inability to implement an EMR system. Currently VRMC’s surgeons dictate medical records on folding tables stuck in corridors outside operating rooms because there are no other adjacent spaces to accommodate this function. Elective surgery is profitable and if there was any practical solution, VRMC would have already implemented it to encourage surgeons to operate there. The ED has a separate medical record system that is not integrated with the rest of the hospital. Patients admitted through the ED must have information manually re-entered, delaying admissions and increasing the potential risk of errors. Numerous physicians voiced their frustrations with VRMC’s IT issues, including, among other things: the lack of ability to communicate via cell phones and text messages in the hospital; slow computer systems; the limited ability to access patients’ full medical records from their offices; and the lack of a “true” integrated EMR system. Dr. Palmire testified: So the cell phones don't work in that hospital. You cannot call out. I cannot call out anywhere in that hospital. * * * And it’s a real – and that is – and communication, you can't be a physician and not be able to communicate with people. So you’re stuck with landlines. You know, cell phones enhance my productivity substantially because I can walk around or do something else. I’m not tied to a phone. There's only so many phones, you know, and lines. You can’t provide a phone and a line for every physician in that hospital. So this kind of communication is critical, and you cannot do it within that facility. The are no viable options to replace VRMC on site without completely disrupting hospital operations and effectively shutting the hospital down because of the limited size of the hospital campus and the surrounding existing residential uses of the adjacent parcels. Further, it would not make sense to replace VRMC onsite even if it were possible given the vulnerability of the existing site to hurricanes. SMH’s CEO, Mr. Verinder, conceded VRMC’s current location was problematic and if SMH had purchased the facility it would have filed a replacement hospital to move the location. Availability/Accessibility/Utilization of Existing Facilities; and Enhanced Access for Residents of the District: § 408.035(1)(b) and (e), Fla. Stat. SMH Laurel Road Subdistrict 8-6 is home to SMH, VRMC, Englewood, and Doctor’s Hospital of Sarasota. Adjacent Charlotte County, part of district 8, is home to Fawcett and BHPC. Except for SMH, all are private, for-profit hospitals. SMH is the Sarasota County’s safety net hospital, providing nearly 90 percent of Medicaid and charity care in Sarasota County, and more than 65 percent of the County’s uninsured care. SMH is the sole provider in Sarasota County for Medicaid-heavy service lines like OB, Level II and III NICU, pediatrics, adult and pediatric psychiatric, and trauma. Utilization at SMH has steadily increased since 2013 at a rate far greater than district, or state averages. The proposed service area for SMH Laurel Road is growing and aging faster than the rest of the County and, by 2021, will represent 60 percent of the 65 and older population of Sarasota County. In addition to growth at its main campus, from 2014 to 2016, SMH experienced 25-percent growth in its south county ambulatory care centers. SMH’s employed physicians group, with locations throughout Sarasota County, including North Port and Venice, also is growing. This established network demonstrates SMH’s commitment to providing care to south county residents. The SMH network will serve as a referral base for south county residents requiring inpatient care--including a substantial and increasing elderly population--who could be treated at SMH Laurel Road without traveling to the main campus. Many of these patients already bypass closer hospitals to travel from south Sarasota County to the SMH main campus, despite substantial distance and drive times, particularly in season. In 2015, nearly 25 percent of SMH Laurel Road service area residents chose to receive inpatient care at SMH, which captured 17.3 percent of the inpatient market share in that service area. By 2016, SMH’s inpatient market share in the SMH Laurel Road service area had increased to 21.3 percent, and 19 percent of SMH main campus patients came from that service area. SMH Laurel Road is expected to capture approximately 3,548 of what otherwise would be SMH main campus adult, non- tertiary, non-OB discharges during its first year of operations, or about 80 percent of the main campus’s 2016 proposed service area market share. As SMH’s market share in the Laurel Road service area increased, VRMC, Fawcett, and Englewood market shares declined and BHPC’s market share was essentially stagnant. SMH’s opposition argued that the presence of other providers with available beds serving the SMH Laurel Road service district weighs against need for SMH Laurel Road. To the contrary, market conditions showing faster growth at the more distant hospital more likely indicate accessibility challenges with the closer hospitals. SCPHD’s focus on avoiding hospital admissions, promoting positive outcomes, and managing chronic conditions, hinges on access to primary care and follow-up continuity of care. SCPHD was anticipated to record over 272,000 south Sarasota County ambulatory care visits in the fiscal year ending September 30, 2017, indicating strong patient-alignment with SCPHD. The top 43 attending physicians accounting for over 61 percent of SMH admissions from the SMH Laurel Road service area did not admit a single patient to VRMC, BHPC, Englewood, or Fawcett in the 12 months ending September 30, 2016. In an abstract evaluation of acute care occupancy versus actual patient flow, it could be argued that “patient convenience” should not outweigh traditional health planning need assumptions of available licensed bed capacity. But the dynamics of contemporary medical care delivery cast doubt on the traditional planning metric: The fact that SMH gained four- percent market share among residents of its proposed PSA in less than one year, likely resulted from SCPHD initiatives to promote access to primary and diagnostic services for residents of south Sarasota County. The SMH Laurel Road proposal will enhance access to inpatient services and promote continuity of care for south Sarasota county residents who have already aligned with SCPHD. This symbiosis also will ensure continued financial viability, and therefore accessibility, of SMH without the need to increase the ad valorem tax burden on county citizens. SMH Laurel Road will offer a full-service OB program, a service currently not available within the proposed service area. Currently, SMH is home to Sarasota County’s only OB, NICU, and pediatrics programs, including high risk maternal fetal medicine, 24/7 OB hospitalist coverage in-house, 24/7 neonatology coverage in-house, and a maternal neonatal transport team for high-risk transfers. The SMH NICU serves as a transfer destination and back-up NICU to several hospitals in the region. SMH already captures over 70 percent of SMH Laurel Road service area OB discharges, 85 percent of which are expected to shift to SMH Laurel Road upon opening. While BHPC’s OB market share has declined, SMH’s has increased steadily since 2013. Even in south Sarasota County zip codes closer to BHPC than SMH, SMH has a larger OB market share than BHPC. Shon Ewens, executive director of the Sarasota County Healthy Start Coalition, a support organization for mothers and children, testified via deposition that the majority of her clients are Medicaid recipients, many come from southern Sarasota County, births from that area are on the rise, and her clients receive OB services at SMH. It is burdensome for south Sarasota County OB patients to travel to the SMH main campus for OB services. As pregnancy progresses, the number of prenatal appointments increases. Mothers may be expected to visit their providers as often as twice a week, driving 45 minutes to an hour to SMH, and interrupting jobs and other obligations. These burdens cause interruptions in prenatal care to the detriment of the expectant mothers’ health. These are barriers to accessibility of OB services in Sarasota County that would be alleviated by the approval of SMH Laurel Road. Ms. Ewens testified that, for her clientele, the SMH Laurel Road OB program is needed. Her conclusion was echoed by health care planning expert, Roy Brady. The large numbers of southern Sarasota County residents, who already travel to SMH main campus for medical care, including pregnant women and the elderly, face challenging road conditions, particularly in season. Residents of the SMH Laurel Road service area who, either by necessity (unique or specialty service line, financial accessibility), or choice (previous experience, recommendation), seek care at SMH main campus do not have access to care within 30 minutes, with the exception of the northwest section of the proposed service area. With respect to the elderly, geographic challenges are exacerbated by visual impairment, hearing loss, and reduced reaction time. To compensate, elderly drivers avoid driving at night, dusk, and dawn; during rush hour, and in bad weather; plan routes that are familiar, and avoid interstates and left turns. This impedes seniors’ access to acute care services, particularly when congested I-75 and Tamiami Trail are the primary roadways to SMH main campus. Approval of SMH Laurel Road will also allow SMH to redirect some of its lower-acuity patients to a location closer to their homes, ensuring accessibility of main campus services only offered at that location. SMH’s opponents argue that SMH’s capacity and decompression argument is SMH-specific need. While this is true in that SMH is the only area provider for certain service lines and the only safety net provider in the County, had the other area hospitals established OB, pediatric, psychiatric, and trauma programs, perhaps capacity at SMH would not pose access barriers to these services within the district overall. Until then, to the extent SMH capacity constraints threaten access to otherwise unavailable services, those capacity constraints support SMH’s need argument and are not institution-specific. The undersigned considered arguments from SMH’s opposition that SMH filed an application in a prior batching cycle which was virtually identical to the CON application at issue, and was denied, suggesting that the more recent application should also be denied. However, AHCA’s representative, Marisol Fitch, noted that the addition of OB services to the application at issue was a “major change,” as was VRMC’s changed position with respect to its facility deficiencies which, in essence, altered the landscape in terms of the availability and accessibility of services in the region. Taken together, the existing capacity constraints at the SMH main campus, and issues of availability and accessibility of services described above, establishes need for the SMH Laurel Road proposal. Specifically, SMH provides the vast majority of Medicaid services to residents of the district, suggesting access barriers to these underserved patients through other providers; utilization of its existing hospital and outpatient services has increased substantially in recent years; there is a large, growing population of south Sarasota County patients, including medically underserved, elderly, and OB patients, seeking services at SMH; its proposal enhances access to needed services within the district with the inclusion of an OB program which, currently, is not accessible through any other provider; and SMH’s main campus is at capacity and requires decompression in order to ensure access to needed services for all Sarasota County residents, including many services that only SMH provides. 2. Venice Regional Replacement Hospital VRMC’s replacement hospital will positively impact subdistrict utilization rates. The utilization forecast used VRMC’s three-year historical market shares by zip code, and assumed VRMC would slowly recapture its premarket shift market shares. By year three, VRMC’s replacement hospital will be 70 percent occupied, with an average daily census of 147 patients. Currently, VRMC is only about 40-percent occupied. Thus, approval of VRMC’s replacement hospital will enhance the subdistrict utilization rates. VRMC’s relocation will bring the facility closer to residents in every zip code within its current and proposed service areas (which are the same), except its current home zip code. Residents in that zip code should not have trouble accessing VRMC’s new location, which will only be a few miles away. Further, VRMC is leaving a freestanding ED on the island to ensure emergency access. VRMC’s new site will also enhance accessibility during and after a major hurricane. VRMC is currently located on an island, very proximate to the coast, with many of its critical systems (including its generators) located below the 100-year flood plain. The building is not built to current hurricane strengthening codes. VRMC’s proposed location will be much more accessible during and after a major hurricane because it will not be on an island and will be further from the coast. Current building codes will require the hospital be built so that the generator and other crucial systems will not be impacted by hurricane flooding, and that the hospital be constructed to meet or exceed the applicable hurricane wind- resistance standards. VRMC’s current facility limits its ability to provide certain state of the art health care services, including TAVR and interventional neurology. VRMC’s replacement hospital will enhance residents’ access to these services. Structured heart procedures, including the TAVR procedure, are the wave of the future in cardiovascular surgery. TAVR reduces the need to perform open-heart surgery by performing valve replacements intravenously, which means shorter hospital stays and recovery times. TAVR requires a blended team of open-heart surgery and interventional clinicians, and the equipment used is very large and specialized. Thus, in comparison to standard operating rooms, TAVR operating rooms must be very large. VRMC is struggling with implementing TAVR capability at its existing facility. The operating rooms are too small to accommodate the TAVR equipment and team. While VRMC is trying to find ways to squeeze it in within the confines of its existing space, the ability to develop and grow the entire structured heart program is limited by the physical capacity of the facility. Approval of VRMC’s replacement hospital will allow this program to flourish, and will enhance access. Venice and North Port stroke patients will have enhanced access to neurological intervention if VRMC’s replacement hospital is approved. Sarasota County Emergency Medical Services (EMS) takes all stroke patients under 80 years old to the closest comprehensive stroke center. SMH is the only comprehensive stroke center in Sarasota County and Charlotte County. Thus, when EMS transports stroke patients from southern Sarasota County, they bypass closer hospitals to go to SMH. In stroke cases, every second of delay in reperfusion means loss of brain tissue, which results in physical and cognitive impairments. VRMC is striving to become a comprehensive stroke center and has everything in place to meet the requirements, except an interventional neurologist. According to hospital administrators, VRMC has not been able to recruit an interventional neurologist because of its aged, outdated facility. Approval of VRMC’s replacement hospital will make it easier for VRMC to recruit an interventional neurologist and become a comprehensive stroke center. When VRMC becomes a comprehensive stroke center, EMS will no longer have to bypass VRMC, and south County stroke victims who are closer to VRMC than SMH will be able to have their intervention sooner, resulting in less brain injury and impairment. VRMC’s replacement hospital will enhance access to disenfranchised former patients of VRMC. The market shift caused former VRMC patients to travel farther to receive acute care services. Replacing VRMC will shift many of these patients back to VRMC, enhancing their access to care closer to home. South Sarasota County residents will also have enhanced access to continuity of care with their primary care physicians and other established specialists. It is difficult for physicians who are not on staff to get access to information from hospitals. Shifting patients back to VRMC will fix this disconnect and enhance patients access to a coordinated system of care. The Extent to Which the Proposal Will Foster Competition that Promotes Quality and Cost Effectiveness: § 408.035(1)(g), Fla. Stat. SMH Laurel Road Approving SMH Laurel Road will add a high-quality, cost-effective, competitive alternative to existing providers. SMH has the lowest average charge for adult general acute med/surg cases compared to VRMC, Englewood, BHPC, and Fawcett. SMH has lower charges than VRBH across the board for the top 20 diagnosis related groups. Thus, introduction of SMH Laurel Road into south Sarasota County can be expected to have a positive impact on charges for patients in that market. In reaching this finding, the undersigned considered argument from SMH’s opponents that its status as a tax-supported public hospital gives it an unfair pricing advantage over private hospitals. The argument was not persuasive. SCPHD is governed by an elected Board with authority to set millage rates and levy taxes. If voters are unhappy with tax burdens, they can take corrective action. At the same time SMH’s opponents were challenging SMH’s proposal on the basis that it receives local funds, they were suing to receive those funds themselves. They prevailed and, on July 6, 2017, the Supreme Court of Florida held that the relevant special law requires Sarasota County to reimburse not just public, but also private hospitals for indigent care. Venice HMA, LLC v. Sarasota Cnty., 228 So. 3d 76 (Fla. 2017). If SMH’s access to public funds gave it a competitive advantage in pricing, the Venice HMA decision should level the playing field. The addition of SMH Laurel Road to south Sarasota County also will increase non-price competition, such as quality and service offerings, as SMH is the only CMS 5-Star rated hospital in the state. In addition to providing residents of the district a new access point for low-cost, high-quality care, SMH Laurel Road will bring new services to the area, such as OB. Historically, VRMC has had a significant competitive advantage when it comes to treating residents of southwest Sarasota County who require hospital care within a close distance of their home. The addition of SMH Laurel Road will give residents a choice and encourage VRMC to enhance its patient satisfaction and quality--all to the benefit of district residents. On balance, the record here shows that SMH Laurel Road will foster competition that promotes quality and cost- effectiveness. 2. Venice Regional Replacement Hospital Approval of VRMC’s replacement hospital would promote competition that will enhance quality and cost-effectiveness. Despite there being six hospitals that serve Sarasota County residents, SMH is the dominant provider with more than 50-percent market share. VRMC is at a distinct competitive disadvantage currently because of its aged and obsolete facility, and the numerous, highly publicized problems that have occurred. These problems have resulted in a significant market shift from VRMC to SMH. If VRMC is not replaced, the market shift will not correct itself, but if VRMC is replaced, it is likely the hospital will recapture a significant portion of its lost market share. Approval of VRMC will promote quality in several ways: It will end the constant facility problems that disrupt patient care; It will eliminate the risks to patients caused by the worn-out facility infrastructure; It will eliminate the risk of asbestos, mold, and the effects of a building that operates under “severe” negative pressure; It will eliminate risk related to the “hodgepodge” design, such as having to transport postoperative open-heart surgery patients in a small elevator to the ICU; It will enhance patient experiences with larger, private patient rooms and ADA compliant bathrooms; It will enhance the nurse call system and overall positioning of nursing units to patient rooms, so nurses can be more responsive to patients’ needs; It will reduce unnecessary emergency room bottlenecks caused by too few emergency room treatment areas, lack of appropriate ancillary space, and reentering patient data; It will add additional large operating rooms, keeping patients from having to leave their community to receive elective orthopedic surgery; It will provide VRMC with IT capacity to meet today’s standard of care by implementing an EMR; It will reduce the risk of medical errors by having more ability to safety check information in patients records and having more automated safety functions; It will reduce the physician frustration level related to the various IT inadequacies and other facility infrastructure problems; It will allow physicians better access to their patients’ medical records from their offices, enhancing post-hospital follow-up care; It will allow the expansion of services like structured heart and comprehensive stroke certification; It will provide southern Sarasota County residents with quicker access to stroke care, minimizing their brain tissue losses and resulting physical and cognitive impairments; It will lessen the number of patients that travel to receive acute care; It will enhance continuity of care for patients with their established primary care and specialty physicians; It will prevent further erosion of VRMC’s volumes and ensure adequate patient volumes to maintain existing specialty services; It will enhance VRMC’s ability to recruit top quality physicians and nurses; and It will make VRMC much more likely to be available during and after a hurricane to meet the community needs. Approval of VRMC’s replacement hospital will also result in more cost-effective care. The costs in terms of dollars and man-hours to maintain VRMC, due to its facility problems are substantial. The one sewer pipe break alone was a $6 million expense, not including business interruption and consequential damages, such as lost referral patterns. The Applicant’s Past and Proposed Provision of Health Care Services to Medicaid Patients and the Medically Indigent: § 408.035(1)(i), Fla. Stat. SMH Laurel Road SMH is the safety net provider for Sarasota County. It is mandated to ensure that all Sarasota County residents, regardless of their ability to pay, have access to needed care and services. SMH’s track record is reflective of this mission. Of the 23 general acute care facilities in district 8, SMH provided the highest number of Medicaid/Medicaid HMO patient days (21,576). Over the past three years, SMH provided in excess of 85 percent of all the Medicaid and medically indigent care to Sarasota County residents. Not surprisingly, SMH far exceeds other area hospitals with respect to the amount of Medicaid and medically indigent care it provides through its ED. Of the 93,077 total ED visits at SMH for the twelve-month period ending September 30, 2016, 43,390 visits were Medicaid or medically indigent, far exceeding all other area hospitals. Looking only at the patients from VRMC’s proposed service area (same as its existing service area) for fiscal year 2016, VRMC had 5,013 Medicaid and medically indigent ED visits (26.3 percent of VRMC’s total ED visits) compared to 11,556 Medicaid and medically indigent SMH ED visits (45.5 percent of SMH’s total ED visits). SMH’s historically high Medicaid and indigent patient volumes are explained, not only by its mission, but also by the product lines it offers. SMH provides services that are typically highly utilized by the medically underserved, such as OB, NICU, pediatrics, and behavioral health. The vast majority of hospitalized Medicaid beneficiaries are pregnant women, newborns, and young children. By offering OB and decompressing the main SMH campus, which provides all Medicaid-dominant service lines, SMH Laurel Road will improve health care access to Medicaid patients throughout Sarasota County. SMH’s historical commitment to the provision of health care services to Medicaid patients and the medically indigent is not in dispute, and the addition of SMH Laurel Road will further enhance access to inpatient care for Medicaid and medically indigent patients. SMH’s past and proposed provision of services to Medicaid patients and the medically indigent weighs in favor of approval of SMH Laurel Road. 2. Venice Regional Replacement Hospital VRMC has a history of providing care to Medicaid and indigent patients. However, VRMC’s service area residents are typically covered by Medicare. VRMC conditioned its CON on providing its current level of Medicaid and indigent care. VRMC will also be seven to ten minutes closer to North Port, which has a higher percentage of Medicaid and indigent patients. There was no credible evidence of record that VRMC denies care to Medicaid or indigent patients, or that such patients are discouraged from accessing care there. Approval of the VRMC replacement hospital is consistent with this statutory criterion. Adverse Impact SMH and VRBH are existing providers with significant market shares in their proposed service areas. Therefore, projecting adverse impact on existing providers, as would be the case with new entrant proposals, where the success of the program is reliant on capturing market share from existing providers is unlikely in this instance. Both applicants built their proposals on the assumption that they primarily would be supported by their existing patient bases resulting in minimal impact on existing providers. The only evidence presented at final hearing implicating adverse impact of VRMC’s proposal related to its market share projections, which, presumably, would require it to regain lost patient volume by taking patients from other providers. However, the evidence does not weigh in favor of denying VRMC’s application based on lost market share, particularly in light of SMH’s criticism that the projections were unrealistic. As for SMH, for nearly two decades, SCPHD has developed a south Sarasota County network of facilities and physicians to respond to patient demand. Undisputed evidence was presented that the SCPHD south County network of providers would generate over 270,000 ambulatory care visits in the fiscal year ending September 30, 2017. The result is an established base of south County patients, including those from the SMH Laurel Road service area who currently, and in increasing numbers, travel to SMH main campus for hospital services. For all inpatient services, nearly 25 percent of south County residents in the SMH Laurel Road service area already seek inpatient care at the SMH main campus. Isolating the adult non-tertiary medical/surgical patient population, it was established that SMH’s inpatient market share increased from 17.3 percent in 2015 to 21.3 percent in fiscal year 2016. This is a significant four-point increase in nine months, continuing the trend of an average quarterly increase of 0.6 percent in SMH’s inpatient market share for adult non-tertiary medical/surgical services over the last 14 quarters. SMH Laurel Road is expected to have a service area medical/surgical market share of 22 percent when it opens in 2021. With the relatively small size of its proposed hospital, and the large base of existing SMH patients, the impact of SMH Laurel Road on other providers in the area will be minimal; a combined average daily census (ADC) impact on all providers of 11.4, wholly unlike the impact of a brand new entrant to the market. SMH Laurel Road’s most significant impact will be the projected ADC loss of 5.8 at VRMC. The impact on VRMC is relatively minimal, particularly in comparison to VRMC’s forecasted market share losses, which far exceed the projected SMH Laurel Road impact. Expected impact in terms of lost adult, non-tertiary ADC for the other hospitals will be 1.6 at Fawcett, 1.4 at Englewood, and .8 at BHPC, none of which is substantial compared to overall hospital operations. These inconsequential losses will be mitigated by growth in the population, particularly among seniors, in the service area. And, the various adverse impact models presented by health planning experts for VRMC/BHPC and Fawcett/Englewood did not consider any mitigating initiatives by management that would further alleviate potential loss. SMH’s opponents argued that approving SMH Laurel Road would impact existing providers’ ability to appropriately recruit for, and staff, their facilities. But no empirical evidence was offered concerning the known, nationwide nurse and physician shortage, or how it impacts, or is projected to impact, hospitals in the district. Rather, the evidence showed that local providers already recruit from around the country, not from a limited pool of Sarasota and Charlotte County candidates who might be targeted by SMH Laurel Road. Despite staffing SMH to provide the highest level of quality and safety, SMH is able to achieve appropriate staffing levels. Witnesses for VRMC, BHPC, and Fawcett/Englewood conceded that, in spite of staffing challenges common to all hospitals, and seasonal population increases more specific to the Sarasota and Charlotte County areas, local hospitals are able to staff their facilities appropriately. In a highly seasonal area like district 8, proper staffing mandates use of contract staffing because hospitals cannot afford to maintain seasonal staffing levels on a year-round basis. BHPC and VRMC have the unique, added benefit of sharing staff with one another during times of increased need, which further mitigates their concerns regarding staffing pressures. The realities of the health care delivery system in district 8, coupled with the fact that SMH Laurel Road is a proposed transfer of existing, presently-staffed beds, rather than an addition of new beds, alleviates any concerns regarding staffing pressures that might be occasioned by the approval of SMH Laurel Road. The greatest impact of SMH Laurel Road will be on SMH’s main campus, which is expected to redirect 3,548 patients annually to SMH Laurel Road for an ADC reduction of 41.8. This patient redirection will serve the goals of decompressing the main SMH campus, and enhancing access to south Sarasota County patients. Financial experts for VRMC/BHPC and Fawcett/Englewood conceded that this volume shift would not jeopardize the financial stability of SCPHD. BHPC argued that OB volume losses will threaten its ability to maintain its NICU. Dr. Jennifer D’Abarno testified that a minimum of 1,000 births per year is required to sustain a NICU. But BHPC already operates successfully without that many births and the evidence established that the impact on BHPC resulting from an OB program at SMH Laurel Road will be minimal. In 2015, the SMH main campus captured 68 percent of the OB market share from the SMH Laurel Road service area. By 2016, that figure increased to 72.3 percent. Over the same period, BHPC’s OB discharges from the SMH Laurel Road service area dropped from 299 to 256 (over 14 percent), without the addition of an OB provider to the area. SMH main campus and SMH Laurel Road are projected to capture a combined 75 percent of the OB market share for the SMH Laurel Road service area in 2021. Of that 75 percent, 62 percent is expected to access SMH Laurel Road with the other 13 percent continuing to rely on the main campus. In other words, SMH Laurel Road’s OB market share in its proposed service area is projected to be less than the main campus’ existing share of that same market. With respect to impact on BHPC’s NICU, the evidence established that ten to 15 percent of births result in NICU placement. Approximately half of those NICU placements are identified prior to birth. SMH Laurel Road’s OB program will target only the lower risk portion of the NICU-bound population. Thus, BHPC’s minimal loss of OB discharges to SMH Laurel Road would have a nominal, if any, effect on the BHPC NICU. SMH presented the most reasonable assessment of the anticipated impact of SMH Laurel Road. That impact will be minimal, and does not justify denying the application. As with the SMH Laurel Road proposal, approval of the VRMC replacement hospital would likewise have a minimal impact on existing providers in the area. While it is true that the construction of a state-of-the art replacement hospital should enable VRMC to recapture some of the market share it has lost to competitors in recent years, that increase is likely to be gradual, and any adverse impact on existing providers will be offset by population growth, particularly in the elderly age cohort. Thus, any adverse impact caused by approval of the replacement hospital will be minimal, and does not justify denying the application. The combined effect of approving both the SMH and VRMC applications will be a net reduction in the number of licensed beds in Sarasota County, and the creation of an additional access point for acute care services.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered: approving CON Application No. 10457 filed by Sarasota County Public Hospital District, d/b/a Sarasota Memorial Hospital, subject to the conditions contained in the application; and approving CON Application No. 10458 filed by Venice HMA Hospital, LLC, d/b/a Venice Regional Bayfront Health, subject to the conditions contained in the application. DONE AND ENTERED this 8th day of May, 2018, 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 8th day of May, 2018.
Findings Of Fact At all times relevant hereto Respondent was licensed as a physician in the State of Florida having been issued license number ME0040318. Respondent completed a residency in internal medicine and later was a nephrology fellow at Mayo Clinic. He was recruited to Florida in 1952 by Humana. In 1984 he became associated with a Health Maintenance Organization (HMO) in an administrative position but took over treating patients when the owner became ill. This HMO was affiliated with IMC who assimilated it when the HMO had financial difficulties. At all times relevant hereto Respondent was a salaried employee of IMC and served as Assistant Medical DIRECTOR in charge of the South Pasadena Clinic. On October 17, 1985, Alexander Stroganow, an 84 year old Russian immigrant and former cossack, who spoke and understood only what English he wanted to, suffered a fall and was taken to the emergency Room at a nearby hospital. He was examined and released without being admitted for inpatient treatment. Later that evening his landlady thought Stroganow needed medical attention and again called the Emergency Medical Service. When the ambulance with EMS personnel arrived they examined Stroganow, and concluded Stroganow was no worse than earlier when he was transported to the emergency Room, and refused to again take Stroganow to the emergency Room. The landlady then called the HRS hotline to report abuse of the elderly. The following morning, October 18, 1985, an HRS case worker was dispatched to check on Stroganow. Upon arrival, she was admitted by the landlady and found an 84 year old man who was incontinent, incoherent, and apparently paralyzed from the waist down, with whom she could not engage in conversation to determine his condition. She called for a Cares Unit team to come and evaluate Stroganow. An HRS Cares Unit is a two person team consisting of a social worker and nurse whose primary function is to screen clients for admission to nursing homes and adult congregate living facilities (ACLF). The nurse on the team carries no medical equipment such as stethoscope, blood pressure cuff, or thermometer, but makes her evaluation on visual examination. Upon arrival of the Cares Unit, and, after examining Stroganow, both members of the team agreed he needed to be placed where he could be attended. A review of his personal effects produced by his landlady revealed his income to be above that for which he could qualify for medicaid placement in a nursing home; that he was a member of IMC's Gold-Plus HMO; his social security card; and several medications, some of which had been prescribed by Dr. Dayton, Respondent, a physician employed by IMC at the South Pasadena Clinic. The Cares team ruled out ACLF placement because Stroganow was not ambulatory, but felt he needed to be placed in a hospital or nursing home and not left alone with the weekend approaching. To accomplish this, they proceeded to the South Pasadena HMO clinic of IMC to lay the problem on Dr. Dayton, who was in charge of the South Pasadena Clinic, and, they thought, was Stroganow's doctor. Stroganow had been a client of the South Pasadena HMO for some time and was well known at the clinic as well as by EMS personnel. There were always two, and occasionally three, doctors on duty at South Pasadena Clinic between 8:00 and 5:00 daily and, unless the patient requested a specific doctor he was treated by the first available doctor. Stroganow had not specifically requested to be treated by Respondent. When the Cares unit met with Respondent they advised him that Stroganow had been taken to Metropolitan General Hospital Emergency Room the previous evening but did not advise Respondent that the EMS squad had refused to return Stroganow to the emergency Room when they were recalled for Stroganow the same evening. Respondent telephoned the Metropolitan General Emergency Room and had the emergency Room medical report on Stroganow read to him. With the information provided by the Cares unit and the hospital report, Respondent concluded that Stroganow needed emergency medical treatment and the quickest way to obtain such treatment would be to call the EMS and have Stroganow taken to an emergency Room for evaluation. When the Cares unit arrived, Respondent was treating patients at the clinic. A clinic, or doctors office, is not a desirable or practical place to have an incontinent, incoherent, and non-ambulatory patient brought to wait with other patients until a doctor is free to see him. Nor is the clinic equipped to perform certain procedures that may be required for emergency evaluation of an ill patient. At a hospital emergency Room such equipment is available. EMS squads usually arrive within minutes of a call being placed to 911 for emergency medical treatment and it was necessary that someone be with Stroganow when the EMS squad arrived. Accordingly, Respondent suggested that the Cares team return to Stroganow and call 911 to transport Stroganow to an emergency Room for an evaluation. Upon leaving the South Pasadena clinic the Cares team returned to Stroganow. Enroute they stopped to call a supervisor at HRS to report that the HMO had not solved their problem with Stroganow. The supervisor then called the Administrator at IMC Tampa Office to tell them that one of their Gold-Plus HMO patients had an emergency situation which was not being property handled. Respondent left the South Pasadena Clinic around noon and went to IMC's Tampa Office where he was available for the balance of the afternoon. There he spoke with Dr. Sanchez, the INC Regional Medical Director, but Stroganow was not deemed to be a continuing problem. By 2:00 p.m. when no ambulance had arrived the Cares Unit called 911 for EMS to take Stroganow to an emergency Room. Upon arrival shortly thereafter the EMS squad again refused to transport Stroganow. The Cares team communicated this to their supervisor who contacted IMC Regional Office to so advise. At this time Dr. Sanchez authorized the transportation of Stroganow to Lake Seminole Hospital for admission. Although neither Respondent nor Sanchez had privileges at Lake Seminole Hospital, IMC had contracted with Lake Seminole Hospital to have IMC patients admitted by a staff doctor at Lake Seminole Hospital. Subsequent to his meeting with the Cares team Respondent received no further information regarding Stroganow until well after Stroganow was admitted to Lake Seminole Hospital. No entry was made on Stroganow's medical record at IMC of the meeting between Respondent and the Cares Unit. Respondent was a salaried employee whose compensation was not affected by whether or not he admitted an IMC Gold-Plus patient to a hospital.
The Issue Whether the application of Wuesthoff Memorial Hospital, Inc. (CON 8740) for a 50-bed general acute care hospital in South Brevard County should be granted?
Findings Of Fact The Parties Wuesthoff The applicant for CON 8740 is Wuesthoff Memorial Hospital, Inc., a Florida not-for-profit corporation. Wuesthoff operates a general acute care hospital (the "Hospital" or the "Rockledge campus") in Rockledge, Florida. According to the division of the county into three areas (north, central, and south) ascribed to by Wuesthoff, Rockledge is in Central Brevard County. Wuesthoff's parent corporation is a not-for-profit corporation, Wuesthoff Health Systems, Inc. (the "Wuesthoff System"). The Wuesthoff System operates health care providers across the health care spectrum. Among the entities controlled by the Wuesthoff System is Wuesthoff Health Services, Inc., which operates a home health agency, a hospice, a durable medical equipment service and a 114-bed skilled nursing facility. The Wuesthoff Foundation, responsible for fundraising activities for all components of the Wuesthoff System and Care Span, a medical services organization which owns and operates physician practices, are also under the umbrella of the Wuesthoff System. The health care system operated by the Wuesthoff System serves residents in and around Brevard County and, to a limited extent, beyond. Examples of its service throughout Brevard County are the hospice, the durable medical equipment-company, and a reference laboratory. The hospice, for example, is licensed and serves all of Brevard County. The reference laboratory, located in Viera, provides services throughout Broward County and to other counties in Florida. The Wuesthoff System also owns a mobile health unit that travels throughout the county to provide health care services. The Wuesthoff System owns two outpatient clinics or "broad based diagnostic clinics" (Tr. 98) in Brevard County. One is on Merritt Island; the other is located in Sun Tree. Home health services are provided from a base of three different offices in the county. Similar to some of the other services offered by Wuesthoff, its home health services are provided throughout the county. Although it draws patients from throughout the county, most of Wuesthoff's hospital admissions come from Central Brevard County where the Hospital is located. If one defines "Central Brevard County" to include Port St. John and Sun Tree Viera, the sites of the northernmost and southernmost physician practices owned or operated by Care Span, then all of the practices in the Wuesthoff System are within Central Brevard County. Ownership of these practices does not restrict the physicians in them from referring patients for treatment outside the Wuesthoff System. But consolidation of the various services offered by the practices (diagnostic and radiology services, for example) enables Wuesthoff to strengthen its presence in Central Brevard County. The result is "additional volume" (Tr. 164) for the Hospital. The Hospital contains 268 acute care beds, 30 psychiatric beds, and five hospice beds, for a total of 303 beds. (It also contains 10 Level II Neonatal Intensive Care Unit beds.) If the project subject to CON review in this proceeding is ultimately approved, 100 of these beds will be de-licensed, leaving a 203-bed facility. HRMC Holmes Regional Medical Center ("HRMC") is a 528-bed regional, not-for-profit hospital, headquartered in Melbourne, Florida, operating on two acute care campuses under a single hospital license. One campus is the site of a 428-bed tertiary care facility in Melbourne; the other is a 60-bed general acute care community hospital in Palm Bay. Both facilities are in the southern portion of Brevard County. In addition to the 428 general medical and pediatric beds operated at the Melbourne facility, HRMC operates there a 10-bed Level II neonatal intensive care unit. HRMC is accredited by the Joint Commission for Accreditation on Health Care Organizations ("JCAHO"). It operates the only hospice program in the county accredited with commendation by the JCAHO; the only comprehensive community cancer program that has been accredited by the American College of Surgeons; the only American Sleep Disorders Association accredited sleep lab; the only American College of Radiology accredited respiratory therapist department; the only certified pulmonary function lab; and, the only life flight helicopter in Brevard County for hospital transports. As a regional medical center, HRMC provides open heart surgery, tertiary, orthopedic and neurosurgical referrals through a seven-county area, and provides trauma support for the central and south central Atlantic Coast in the State of Florida. It is the only designated trauma center in Brevard County. HRMC was founded 60 years ago by the community and has been a not-for-profit, community-based hospital ever since. The mission of HRMC is to improve, regardless of ability to pay, the health status of every member of the community through collaborative and cooperative agreements with other organizations and agencies it its service area. To represent the community's interests, HRMC's Board is composed of community leaders, educators, and employers. HRMC plays an active role in the community. The program denominated HOPE (Health Outreach Production and Education) is a collaborative effort by the Brevard County Public Health Unit, the American Cancer Society, the School Board, the County Commission and HRMC to solve community health problems. There are currently nine HOPE sites, and three HOPE centers. Among the purposes of the HOPE sites and centers is meeting the unique needs of children with developmental disabilities. Cape Canaveral Hospital, Health First and HFHP Cape Canaveral Hospital, Inc. ("CCH") is the licenseholder for a 150-bed hospital approximately five miles east of Wuesthoff in Cocoa Beach, Florida. Like Wuesthoff, Cocoa Beach is located in Central Brevard County. In August of 1995, HRMC entered into an agreement with CCH to create Health First, Inc. The presidents/chief operating officers of HRMC and CCH are employees of Health First. Similar to the Wuesthoff System, Health First controls the operations of its hospital facilities (HRMC and CCH) and owns and operates physician practices, health clinics, a home health agency, a hospice, and a skilled nursing facility. Health First is the sole shareholder of a Florida not- for-profit corporation known as Health First Health Plans, Inc. ("HFHP"). HFHP is the largest managed care organization in Brevard County operating both a traditional health maintenance organization ("HMO") and a Medicare HMO. Other Nearby Hospitals Parrish Medical Center, operated by a statutorily created tax district, is located in Titusville. If the county is considered to contain three distinct areas (north, central, and south) as proposed by Wuesthoff, Parrish is the only hospital in North Brevard County. Sebastian River Medical Center is located in Indian River County, south of Brevard County. Located in a relatively rural area, it is a small hospital. It provides no tertiary services. It draws some patients from South Brevard County. These patients would otherwise in all probability seek hospital services from a Brevard County hospital. Second Attempt by Wuesthoff Wuesthoff's CON application seeks to establish a new 50-bed general acute care hospital in South Brevard County. This is not the first time Wuesthoff has attempted to obtain such a CON. It applied earlier in CON 8597 for a 50-bed hospital in South Brevard County. In the first attempt, the Agency preliminarily denied the application. Wuesthoff petitioned for a formal administrative hearing. Following receipt of a Recommended Order entered in DOAH Case No. 97-0389 that CON 8597 be denied, Wuesthoff withdrew its application and dismissed its petition for a formal administrative hearing. The Agency entered a "final order" closing its file and dismissing Wuesthoff's petition in light of the application's withdrawal. (Legal proceedings which followed issuance of the order are briefly described in the Preliminary Statement of this Recommended Order.) No New Beds in the Subdistrict Proposed by the Application By the application subject to this proceeding, Wuesthoff does not propose the addition of new beds to Brevard County (the acute care subdistrict at issue, designated by the Agency as Subdistrict 7-1.) In fact, because of Wuesthoff's commitment to delicense 100 beds as a condition of the approval of its application, the granting of the application will result in a net loss of 50 hospital beds in the subdistrict. "[F]ixed need pool[s] only appl[y] to the addition of new beds to a subdistrict." (Tr. 3468). That the fixed need pool resulted in a published need of zero for general acute care hospital beds for the batching cycle in which Wuesthoff's application was filed, therefore, has "no bearing" (Id.) on the issues in this proceeding. For the same reason (that granting Wuesthoff's application will not result in the addition of new general acute care beds in the district) the applicant is not required to prove the existence of "not normal circumstances" to overcome any presumption created by the calculation of the fixed need pool as zero. The Proposed Project The site of the proposed hospital, 43 acres purchased by Wuesthoff for approximately $2.5 million, is on Wickham Road in the city of Melbourne. Twenty of the 43 acres will be devoted to a medical complex of which the 50-bed hospital will be a part. The complex will be "one building that has three very definite components." (Tr. 83). The three components are "an ambulatory and diagnostic center" (Id.), a medical office building, and the 50-bed hospital. The diagnostic center is CON- exempt and the medical office building has been issued a certificate-of-need. Although committed to construct the diagnostic facility and the medical office building at least since March of 1997, at the time of hearing, no construction permits for the property had been obtained nor had any activity on the two components been commenced. Nonetheless, Wuesthoff remains committed toward construction of the diagnostic center and the office building regardless of the outcome in this proceeding. Although the proposed hospital will not provide tertiary services, it will provide all services typically provided in a community hospital. These include obstetrics, pediatrics, and emergency services in a 24-hour emergency department. The services to be offered will not be unique in the subdistrict; all are presently available in the community. In other words, the services to be offered will duplicate services presently offered by existing providers. The estimated cost of the 50-bed hospital proposed in CON 8740 is $38,512,961, a cost that, in the case of a not-for- profit hospital, will ultimately be born by the public "one way or another." (Tr. 2402.) Wuesthoff's application included projections of revenues and expenses attributable to the proposal for the proposed construction period and the first two years of operation. It also included, as required, audited financial statements for two years and a listing of all Wuesthoff's capital projects planned, pending or underway at the time of the filing of the application. A Purpose of CON Law One of the purposes of CON review of an application for a new hospital is "to limit unnecessary, costly duplication of services that are available at other hospitals . . . at least where those services are being provided at reasonable costs." (Tr. 2401-02). Preliminary Agency Action Initially, AHCA Staff intended to recommend denial of Wuesthoff's application. After a meeting with the Director of AHCA, the decision was made to approve the application. The most important factor weighing in favor or approval was one related to competition and costs of hospital services to the ultimate consumer of the services, "[n]amely that . . . large HMO providers have no access to [HRMC] . . . or have been unable to get contractual relationships with [HRMC]." HRMC No. 75, p. 20. The meeting with the Director clarified the Agency's priorities. On July 11, 1997, AHCA issued its State Agency Action Report ("SAAR") containing its determination that the application should be approved. This proceeding was initiated on August 15, 1997, when HRMC filed its Petition for Formal Administrative Hearing on August 15, 1997, in order to challenge the Agency's decision. Need in Relation to the District Health Plan: Section 408.035(1)(a), F.S. The portion of the District 7 Local Health Plan governing the transfer of existing beds includes five parts. Preference is given to applicants that provide documentation of compliance with the five parts. The first part addresses need in the service area proposed to receive the beds. In addressing specific populations, access is one of the considerations. There was no published need for beds to be provided if the application is granted. "[A]t the time the application was filed the Agency's formula showed in excess of 342 beds. [At the time of hearing], the current formula shows an excess of 333 acute care beds for Brevard County." (Tr. 3385). There are no barriers (such as geographic barriers) typically associated with access to acute care services in the subdistrict. Every resident of Brevard County has access to a general acute care hospital within a drive time of 30 minutes usually and 40 minutes at the most. In South Brevard County, Holmes Regional at its two campuses provides high quality inpatient care and excellent medical services. Wuesthoff's hospital in Central Brevard County and Sebastian Medical Center in the adjacent county to the south also serve some of the residents of South Brevard County. Wuesthoff does not receive preference under the first part of the district plan applicable to this proceeding. The second part of the local health plan applicable to this proceeding governs impact to the parent facility including projected occupancy declines, curtailing of service effect on operating cost, use of vacated space at the main campus and charge changes. "[T]here would be minimal utilization decline at the Rockledge facility tied to some redirection of patients from Rockledge to south Brevard." (Tr. 1222). The space that will be vacated will be reused. Wuesthoff receives preference under this part of the district plan. The third part calls for documentation of improvement of access by at least 25 minutes to at least 10% of the population or a minimum of at least 35,000 people. While Wuesthoff's proposal will provide a competitive alternative to substantially more than 10% of the population of South Brevard County, a number in excess of 35,000 people, access to acute care hospital services is presently satisfactory in South Brevard County. Wuesthoff does not receive any preference under this part of the plan. The fourth part relates to the commitment of the applicant to the provision of charity care and care to the medically indigent. Wuesthoff meets this preference based on its commitment that 15% of the discharges from the proposed facility will be Medicaid and charity care. The fifth part addresses the applicant's participation in indigent care programs in the county. Wuesthoff participates in a significant number of community benefit and outreach programs that meet the concerns of this part: There is the We Care Program, . . . a distributed medical access point . . . [and]. . . the United Order of True Sisters, . . .a service group which Wuesthoff supports. Wuesthoff works with a CMS program to provide baby and young children support services. Wuesthoff was involved with the development of the Children's Advocacy Center . . . a community-based program. It's a participant in the Health Start Coalition. And Wuesthoff has also sponsored its own mobile health program with a specific focus and purpose to provide care to [the indigent]. (Tr. 1225). Wuesthoff clearly meets this preference. On balance, despite the lack of an access problem for residents of the subdistrict, Wuesthoff meets the need criteria identified in the applicable portion of the district plan. The Availability, Quality of Care, Efficiency, Appropriateness, Accessibility, Extent of Utilization, and Adequacy of Like and Existing Health Care Services in the Service District: Section 408.035(1)(b),F.S. There is an excess of capacity in acute care beds in Brevard County. Despite an increase in population from 1993 to 1997 of about 2% per year overall and about 3.5% per year in the populace over 65 years of age, the use rate of hospital services declined. In 1993, the use rate was 600 acute care patient days per thousand population. In 1997, the rate was 484 acute care patients per thousand. The occupancy rates for Brevard County hospitals, despite the population increase, is also trending downward. In 1990, overall occupancy of hospital beds in Brevard County was 63%. In 1997, it was approximately 53%. This is due to a number of factors. Managed care penetration has increased; managed care exerts influence to hold down admissions and inpatient days; and there has also been a shift from inpatient surgical procedures to outpatient surgical procedures. The SunTree/Viera area, mid-way between Wuesthoff and Holmes Regional, is the most rapidly growing area of its size in Brevard County. As opposed to areas south of the SunTree/Viera area, where the overwhelming majority of patients use Holmes Regional for hospital services, the SunTree/Viera area is subject to active competition between Wuesthoff and HRMC for patients. Holmes Regional has been shown to be a consistent low charge provider operating within the expected range of outcomes. Furthermore, HRMC has performed as one of the top five hospitals in Florida in reducing overall Cesarean-Section births and increasing vaginal births after Cesarean ("VBAC"). This is important because "unnecessary Cesarean Section presents a real risk for both the mom and the baby . . . [and] the cost to the State for Cesarean Sections performed when vaginal birth would be a desirable alternative added about $3,000 per delivery to the State funded [deliveries]." (HRMC No. 77, p. 1091). Holmes Regional has had the lowest Cesarean Section rate in the county and the highest VBAC rate in the County. The construction of the proposed facility would not significantly increase access to hospital services for Brevard County patients. Holmes Regional delivers the majority of Medicaid babies in the county and is also a contract provider for Children's Medical Services. Ten years ago or so, in recognition of a substantial portion of the population in Brevard County without health insurance, Holmes Regional collaborated with the school board, the public health unit, civic organizations and others to create two school-based community health clinics. "[T]argeted at young families and children" (HRMC No. 77, p. 1063), the clinics provide pro bono health care services. The collaboration was the genesis of the HOPE program. The HOPE program's agenda was expanded to include a mobile clinic to reach those in need of pro bono services who were without transportation to the school-based clinics. The agenda was again enlarged to provide integrated services for children with developmental and cognitive disabilities and delays. Holmes Regional provides direct funding of approximately $1.5 million per year through operational costs of the HOPE program. Holmes Regional not only provides funding to HOPE but it subsidizes salaries of nurses, midwives, and obstetricians directly employed by the Public Health Unit, whose duties include the provision of medical care to the indigent. Dr. Manuel Garcia, Medical Director of the Public Health Unit in Brevard County for over 20 years until his retirement in 1998 offered the following in his testimony in the hearing before Administrative Law Judge Johnston (admitted into evidence in this proceeding as HRMC No. 65) about Holmes Regional's support of the Public Health Unit: "Holmes has always been willing to go the extra mile to help the Health Department with other programs and activities." HRMC No. 65, p. 1211. With regard to the question of which hospital "in Brevard County sets the pace in providing indigent care" (Id.) Dr. Garcia answered: ll the hospitals do a pretty good job . . . [t]here is no doubt that Holmes has been more aggressive in terms of getting into the community to kind of use all the resources available and putting together different organizations and agencies in order to provide more services to the poor in the community. They have been going the extra mile . . . (HRMC Ex. No. 65, pgs. 1211, 1212.) Holmes Regional's efforts in support of the Public Health Unit have continued following Dr. Garcia's tenure. At the same time, "it is true" (Tr. 274) that Wuesthoff, Cape Canaveral, and Parrish Medical Center all "go the extra mile in providing services to the patients that come through the health department." (Id.) Holmes Regional works with the Brevard County Public Health Unit, whose duties include provision of medical care to the poor and indigent patients in the county to develop a better system for giving prenatal care to Medicaid and indigent mothers. In 1998, HRMC provided $10 million of free charity for indigent patients not admitted through HOPE. General community donations and contributions totaled $542,000 and in-kind contributions totaled $714,000. The HOPE program, funded entirely by Holmes Regional, paid $1.1 million in clinical services for staff, pharmacy, services, and supplies to operate its clinics. In addition to these direct dollars, HRMC contributed 2.1 million in uncompensated services to the HOPE program in 1998. The HOPE program has been honored for ground-breaking work in community health improvement and for improving life in Florida through the American Hospital Association's Nova Award and the Heartland Award from the Governor of Florida. Holmes Regional supports a variety of agencies to provide care to AIDS patients. One such clinic is the Comprehensive Health Clinic. In existence since 1991, it currently treats 400 AIDS patients. Its services are mostly paid for through federal programs. Without the assistance of HRMC, the clinic would not be able to provide the quality of services it offers these AIDS patients. Holmes Regional is involved with several children's health programs, including a Healthy Families Program providing in-kind screening assessment. Health Kids Plan subscribers are provided access to managed care insurance products by Health First Health Plans, the managed care company affiliated with Holmes Regional through its parent, Health First, Inc. The company loses "hundreds of thousands of dollars" (Tr. 2108) on the Health Kids segment of its business. There was no evidence presented that persons in need of quality, general acute care services are not able to obtain those services at existing providers in Brevard County. There is no lack of availability or access to general acute care services on either geographic or financial grounds. The ability of the applicant to provide quality of care and the Applicant's Record of Providing Quality of Care: Section 408.035(1)(c), F.S. Wuesthoff is capable of providing quality inpatient health care services and has done so in the past. The Availability and Adequacy of Other Health Care Facilities in the District which may serve as Alternatives to the Health Care Facilities and Health Services to be Provided by the Applicant: Section 408.035(1)(d), F.S. There are available alternatives to the inpatient services proposed by Wuesthoff. The existing providers of acute care services have excess capacity to absorb any increase in the utilization of acute care services in the county. Utilization of the services Wuesthoff proposes, moreover, have been in decline in relation to the earlier part of the decade of the nineties. From 1993 to 1997, inpatient surgery procedures conducted in Brevard County declined approximately 18.8%, a trend consistent with the statewide trend. In 1998, "the number of inpatient procedures pretty much level[ed] off." (Tr. 3410). In contrast, the number of outpatient procedures in the county rose in 1997 from the number conducted in 1993. For each year in the same time period, the number of outpatient surgical procedures conducted in the county far exceeded the number of inpatient ones. In 1997, for example, there were more than twice as many outpatient procedures as inpatient. The move toward outpatient procedures is the result of health care providers seeking alternatives to hospitalization. Among the alternatives in the case of surgical procedures are the provision of those procedures on an outpatient basis performed in physician offices and ambulatory surgical centers. There has been a decline in Brevard County in utilization of other services Wuesthoff proposes for its 50-bed hospital. During the period of 1993-1997, while the population of Brevard County was growing at a rate in excess of 2% per year, obstetric admissions as a percentage of admissions to Brevard hospitals declined. Pediatric admissions did likewise. Not surprisingly, therefore, there is excess capacity for pediatric and obstetrical beds in Brevard County. With 66 reported available beds in Brevard County, the average daily census is about 34 beds. The average daily census for the 86 pediatric beds in the county is about 32 to 35. At the time of hearing, available data for 1998 showed a continued decline in pediatric bed demand and "[b]ased on the annualized data . . . a very slight increase" (Tr. 3402) in obstetric bed demand. The excess capacity demonstrated for the period from 1993 through 1997 remains. Although alternatives are available, they are not adequate for one reason. That reason is a competitive problem which exists in South Brevard County, discussed in Findings of Fact Nos. 91-107, below. Probable Economies and Improvements in Service that May be Derived from Operation of Joint, Cooperative, or Shared Health Care Resources: Section 408.035(1)(e), F.S. Wuesthoff does not propose its new hospital operate a joint, cooperative, or shared program with any entity except its Rockledge facility. It proposes the sharing of resources with its main facility in Rockledge. "The services that are being proposed for the South Brevard hospital [the proposed hospital] are a subset of what's there now." (Tr. 1257). The proposed services, therefore, are a duplication of existing services. There are some economies of scale and benefits enjoyed by a second campus of a hospital by virtue of the first hospital's existence, but generally, it is less efficient for a hospital to operate two campuses. The Need in the Service District for Special Equipment and Services which are not Reasonably and Economically Accessible in Adjoining Areas: Section 408.035(1)(f), F.S. Wuesthoff does not intend to provide equipment that is not available within the county or in adjacent districts. The Need for Research and Educational Facilities, Health Care Practitioners, and Doctors of Osteopathy and Medicine at the Student, Internship and Residency Training Levels: Section 408.035(1)(g), F.S. This need is met in Brevard County. The Brevard County hospitals are active in community training programs in conjunction with Brevard County Community Hospital and the University of Florida. Holmes Regional has institutional training programs with the University of Florida, All Children's Hospital, the local vo-tech, and the University of Central Florida, in addition to other community programs. Immediate and Long-term Financial Feasibility of the Proposal: Section 408.035(1)(i), F.S. a. Immediate Financial Feasibility. Immediate financial feasibility is determined by whether the applicant has adequate financial resources to fund the capital costs of the project and the financial ability to fund short-term operation losses. The project costs projected in Schedule 1 of Wuesthoff's application, taking into account inflation and other factors arising from delays associated with this proceeding, are reasonable and appropriate. Wuesthoff proposes to finance the project with $10.5 million in existing funds and $28 million in debt financing. At the time of hearing, Wuesthoff had $51 million in cash assets on its balance sheet available to cover the $10.5 million proposed to come from existing funds. The $28 million in debt financing was proposed in the application to be provided by "proceeds from a fixed rate bond issue." (Wuesthoff No. 1, Vol. I of II, Schedule 3 Assumptions.) "The interest rate for the debt is expected to be approximately 6.5%." (Id.) As part of its case for immediate financial feasibility, Wuesthoff presented a letter from The Robinson- Humphrey Company, Inc., dated April 6, 1999. In support of the opinion that Wuesthoff would qualify for tax exempt financing, the company wrote: Based on our long relationship and thorough understanding of Wuesthoff and its strategic direction, we believe that the rating agencies, bond insurers and capital markets will react positively to the Hospital's project. In addition, based on the Hospital's ability to secure a competitive insurance bid on its Series 1996 Bonds, the Hospital will be able to secure a new competitive bond insurance policy as well as credit ratings in the "A" category from the rating agencies in conjunction with the financing to help fund a portion of the proposed facility. Based on today's market conditions, the average interest rates available on a 30-year tax-exempt bond issue would be in the range of 5.25% to 5.50% based on an "A" rating category issue and "AAA/Aaa" rated issue with bond insurance, respectively. Although it is difficult to anticipate the interest rate environment throughout 1999, we would expect rates to be in the 5.50% to 5.75% range , using recent interest history as a benchmark. (Wuesthoff No. 3, pgs. 1 and 2). After testimony with regard to the letter by Wuesthoff's witness Rebecca M. Colker, qualified as an expert in health care finance, the following colloquy between Ms. Colker and Wuesthoff's counsel took place at hearing: Now, based on your assessment of the marketplace and your investigation of the marketplace, do you have an opinion as to whether Wuesthoff has the ability to finance the project that it proposed in [its] application . . .? A. Yes, sir, I feel [Wuesthoff] has the ability to finance the project. (Tr. 179). During the hearing, but after Ms. Colker's testimony, allegations surfaced publicly that Wuesthoff had violated the law with respect to its tax-exempt status as a "501(c)(3) organization" under the Internal Revenue Code by engaging in political activity and obtaining private benefit. Proof of the violations exposes Wuesthoff to revocation of its tax-exempt status. At the time of hearing, the IRS had not determined the truth of the allegations. If the IRS determines that the violations occurred, there are penalty options available to the Service short of revocation of Wuesthoff's tax exempt status. These options are referred to as intermediate sanctions. In addition, the IRS may enter a closing agreement with the offender in which an intermediate sanction is accepted in lieu of revocation. Wuesthoff, moreover, can take certain steps in mitigation of any ultimate penalty imposed by the IRS. Wuesthoff presented evidence that "upon a resolution of the allegations of wrongdoing which falls short of revocation of Wuesthoff's tax exempt status, there will be no cloud upon Wuesthoff's ability to obtain the tax exempt debt financing it has proposed." Joint Proposed Recommended Order of Wuesthoff Memorial, Inc., and the Agency for Health Care Administration, p. 39. Such a resolution, if it is the one chosen by the IRS, can reasonably be expected to occur within a single year. In the meantime, whatever the outcome of the IRS' dealing with the allegations, their very existence jeopardizes Wuesthoff's ability to obtain tax exempt debt financing. Given what he had heard and read about the allegations, Mr. Todd Holder, an investment banker who provides "basically the same services that Robinson-Humphrey would provide to a hospital client" (Tr. 3337) testified: At this time, my firm would not underwrite these bonds [proposed by Wuesthoff] and I wouldn't imagine at this time any firm would underwrite these bonds . . . (Tr. 3339). If Wuesthoff's tax exempt status were revoked, its bonds would be in jeopardy of being called to cover loss to existing bond holders. Such action would affect its bond rating. A BBB rating would involve approximately a 3% rise in interest rates. If its rating were to fall below investment grade, the interest rate could rise 5% or more. Based on a $28 million issue, the amount Wuesthoff proposes for financing the new facility, each percentage point rise in interest rate equates to an annual debt service cost of $250,000. Furthermore, a loss of its tax exempt status would make it more difficult to obtain bond insurance. It is by no means certain that the IRS will revoke Wuesthoff's tax exempt status as explained above. When a charitable organization continues to fulfill its charitable obligations, "the IRS has, in practice, not revoked [its] tax- exempt status but tried to exact some other type of penalty." (Tr. 3600). Furthermore, when an offending organization has removed from authority the individuals responsible for the violations, the IRS considers such action to mitigate the penalty it imposes. At bottom, predicting the action of the IRS is speculative. If the IRS does revoke Wuesthoff's tax exempt status, Wuesthoff has enough cash assets on hand to build the proposed facility without resort to financing. If it comes to that, however, Wuesthoff's decision to carry the costs of construction and getting the facility off the ground in the first few years of operation without debt financing has implications for the project's long-term financial feasibility. b. Long-term financial feasibility. Historically, AHCA has defined long-term financial feasibility as at least breaking even, if not making a profit, by the end of the second year of operation. Among other matters Wuesthoff must prove in order to satisfy the test employed by AHCA historically, it must demonstrate that "projected revenues can be attained in light of the projected utilization of the proposed service and average length of stay." OR-1, p. 18. The processes used by Wuesthoff's expert to conclude that the project is financially feasible were conservative. But the processes contained flaws. Wuesthoff, for example, projects that it will have a volume of 8,327 patient days at its South Brevard campus in year one of operation and 11,224 patient days in year two. For the same time periods, it projects volumes of 50,000 patient days at its Rockledge facility for both year one and year two of operation, the same volume it projects at its Rockledge facility for the 12-month period during which the new facility will be built. The projections are not reasonable. Building the new hospital will not increase the demand for hospital services in Brevard County. Rather, patients will be reallocated. The proposed facility will receive patients who otherwise would be hospitalized at Holmes Regional or the Wuesthoff Rockledge campus. It is not reasonable, therefore, for Wuesthoff to project that its patient days at the Rockledge facility will remain the same in years one and two of operation of the new facility as during the year's period of construction. The Agency concurred with Holmes Regional's expert that Wuesthoff's utilization projections were overstated but did not see the overstatement as a problem because "while the applicant may not fully attain what is projected within the application . . . [it] will attain a level which will be successful, especially for a provider that is financially stable at this point in time and has the resources to carry out this project." (Tr. 3474). There are other flaws. Wuesthoff assumed that for the Rockledge facility pro forma all payors' reimbursement increased 4% a year for years one and two of operation resulting in a net revenue increase in excess of 9% for the two-year period. Managed care companies are typically not allowing a 4% per year increase to providers. Medicare reimbursement (the largest single payor source) was not likely to increase 4% per year prior to the Balanced Budget Act of 1997 (see finding of fact no. 86, below). Medicare is the largest payor source currently at Wuesthoff, accounting for in excess of 50% of operating revenues. It is also the largest payor source projected for the proposed project. In the wake of the Balanced Budget Act of 1997, Medicare margins have declined and are expected to continue to decline. Wuesthoff's Medicare revenue in year one of operation were overstated by 4.3% and in year two by 5.7%. Wuesthoff's expert did not assess the impact of the Balanced Budget Act on the Wuesthoff projections at the time they were made since they were made before the effective date of the Act. But he had not assessed the impact of the Act on the pro forma prepared for the new facility as of March 1999, after effects of the Act's impact were observable. Presumably, no such impact analysis was undertaken because Wuesthoff is a hospital that takes action to contain costs, a method for reducing the negative impact of the Act on a hospital's revenue. Other assumptions that underlie projections by Wuesthoff in the application are also not reasonable. Wuesthoff assumed that Medicare HMO would generate higher charges than traditional Medicare, but have a length of stay almost half the time such that the net reimbursement per case would be identical. On a per day basis, Weusthoff assumed that the Medicare and Medicaid HMO patient will generate a greater per diem reimbursement than a traditional Medicare and Medicaid patient, respectively. This is not a reasonable assumption. The assumption that commercial insurance remains a significant payor at the South Brevard campus is critical to the financial viability of the project. If the pro forma had shown a more reasonable managed care percentage and less commercial insurance in the payor mix, net revenue would decrease by approximately $280,000 in year two. The projected costs of operation at the South Brevard campus are unrealistically low because the projected salary expenses have been understated. The nursing staff will comprise almost one-third of the total hospital FTEs for years one and two at the South Brevard campus. There currently exists a nursing shortage such that hospitals in Brevard County are having to pay a several thousand dollar signing bonus when hiring nursing staff. Projected nursing salaries for the first and second year of operation were only minimally higher above what Wuesthoff was paying its nursing staff three years earlier. The Needs and Circumstances of those Entities which Provide a Substantial Portion of their Services or Resources or Both, to Individuals not Residing in the District: Section 409.035(1)(k), F.S. Wuesthoff's application does not address providing a substantial portion of its services or resources to individuals not residing in the District. The Probable Impact of the Proposed Project on the Costs of Providing Health Services Proposed by the Applicants, Including the Effect on Competition: Section 408.035(1)(l), F.S. Brevard County's Unusual Shape Brevard County is relatively narrow from East to West and extremely long from North to South, stretching 72 miles from its northern border to its southern one. Because of its unusual geographic shape, the county is easily divisible into three areas, north, central and south. North Brevard County's population was approximately 68,000 in 1998. Central Brevard County's population was approximately 168,000 and South Brevard County's was approximately 234,700. Since 1970, the share of total county growth has consistently been lowest in North Brevard County, peaking at 13% in 1990, with a projected share of total county growth in 2003 at 10.4%. Next in order, Central Brevard County's share of growth since 1970 has been on the rise but has remained substantially lower than South Brevard County's. Its share of growth in 2003 is expected to be about 38.8%. The County's "growth has been predominantly in [S]outh Brevard." (Tr. 375). In 1971, its share of total county growth was 71.1%. Although "the share of growth in [S]outh Brevard has declined over time . . . it is still about 50%." (Id.) In 2003, South Brevard County's share of total growth is projected to be 51.2%. Consistent with its higher share in total county growth, more than half of Brevard County housing starts have within recent years occurred in South Brevard County and more than half of Brevard County employers and employees are located in South Brevard County. South Brevard, for some time, has been the most populated of the county's three areas. It will continue to be the most heavily populated area for a considerable time in the future. North Brevard has one hospital: Parrish Medical Center. Central Brevard has two hospitals: Wuesthoff and Cape Canaveral Hospital. The two are operated by different hospital systems; Wuesthoff by the Wuesthoff Health System and Cape Canaveral by Health First. South Brevard has two hospital facilities: Holmes Regional Medical Center and Palm Bay Community Hospital. Unlike the situation in Central Brevard the two South Brevard facilities operate under a single hospital license and are part of one system: Health First. Markets, Monopolies, and the Exercise of Monopoly Power A great deal of evidence was introduced by both Wuesthoff and Holmes about whether or not South Brevard County, by itself, constitutes a market for purposes of economic analysis and, if so, whether Health First through its operation of the two South Brevard hospitals has a monopoly on hospital services within the market. Further evidence was introduced about whether Health First, in fact, exercises monopoly power. Wuesthoff posits that South Brevard County, in and of itself, is an economic market for purposes of economic analysis. While there was evidence that indicated that South Brevard County is a market for purposes of economic analysis, none of the experts who testified could ever recall a proceeding in which they had been involved in which an area smaller than a county had ever been found to constitute a market. Wuesthoff's approach, moreover, is problematic in a Certificate of Need proceeding (as distinguished from other types of proceedings that typically employ economic analysis, such as anti-trust proceedings.) Brevard County is one part of AHCA District VII, a district established by the Legislature for health planning purposes. The district is divided into subdistricts. Subdistrict 1 is composed of Brevard County, nothing more and nothing less. But the subdistricts are not further divided for health planning purposes. There is no question (nor any argument from Wuesthoff otherwise) that Health First does not have a monopoly on hospital services over the entire subdistrict, let alone the district. Assuming for the sake of argument that South Brevard County is a market for purposes of this proceeding and that Health First has a monopoly over hospital services in that market, Health First has not exercised its monopoly power as would typically be expected on the basis of net price. First of all, while one might expect that an entity with monopoly power would exercise it, that expectation cannot be assumed in the case of not-for-profit hospitals, such as Holmes Regional. The not-for-profit hospital "can't act like a profit- maximizing organization because of the way it is structured." (Tr. 2958). More importantly, "the economic hallmark of the exercise of monopoly power is a price above the competitive level, one that permits the earning of an above-competitive profit rate." (Tr. 2946). Holmes Regional's average net prices are 90.8% of what would be expected. In contrast, Wuesthoff's are 115.1% of what would be expected. Neither of these is "extraordinarily far from what you would expect." (Tr. 2971). In the final analysis, pricing data with regard to both list prices and net prices, no matter the payor source, does not indicate "the systematic exercise of monopoly power by Holmes . . ." (Tr. 2973), in "[S]outh Brevard County." (Tr. 2975). It is clear, however, that residents of South Brevard do not have convenient access to Brevard County hospitals other than the two Health First hospitals in South Brevard, Holmes Regional and Palm Bay Medical Center. The other Brevard County hospitals are either too far away in distance or require too much travel time to reach by automobile for most of the residents of South Brevard. Consistent with this convenience factor, 82% of the South Brevard County residents discharged from hospitals in the first six months of 1998 were discharged from Holmes Regional and Palm Bay Community. Of the remaining South Brevard County residents discharged from hospitals, the highest percentage (6%) of patients were discharged from Sebastian River Medical Center. Sebastian River, while close to some South Brevard County residents, does not provide a high enough level of services in many cases to be a reasonable substitute for Holmes Regional. Even if it is convenient to use hospital services that are close by, a patient will chose a more inconvenient hospital if the nearby hospital does not provide services of reasonable quality at reasonable prices. The two Health First hospitals provide services of reasonable quality at reasonable prices. Nonetheless, the establishment of Wuesthoff's proposed hospital would substantially increase the accessibility of South Brevard County residents to a non-Health First facility. The presence of Wuesthoff's proposed hospital in South Brevard County would offer residents of South Brevard more of a meaningful choice. In essence, granting Wuesthoff's application would produce a more competitive environment for the hospital services to be offered by Wuesthoff in South Brevard County, whether South Brevard County constitutes a market or not. Wuesthoff presents a greater question for resolution in this proceeding than whether granting the application would simply provide more competition. Even though Holmes Regional's net pricing in general does not indicate that it is exercising monopoly power in South Brevard County, is there, nonetheless, a need for a more competitive environment for hospital services in South Brevard County? The answer to that question is "yes" when one considers competition from the perspective of managed care payors. Need for Competition for Hospital Services in South Brevard County. In general, competition enhances the quality of health care services even when services being provided are of high quality. Competition also provides an incentive for hospitals, including non-profit hospitals to serve patients more efficiently. Competition lowers the costs consumers pay for hospital services. When managed care payors are able to reduce their payments to hospitals, they are able to lower the premiums paid by the "end purchaser." (Tr. 609). If the end purchaser is an employer, the "employer then makes [its] business decision internally as to how much of that cost is passed along to the individual employee." (Id.) This effect of competition is the basis for a number of managed care contractors and employers' vigorous support of Wuesthoff's application, the success of which will create competition in South Brevard County. Wuesthoff's proposed hospital will spur competition which will benefit consumers by lowering Holmes Regional's prices. Managed care helps contain costs and injects price sensitivity into the market. At the same time, higher levels of hospital concentration are associated with lower levels of discounting to managed care companies. Managed care penetration has been increasing in Brevard County. In South Brevard County, managed care penetration has increased but mainly due to increase in enrollment in HFHP, Health First's managed care plan. Managed care penetration in South Brevard County achieved by HFHP "in itself is not the issue." (HRMC No. 75, p. 32.) With only one active HMO in South Brevard County, there is no incentive to achieve better rates for the ultimate consumers especially if the main HMO is part of the same organization as the hospital as in this case. "[I]f you have several large commercial plans . . . they will be able to get better rates from Holmes Regional than if you only have one." (Id., p. 32-33). Commercial HMO inability to contract with HRMC was considered by the agency as the most important factor in approving Wuesthoff's application. Health maintenance organizations, other than HFHP, do not have meaningful competitive ability to compete with HFHP in South Brevard County. In recognition of their inability to use Central Brevard County hospitals or Sebastian River Medical Center as substitutes, and to avoid losses caused by the lack of hospital competition in South Brevard County, Aetna and United, two large managed care payors in Brevard County, have embarked on an exit strategy with regard to South Brevard County. It is difficult for managed care payors to steer south Brevard residents to central Brevard hospitals. Patients are generally unwilling to change physicians when it becomes necessary to enter a hospital. Discharge data demonstrates the lack of overlap in physician privileges between South and Central Brevard. The Central Florida Health Care Coalition, an organization comprised of businesses and formed to address health care issues which includes the largest of Brevard County employers, supports Wuesthoff's application because of the competition it will create and a number of consumers expressed support for the Wuesthoff application based on the need for competition in South Brevard County. In contrast, not a single employer, large or small, testified in support of opposition to the application. Wuesthoff's new hospital would provide an alternative for managed care payors to negotiate hospital prices in South Brevard County. More favorable hospital prices in managed care contracts, in turn, would lead to managed care premiums that would be lower for managed care customers. Lower health care premiums enable larger numbers of consumers to purchase health care coverage, thereby reducing the number of persons who have no source of payments for health care services. The ability of managed care plans to negotiate hospital prices is dependent upon ability to engage in selective contracting, the ability of a managed care plan to refuse to include a hospital in its network of providers. Selective contracting induces hospitals to offer discounted prices to assure participation in a managed care plan's network of hospitals in order to avoid losing the managed care plan's business to other competitive hospitals. Selective contracting can only be an effective strategy if managed care contractors have meaningful choices among hospital providers. In Brevard County, only in the central area do managed care plans have more than one hospital system from which to choose meaningfully and only in Central Brevard County has there been any real competition among hospitals for managed care contracts. Holmes Regional does not face the threat of a loss of business if it refuses to contract with any one managed care plan because South Brevard residents for the most part will not seek hospital services outside South Brevard County. Without the threat of a loss of business, Holmes Regional has little, if any, incentive to offer reduced prices to managed care plans. The lack of incentive for Holmes Regional to reduce prices to managed care plans was demonstrated by several analyses, including one showing that from 1995 through 1998, net prices paid by all managed care contractors to Holmes Regional were on average 32% higher per year than those paid to Wuesthoff, which has competition from another hospital in Central Brevard County Apart from pricing analyses, the lack of competition in the managed care arena for Holmes Regional was demonstrated by its ability to resist entry into any per diem managed care contracts despite efforts by some managed care contractors to negotiate such agreements with Holmes Regional. Per diem contracts are a favored from of contracting by managed care payors because they tend to enable managed care payors to predict the level of hospital payment to which they will be exposed. Such contracts are commonly found where there is competition among hospitals. In contrast, as is to be expected of a hospital in a competitive environment, most of Wuesthoff's contract with managed care payors are per diem contracts. The Applicant's Past and Proposed Provision of Health Care Services to Medicaid Patients and the Medically Indigent: Section 408.035(1)(n), F.S. Wuesthoff has "a history of providing care to the medically indigent population." (Tr. 1244). Its commitment to continue to provide such care at the proposed facility has been discussed. Whether Less Costly, More Efficient, or More Appropriate Alternatives to the Proposed Inpatient Services are Available: Section 408.035(2)(a), F.S. The greater weight of the evidence establishes that denial of the application is less costly and more efficient. The new facility will cost $38 million to build. At the same time, existing providers are operating efficiently and have unused capacity. In fact, there is insufficient utilization of the inpatient acute care services in existence in Brevard County. The subdistrict occupancy rate is "about 54% . . .[with] at least [hundreds of] beds that are unoccupied at any point in time with the county." (Tr. 3385). Whether the alternative of denying the application is more appropriate in light of the cost of the project and efficiency considerations turns on the weight to be given Wuesthoff's case for the need for competition in the managed care arena in South Brevard County. Whether the Existing Facilities Providing Similar Inpatient Services are being Used in an Appropriate and Efficient Manner: Section 408.035(2)(b), F.S. Existing facilities are being used in an efficient manner. Whether the status quo is appropriate, again, turns on the weight to be given Wuesthoff's case for the need for competition. That Patients Will Experience Serious Problems in Obtaining Inpatient Care of the Type Proposed in the Absence of the Proposed New Service: Section 408.035(2)(d), F.S. There was no evidence that patients will experience serious problems in obtaining inpatient care of the type proposed by Wuesthoff for its South Brevard County if the application is not granted. Rule Criteria Rule 59C-1.030, Florida Administrative Code, sets forth "health care access criteria . . . [i]n addition to criteria set forth in Section 408.035, Florida Statutes . . .". Among the criteria are [t]he contribution of the proposed service in meeting the health needs of members of such medically underserved groups, particularly those needs identified in the . . . State Health Plan as deserving of priority." The first State Health Plan preference favors an applicant that provides a disproportionate share of Medicaid and charity care patient days in relation to other hospitals within the subdistrict. Wuesthoff has provided its fair share of Medicaid and charity care patient days in the past and proposes to continue to do so at the new facility if approved. But Wuesthoff is not a disproportionate share provider. As to the second preference which considers the current and projected indigent inpatient case load, the proposed facility size, and the case and service mix, Wuesthoff's application partially complies with preference in that it proposes to provide indigent care. But, Medicaid and indigent members of the population were not shown to have been denied access to hospital services in Brevard County. Approval of the facility, moreover, will not improve access or increase the number of beds since approval will result in a net loss of 50 beds in the county. The fourth preference favors an applicant with a record of accepting indigent patients for emergency care. Wuesthoff meets the preference. The fifth preference favors applicants for a type of hospital project if the facility is verified as a trauma center. Holmes Regional will remain the only verified trauma center in the subdistrict, even if the application is approved. The sixth preference favors applicants who document that they provide a full range of emergency services. The new facility will provide emergency services but not a full range unless the emergency services provided by Wuesthoff at its Rockledge campus are considered. Because the 50-bed hospital will not provide tertiary services nor high-level trauma services, "[t]he complicated or trauma cases will . . . go to Holmes Regional Medical Center" (Tr. 3384), the hospital campus closest to the new facility. The seventh preference favors applicants not fined by AHCA for any violation of emergency service statutes. Wuesthoff meets this preference. The eighth preference favors applicants who demonstrate that the subdistrict occupancy rate is at least 75%, or in the case of exiting facilities, where the occupancy rate for the most recent 12 months is at least 85%. Wuesthoff did not show that it meets this preference. The ninth preference of the State Health Plan favors an applicant with a history of providing a disproportionate share of the subdistrict's acute care and Medicaid patient days and is a Medicaid disproportionate share provider. Wuesthoff does not meet this preference.
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 Wuesthoff Memorial Hospital, Inc.'s application for CON 8740. DONE AND ENTERED this 12th day of July, 2000, 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 12th day of July, 2000. COPIES FURNISHED: Richard A. Patterson, Esquire Agency for Health Care Administration Fort Knox Building Three, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403 Terry Rigsby, Esquire Blank, Rigsby & Meenan, P.A. 204 South Monroe Street Tallahassee, Florida 32301 Stephen K. Boone, Esquire Boone, Boone, Boone & Hines, P.A. Post Office Box 1596 Venice, Florida 34284-1596 David C. Ashburn, Esquire Smith & Ashburn, P.A. 1330 Thomasville Road Tallahassee, Florida 32303 Sam Power, Agency Clerk Agency for Health Care Administration Fort Knox Building Three, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403 Julie Gallagher, General Counsel Agency for Health Care Administration Fort Knox Building Three, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403
Conclusions THIS CAUSE came before the State of Florida, Agency for Health Care Administration (“the Agency") for the issuance of a final order. 1. On March 10, 2014, Greystone Hospice of District 7B, LLC, (“Greystone”) requested a formal administrative hearing to contest the preliminary denial of Certificate of Need (“CON”) Application No. 10209, which it submitted to establish a hospice program in the Agency Health Planning Service District 7, Hospice Service Area 7B, and to contest the preliminary approval of Halifax Hospice, Inc.’s (“Halifax”) CON Application No. 10210, to Filed May 15, 2014 4:20 PM Division of Administrative Hearings establish a hospice program in Hospice Service Area 7B. 2. The matter was referred to the Division of Administrative Hearings (CDOAH”) where it was assigned Case No. 14-1368CON. 3. On April 1, 2014, Halifax requested a formal administrative hearing challenging the co-batched applications and supporting the Agency’s preliminary approval of Halifax’s CON Application No. 10210, to establish a hospice program in Service Area 7B, and to support the Agency’s preliminary denial of the co-batched application filed by Greystone. 4. The request was referred to DOAH where it was assigned Case No. 14-1472CON. 5. On April 2, 2014, DOAH issued an Order of Consolidation. 6. On April 18, 2014, Greystone filed a Notice of Voluntary Dismissal. It is therefore ORDERED: 7. The denial of Greystone’s CON Application No. 10209 is upheld. 8. The approval of Halifax’s CON Application No. 10210 is upheld subject to the conditions noted in the State Agency Action Report. ORDERED in Taliahassee, Florida, on this ee day of [hae , 2014. ab hb Ductere Elizabeth Dudek, Secretary Agency for Hegfth Care Administration
Other Judicial Opinions A party who is adversely affected by this Final Order is entitled to judicial review, which shall be instituted by filing one copy of a notice of appeal with the Agency Clerk of AHCA, and a second copy, along with filing fee as prescribed by law, with the District Court of Appeal in the appellate district where the Agency maintains its headquarters or where a party resides. Review of proceedings shall be conducted in accordance with the Florida appellate rules. The Notice of Appeal must be filed within 30 days of rendition of the order to be reviewed. Page 2 of 3 CERTIFICATE OF SERVICE I CERTIFY that a true and correct copy of this Final Order was served on the below- —~—” named persons by the method designated on this [Pine Les , 2014. Richard J. Shoop, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Stop #3 Tallahassee, Florida 32308 (850) 412-3630 W. David Watkins Administrative Law Judge Division of Administrative Hearings (Electronic Mail) Lorraine M. Novak, Esquire Office of the General Counsel Agency for Health Care Administration (Electronic Mail) Stephen A. Ecenia, Esquire Rutledge, Ecenia and Purnell, P.A. Post Office Box 551 Tallahassee, Florida 32302-0551 Steve@reuphlaw.com (Electronic Mail) Seann M. Frazier, Esquire Parker, Hudson, Rainer and Dobbs, LLP 215 South Monroe Street, Suite 750 Tallahassee, Florida 32301 Sfrazier@phrd.com (Electronic Mail) R. David Prescott, Esquire Rutledge, Ecenia and Purnell, P.A. Jonathan L. Rue, Esquire Parker, Hudson, Rainer and Dobbs, LLP Post Office Box 551 285 Peachtree Center Avenue, Suite 1500 Tallahassee, Florida 32302-0551 Atlanta, Georgia 30303 David@reuphlaw.com jrue@phrd.com (Electronic Mail) (Electronic Mail) | Gabriel F.V. Warren, Esquire James McLemore, Supervisor Rutledge, Ecenia and Purnell, P.A. Certificate of Need Unit Post Office Box 551 Agency for Health Care Administration Tallahassee, Florida 32302-0551 (Electronic Mail) Gabriel@reuphlaw.com (Electronic Mail) Page 3 of 3
Conclusions THIS CAUSE comes before the State of Florida, Agency for Health Care Administration (“the Agency") concerning Certificate of Need (“CON”) Application No. 10194, submitted by Hope Hospice and Community Services, Inc. (“Hope Hospice”), to establish a 24-bed freestanding inpatient hospice facility in Lee County, AHCA District 8, Service Area 8C. 1. On August 19, 2013, the Agency published notice of its preliminary decision to deny CON Application No. 10194. (Ex. 1) 2. On August 23, 2013, Hope Hospice filed a petition for hearing challenging the preliminary denial of CON Application No. 10194. The matter was referred to the Division of Administrative Hearings (“DOAH”). 3. The parties have since entered into the attached settlement agreement (Ex. 2), which is adopted and incorporated into this Final Order. It is therefore ORDERED: 4. CON Application No. 10194 is approved subject to the terms and conditions set forth in the Settlement Agreement. Filed June 17, 2014 4:41 PM Division of Administrative Hearings ORDERED in Tallahassee, Florida, on this { 3 day of Creene.. 2014. Agency for Health Care Administration
Other Judicial Opinions A party who is adversely affected by this Final Order is entitled to judicial review, which shall be instituted by filing one copy of a notice of appeal with the Agency Clerk of AHCA, and a second copy, along with filing fee as prescribed by law, with the District Court of Appeal in the appellate district where the Agency maintains its headquarters or where a party resides. Review of proceedings shall be conducted in accordance with the Florida appellate rules. The Notice of Appeal must be filed within 30 days of rendition of the order to be reviewed. CERTIFICATE OF SERVICE I CERTIFY that a true and correct copy of this Final Order was served on the below- named persons by the method designated on this/ 6 4 day of [ ow . 2014. Ll WA Ka Richard J. Shoop, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Stop #3 Tallahassee, Florida 32308 (850) 412-3630 Facilities Intake Unit Lorraine M. Novak, Esquire Agency for Health Care Administration Office of the General Counsel (Electronic Mail) Agency for Health Care Administration (Electronic Mail) David M. Maloney John Robert Griffin, Esquire Administrative Law Judge Hope Hospice and Community Services, Inc. Division of Administrative Hearings 9470 HealthPark Circle www.doah.state.fl.us Fort Myers, Florida 33908 (Electronic Mail) Bob.Griffin@hopehes.org (Electronic Mail) James McLemore, Supervisor Certificate of Need Unit Agency for Health Care Administration (Electronic Mail) Florida Administrative Register Volume 39, Number 161, August 19, 2013 Section XI Notices Regarding Bids, Proposals and Purchasing NONE Section XII Miscellaneous AGENCY FOR HEALTH CARE ADMINISTRATION Certificate of Need DECISIONS ON BATCHED APPLICATIONS The Agency for Health Care Administration made the following decisions on Certificate of Need applications for Other Beds and Programs batching cycle with an application due date of May 15, 2013: County: Hillsborough Service District: 6 CON # 10191 Decision Date: 8/16/2013 Facility/Project/Applicant: LifePath Hospice, Inc. Project Description: Establish an eight-bed inpatient hospice facility Approved Cost: $0 County: Charlotte Service District: 8 CON # 10192 Decision Date: 8/16/2013 Facility/Project/Applicant: Tidewell Hospice, Inc. Project Description: Establish a seven-bed inpatient hospice facility Approved Cost: $73,113.00 County: Desoto Service District: 8 CON # 10193 Decision Date: 8/16/2013 Facility/Project/Applicant: Tidewell Hospice, Inc. Project Description: Establish an eight-bed inpatient hospice facility Approved Cost: $49,035.00 County: Lee Service District: 8 CON # 10194 Decision Date: 8/16/2013 Decision: D Facility/Project/Applicant: Hope Hospice and Community Services, Inc. Project Description: Establish a 24-bed inpatient hospice facility Approved Cost: $0 Decision: D Decision: A Decision: A 4168 A request for administrative hearing, if any, must be made in writing and must be actually received by this department within 21 days of the first day of publication of this notice in the Florida Administrative Register pursuant to Chapter 120, Florida Statutes, and Chapter 59C-1, Florida Administrative Code. DEPARTMENT OF HEALTH Board of Occupational Therapy Notice of Emergency Action On August 15, 2013, the State Surgeon General issued an Order of Emergency Restriction Order with regard to the license of Darren Henry Combass, P.T.A., License # PTA 18687. This Emergency Restriction Order was predicated upon the State Surgeon General's findings of an immediate and serious danger to the public health, safety and welfare pursuant to Sections 456.073(8) and 120.60(6), Florida Statutes (2011). The State Surgeon General determined that this summary procedure was fair under the circumstances, in that there was no other method available to adequately protect the public. DEPARTMENT OF HEALTH Board of Occupational Therapy Notice of Emergency Action On August 15, 2013, the State Surgeon General issued an Order of Emergency Suspension Order with regard to the license of Michelle C. Broach, O.T., License # OT 9470. This Emergency Restriction Order was predicated upon the State Surgeon General’s findings of an immediate and serious danger to the public health, safety and welfare pursuant to Sections 456.073(8) and 120.60(6), Florida Statutes (2011). The State Surgeon General determined that this summary procedure was fair under the circumstances, in that there was no other method available to adequately protect the public. DEPARTMENT OF HEALTH Board of Occupational Therapy Notice of Emergency Action On August 15, 2013, the State Surgeon General issued an Order of Emergency Suspension Order with regard to the license of Melissa Terpos, R.P.T., License # RPT 39879. This Emergency Suspension Order was predicated upon the State EXHIBIT 1
