Findings Of Fact Respondent St. Augustine Artificial Kidney Center, Inc. (AKC) filed an application for a certificate of need with Respondent Department of Health and Rehabilitative Services (HRS) on June 2, 1980, to construct and operate an eight-station outpatient free standing hemodialysis center at St. Augustine, Florida, for an estimated capital expenditure of $144,650. Petitioner University Hospital Academic Fund, Inc. (Academic Fund) also filed an application with Respondent on June 16, 1980, to construct a similar facility at St. Augustine, with a proposed project cost of $138,131.64. The Academic Fund application stated that it was in the process of incorporating a separate entity to operate the proposed facility. By letter of July 28, 1980, the Academic Fund informed HRS that it planned to form a new corporation named St. Johns Renal Services, Inc. to operate the facility and that any certificate of need which might be granted should be issued in the name of that corporation. However, no such corporation has yet been formed. (Testimony of Goldberg, Exhibits 1-2) The two applications were comparatively reviewed by the Health Systems Agency of Northeast Florida, Area 3, Inc. (HSA) during July 1980. The review consisted of evaluation at various agency levels and culminated in a determination by the HSA Board of Directors on July 24, 1980, that the application of the Academic Fund should be recommended to HRS for approval. The HSA reports on the two applications were transmitted to HRS by a letter of Fred J. Huerkamp, Executive Director of the HSA, dated August 7, 1980. Although the HSA Board of Directors did not specifically vote to deny the application of AKC, the HSA report on the AKC application stated that inasmuch as the Board of Directors had adopted the recommendations of its Health Needs and Priorities Committee recommendations to approve the Academic Fund application, it had also adopted the implicit denial of the AKC application by the committee. The HSA report itself recommended denial of the AKC application. The HSA found that there was a need for an eight-station dialysis facility in St. Augustine under its Health Systems Plan because only three such dialysis facilities are located in the applicants' proposed service areas, two of which are in Jacksonville and one in Daytona Beach, thus necessitating considerable present travel to prospective patients residing in St. Johns County and contiguous portions of adjacent counties. One of the Jacksonville facilities is an inpatient unit at University Hospital. The HSA also found that the two applicants were virtually equal with respect to probable quality of service, financial resources, and costs of operation. The HSA decided that the Academic Fund application should be approved because funds received for operation of the facility could, in part, be utilized to enhance the overall patient care capabilities of University Hospital, particularly with medical staff teaching expenses. The Academic Fund is a nonprofit corporation which provides a billing service for professional fees of the physicians who are salaried employees of University Hospital and who participate in a University of Florida teaching program there. The organization is comprised of these physicians and operates in a manner similar to a medical group practice plan. A percentage of fund assets are donated to University Hospital to support its teaching program. The hospital is a tax-supported indigent care facility. (Testimony of Dewberry, Goldberg, Huerkamp, Exhibits 1- 3) The two competing applications also were reviewed by the Florida End Stage Renal Disease Network 19, Inc., (Network 19) , a federally funded organization under the Department of Health and Human Services which performs a planning function to determine the need for new or expanded services with respect to dialysis and kidney transplants in Florida. It makes recommendations to the federal Health Care Finance Administration in such matters for determination of eligibility of a provider for participation in the Medicare and Medicaid reimbursement programs. By agreement with HRS, Network 19 also provides review and recommendations as to certificate of need applications submitted by proposed dialysis facilities. HRS considers such recommendations during its certificate of need review process as "other pertinent data" under Rule 10-5.10(5), F.A.C. On July 29, 1980, Network 19 transmitted its recommendation to HRS which stated that although it had found both applications to be essentially equal under the Network's review criteria and standards, AKC was chosen over the Academic Fund in light of the fact that it had submitted the first application and because of its expected greater cost efficiency of operation. The organization projected a need for eight dialysis stations in St. Augustine by mid-1982. The basis for the finding that AKC would be more cost efficient was that the AKC application projected a profit during the first year of operation whereas the Academic Fund application indicated a deficit for the initial year. (Testimony of Moutsatsos, Hudson, Exhibit 4) HRS reviewed the two applications, together with the recommendations of Network 19 and the HSA, and determined that the AKC application should be approved. By a letter of October 3, 1980, the Administrator of HRS' Office of Community Medical Facilities transmitted a certificate of need to AKC, subject to any request for a hearing filed pursuant to Chapter 10-5, F.A.C. By letter of the same date, the Administrator advised the Academic Fund that its application had not been favorably considered because the proposed project did not demonstrate "favorable feasibility" when compared with the financial aspects of the AKC proposal, and that it presented a less favorable alternative method of providing services in St. Augustine. The Administrator also informed the HSA by letter of the same date that the HSA recommendation had been rejected for reasons contained in an attached "State Agency Report." Both the Academic Fund and HSA thereafter filed appeals of the HRS decision. (Exhibits 1-3) The HRS medical facilities consultant, Nancy E. Hudson, who reviewed the applications and made the initial staff recommendation, favored the AKC proposal as being more financially feasible in that it planned to charge the Medicare "screen" or maximum of $138 per treatment, as opposed to the Academic Fund's plan to charge $133, plus a $5 laboratory fee. She was of the opinion that the Fund's proposed charges would be less cost effective because experience showed that laboratory fees would normally exceed $5, and thus require either an additional charge to patients or obtaining an exception to the Medicare "screen." She further found that AKC had considerable experience in the field of free standing dialysis facilities since its principals operated several other facilities in Florida, whereas the Academic Fund had not involved itself in such an enterprise apart from its members' participation in the dialysis unit at University Hospital. Although Hudson recognized that the Academic Fund's proposal stated overall lesser project costs, she testified that she could not adequately assess the resources of the applicant, particularly due to the fact that it had indicated its intention to form a new corporation to operate the facility. She also felt that competition in the area would be adversely affected if the Academic Fund, which was affiliated with University Hospital, was granted approval to set up the facility at St. Augustine. The Administrator of HRS' Office of Community Medical Facilities accepted the staff recommendations and approved the AKC application. He, too, was of the opinion that the AKC experience factor was important and placed reliance on the recommendations of Network 19, even though he did not view the fact that AKC had filed its application first to constitute a valid reason for preference. (Testimony of Hudson, Forehand, Exhibits 1-3) AKC plans to spend $144,650 to establish its proposed facility and begin operations, whereas the Academic Fund intends to allocate $138,131.64 for its project. AKC estimates a first-year net income of $16,476, while the Academic Fund estimates a first year net loss of some $42,000. Financial statements submitted by both applicants show that they will have sufficient financial resources to meet the projected initial costs of establishment and operation of the planned facility. AKC shows a proposed cost of $35 for supplies per treatment and the Academic Fund estimates a $50 per treatment cost of supplies. The difference in expected costs is explained by the fact that AKC intends to obtain bulk negotiated discount prices from various manufacturers as its principals have done in past operations, compared to the Academic Fund's plan to seek out the "best list" prices it can obtain. AKC plans to purchase necessary equipment in the amount of an estimated $115,350, but the Academic Fund plans to expend only $96,105. The discrepancy between these figures is, in part, based upon the fact that AKC plans to install individual television sets at each dialysis station which it considers essential for the comfort of patients. Additionally, the Academic Fund plans to purchase generally less expensive equipment for its facility than does AKC. AKC believes that for essentially the same treatment costs, it will offer a better center for patients, and that efficiency in controlling costs will maintain a high quality of care. The Academic Fund is somewhat pessimistic concerning the number of patients who will use its services during the first year, thus providing a basis for the anticipated first-year loss in revenues. Approximately fifteen patients in the proposed service area reasonably can be expected to transfer to a facility in St. Augustine. However, the Academic Fund expects to gradually acquire about three to twelve patients during its first year of operation, whereas AKC estimates that it will have some twelve patients at the outset, primarily due to the accessibility of the new facility. (Testimony of Levy, Dewberry, Anderson, Cunio, Exhibits 1-4) The applicants have made satisfactory arrangements for ancillary services, including acute backup, kidney transplant, and home training services with qualified medical facilities. Both plan to use University Hospital at Jacksonville as a backup hospital and Shands Teaching Hospital at Gainesville for any necessary transplant services. The Academic Fund intends to use University Hospital for home training services and AKC will utilize Dialysis Clinics, Inc. of Jacksonville. Both applicants plan to have a nephrologist available at the facility and other personnel staffing proposed is sufficient for proper operation. AKC plans to utilize a smaller staff than the Academic Fund, thus reducing expenses. (Testimony of Levy, Dewberry, Anderson, Cunio, Exhibits 1-3) Both of the applicants reasonably can be expected to offer a satisfactory quality of care in the operation of a dialysis facility. Academic Fund will draw upon its staff of experienced physicians who operate the 24- station unit at University Hospital. Their association with the Hospital assures ready access to that "backup" facility in the event of acute need. Both applicants plan to use the two local St. Augustine hospitals for routine hospitalization requirements. AKC's principals, Doctors Cunio and Anderson, have had extensive experience in the ownership of free standing dialysis facilities. Dr. Cunio is the Director of the Mercy Hospital Dialysis Unit in Miami and has had a close affiliation with the South Florida Artificial Kidney Center and Dade Dialysis Center in Miami. Dr. Anderson is the Medical Director of the South Florida AKC and its satellite unit in Fort Myers. He has been affiliated in the management and direction of the Dade Dialysis Center, Hialeah Dialysis Center and Indian River Artificial Kidney Center in Stuart. He is also the operator and owner of Suncoast Artificial Kidney Center in Naples. The South Florida Artificial Kidney Center was commended by the Mayor of Metropolitan Dade County, Florida, in 1977, in a proclamation that November 7th of that year would be "South Florida Artificial Kidney Center Day," in recognition of its ten years of success in the treatment of patients. Although the University Hospital dialysis unit received an unfavorable report as the result of a state Medicare survey in 1980, the deficiencies were primarily housekeeping in nature and did not directly reflect unfavorably upon the quality of medical services provided to patients. (Testimony of Dewberry, Cunio, Anderson, Exhibits 1-2, 5-0)
Recommendation Case No. 80-2137: That the petition of the Health Systems Agency of Northeast Florida, Area 3, Inc. be DISMISSED. Case No. 80-2138: That the application of St. Augustine Artificial Kidney Center, Inc. for a certificate of need to establish an eight-station free standing dialysis center in St. Augustine, Florida be APPROVED, and that the competing application of the University Hospital Academic Fund, Inc. for a similar facility be DENIED. DONE and ENTERED this 14th day of July, 1981, in Tallahassee, Florida. THOMAS C. OLDHAM Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 14th day of July, 1981. COPIES FURNISHED: Honorable Alvin J. Taylor, Secretary Department of HRS 1317 Winewood Boulevard Tallahassee, Florida 32301 Eric J. Haugdahl, Esquire Assistant General Counsel Department of HRS 1317 Winewood Boulevard Tallahassee, Florida 32301 Eleanor Hunter, Esquire 702 Lewis State Bank Bldg. Post Office Box 471 Tallahassee, Florida 32301 E. G. Boone and Richard Whitton, Esquires 1001 Avenida del Circo Post Office Box 1596 Venice, Florida 33595 Health Systems Agency of Northeast Florida, Area 3, Inc. 1045 Riverside Avenue, Suite 260 Jacksonville, Florida 32204
Conclusions Sovereign immunity extends to “corporations primarily acting as instrumentalities . . . of the state, county, or municipalities.” See § 68.28(2), F.S.; Pagan v. Sarasota County Public Hospital Board, 884 So.2d 257 (Fla. 2d DCA 2004). MRHS was deemed to be an instrumentality of the hospital district by the Attorney General in an opinion dated December 8, 2006 and the circuit court in Marion County has reached the same conclusion in several cases. As a result, MRHS is entitled to sovereign immunity under § 768.28, F.S. The public policy basis for extending sovereign immunity to private entities such as MRHS has recently been questioned by two appellate courts. See University of Florida Board of Trustees v. Morris, 32 Fla. L. Weekly D1803 (Fla 2d DCA July 27, 2007) (Altenbernd, J., concurring), rev. denied, 2008 Fla LEXIS (Fla. Jan. 7, 2008); Andrews v. Shands at Lakeshore, Inc., 33 Fla. L. Weekly D30 (Fla 1st DCA Dec. 20, 2007). The nurses are employees of MRHS and they were acting within the scope of their employment when providing services to Tyler. As a result, the nurses’ negligence is attributable to MRHS. The nurses had a duty to provide competent medical care to Tyler. They breached this duty and violated the standards of care for nursing personnel by failing to report the cyanotic episodes to Dr. Pierre and by failing to properly perform the four-extremity blood pressure test. The nurses’ actions and inactions contributed to the delayed diagnosis of Tyler’s heart condition. However, Dr. Pierre’s failure to order an immediate cardiology consultation when she detected a heart murmur shortly after Tyler’s birth also contributed to the delayed diagnosis of Tyler’s heart condition. The delayed diagnosis of Tyler’s heart condition led to his “crash” on December 16 because it is more likely than not that Tyler would have been transferred to Shands or another tertiary facility had his condition been diagnosed sooner. Tyler was not a candidate for the second and third stages of the Norwood procedure because of the damage caused by the “crash,” and he also suffered brain damage during the “crash” that caused his developmental delay. The amount of damages agreed to by MRHS is reasonable, even though Dr. Pierre likely shares some of the responsibility for Tyler’s condition. Indeed, the life care plan prepared for Tyler reflects that the cost of a transplant is between $650,000 and $700,000 and Tyler is expected to require multiple transplants over the course of his life. Moreover, the non-economic damages (e.g., pain and suffering) of Tyler and his parents could very well have exceeded the settlement amount had the case gone to jury trial. LEGISLATIVE HISTORY: This is the first year that this claim has been presented to the Legislature. ATTORNEYS’ FEES AND LOBBYIST’S FEES: The claimants’ attorney provided an affidavit stating that that attorney’s fees will be capped at 25 percent of the amount awarded by the claim bill in accordance with §768.28(8), F.S. Lobbyist’s fees are not included in the 25 percent attorney’s fees. Lobbyist’s fees will be an additional 4 percent of the amount awarded by the claim bill, which would be $28,000 based upon the $700,000 claim. The Legislature is free to limit the fees and costs paid in connection with a claim bill as it sees fit. See Gamble v. Wells, 450 So. 2d 850 (Fla. 1984). The bill does so by stating that “[t]he total amount paid for attorney’s fees, lobbying fees, costs and other similar expenses relating to this claim may not exceed 25 percent of the amount awarded [by the bill].” If this language remains in the bill (and the bill is amended as recommended below to reflect the allocation approved by the circuit court), the claimants will receive a total of $525,000, with $393,750 going into Tyler’s special needs trust and $131,250 going to his parents. The remaining $175,000 will go to attorney’s fees, costs, and lobbyist’s fees. If this language was not in the bill (and the bill is amended as recommended below to reflect the allocation approved by the circuit court), the claimants would receive approximately $362,000, with approximately $271,500 going into Tyler’s special needs trust and approximately $90,500 going to his parents. The claimants’ attorney would receive a total of approximately $310,000 ($175,000 for attorney’s fees and approximately $135,000 for costs), and the lobbyist would receive $28,000. OTHER ISSUES: The bill identifies the Marion County Hospital District as the entity responsible for payment of the claim. The parties agree, and I recommend that the bill be amended to reflect MRHS as the entity responsible for payment because it is responsible for operating the hospital pursuant to a lease from the hospital district. The bill requires the entire claim to be paid into Tyler’s special needs trust. The parties agree, and I recommend that the bill be amended to require payment of the claim in accordance with the allocation approved by the circuit court, i.e., 75 percent into Tyler’s special needs trust and 25 percent to his parents. The bill requires any funds remaining in Tyler’s special needs trust upon his death to revert to the General Revenue Fund. The parties agree, and I recommend that the bill be amended to remove this language because the bill is being paid from the hospital’s funds, not State funds. The bill should be also amended to include the standard language requiring payment of Medicaid liens prior to disbursing any funds to the claimants. See § 409.910, F.S. RECOMMENDATIONS: For the reasons set forth above, I recommend that Senate Bill 68 (2008) be reported FAVORABLY, as amended. Respectfully submitted, cc: Senator Charlie Dean Representative Marcelo Llorente Faye Blanton, Secretary of the Senate T. Kent Wetherell Senate Special Master House Committee on Constitution and Civil Law Tony DePalma, House Special Master Counsel of Record
Findings Of Fact Procedural background: Petitioner, COMMUNITY DIALYSIS CENTERS, INC., d/b/a COMMUNITY DIALYSIS SERVICES OF LAKELAND (CDC), owns and operates a 16- station outpatient kidney dialysis facility in Lakeland, Florida. On February 14, 1984, Respondent, WATSON CLINIC (WATSON), received a certificate of need to operate a four-station outpatient kidney dialysis center in Lakeland, Florida, CON No. 2916, from the DEPARTMENT OF HEALTH AND REHABILITATIVE SERVICES (HRS). Petitioner contests the grant of this certificate of need as an existing provider. Timely notice of the final hearing was issued June 26, 1984, and the final hearing was held as stated above. WATSON presented the testimony of Spero Moutsatos, Dudley Towne, Franklin L. Smith, Carter Fitzgerald, Joy Harrison, Nell Boutwell, Eugene DeBerry (by deposition), Sandra Biller, Dr. James Whitfield, John Dowless, Robert L. Mayer, Don Morris, Marilyn Neff, and Dr. Henry M. Haire. HRS presented the testimony of Ed Carter. CDC presented the testimony of Elaine Feegel, Jan Graff, and Michael Sullivan. CDC presented seven exhibits which were received into evidence, HRS had one exhibit, and WATSON presented into evidence 27 exhibits. The parties stipulated that subparagraphs 6, 7, 10, and 11 of Section 381.494(6)(c), Fla.Stat., are not applicable to this case, but that subparagraphs 1 through 5, 8, 9, 12, and 13 are in dispute in this proceeding. WATSON seeks a certificate of need to provide kidney dialysis for end- state renal disease (ESRD) patients in the western portion of Polk County, District 8, and particularly in the vicinity of Lakeland, Florida. WATSON's proposal would also include training for home hemodialysis and chronic ambulatory peritoneal dialysis (CAPD). WATSON originally applied for ten dialysis stations, HRS Exhibit 1, but amended its application at the hearing to four stations. WATSON Exhibit 14, hereinafter W. Exhibit 14. The area in which WATSON seeks to provide services is now served primarily by the 16 dialysis stations operated by CDC. ESRD patients must either successfully dialyze, obtain a successful kidney transplant, or they will die. Evidence as to need was provided by Spero Moutsatos, Executive Director of the Florida End-Stage Renal Disease Network 19. Network 19 was established in August 1977 as a part of a national network established by Congress, administered by the Health Care Financing Administration. Network 19 gathers data in Florida regarding End-Stage Renal Disease (ESRD) patients, provides data and projections of ESRD dialysis need to the Department of Health and Rehabilitative Services (HRS), assists patients and professionals with information, serves as an ombudsman for patient complaints, and monitors and evaluates the quality of care delivered in dialysis facilities. Network 19 did two evaluations of need with respect to the WATSON proposal, WATSON Exhibits 1 and 2. In the last three years, following the growth in availability generally of renal dialysis facilities in Florida, Network 19 has considered need on the basis of sub-areas within a District in about 75 percent of the cases considered. As of September 1, 1984, most of the ESRD patients residing in Polk County were dialyzing at CDC in Lakeland. CDC Lakeland provided services for 51 patients and one home patient, while the remainder (10 in-clinic patients and 16 home dialysis patients) were treated at Lakeland Regional Medical Center, CDC Winter Haven, CDC Tampa, and BMA of Orlando (one patient). WATSON Exhibit 2. Dialysis often leaves a patient feeling very weak at the end of the dialysis session. Dialysis in-clinic is required at least three times each week and takes about four hours. Emergency services are needed nearby since on occasion a dialysis patient will become unconscious and need immediate attention and hospitalization. Patients needing dialysis frequently are not employed or underemployed and do not have money for extensive travel for dialysis. Based upon the zip code analysis in WATSON Exhibit 2 and the testimony of patients, the appropriate service area for consideration of the need for dialysis facilities in this case is at a minimum in Polk County, and more appropriately, the vicinity of Lakeland. While some Lakeland area patients in the past drove all the way to Tampa for in-center dialysis, this is not a suitable alternative. Only CDC Lakeland and CDC Winter Haven adequately provide in-center dialysis to persons living in the Polk County and Lakeland areas. Lakeland Regional Memorial Center does not provide in-center dialysis, but only provides services for chronic ambulatory peritoneal dialysis (CAPD) Rule 10-5.11(18), F.A.C., establishes the methodology applicable in this case for determining need for chronic renal dialysis facilities. This rule sets forth the method to project the number of patients who will need dialysis one year from the date the application is deemed complete. The number of dialysis stations needed is then computed by using an 80 percent use rate for each station. The rule provides that each station at 100 percent use can dialyze four patients, assuming two shifts, six days each week. (Each patient dialyzes three times during the week.) Evening or third shifts are not counted as a part of capacity. The 80 percent use rate results in a capacity of 3.2 patients per station. The record evidence reflects that 80 percent is a reasonable level of use to set as a maximum justifying additional stations. The 20 percent additional capacity is needed for transient patient dialysis during the winter season, to account for repairs and maintenance on machines, and to provide some leeway when there are staffing problems. The net number of new stations needed is then computed by dividing the number of projected patients by 3.2 stations and subtracting from this the number of existing stations. The use rates for the two in-center dialysis facilities in the Lakeland area for the most recent quarter prior to the hearing show that facilities in the area are over the threshold for expansion: Utilization Month Rate (percent) CDC Lakeland July 1984 78 August 1984 81 September 1984 81 CDC Winter Haven July 1984 85 August 1984 87 September 1984 88 The evidence indicates that the above rates are not unusual, but reflect an upward trend in the area. In 1983, CDC Lakeland operated at an average of 76.5 percent, and CDC Winter Haven operated at 77 percent of its capacity. Network 19 projects a need by September 1, 1985, for six additional in-center dialysis stations for Polk County, and seven additional stations for the Lakeland sub-area. These calculations are explained in WATSON Exhibit 2 and the testimony of Mr. Moutsatos, transcript pages 68-72. The methodology for these projections is to take the ESRD patient census from Net work 19 records as of September 1, 1984, for the particular area, subtract the number of actual home dialysis patients on that date, add the number of patients projected for the area as new patients by September 1, 1985, calculated using 116 new patients per one million of projected population, subtract the number of these new patients expected to go on home dialysis, subtract the projected number of kidney transplants for the coming year, add back 25 percent of these transplant patients as transplant failures, subtract projected deaths of patients, and add back the number of patients on home dialysis which must return for in center dialysis. The final number is the number of patients expected to need in-center dialysis by September 1, 1985. Then, using 3.2 patients as the optimum per station, the number of stations projected as needed by that date, less the existing number, yields the projected net need. These projections of need followed the formula set forth in the rule. Moreover, there was no evidence that the assumptions or data underlying the above methodology was unreasonable, inaccurate, and for any other reason unreliable. Based upon the evidence, there is in fact a need for six in-center kidney dialysis stations for Polk County by September 1, 1985, and a need for seven stations by the same time for the Lakeland sub-area. Polk County is the only county in Florida where all in center dialysis facilities are owned by one owner. That owner is Community Dialysis Centers, Inc., CDC. CDC also owns the only other somewhat near facility in Plant City. Of the 97 patients using in-center dialysis in Polk County on September 1, 1984, 54 percent of these (52 patients) were using CDC in Lakeland. Home dialysis and CAPD are two alternatives to dialysis in-center. These alternatives for certain patients are more desirable due to the greater freedom afforded by these methods. Training and continued assistance, however, is needed to allow use of these methods. CDC Lakeland has not in the last few years provided adequately in this area. CDC's current home training nurse, unit administrator Elaine Feegel, lives in Tampa and must commute to Lakeland each day, thus making it more difficult for her to provide home training. Ms. Feegel further has not been able to provide home training because she has been so busy trying to correct problems at the CDC Lakeland facility. In addition to the lack of home training, the evidence showed that for significant periods of time in the past few years the ESRD patients who have had to use the CDC Lakeland facility as their only reasonable source of dialysis have been subjected to seriously inadequate, and at times, dangerous health care. Several patients who now dialyze at CDC Lakeland, and who have used that facility for several years, testified to the quality of care received. The facility was initially named Kidneycare, and was not opened or operated by CDC. In late 1980 or sometime in 1981, CDC bought Kidneycare and took over the management of the facility. (The precise date was not established by competent non-hearsay evidence, but is irrelevant.) At some time after patients became aware that CDC was managing the Lakeland unit, the quality of care began to decline. The quality of care when the unit was operated as Kidneycare was adequate. Joy Harrison is a resident of Lakeland, Florida, and has depended upon kidney dialysis since 1978 to stay alive. She moved to Lakeland, Florida, in 1981. She is 41 years old and has two children, 12 and 8 years of age. Ms. Harrison dialyzed at CDC from March 29, 1981, until June 1984 when she went on CAPD. Dr. Haire has been her physician since 1981. Her testimony concerned the quality of health care at CDC from 1981 until June 1984. Ms. Harrison testified to the following regarding the quality of care at CDC, all of which were unrebutted and is found to be true: Another patient was dialyzing at the station immediately next to Ms. Harrison. Ms. Harrison, who was then being disconnected from her dialyzer at the end of her session, noticed that the other patient was getting sick. She told the CDC employee on duty. Ms. Harrison had to tell the employee three times, and still the employee failed to respond, continuing to work on disconnecting Ms. Harrison from her dialyzer. By this time, the adjacent patient had passed out and began vomiting. When CDC staff finally responded, it took 20 minutes to revive her. CDC staff failed to turn on the air bubble detector on another occasion when Mrs. Harrison as dialyzing. Air got into the lines. The air bubble came within three inches of entering Ms. Harrison's body when CDC staff stopped it. (The distance is the estimate of the Hearing Officer observing the witness indicate the distance.) Had the air bubble entered her blood stream, it may have killed her. CDC staff failed to observe or record the correct number of bags of saline solution that is normally to be given to a patient at the end of the dialyzing session to restore the correct balance of fluid and weight, and ended up giving her two bags too many. Ms. Harrison got very sick as a result. On another occasion, there was only one nurse on the floor. Ms. Harrison was dialyzing, and her feet began to cramp. Saline solution at times must be injected when cramps occur to prevent cramping. Ms. Harrison called out to the nurse, who was talking on the telephone, to tell her she was cramping and needed saline solution. The nurse continued to talk. A few minutes went by and the pain of the cramps got worse. Again, Ms. Harrison called to the nurse for help. The nurse continued to talk on the telephone. The cramps worsened, and Ms. Harrison's hands started to cramp, and she was in much pain. She then told the nurse that if she did not get off the phone and help, she (Ms. Harrison) was going to pull the dialyzing lines out by herself. The dialyzing lines are inserted into Ms. Harrison's arms with two 16-gauge needles. The nurse finally came to assist her. Ms. Harrison could hear the nurse's conversation on the telephone as she was cramping, and the nurse was "laughing and joking on the phone to somebody." (This testimony is not hearsay, but is admissible as proof of what Ms. Harrison heard, not for the truth of what the nurse said on the phone.) During the dialyzing process, nurses each hour are supposed to take blood pressure, weight, and temperature to insure that the patient's system remains stabilized during the otherwise rather intrusive and disruptive process of having all of their blood circulating outside their body to be cleansed. Nurses at CDC frequently failed to check these vital signs when Ms. Harrison was dialyzing for two and three hours at a stretch. Ms. Harrison later checked her medical record and discovered that weights and blood pressures would be recorded at hourly intervals when in fact no one at CDC had actually observed and taken these readings at these times. On other occasions she was given 5 percent extra saline solution, but CDC staff failed to record this in the record. Someone else came along and read the chart and tried to give her another dose of 5 percent saline solution. Ms. Harrison stopped her. When Ms. Harrison first dialyzed at the Lakeland facility, it was in good location near the hospital. Shortly thereafter, while under the ownership of CDC, it was moved to a small shopping center. The location, as will be discussed in additional findings ahead, was undesirable for two reasons: the outside was trashy, and alcoholics and transients hung around the parking lot and rear of the facility. ESRD patients who must dialyze to remain alive depend upon the continued health of special grafts that are placed in their arms or legs which provide access for the dialyzing needles three times each week. Ms. Harrison lost her arm graft apparently due to the negligence of CDC staff in the insertion of the needle or use of a needle with a burr on it. (Additional findings have been made ahead as to the substantial likelihood that the injury was caused by a needle with a burr on it.) On the day of the injury, Ms. Harrison felt unusual pain during the entire dialyzing process. When CDC staff took the needle out at the end of the dialyzing session, an aneurysm (a sac formed by enlargement of the wall of an artery, caused by disease or injury, Webster's New World Dictionary) had formed in her arm. That night the aneurysm broke and a blood clot came out. Ms. Harrison had to go to the hospital. Her graft was destroyed, and surgeons next created a Bentley button for further dialyzing. A Bentley button is another method of allowing access to the blood stream of an ESRD patient. Ms. Harrison still had some infection in her system from the failed arm graft. It was very important that the Bentley button be kept antiseptic and clean because it is a direct open hole providing access to the patient's blood steam. Ms. Harrison's infection was doing well, responding to antibiotics given to her by her physician. But as she was dialyzing at the CDC facility, the attending nurse failed to use the antiseptic procedure of wearing a mask and using gloves. At the end of the session, the button must be carefully cleaned and Betadine placed in the two holes. The nurse said she was in a hurry and did not carefully clean the Bentley button or put any Betadine in the button. She simply replaced the cap and wrapped gauze around it. By the next treatment several days later, Ms. Harrison's infection was worse, and she had to start again on antibiotics. For the next two months Ms. Harrison could not use the Bentley button. Finally, it failed entirely as a method of dialysis, and it was removed. Ms. Harrison now is on CAPD, but testified it is not working very well, and she does not know what alternative for dialysis she may have if it too fails. CAPD (chronic ambulatory peritoneal dialysis) is a method of dialysis that involves the implantation of a tube into the interior of the peritoneum. A bag of fluid is placed above the point of insertion so that the fluid will slowly drain into the peritoneal area. Blood slowly exchanges its impurities with this fluid. After a few hours, when the bag has drained fully, the process is reversed. The bag is lowered, and the fluid drains out. When the bag is again full, it is discarded, a new bag is attached, and the process begins again. On another occasion, the dialyzing machine was not working properly. A line collapsed, the red light was flashing, and when the line collapses, it hurts the patient. The nurses failed to respond. A technician, who is not supposed to do any work in connection with treatment of a patient, tried to come over and get the machine working again. During the time CDC owned the facility at Lakeland, there was a significant continuing turnover of nurses, thus subjecting patients to new nurses who were not very experienced in dialysis. Some stayed only a few months; others, longer. Ms. Harrison dreaded getting a new nurse because an untrained nurse often took three or four attempts to implant the needle and it hurt. Also, as described above, ESRD patients depend upon the life of their access point for their own life. An untrained nurse who is likely to cause injury to an ESRD patient's access is particularly hazardous to the health of that patient. Ms. Harrison served for a time as a patient representative for patients on her shift. Of the complaints made by patients, CDC only responded to the request that curtains be installed on the back windows to prevent vagrants from looking in at the patients. (A man was seen at the window on one occasion.) Another request, that a particular nurse not pump the blood pressure cuff up so high as to be painful, was not corrected. Nell Boutwell is an ESRD patient who has dialyzed for about seven years. She began her dialysis at Tampa General Hospital, then dialyzed at Tampa BMA. In about August 1978, she began to dialyze at Kidneycare in Lakeland. She had no complaints about the quality of care at the Kidneycare unit. There then came a time, which the witness was unable to establish precisely, when it became generally known among patients and staff that Kidneycare had been purchased by Community Dialysis Centers, Inc. The purchase by CDC occurred before Ms. Boutwell wrote a certain letter dated August 25, 1981. Ms. Boutwell testified to a number of matters concerning the quality of health care at the CDC Lakeland facility. Her testimony was unrebutted and is found to be true: Under Kidneycare, the Lakeland facility was typically staffed at about two nurses for four patients, or six nurses for a shift of 12 patients. When CDC took over, the number of nurses declined until there were only two or three nurses for 11 or 12 patients, about one nurse for four patients, which is approximately 50 percent fewer nurses. One result of having fewer nurses was that patients had to stay on the dialyzer machine longer because a nurse is needed to disconnect that patient, thus causing patient discomfort. The replacement nurses were not well trained. On one occasion, air got into the lines of Ms. Boutwell's machine. The available nurses were busy and failed to respond to her calls for help. A technician came over, and he finally was directed by another patient to turn off the machine. Then a nurse appeared and fixed the machine. Air in the machine is a life-threatening condition, as described above. CDC was short on tape and frequently had no Band Aids to cover the place where the needles are removed at the end of the session. When Kidneycare ran the Lakeland facility, it was clean. When CDC took over, the new location was dirty on the outside: there were bottles, dirt, and Pampers in the parking lot. A streak of blood was on the wall of the reception room a week before the hearing. Blood is sometimes left on the dialysis chairs from the last patient to dialyze, including the arm rest. Ms. Boutwell was concerned about cleanliness due to the risk of infection. A patient with a heart monitor attached during dialysis was left unattended as all nurses left the floor, and the monitor began to "act up", although Ms. Boutwell is not trained in reading such a monitor and could not say what it meant. The needle came out of the arm of one patient and he became unconscious as his blood drained onto the floor. This accident was not discovered by CDC staff, but was first discovered by another patient. The restrooms had no paper towels so that patients who wished to wash their hands had nothing sanitary to dry them on. A CDC nurse by mistake put Clorox into Ms. Boutwell's machine as she was dialyzing. The Clorox was intended for another machine which was being cleaned. Ms. Boutwell caught the error before it harmed her. Ms. Boutwell dialyzes early in the morning now, and in the winter it is dark when she arrives. Having vagrants hanging around the shopping center causes her fear. As will be discussed ahead, the artificial kidney in a dialysis machine is a relatively small tubular filter. After appropriate cleaning, an artificial kidney under some circumstances can be reused. Ms. Boutwell did not want to dialyze with an artificial kidney that had been used before. She had had experience with reused kidneys, and they did not clear her blood as well as new kidneys. Ms. Boutwell's insurance pays for a new kidney for each dialysis. CDC staff brought a consent form for Ms. Boutwell to sign agreeing to reuse. She refused to sign. CDC told her she either had to sign or she would not be allowed to dialyze at CDC Lakeland. Her only other choices involved unreasonable travel (Tampa, Orlando) or facilities owned by CDC (Winter Haven, Plant City) After continuing to refuse to sign the consent form, CDC allowed her to have a new artificial kidney for each dialysis. CDC Lakeland periodically was inspected by outside agencies. For the week or so prior to inspections, Ms. Boutwell observed CDC staff making unusual efforts to clean the facility and bring patient records up-to-date. For four years, Ms. Boutwell worked during the day, and thus had to dialyze at night. The administrator of CDC Lakeland told Ms. Boutwell that CDC was going to discontinue the evening shift. She told Ms. Boutwell that she could come early in the morning to dialyze, drive to Tampa in the evenings after work, or quit work. There were four patients using the evening shift. As a result of the proposal to stop the evening shift, Ms. Boutwell wrote a letter dated August 25, 1981, to Dr. Michael Pickering. Dr. Pickering had been one of the physicians associated with the clinic when it was Kidneycare and knew of the needs of those patients. In the letter, Ms. Boutwell asked for his help to prevent the cessation of the evening shift. She explained that dialysis left her in a weak condition, and that travel home from Tampa at 10:00 p.m. would not be safe, that dialysis at 6:00 a.m. at CDC Lakeland would require too many hours away from her job, that she did not have help for home dialysis, and that CAPD was not suited for her due to her work. Her letter is WATSON Exhibit 17. CDC sent a representative to investigate as a result of her letter. The representative told Ms. Boutwell that CDC was only "talking" about discontinuing the evening shift, but that they were not actually going to do it. This contradicted what the administrator had told Ms. Boutwell initially, leading to the conclusion that either on the first occasion or the second occasion, and more probably the second occasion, the CDC administrative staff was untruthful to one of their patients. On each occasion mentioned above when CDC staff told Ms. Boutwell that she could go somewhere else to dialyze if she did not like the new CDC policy, there was no adequate alternative for Ms. Boutwell to turn to. The suggestion that she could go somewhere else when no reasonable alternative existed was evidence of a callous indifference to her needs as a patient, and was harmful to the trust needed for a healthy clinical patient relationship. Ms. Boutwell had experienced dialysis at CDC since January 1984 when Elaine Feegel became unit administrator. Ms. Boutwell was of the opinion that Ms. Feegel was doing a good job as the new administrator, trying to clean the place up, trying to hire good nurses, and personally on the floor more often than her predecessor checking on the operation of the unit. She felt that she was personally getting good treatment at CDC Lakeland at the time of the hearing, November 6, 1984. The deposition of Eugene DeBerry, another patient who dialyzes at CDC Lakeland, was received into evidence as WATSON Exhibit 18. Petitioner's objections to certain portions of that deposition have been ruled upon in the conclusions of law. Mr. DeBerry began dialysis in January 1977 at Tampa General Hospital. Mr. DeBerry has dialyzed at seven other clinics and CDC Lakeland since he began at Tampa General Hospital. Mr. DeBerry's testimony has not been rebutted and is found to be true with respect to the following matters concerning the quality of care at CDC Lakeland: Of all of the units in which Mr. DeBerry dialyzed, the Lakeland unit operated by Kidneycare was the best, in his opinion. Mr. DeBerry was one of the six initial patients at Kidneycare when it opened on June 22, 1977. Kidneycare operated the clinic for two or three years before CDC purchased it. The original locations of the Kidneycare facilities (there were two) were about a block from the Lakeland General Hospital. The second facility that was used by Kidneycare had a central nurses station that permitted observation of all kidney dialysis stations at one time. About a year after CDC bought the Kidneycare facility, CDC moved it to its present shopping center location. Mr. DeBerry described the same problem with vagrants and trash on the outside of the CDC facility as described by other witnesses. There have been occasions when these vagrants have entered the clinic to use the restrooms, sit in patient chairs, or steal. Mr. DeBerry requires a wheelchair for movement. The restroom at the CDC unit is too small to allow him to use the toilet, that is, it is not accessible to a wheelchairbound person. Similarly, the waiting room for patients is not suitable for wheelchair patients, and Mr. DeBerry has to wait in his wheelchair in the hall. Kidney dialysis patients are restricted on intake of fluids, so being able to have coffee or a soft drink is a special treat. At the beginning of dialysis in the first hour there is an opportunity to drink a liquid. Kidneycare used to provide this treat; CDC cut it out, stating that it was expensive. When CDC took over the unit, the attitude of the nurses changed. The nurses said that CDC was very cost-conscious, and were cutting back on expenses, including nursing staff, that CDC wanted to get rid of four nurses. (This hearsay evidence was corroborative of direct testimony that the staffing under CDC was decreased by about 50 percent compared to Kidneycare staffing.) When CDC took over the unit, it attempted to require all patients to use only one type of artificial kidney, or to stock only a few. ESRD patients, however, have different needs. Some still have a portion of their natural kidneys intact and operative, and need less dialysis, and especially cannot tolerate large losses of fluid during dialysis because this causes painful cramps. Others, like Dr. DeBerry, have no kidneys, and need an artificial kidney that dialyzes more completely. The CDC effort to cut this cost ultimately was blocked by the orders of individual physicians requiring specific artificial kidneys for their patients. Within six months of the CDC takeover, CDC circulated a consent to reuse form among all patients. The form relieved CDC from responsibility for harm that might be caused by reuse of artificial kidneys. Darlene, the CDC unit administrator told Mr. DeBerry that he could either reuse the artificial kidneys or he could dialyze someplace else. Mr. DeBerry did not want to reuse due to the possibility of infection. He had already lost not only his kidneys, but his bladder, prostate, and both legs due to infection. But Mr. DeBerry could not go on home dialysis because it caused him severe hypertension, and travel to Tampa was unacceptable, so he signed the consent form. After about a year of reuse, Mr. DeBerry again discussed his options with the unit administrator, then Pat Segien. Ms. Segien said that the CDC units at Plant City and Winter Haven also required reuse. The CDC unit was often short on important supplies. Mr. DeBerry had to dialyze with the wrong needle and the wrong kidney on occasion. The unit was out of Band Aids, tape, blood lines, and saline solution on a regular basis, and Mr. DeBerry complained about this several times. The CDC facility was not clean inside. Blood would remain on dialysis chairs, the floor, and on walls for a week or more. As a result of these problems with the quality of care at the CDC unit, Mr. DeBerry complained to Senator Lawton Chiles' office. Thereafter, Network 19 came in to inspect and the unit was cleaned up. When CDC took over Kidneycare, they began using a cheaper grade dialysis needle, and Mr. DeBerry began to experience a tearing of the place where the needle was inserted, resulting in bleeding around the needle throughout the four hours of dialysis. Mr. DeBerry complained to his physician. His physician then ordered CDC to provide him with the needle he had formerly used. CDC complied. Mr. DeBerry encouraged other patients who were experiencing the same bleeding to contact their own physicians. Now CDC seems to use the good needles generally throughout the unit. Pat Segien, the unit administrator, told Mr. DeBerry that CDC used the new, inferior, needles because they were cheaper. CDC cut the nurse/patient ratio to 1:4. It had been 1:3 or less under Kidneycare. The problem with having only one nurse for four patients is that nurses routinely during dialysis have to respond to special needs, including sick patients. Mr. DeBerry described the following example of why three nurses cannot adequately handle 12 patients: one patient passed out; two nurses responded. Another patient started vomiting, Mr. DeBarry's line got air in it, and another patient was nearly unconscious due to low blood pressure. The nurses were unable to handle all of this and continue to do the routine work of checking blood pressure of other patients. Mr. Deberry was home trained, and therefore knew to clamp off the incoming air bubble and turn off his blood pump, which he did himself. Mr. DeBerry had seen air enter the lines of other patients on a number of other occasions because CDC staff allowed saline or blood bags to be pumped dry without properly attending to them. Many of the patients sleep during the four hours of dialysis, and thus the attentiveness of CDC staff is very important to their health. Since CDC took over, there has been so much turnover of nurses that many of the nurses are not experienced. Under CDC management, technicians who were not trained as nurses were allowed to do blood pressures, put heparin in the dialysis machine, and mix the formula for the bicarbonate bath. These practices have now been discontinued by CDC. CDC suffered from a frequent lack of soap, towels, and toilet paper in the restrooms, and a lack of soap at the sink at the exit to the isolation room. Nurses had no soap to wash their hands after leaving the isolation room when that room was in use dialyzing a patient that required isolation from the other patients. It took six to eight months for CDC to buy curtains to stop vagrants from looking into the back windows at the patients at night. In May 1984, Mr. DeBerry was mistakenly given a double dose of Desferal, and went into such shock that he could not talk so as to tell the nurses the mistake they had made. CDC has been constantly out of blankets, and once recently was out of sheets. Mr. DeBerry's wife had to buy a sheet to enable him to dialyze on schedule that day. CDC nurses are supposed to keep patient medical records current. On several occasions, Mr. DeBerry was asked to go over and sign his records for as many as four months earlier, which had-not been kept up-to-date. This happened before inspections in particular. Prior to inspections, CDC staff makes a number of improvements, including updating records and cleaning the facility. The front door of the CDC facility is not adequately constructed to allow a wheelchair to enter unless the patient has one person to push him up the ramp and another person to hold the door. Since Elaine Feegel became unit administrator at CDC, the quality of care has improved, but the nurses still need to improve in implementation of sterile procedures. Mr. DeBerry felt that he had received good quality care in the last few months. Sandra Biller is a registered nurse specializing in hemodialysis. She is currently employed by the Lakeland Regional Medical Center. She has specialized in hemodialysis for six and one-half years. She was accepted as an expert witness in ESRD nursing. She has worked in hemodialysis nursing at the Kidneycare facility beginning in 1979 and remained employed there under CDC until October 1982. During the time that the facility was managed as Kidneycare, the quality of care was good. Then CDC purchased the facility and began management thereof. Ms. Biller testified to the following aspects of health care at CDC when she was employed by CDC. The testimony was not rebutted, and is found to be true: When CDC took over the facility, it changed the type of needle used. The new needles had burrs on them that tore the access points in the patients' bodies and prolonged bleeding. Trauma to the access ultimately decreases the life of the access. As was seen by the medical history of Joy Harrison, an ESRD patient depends upon the life of the access for her own continued life. When all accesses and dialysis methods have been exhausted, and dialysis becomes impossible, the patient dies. Moreover, burrs on the needles caused unnecessary pain to the patients. Kidneycare did not have these problems because they used Terumo needles. CDC "frowned" upon use of these needles, and required a special order by the physician to use these needles. The new needles used by CDC were cheaper and were used to save money. Patients and nurses complains about the use of the cheaper needles, but nothing was done about it. A policy was instituted by CDC requiring reuse of artificial kidneys by all patients. Patients were told to dialyze elsewhere if they refused to reuse. Some patients who objected to reuse long enough were allowed not to reuse, but CDC told nurses to keep that fact quiet among other patients, and did not tell other patients about the exceptions. Jerry Bryant, the area administrator for CDC, told Ms. Biller that the reuse policy was premised upon the size of the facility and a goal of having a certain percentage of patients reusing. CDC's reuse policy was initially limited by a standard that the reused kidney function at 80 percent of its initial capacity. This was then changed to 75 percent of initial capacity. At one point reuse was also limited to 12 reuses, but later some artificial kidneys were reused 25 or 30 times. Patients and nurses complained about reuse without success. The primary harm to patients caused by reuse was that Ms. Biller's patients did not feel well at the end of dialysis on a reused kidney. Reused artificial kidneys frequently still had dark brown clots of fibrin in them. CDC reused the parallel plate type of dialyzer, and this type of dialyzer was inappropriate for reuse because it was impossible to inspect between the parallel plates to see if the dialyzer was clean. One patient became septic reusing a parallel plate kidney. Reuse caused an additional health problem or potential health problem for CDC patients because a reused kidney is cleaned with formaldehyde which is toxic to humans and must not be ingested in excessive quantities. Cleaning the dialyzers with formaldehyde released fumes into the air. Although CDC had an instrument to measure the quantities of formaldehyde fumes in the air to insure safety to patients, it did not use it to test the air as required on a regular basis. There are several types of artificial kidneys, and some are more suitable than others for the needs of specific patients. CDC would not provide the type of dialyzers specifically needed by individual patients. Dialyzing machines were not maintained according to the 100- and 500- hour schedules for maintenance that they were supposed to have. Staffing at Kidneycare was two patients per nurse. Under CDC, the staffing ratio ultimately became four patients per nurse, a loss of 50 percent of the nursing staff. It was a dangerous condition for the patients sometimes. Many of the patients were unstable. The nurses did not have enough time to care for sick patients and monitor the equipment properly due to the staffing shortages. When CDC took over, the pay and benefits for nurses was regulated more strictly. All nurses were paid on an hourly basis. Sick leave went from an informal system to a strict accounting policy. CDC refused to carry over certain forms of sick leave earned as employees of Kidneycare. New nurses were placed in charge of direct care of patients without sufficient training. Nurses require four to six weeks not only to learn how to operate the machines, but more importantly, to learn what to look for as trouble signs in a dialyzing patient. Jerry Bryant stated it should not take more than two weeks to train a CDC nurse, and CDC nurses were put onto the floor with less than four weeks' training. One nurse was found to be doing dangerous things, and when Ms. Biller reported this, she was ignored and told to "watch her closely." The nurse was failing to turn on the air bubble detector and failed to close the saline line to prevent an overdose of saline solution. On one occasion a patient was negligently given three liters of saline solution, and this mistake was never documented on the patient's record. This sort of mistake happened more than once. One liter was the normal amount, and probably was not proper for this patient, who usually needed fluid taken off during dialysis. CDC staff generally did not show a professional attitude toward their work. They came in late without correction by the administrator. One nurse, who did the reuse job, wore dirty clothes, and she was handling the dialyzers. Sometimes a nurse would see that a patient was sick and vomiting and would walk right by, failing to stop and care for the patient. All of the nurses who originally worked for Kidneycare have left CDC and most work for Lakeland Regional Medical Center now. Typically, within a period of four years nurses do not leave a good dialysis center. Ms. Biller left CDC due to her dissatisfaction with the quality of health care provided at CDC. Patient charts were supposed to be done at least every two weeks. Sometimes the CDC staff would fail to complete these records for six or eight months, but would do so for an inspection. Charts were not kept current due to the shortage of nursing staff. Dr. de Quesada was the Medical Director of CDC when Ms. Biller was a nurse employed by CDC. He lived in Tampa where he had his practice, and she saw him at the CDC Lakeland facility about once a month. During emergencies, it was sometimes difficult to reach the Tampa physicians until two or three hours later. The Watson Clinic physicians were always available. Watson Clinic nephrologists were seen at the CDC clinic at least every week or so. James Whitfield is a physician specializing in internal medicine and kidney diseases. He practices nephrology with Dr. Haire and has treated ESRD patients who dialyze at the CDC Lakeland facility since July 1983. Dr. Whitfield observed the following matters with respect to the quality of medical care at CDC Lakeland which were not adequately rebutted and are found to be true: The most frequent problem at CDC was failure to achieve the proper weight at the end of the dialysis session. CDC staff is supposed to monitor the process so as to achieve the correct weight at the end. Leaving a patient with either too much fluid or too little fluid is hazardous to the patient. One patient on two successive occasions had too much fluid taken off, causing the patient to go into shock and necessitating emergency procedures to revive the patient. The problem was that the CDC dialysis machine had a part stuck in an open position, thus operating to remove excessive amounts of fluid. Patient records were not maintained in a current condition. Orders were given to CDC to take a blood count at the end of each dialysis because the patient had recurrent internal bleeding. CDC failed to take the blood count. The patient suffered a substantial drop in blood count, and had to be hospitalized for anemia. On another occasion, an order to use a particular type of artificial kidney was not followed by CDC. CDC delayed a long time in providing a bicarbonate dialysis machine, which was needed for several patients. Four or five weeks before the hearing, Dr. Whitfield had a patient that for a two-week period needed to be dialyzed daily. CDC refused to do this, stating that they would only get recompensed for routine dialysis and would not be paid for the extra dialysis. Medicare will pay for non-routine dialysis in certain cases, but in this case, CDC did not apply. In the summer of 1983, Dr. Whitfield performed a rectal examination of a patient, taking a small amount of fecal matter to test for blood. A week later he used the same examination room at CDC Lake land. He found the feces and towel he had used the week before in the same place he left it. CDC had not cleaned it up for a week. CDC has a goal of requiring all patients to reuse artificial kidneys. Formaldehyde is used to clean the kidney for reuse. The long-range toxic effects of formaldehyde are unknown. Many of the leaders in the field of dialysis feel it is inappropriate for ESRD patients to constantly be exposed to formaldehyde. Formaldehyde use also creates a heard of fumes in the air. Moreover, a reused dialyzer is not as efficient as a new one, and results in fluid not being removed properly from the patient, causing the patient to come back the next day for dialysis. On one occasion, a dialyzer that had been reused 15 times was supposed to have removed 10 pounds from a patient, but removed only two pounds, resulting in the discomfort of another dialysis session the next day. Reuse can, for some patients, be beneficial because the reused kidney does not cause a mild allergic reaction suffered by some patients. But the safe level of reuse cannot be established administratively at a single standard or level because the medical needs of patients vary greatly. Supervision of nursing staff at CDC has improved considerably since Elaine Feegel became unit administrator. John Dowless is a hospital consultant/supervisor, Office of Licensure and Certification, Department of Health and Rehabilitative Services. He is a team leader on an interdisciplinary survey of health care team. The team determines if health care facilities in Florida meet federal and state requirements. He has 40 years of experience in health care, and has worked in the above capacity for eight years. He was accepted as an expert in health care surveying. In late March 1983 his office received a request from the Health Care Financing Administration that Mr. Dowless' office conduct an investigation of the CDC Lakeland facility with respect to complaints received about the quality of health care at that facility. Mr. Dowless and Maryanne Judkins, R.N., constituted the survey team that conducted the investigation on or about April 8, 1983. The investigation was an unannounced visit. (Annual routine surveys conducted by HRS are announced in advance.) The purpose of the April investigation was to determine if the CDC Lakeland clinic was in compliance with Medicare regulations. WATSON Exhibit 4 contains the HCFA forms used by Mr. Dowless in conducting this survey. Mr. Dowless found more patient care deficiencies at the CDC Lakeland facility than he had previously found at any other renal dialysis facility. The survey team found three Medicare "conditions" not met by CDC Lakeland. Failure to meet a condition results in disqualification for Medicare participation by the facility. Mr. Dowless at that time was considering decertifying the CDC Lakeland facility as a Medicare provider. CDC then sent a representative from its Atlanta office, and CDC promised to make corrections. On June 20, 1983, a reinspection was made. Mr. Dowless found that the facility had made quite a bit of improvement. The facility did not lose its Medicare certification, and sufficient progress was made toward correcting the deficiencies. The April 1983 survey of CDC Lakeland by HRS found the following substantial deficiencies: One member of the nursing staff did not have a current Florida license. This was a violation of a condition to obtain Medicare participation. The governing body failed to effectively manage. It has no written policy on reuse of dialyzers. Patients were scheduled without an adequate time between treatments. The facility failed to adequately insure that physicians made rounds when the patients were in the facility. Records did not have physician signatures for orders. Patient copies of the grievance procedure did not inform them they could complaint to Network 19. The above cumulatively was a violation of a Medicare condition. There were no written policies regarding patients' rights available to relatives. This was a violation of a Medicare condition. The patient environment was found to be unsafe and unsanitary. A bloody reused kidney was placed on top of a disinfected dialysis machine. Two chairs used by patients for dialysis were soiled with blood. The nursing station had 21 items marked sterile with an expiration date 12 months earlier. Other dusty, dirty, and cluttered items were noted. The floor of the dialyzing area had soiled gauze, cotton, rubber gloves, and paper. A soiled mop and dirty water were stored in the supply room, and the floor of the supply room was dirty and cluttered. The acetate hemodialysis concentrate solution was contaminated. The emergency tray was not fully stocked. The facility had been directed by a written memorandum to discharge patients who refused to reuse dialyzers, in violation of the written discharge policy. CDC failed to recognize individual needs concerning reuse, forcing patients to choose between reuse and traveling 60 miles to Orlando to dialyze, and refusing to allow one patient to reuse who offered to pay for the new kidney. A year later, on April 5, 1984, HRS conducted its annual survey for Medicare certification. Annual surveys are announced beforehand, and as prior testimony indicated, CDC would make a special effort to clean up and correct deficiencies before such surveys. This annual survey found no discernible deficiencies. As a result of complaints about the quality of care at CDC Lakeland, Network 19 also conducted an investigation of the facility on May 2, 1983. The report of that investigation is contained in WATSON Exhibit 4. The report was acted upon by the executive committee of Network 19 and transmitted to HCFA for its information and action. The site visit was announced ahead of time to CDC. Network 19 concludes in the report that the problems existed at CDC due to lack of leadership at all management levels and poor communication. It also concluded that the physician director appeared to have no direct or deciding input into unit operations, and the new unit administrator was following corporate policy changes. It was reported to Network 19 that CDC had instituted changes to correct these deficiencies. Finally, after recommending that the physician director become more involved in directing the unit, the report concluded with the finding that there was no direct evidence that the health and safety of the patients were then being compromised. It is evident from the findings above that between the unannounced inspection by HRS on April 8, 1983, and the announced inspection by Network 19 on May 2, 1983, CDC made improvements. Dr. Alejandro de Quesada is the Medical Director of CDC Lakeland and CDC Winter Haven. He originally became involved with the Lakeland unit as an owner and investor, as well as a physician having ESRD patients treated three. He is responsible for delivery of medical care, but is not directly responsible for machine maintenance, purchasing of supplies, or personnel matters, including hiring and firing. In these areas, he becomes only involved to the extent that the Lakeland staff tells him about problems they have identified. Dr. de Quesada lives and works in Tampa and is an Associate Professor of Medicine at the University of South Florida as well. Dr. Tapia is Associate Director of the unit and he is located in Lakeland. Dr. de Quesada has been Medical Director at the Lakeland facility either in the fall of 1983 or 1982; he could not state precisely when. Neither Dr. de Quesada or Dr. Tapia attended the hearing, and Dr. de Quesada's testimony was made a part of the record by deposition. Dr. de Quesada admitted in general terms many of the problems found above (loss of experienced nurses, reuse of dialyzers, problems with needles) but did not have any detailed knowledge of these problems, did not state whether he felt the problems were serious or minor, did not elaborate on the cause of the problems, and asserted that each one had been corrected. He admitted that at about the time he became Medical director, there was a large turnover of nurses and medical care was not "optimum." The location and external condition of the CDC facility in Lakeland is very unpleasant. WATSON Exhibits 19, 20, and 21 are photographs taken during the work week (October 19, 22, and 26, 1984) and very close to the date of the hearing. The CDC facility is located in a small strip shopping center. Immediately next door is a grocery store. Drunks and vagrants hang around the shopping center. Thus, CDC dialysis patients must come three times every week to a place not associated with health care, but with vagrants and groceries. For two years CDC has received complaints about unsightly trash outside the CDC facility. Yet, one week before the final hearing these photographs show a dishearteningly filthy collection of debris in the gutter immediately in front of the door into the CDC facility. For patients who are so critically vulnerable to infection, this array of trash at the entrance to the place they depend upon for cleansing of their blood directly erodes their confidence in the CDC facility and is demeaning to them. Dr. Henry M. Haire lives in Lakeland and is a nephrologist. Since early in 1980, he has both been on the staff of Watson Clinic and a member of the treating staff at Kidneycare and CDC. He was accepted as an expert in nephrology. Dr. Haire wrote the original certificate of need application for WATSON. The original application for a certificate of need was the result of Dr. Haire's assessment in January or February of 1983 that it was unsafe for his patients to dialyze at CDC Lakeland due to the quality of care at that facility. Dr. Haire testified to the following matters concerning the quality of health care at the CDC Lakeland clinic. These matters were not adequately rebutted by the Petitioner and are found to be true: The quality of health care at CDC Lakeland has been like a roller coaster for the last four years, with poor care followed by improvement and then another decline in care. Care improved after the HRS and Network 19 investigation in April-May 1983, and then declined again. Since July 1984 the quality of care has again improved. There have been occasions when the Tampa treating physicians could not be located in emergencies, and Dr. Haire had to respond for their patients at CDC. Some patients need a bicarbonate dialysis machine to reduce acid levels. Dr. Haire waited 18 months after he requested CDC to obtain one of these machines before they did so. CDC on two occasions transferred patients of Dr. Haire without prior notification to him. One patient was transferred to Tampa when the night shift was discontinued. Two other patients were transferred to Winter Haven one month before the hearing. One of these patients was very unstable and needed to be dialyzed near Dr. Haire. Dr. Haire had her transferred to a physician in Winter Haven. As recently as July 1984, Dr. Haire had found that CDC staff had failed to take weights and record other data in the charts. On one occasion, Dr. Tapia, the Associate Medical Director at CDC who lives in Lakeland, was not available to handle an emergency involving evacuation of patients due to formaldehyde fumes in the room, and Dr. Haire had to fill in for him. Based upon the foregoing findings, the following additional findings are made: End-State Renal Disease (ESRD) patients are captive consumers. Without continuing adequate renal dialysis they will die. ESRD patients are particularly vulnerable in a variety of ways. Loss of the use of one's kidneys demands a major psychological readjustment for the patient. Confidence in the quality of health care is critical to the readjustment. Some ESRD patients are frail, confused, disabled in other ways, elderly, and cannot adequately protect themselves from inadequate health care during dialysis. Further, ESRD patients have a well justified fear of infection, since loss of dialysis access may mean loss of ability to dialyze and death. Dialysis is uncomfortable and painful under the best circumstances, and is easily made more uncomfortable and more painful if treating staff is overworked, untrained, or indifferent. The quality of health care at the Lakeland facility since 1980 when CDC purchased it and began to manage it has been inadequate in a number of ways. From 1980 until 1984, despite repeated complaints from patients, physicians, and nursing staff, the quality of care at CDC for substantial periods of time was inadequate. Improvements have been made in 1984. The current administrator, who took that job in July 1904, is doing an excellent job. She is well- qualified for the job and has shown a genuine interest in improving CDC Lakeland. The current regional administrator is equally well-qualified, and has also demonstrated a sincere desire to improve the Lakeland facility. But problems persist. A few instances of questionable care occurred within a few months of the November 1984 hearing. The outside of the facility remains trashy as of ten days before the hearing and the location of the facility continues to suffer from proximity to vagrants. From 1980 to 1984, the health care at CDC Lakeland has been erratic and unstable, improving only in response to an investigation under threat of loss of Medicare money, annual inspections, or the potential of competition that may occur as a result of this certificate of need proceeding. Health care which is erratic and unstable is unreliable and, for that reason, inadequate, and the health care provided by CDC Lakeland for this additional reason has not been adequate. The Watson Clinic was started in 1926. Today, it is a large specialty hospital providing a wide range of services, from primary care to open-heart surgery. It has 22 departments and specialty services. The Clinic has 75 affiliated physicians, all of whom, with the exception of two, are specialists. Of these, 67 physicians are partners in the partnership which owns and manages the Clinic. The organization of the Clinic as a multispecialty group practice was derived from the Mayo Clinic example. Major decisions are made by the full partnership. Day to-day management is committed to an Executive Committee and to the Clinic Manager, Dudley Towne. The Clinic is located in Lakeland, Florida, in Polk County. The Watson Clinic currently has approximately 265,000 outpatient visits annually. As of January 31, 1984, Watson Clinic had current assets of $3,084,200.36, of which more than 50 percent was in cash deposits. For the year ended January 31, 1984, the Watson Clinic collected over $27 million in fees and distributed more than $12 million to its 67 partners. The Watson Clinic partnership, through its Executive Committee and by vote of the partnership, approved the plan to seek a certificate of need for a kidney dialysis center. Watson Clinic's amended application for a certificate of need seeks a four-station unit. The Watson Clinic partnership will pay for the purchase of equipment of the proposed dialysis center, will pay all start-up costs, and will continue to absorb all losses until the dialysis center becomes profitable. The dialysis center would be managed as another one of the entities of the Watson Clinic. Watson Clinic does not necessarily plan to do more than break even in its operation of the dialysis center. From a fiscal perspective, the Watson Clinic frequently undertakes to provide a new service to its patients that itself may only be marginally profitable but that furthers the goal of the Clinic to be a full-service multi-specialty clinic. WATSON Exhibit 14 is WATSON's amended certificate of need application. The amendments were primarily to conform the application to the number of dialysis stations initially approved by HRS. WATSON originally requested ten stations, but HRS approved only four. The projected staffing for the dialysis center is one head nurse who would administer the unit, two staff registered nurses, one licensed practical nurse, and part-time assistance from a dietician, a social worker, and a secretary/receptionist. Watson Clinic is currently aware of six registered nurses with some background in nephrology who might fill one of the three nursing positions, and four licensed practical nurses. Of these, only one (one LPN) is currently on the staff of CDC Lakeland. There was no rebuttal evidence on these facts, and it thus appears that the new center could be staffed reasonably soon, and without causing a loss of staff to CDC. The projected salaries for staff were reasonable and sufficiently high to attract reasonably qualified staff. The total cost of the project is projected to be $81,500, and the underlying costs which make up this figure are reasonable. Two additional costs not included in the above figure were identified. Legal fees have been incurred in the amount of about $25,000, and this is paid by the Watson Clinic partnership, and future fees will be paid in a like manner. Most renovation costs will be of minimal expense. The dialysis center will be in a building owned by the Watson Clinic partnership directly across the street from the Clinic. The only cost not identified in the application that may be substantial is the cost of putting in plumbing. This, however, does not affect the financial feasibility of the project since the Watson Clinic clearly has sufficient assets to absorb the costs of plumbing renovation. The projected utilization of the new dialysis center is reasonable based upon the projected need data discussed above. It is projected that the new center will have ten patients the first month and will grow to a maximum of 16 patients by the seventh month, October 1985. Thereafter, the center is projected to operate at full capacity of 16 patients. WATSON Exhibit 2, page 3, shows a predicted 75 ESRD patients needing dialysis in the Lakeland sub-area by September 1, 1905. If 16 of these dialyzed at the WATSON dialysis unit, the remaining 59 would dialyze at CDC Lakeland, which would be seven or eight more patients at CDC than are currently using that facility. The data of projected ESRD patients from Network 19 were corroborated by evidence provided by Dr. Haire. Dr. Haire and his partners are currently following 12 patients with renal problems and expect six of these will need dialysis in the next four or five months. Dr. Haire estimated that initially four of his 22 patients now using CDC would immediately transfer to the new unit, and that later in the year another one or two would transfer. Dr. Haire finally estimated that the remaining six patients of the 12 mentioned above as having renal problems would need dialysis by the end of the year. Thus, the majority of the projected patients were in fact known to Dr. Haire by name and their projected needs currently identified. The projected operating revenues were based upon reasonable assumptions from experience in reimbursement and payment in dialysis centers in the industry and actual reimbursement experience at Watson Clinic. The operating expenses were likewise based upon experience in the industry and are found to be reasonable projections. Attached to WATSON Exhibit 14 are computer-generated pro forma financial statements. These statements project net income and operating profit for the new facility for a two-year period, and are premised upon the patient utilization rates discussed above, as well as projected revenues and expenses, including the expense of amortizing the initial project cost. The first year operating profit is projected to be $19,809, with a pretax profit of $428. The second year has a projected operating profit of $20,790 and a pretax profit of $13,126. The financial statements erroneously show a corporate income tax, which does not exist since the Clinic is a partnership, so the pretax profit is the same as the net income. The financial statements are conservative in that they presume that all patient revenue will come from patients who dialyze in the unit. Medicare pays for home dialysis as well, to encourage that form of dialysis, but since operating expenses are less for home dialysis, the new center will enjoy greater net revenue (approximately $6,000 more per patient per year) for each patient on home dialysis. Dr. Haire and his partners in their practice have historically placed great emphasis on home dialysis, and it is reasonably certain that the center will have greater net revenue as a result of their efforts to train new patients on home dialysis. The projected revenues are conservative for another reason: they are based on patient visits at a 90 percent rate during the year, rather than 100 percent of the available dialysis days. The 10 percent shortfall was used to account for missed appointments or hospitalization. For example, there are three dialysis days per week, or 156 dialysis days per year for 52 weeks. Thus, at 100 percent 16 patients would generate 2,496 revenue visits. WATSON's second year projection of revenue, however, is based upon 2,254 visits, or 90 percent of 2,496. Elaine Feegel, CDC's current administrator, however, testified that "very few" patients ever miss a dialysis visit. The willingness of the Watson Clinic, with its clearly ample resources, to absorb all losses from the new dialysis unit in order to provide a full range of services, means that the unit will always have a resource to turn to during the start-up phase and during lean periods. The evidence in the record also shows that the facility will be self-supporting in a reasonable period of time and therefore is financially feasible. The facility will break even in the first year based upon an average of 14.25 patients per month. While this utilization rate is somewhat high, it is supported by the evidence. First, Network 19 projects 75 patients needing dialysis in the Lakeland area by September 1, 1985. If 14 of these patients use the Watson unit, the remaining 61 can use the CDC unit, putting CDC at 95 percent of its capacity of 64 patients. Given the record of inadequate care at CDC and the fact that the Watson unit will be brand new, coupled with the association of the Watson unit with the adjacent Watson Clinic, it is very likely that the Watson unit will have from 14 to 16 patients regularly using the facility by the end of the first year. CDC's expert on accounting, Michael Sullivan, sought to discredit the financial feasibility of the proposed four station dialysis center, but his testimony was not persuasive. The portion of his testimony based upon the original CON application data was not relevant because the data was altered by the amended application. Mr. Sullivan also excluded pharmacy and EKG revenue from his calculations of revenue. The main Watson Clinic has both a pharmacy and EKG that will be used by the dialysis center. It is unclear on this record whether the revenues from these activities will, for accounting purposes, be treated as separate revenues of the dialysis center, or revenue of the Watson Clinic. The point is irrelevant, however, since the Watson Clinic will cover all losses that may occur at the dialysis center, and can use these center generated revenues to do so. Moreover, the amounts in question are relatively small. The annual projected EKG revenue is only about $600, and the annual projected pharmacy revenue is only about $7,000. If Watson Clinic successfully has three patients on home dialysis, it will enjoy $18,000 in additional revenue annually, which will more than cover any overstatement of pharmacy or EKG revenue. Mr. Sullivan's criticism that there was no expense indicated for fees of the medical director was not relevant since Dr. Haire will provide those services without charge until the center becomes financially self-sustaining. Mr. Sullivan's further criticism that administrative costs were not accounted for was similarly not correct. A portion of the rental fee will cover administrative services to be provided by the Watson Clinic. Further, the current plan is to computerize much of the billing, and the cost of the computer equipment is included in the financial statements. In summary, the evidence shows that the proposed dialysis center will be financially feasible. The quality of care that will be delivered by the proposed four- station center will with a reasonable probability be adequate. There was a substantial amount of evidence as to the qualifications of persons who will be involved in delivery of that health care, and no rebuttal of any consequence from CDC. WATSON intends to offer complete dialysis services consistent with the current state of the art, with new equipment, properly trained staff, professional operating and management procedures. a patients' bill of rights, adequate professional supervision, and adequate staffing. Dr. Haire, who will be the Medical Director, is well-qualified for the job. Initial planning and consultation will be provided by a professional consulting firm. The medical staff will be open staff. The proposed center will place great emphasis on self care and home dialysis since Dr. Haire and other nephrologists at the Watson Clinic actively encourage these techniques. Additionally, the Watson Clinic plans to offer a full range of support services, including dietary counseling, rehabilitation services, social services, and the like. When the new Watson facility opens, CDC Lakeland should experience some loss of patients, but will not suffer harm in the long run. Dr. Haire will continue to use CDC Lakeland for some of his 24 patients, since the new facility can only handle 16 patients at its maximum capacity. By September 1, 1985, there will be enough new patients in the Lakeland area that even if WATSON served 16 of these, CDC Lakeland still would be needed to serve the remaining 51 patients and would at that time be operating at 92 percent of its capacity. The new clinic will, over the long run, compete with CDC Lakeland for staff, but as discussed ahead, competition will be beneficial to patients and should result in better health care in dialysis in the area. Initially, however, as found above, the Watson facility could be staffed without "raiding" the staff at CDC since there is an adequate, identified pool of potential staff other than current CDC staff. Since CDC Lakeland has enjoyed a virtual monopoly over dialysis services in the Lakeland area for the last few years, and the quality of health care provided by CDC has been so unreliable, there is a great need for the Watson Clinic facility to provide CDC Lakeland with competition. Patients at CDC tried to persuade the management of CDC to improve, but when these patients objected to CDC policies and sought change, they were told to dialyze elsewhere if they were dissatisfied. Having the Watson Clinic facility available will enable CDC patients to make that choice, which should then result in sustained and real improvement at CDC. In sum, the need is such that the new facility will not really be duplicative of services provided by CDC, but to the extent it may be duplicative, the competition that will result will be beneficial, not detrimental, to ESRD patients. The parties may have proposed other findings of fact which have not been considered in the paragraphs above. Many of these are subordinate to findings stated above, are cumulative, or are irrelevant to the above findings and this case. Those of marginal relevance are considered in the following paragraphs: WATSON proposes that a finding be made as to the accidental infusion of formaldehyde and bleach into two patients on two separate occasions. This proposed finding was based solely upon hearsay, and therefore cannot be made on this record. WATSON proposes that a finding be made that formaldehyde causes cancer. There is no evidence in the record to support this finding. CDC Lakeland proposes a finding that the fluctuations in health care occurred as a natural consequence of change in management. This finding is contrary to the evidence and has no evidence to support it. CDC Lakeland proposes a finding that the absence of any projected cost for accounting or legal fees shows the project to be financially not feasible. The evidence does show that Watson Clinic has incurred about $25,000 to date in legal fees, and that it intends to pay these costs without attribution to the dialysis center. The issue, however, is basically irrelevant, since the Watson Clinic, which has sufficient funds to underwrite this project, intends to fund all costs until the project is self-sustaining. CDC Lakeland proposes a finding that Watson Clinic might expand to three shifts. There is no evidence to support this finding, and the only evidence on the evidence on the point is to the contrary.
Findings Of Fact Upon consideration of the oral and documentary evidence adduced at the hearing, the following relevant facts are found: On September 14, 1977, respondent received petitioner's (BMA) application for approval of a capital expenditure proposal to establish a new twenty-station chronic renal dialysis facility in Clearwater, Florida. Petitioner is a subsidiary of National Medical Care, Inc., which is the largest provider of chronic dialysis services, operating some sixty facilities nationwide. BMA currently operates two facilities in the Florida Gulf Health Systems Agency (FGHSA) region -- a twenty-five station facility in Tampa and a twenty station facility in St. Petersburg. BMA also operates facilities in Sarasota, Gainesville and Orlando, Florida. The present application proposes to spend $470,000.00 for leasehold improvements and $140,000.00 for equipment for a total capital expenditure of $610,000.00. The proposed facility is designed to provide outpatient hemodialysis treatments to medically stable, ambulatory patients suffering from end state renal disease (ESRD). Such patients suffer negligible kidney functions and require either regular chronic dialysis treatment or transplantation. Those patients who undergo hemodialysis generally have three treatments per week, each treatment lasting from four to six hours. By letter dated December 12, 1977, the respondent's administrator notified petitioner that its capital expenditure proposal was not favorably considered for two reasons, both relating to the need for such services within the applicable service area. The first reason cited by the respondent was the finding by the FGHSA that only five additional stations would be needed in the year 1978. Due to the fact that the FGHSA failed to provide respondent with its recommendation within sixty days, respondent was required, pursuant to F.S. Section 381.494(5)(e), to deem that the proposal was recommended for approval by the FGHSA. The second reason for disapproval listed by the respondent was its own determination that a surplus of eleven stations would exist in the service area of 1978. This figure of eleven was amended at the hearing to four. Subsequent to the time that petitioner's application was considered at the local and state levels, respondent approved the application of Kidneycare of Florida, Inc. for the establishment of a ten station chronic renal dialysis facility in Clearwater, Florida. This action occurred on February 15, 1978, after an administrative hearing was held in which petitioner BMA was an intervenor. That case (Case No. 77-2203) is presently on appeal in the District Court of Appeal, Second District. Apparently, the BMA and the Kidneycare applications were submitted to and considered by the local and state reviewing authorities during the same period of time. The generally accepted formula for arriving at a projected need for additional dialysis stations is not in dispute. The starting point is the actual number of persons who are ESRD patients within the service area. To this number is added the number of patients expected to develop ESRD during the planning period. This sum is then reduced by the number of successful kidney transplants expected to occur and by the number of patients expected to die within the planning period. For planning purposes, veteran administration patients and dialysis machines are not to be included in the projections. In order to arrive at a valid project patient population figure for the planning period, it should be appropriate to add the number of transient patients or winter visitors to the area and subtract the number of patients trained for home dialysis. To arrive at the number of stations (machines) required to serve the project patient population at the end of the planning period, the projected patient pool is divided by the station utilization factor (a ratio of number of patients per station). The number of existing stations in the area is then subtracted from this figure, thus yielding the number of additional stations needed. Thus the ideal formula reads as follows: current patient pool + new patients successful transplants mortality factor home trainees + winter visitors V.A. patients = projected patient pool divided by station utilization factor number of existing non V.A. stations + additional stations needed This formula necessarily employs certain conjectural components and the dispute in this proceeding concerns the derivation and propriety of the statistics used to supply these conjectural components. It appears from the testimony and documentary evidence that the respondent relied exclusively on the data supplied by the FGHSA, with the exception of the station utilization factor. Therefore, it is presumed that the figures utilized by the FGHSA in its analysis were also utilized by respondent. In arriving at the projected patient pool, the petitioner and the HSA were in agreement with the number of new patients and the number of successful transplants. They were not in agreement with the projected morality figure or with the projected number of veterans administration patients. The HSA utilized the actual morality figure (21.8 percent) for the 1975-76 year. The petitioner utilized the figure of 15 percent. The actual morality rate for the 1976-77 year was 14.1 percent. Had the HSA had this more recent statistic available to it at the time, it would have utilized it. A more appropriate method would have been to average the two figures. This would have increased the number of deaths projected by the petitioner and decreased the number projected by the HSA. The evidence with respect to the patient cap at the V.A. hospital was based upon hearsay and thus is not sufficient to refute the HSA's projections in that area. Neither the HSA nor the petitioner took into account the number of transient patients or the number of existing patients who would undergo home dialysis training within the planning period. Each of these factors was deemed too speculative or conjectural for a meaningful computation of projected needs. Testimony was adduced to the effect that the intervenor Kidneycare had received a nine-year grant to establish home dialysis training in the subject service area, and that once this program was underway, it was expected that from 30 to 50 patients would be trained in home dialysis. The utilization factor per station or machine was also in dispute. In making their projections, both the petitioner and the HSA used a factor of 3.2. This result is obtained by assuming that each machine has a capacity for dialyzing two patients per day, and that each patient must be dialyzed three times per week. Assuming a capacity rate of 80 percent, the utilization factor is 3.2 patients per station. Using a capacity rate of 90 percent, the utilization factor is 3.6 patients per station. The respondent utilized the 3.6 factor in projecting future need. This 3.6 utilization standard has consistently been used by respondent in its review of other free-standing chronic renal dialysis facilities, and petitioner has failed to demonstrate that such a standard is unreasonable. The remaining area of the formula in dispute is the number of existing non-V.A. stations in the area to be served. The parties agreed that as of the end of 1977, there were 73 chronic renal dialysis stations in existence or authorized in the four county are covered by the FGHSA. The dispute arose over the actual utilization by Tampa General Hospital of its existing 14 stations. The assistant hospital administrator at Tampa General Hospital testified that it is the future intent of said hospital to reduce the number of stations available for stable chronic patients in order to make room for more unstable chronic and acute patients. This "future intent" is still in the recommendation stage and the testimony regarding this intent was not specific as to the actual number of stations to be withdrawn. The testimony established that a reasonable planning period for chronic renal dialysis equipment is one year. If one considers the one year period to commence at the time that the proposed facility can be operational, the testimony indicates that the one year period would run from the end of 1978 through the end of 1979. In applying the facts discussed above to the acceptable formula, it is found that the patient pool projected by the HSA must be increased by utilizing a lower mortality rate (18 percent in lieu of 21.8 percent) and that the petitioner's projected patient pool must be decreased by utilizing a higher number of deaths and a higher number of V.A. patients. The resulting figures must also be offset by applying a station utilization factor of 3.6 in lieu of 3.2 and by adding to the number of existing stations the ten stations for which the intervenor Kidneycare recently received approval from respondent. Applying these adjustments to the figures projected by the respondent, the projected patient pool for non-V.A. patients for the end of 1978 approximates 294, and the figure for the end of 1979 is somewhere close to 326. A utilization factor of 3.6 patients per station indicates an approximate need for 82 stations by the end of 1978 and 90 stations by the end of 1979.
Recommendation Based upon the findings of fact and conclusions of law recited above, it is recommended that respondent's denial based upon the ground of lack of demonstrated need for additional dialysis stations in the service area be reversed. It is further recommended that, a need having been shown for an additional seven stations in the planning period, petitioner be permitted to submit a revised or amended application within twenty days for approval of a seven station facility. Respondent should then act upon said revised application within fifteen days from receipt of the same. Respectfully submitted and entered this 9th day of May, 1978, in Tallahassee, Florida. DIANE D. TREMOR Hearing Officer Division of Administrative Hearings 530 Carlton Building Tallahassee, Florida 32304 904/488-9675 COPIES FURNISHED: Art Forehand, Administrator Office of Community Medical Facilities 1323 Winewood Boulevard Tallahassee, Florida 32301 Harold W. Mullis, Jr. Trenam, Simmons, Kemker, Scharf, Barkin, Frye and O'Neill Post Office Box 1102 Tampa, Florida 33601 Eric J. Haugdahl Assistant General Counsel 1323 Winewood Boulevard Building 1, Room 406 Tallahassee, Florida 32304 John H. French, Jr. 630 Lewis State Bank Building Tallahassee, Florida 32304
Findings Of Fact The Agency For Health Care Administration ("AHCA") is the state agency authorized to issue, revoke, or deny certificates of need ("CONs") for health care facilities and programs in Florida. AHCA published a numeric need for an additional adult open heart surgery ("OHS") program in AHCA District 1. District 1 is approximately 90 to 95 miles in length, from west to east, and includes Escambia, Santa Rosa, Okaloosa, and Walton Counties. Adjacent to Escambia County, north and further west, is the State of Alabama. Adjacent to Walton County and further east are (from north to south) Holmes, Washington, and Bay Counties, Florida, which are in AHCA District 2. The adult population of the District 1 is distributed so that 49 percent is in Escambia, 17 percent in Santa Rosa, 28 percent in Okaloosa, and 6 percent in Walton County. Fort Walton Beach Medical Center ("FWBMC"), in Fort Walton, Okaloosa County, and Baptist Hospital, Inc. ("Baptist"), in Pensacola, Escambia County, are competing applicants for an adult OHS CON. The parties stipulated to the need for one additional adult OHS program. Existing OHS Providers In AHCA District 1, Sacred Heart Hospital ("Sacred Heart") and West Florida Regional Medical Center ("West Florida") are the only two hospitals currently authorized to operate adult OHS programs, and both are located in Pensacola, Escambia County. There are also OHS programs adjacent to District 1, in District 2 and in Alabama. In 1991-1992, there were 507 OHS at West Florida, and 512 at Sacred Heart. Using the same quarters for the year for 1992-1993, OHS volumes declined to 447 at West Florida, and 408 at Sacred Heart. The following year (1993- 1994), volumes increased to 456 at West Florida, and 541 at Sacred Heart. The most recent data available from the local health council, for comparable quarters in 1994-1995, shows 483 procedures at West Florida and 743 at Sacred Heart, or a total of 1226. Using county-specific use rates and county-specific market shares, the total estimated number of OHS in District 1 facilities will be approximately 1275 in 1996, 1297 in 1997, and gradually rising to 1360 in the year 2000. Absent approval of any additional programs, Sacred Heart is projected to perform 764 procedures in 1996 and 811 in the year 2000, with West Florida Regional projected to perform 512 in 1996 and 550 in the year 2000. Sacred Heart Sacred Heart is a 391-bed not-for-profit hospital in Pensacola. The primary service area for Sacred Heart includes Escambia and Santa Rosa Counties. The secondary service area includes Okaloosa County, and Baldwin and Escambia Counties in Alabama. Sacred Heart is a disproportionate share provider. There has been an OHS program at Sacred Heart for over twenty years. Currently, three of the seven inpatient surgery operating rooms are used for OHS, with a heart- lung machine for each room. Sacred Heart also operates three cardiac catheterization ("cath") lab rooms, two primarily for caths and the third for electrophysiology studies. The designation of a third OHS operating room in March 1995, eliminated the need to schedule cardiac caths and angioplasties for limited, specific slots of time, by assuring the availability of an operating room for OHS back-up for patients who "crash" or need immediate OHS during a cardiac cath lab procedure. In 1993, a review of open heart surgery outcomes at Sacred Heart indicated higher than expected mortality rates. At that time mortality rates at Sacred Heart were statistically substantially above those at West Florida. When mortality rates were higher, the volume of OHS procedures at Sacred Heart was between 408 - 541, in contrast to current volumes in excess of 700 cases. Before 1993, two cardiovascular surgeons were on the Sacred Heart staff. Since the fall of 1993, two additional cardiovascular surgeons, affiliated with the Cardiology Consultants group, have been added to the staff at Sacred Heart, the more recent in the summer of 1994. Cardiology Consultants, a group of fifteen cardiologists, and its affiliate group of two cardiovascular surgeons, Cardiothoracic Surgery Associates of Northwest Florida, are the primary referral sources for 75 to 80 percent of OHS cases at Sacred Heart. The group operates the cardiology program at Sacred Heart. Cardiology Consultant's referrals for OHS are made to its two affiliated cardiovascular surgeons and to the two other cardiovascular surgeons, who are in a separate group. Cardiology Consultants has established an outreach program to smaller community hospitals. Two of the group's cardiologists conduct monthly case management conferences in Fort Walton Beach. They review, with local cardiologists, the treatment and subsequent care of patients previously referred to the group. In addition, cardiologists from the group have regularly scheduled consultation hours at hospitals in Atmore, Brewton, and Baldwin, Alabama. One member of Cardiology Consultants practices full-time in Foley, Alabama, where an 82-bed hospital is located. Although 100 percent utilization is unreasonable and impossible, Sacred Heart estimated that it had the capacity to perform 980 OHS a year and that the district had the capacity to perform 2,450 OHS a year, at a time when Sacred Heart had two cardiovascular surgeons and the district had five. Sacred Heart supports the approval of a new OHS program at Baptist, provided that Sacred Heart manages the entire program for the first two years and that a monitoring process assures adequate volumes to maintain the quality of care at Sacred Heart. West Florida Regional Medical Center West Florida, the only other OHS provider in District 1, is affiliated with the Columbia/HCA Health Care Corporation, as is the applicant, FWBMC. Until two years ago, West Florida served approximately 71 percent of OHS patients residing in Okaloosa and Walton Counties, as compared to 29 percent served at Sacred Heart. Sacred Heart, due to its and Cardiology Consultants' outreach, is gaining a greater share of the market. West Florida, FWBMC, and Gulf Coast Community Hospital, in Panama City, are three of five Columbia/HCA Health Care Corporation hospitals in what is called the Columbia North Gulf Coast Network. The other two are Twin Cities Hospital, with 75 beds in Niceville, and Andalusia Hospital in Andalusia, Alabama. The Gulf Coast Network negotiates managed care contracts and purchasing agreements on behalf of the five Columbia hospitals in the area. In District 1, Columbia also owned a hospital in Destin, which is now closed. Bay Medical Center Bay Medical Center is an independent, tax-exempt special district, authorized by the Florida Legislature in July, 1995, to operate an existing public hospital, and to meet the health care needs of residents of Panama City and the surrounding areas. Panama City is in Bay County, which is in AHCA District 2, immediately adjacent to southern Walton County. The hospital has 353 licensed beds and is located approximately 2 miles from Gulf Coast Community Hospital. Bay Medical has approximately $43 million in long-term debt financed through tax-exempt revenue bonds. Bay Medical provides cardiac cath, open heart surgery and angioplasty, obstetrics, and inpatient psychiatric services. As a full-service regional tertiary hospital, Bay Medical also has renal dialysis, neurosciences, a hyperbaric chamber, and radiation oncology. Approximately 97 percent of all indigent care services rendered in Bay County are provided by Bay Medical. Under a certificate of convenience from Bay County, Bay Medical operates an advanced life support transportation system for intra-hospital transfers. The transportation system received a subsidy of approximately $450,000 in 1994, having not reached sufficient volume to break even. The staff at Bay Medical includes seven cardiologists and four cardiovascular surgeons. For the fiscal year ending September 30, 1995, 329 OHS cases and 2,447 caths (including 469 angioplasties) were performed at Bay Medical. In 1994, two OHS cases at Bay Medical originated in Okaloosa and Walton Counties, one from Point Washington and one from Crestview. Until the 1995 legislation establishing the special district, Bay Medical Center was limited to doing business in Bay County. Bay Medical is now authorized to establish business entities or satellite clinics in neighboring southern Walton and Okaloosa Counties, including the beach communities located between Panama City and the Destin/Sandestin area. Destin is approximately 45 miles and Fort Walton is approximately 65 miles from Bay Medical. With its existing OHS operating room and an additional one that was scheduled to be equipped for OHS in November 1995, Bay Medical has the capacity to double the 329 OHS cases and to accommodate an additional 300 angioplasties. Alabama Hospitals Three OHS programs exist in Mobile, Alabama, within 45 miles of Pensacola, but few referrals are made from District 1 to the Mobile hospitals. When out-migration to Alabama occurs, the relatively few cases go either to a large university teaching hospital or to a veterans administration hospital, both in Birmingham. Con Applicants Baptist Hospital Baptist is licensed to operate 601 beds, and 541 of those beds are located in Baptist Hospital ("Baptist"), Pensacola. The other 60 beds are located at Gulf Breeze Hospital, approximately 10 miles southeast of Pensacola in Santa Rosa County. The licenses for the two facilities were combined into a single license in April 1995. Baptist Hospital is a major acute care hospital and tertiary referral center, with an active oncology program providing infusion services, chemotherapy, and radiation therapy, and a wide range of psychiatric and substance abuse services. It is accredited by the Joint Commission for Accreditation of Health Care Organizations (JCAHO). Baptist is a state-designated trauma center. Emergency ambulance transportation and life flight, covering northwest Florida and southwest Alabama, are provided by Baptist, consistent with its extensive outreach to physicians, clinics, and to a 55-bed Baptist Health Care hospital located in the town of Jay in Santa Rosa County. Baptist is a disproportionate share provider under the state Medicaid and the federal Medicare programs. In District 1, Baptist provided care to the largest number of patients with AIDS for 1993 and 1994. Baptist offered to condition its CON-approval on providing 1.8 percent of total OHS to Medicaid patients and .9 percent to charity. Baptist has a sophisticated cardiology program, providing a wide range of non-invasive, as well as diagnostic and therapeutic services, including inpatient and outpatient cardiac caths, echocardiography, and electrophysiology. Baptist was the first hospital in District 1 to offer electrophysiology, beginning in 1983. Baptist also offered angioplasty services before they were regulated. The general term "angioplasty" includes traditional coronary balloon angioplasty, arthrectomies, and stents. In traditional balloon or percutaneous transluminal coronary angioplasty ("PTCA"), an obstruction in an artery is opened by inflating a balloon-type device at the end of the catheter. As a grandfathered provider, Baptist continues to provide emergency angioplasties, which are typically performed on patients presenting to an emergency room with evidence of acute myocardial infarction (heart attack). Approximately 70 emergency angioplasties were performed at Baptist in 1995. In the year ending in June 1995, there were approximately 990 diagnostic cardiac caths at Baptist. One fourth to one third of all cardiac caths result in a finding that a follow- up interventional procedure is needed. Cardiology Consultants also operate the cardiology program at Baptist, as a part of the Sacred Heart program. The unified Baptist/Sacred Heart cardiology department has a common medical staff, a single section chief, joint peer review, and shared on-call teams. Baptist/Sacred Heart cardiologists also staff Baptist's Jay affiliate and four smaller hospitals in Alabama. Services available through the outreach program include computerized EKG interpretation, multi-monitor scanning, and mobile cardiovascular ultrasound services. Baptist and Sacred Heart have licenses for cardiovascular information systems software, with common data elements, and report formats. If approved, Baptist would implement OHS services with quality assurance, case management, and other protocols used at Sacred Heart. The two hospitals' surgical team members will cross-train and eventually have the ability to operate at either facility with any of the cardiovascular surgeons on staff. Baptist has approval from an affiliate of Sacred Heart, the Daughters of Charity National Health System, to access its national cardiac database. Cardiology Consultants would recruit an additional cardiovascular surgeon for the Baptist OHS program. Baptist proposes to renovate approximately 5700 square feet and to use two existing operating rooms in the surgical suite in the Pensacola hospital for OHS. Between the two operating rooms, an area which currently is a cystoscopy room would be used for perfusion services. Baptist proposes to add two beds to the 8-bed coronary ICU unit located on the first floor, adjacent to the operating rooms. A progressive care unit on the fourth floor will also serve OHS patients. Baptist's proposal was criticized as a response to an institutional desire to complete the range of cardiac services available at Baptist, not a response to a community need for the service. Baptist was also criticized for its potential adverse impact on the OHS program at Sacred Heart, although Sacred Heart supports Baptist's proposal. Baptist's proposal relies on Sacred Heart for management services and Cardiology Consultants for volume monitoring. The only document stating the proposed terms of an agreement with Sacred Heart is a letter of May 1, 1995, from Sacred Heart's President and CEO. The letter requested written confirmation of the ground rules by Baptist, which has not been done. The State Agency Action Report, which gives the reasons for AHCA's preliminary approval of the Baptist application, includes a reviewer's statement that "Concern is raised regarding control and responsibility for the proposed open heart surgery program between the parties of the 'cooperative arrangement'. At the final hearing, AHCA's expert testified that she was not concerned about the details of the proposed agreement because it cannot affect the OHS program negatively. Fort Walton Beach Medical Center FWBMC is a 247-bed hospital, with 170 medical/surgical beds, averaging 52 percent occupancy, or approximately 128 patients. A 20-bed comprehensive medical rehabilitation unit and an 18-bed skilled nursing unit are CON-approved and under construction at FWBMC. Comprehensive rehabilitation services were scheduled to begin in February, 1996, and skilled nursing in the Spring of 1996. FWBMC has received, with its accreditation, letters of commendation from the JCAHO. FWBMC is located 45 miles from the Gulf of Mexico in the center (from east to west) of Okaloosa County. The primary service area for FWBMC is Okaloosa County and the southern fringes of Santa Rosa and Walton Counties. The communities of Fort Walton Beach, including Eglin Air Force Base, Niceville, and Valparaiso, Santa Rosa Beach, Sandestin, Destin, Navarre Beach, Crestview, and DeFuniak Springs are in the service area. FWBMC does not include Bay County, which is southeast of Walton, in its service area. Okaloosa County has a population of 157,000, which is growing, in part, by attracting retirees, including retired military personnel. Eglin Air Force Base is located on 724 square miles of federally owned land in the County. The Base hospital, located approximately 8 miles northeast of FWBMC, is a regional facility for approximately 20,000 active and 30,000 retired military personnel. Eglin Hospital operates 80 of its 155 beds and is a basic medical/surgical hospital, with small psychiatric and obstetrics units. Eglin provides significant outpatient clinic care. Eglin Hospital does not have OHS or cardiac cath. When a service is not available at Eglin Hospital, the patient receives a non-availability statement authorizing the patient to receive that specific service at another hospital. Eglin patients are most often referred to FWBMC for neurosurgery, psychiatric care, intensive care, coronary care and cardiac caths, and, when Eglin's capacity is exceeded, for obstetrical care. OHS cases from Eglin are referred to the two Pensacola providers. In addition to FWBMC and Twin Cities, other hospitals in Okaloosa County are North Okaloosa Medical Center, with 115 beds, and Harbor Oaks, a psychiatric adolescent hospital. In Walton County, there is one hospital, Walton Regional in DeFuniak Springs. Currently, at FWBMC, non-interventional diagnostic procedures include nuclear stress testing, and echocardiography, which is a type of ultrasound. Although transesophageal echocardiography, in which the patient swallows a probe that touches the back of the heart, gives far better resolution and a clearer picture of the heart, FWBMC has been unable to justify the maintenance of the probe due to low volumes of the procedure. Five cardiologists are on staff at FWBMC. Two of them also work at North Okaloosa Medical Center, four of the five also see patients at Twin Cities Hospital in Niceville. The cardiologists performed approximately 700 cardiac cath lab procedures in 1995. Rule 59C-1.032(6)(a), Florida Administrative Code, requires cardiac cath labs to have written protocols for the transfer of patients by emergency vehicle to a hospital with OHS within 30 minutes average travel time. Emergency heart attack patients benefit most from having angioplasties within two hours of the onset of symptoms. In reality, however, the experience at FWBMC is that preparing the patient for transfer, waiting for the helicopter or ambulance, exchanging information between transferring hospital staff and transport personnel, and between transport personnel and receiving hospital staff, and actual travel time can take up to two and a half hours. The only interventional cardiologist in Okaloosa County performed 28 PTCAs at West Florida in Pensacola, in 1994. American College of Cardiology and American Heart Association ("ACC/AHA") guidelines set an annual minimum of 75 therapeutic cath procedures for interventional cardiologists. The application and the testimony were in conflict on the issue of whether one or two cardiovascular surgeons would perform OHS at FWBMC when the program opens. Initially, case volumes would support only one cardiovascular surgeon, but at least two are needed to provide 24 hour coverage. Although Fort Walton's administrator testified that there would be two cardiovascular surgeons at some point, the application describes the need to recruit a surgical team consisting of one surgeon. FWBMC plans to construct an operating room, dedicated to OHS, to renovate an adjacent operating room for OHS, and a middle room as a pump room, and to purchase the equipment necessary for the OHS program. The program protocols will be developed using the experiences of other Columbia affiliates, including West Florida, Miami Heart Institute, and Bayonet Point Hospital in Hudson, Florida. The staff at FWBMC has the ability to apply an intra-aortic balloon pump assist. FWBMC also has an established thrombolytic protocol, and a team to evaluate the outcomes of patients with cardiovascular disease. Approximately 10 nurses at FWBMC have a minimum of three years experience with OHS critical care. Within the past two years, four nurses have been hired by FWBMC directly from OHS programs. The majority of ICU and CCU nurses are certified in cardiac life support. As a Columbia facility, FWBMC also has on-line access to other Columbia affiliates information systems, including other hospitals' policies, protocols, and volumes, and would utilize Columbia's resources for training and refresher courses for staff. FWBMC is committed to providing three percent of OHS services for Medicaid and two percent for indigent patients. FWBMC also commits, as a condition for CON approval, to having charges set at 85 percent of the maximum allowable rate increase (MARI) adjusted average for existing providers' OHS charge. FWBMC's proposal was criticized as being unable to attract the volumes projected, the cardiovascular surgeons needed for 24 hour coverage, or to provide OHS at the cost proposed. FWBMC was also criticized for the potential adverse impact on the OHS programs at Bay Medical Center and West Florida. Statutory Review Criteria Section 408.035(1)(a)-need for the service in relation to local and state health plan The parties agree that the 1994 District One Health Plan Certificate of Need Allocation Factors to apply the review of their CON applications. The District 1 health plan gives a preference to a CON applicant that best demonstrates cost efficiency, lower project costs, and lower patient charges. Baptist's total project costs are $1.58 million, FWBMC's are $2.2 million. Baptist's project is confined to the renovation of 5,700 square feet of existing space, as compared to FWBMC's combined renovation of 1,100 square feet and new construction of 1,600 square feet. FWBMC commits, as a condition for the award of its CON, to set OHS charges at not more than 85 percent of the MARI, adjusted district average. In the application, FWBMC further explains that its proposed fixed rate structure will not exceed 85 percent of the adjusted district average for existing district providers' DRG charges, using a six percent annual inflation rate. Using 1994 data for the World Health Organization's classification of Major Diagnostic Category-5 ("MDC-5"), a grouping of cardiovascular diseases, excluding OHS, Baptist demonstrated that charges per discharge were highest at FWBMC, followed in order by Baptist, West Florida, and Sacred Heart. Outside the district, Bay Medical's cardiology rates were approximately 16 percent lower than those at FWBMC. Baptist's expert concluded, therefore, that FWBMC's second pro forma year open heart revenue per case would be $75,314 per case, not $47,534 as projected in the CON application. By comparison the same methodology shows MDC-5 revenues per admission at West Florida and Baptist varying by only two percent. Baptist's second pro forma year revenue per case, using the same methodology, is $60,268, as compared to its CON projection of $61,441. Revenues per case for two different categories of inpatient cardiac caths, for the 12 months ending December 31, 1994, were $13,721 at FWBMC and $10,901 at Baptist in one category, and $11,219 at FWBMC and $9,186 at Baptist in the other. Baptist also contends that charge master items, including procedures, ancillaries, and tests which are common to other MDC-5 categories cannot realistically be billed at a different rate when related to OHS. FWBMC asserts that its commitment to lower charges can be accomplished by adjusting the charge master for "big ticket" items included in OHS cases, such as the use of the OHS operating rooms or the daily charge for cardiovascular intensive care beds. Baptist's assertion that FWBMC cannot set charges to meet the commitment is rejected in view of a similar commitment having been offered by Baptist in a prior application, and the apparent implementation of a similar pricing formula at another Columbia facility, Tallahassee Community Hospital ("TCH"). Beyond stating that "big ticket" item pricing could be used, FWBMC, however, failed to explain any details for implementing charges in this case, in view of its higher MDC-5 charges, and its existing requests for amendments to the MARI. There was no evidence that the charge structure is comparable to that which existed at TCH, although a former TCH administrator now works at FWBMC. Assuming arguendo that FWBMC can discount OHS charges by 15 percent, FWBMC concedes that lower patient charges will benefit directly only the payor groups which have reimbursement formulas related to actual charges. The direct benefit affects not more than 38 percent of the patients who are in a payor category which is declining with the rise in managed care. Indirectly, FWBMC noted, charges can be a starting point for negotiating managed care rates. FWBMC's lack of specificity on how it would set charges despite its higher MDC-5 charges, its limited benefit to patients due to shifts in payor mix, and the fact that an affiliate hospital is setting charges used to calculate the district average diminish the importance of the FWBMC pricing proposal as a community benefit in an OHS program. In addition, AHCA's expert noted, 1992 data indicated "that District 1 had on the whole lower average charges for OHS than the state." In general, the Baptist application better meets the first preference of the local health plan. Based on Baptist's failure to address local health plan preference 2 in its CON application, and FWBMC's statement that the preference, related to the conversion of beds, is inapplicable, the preference is deemed inapplicable or not at issue. Preference three for CON applications to convert existing capacity to expand existing or new services over CON applications seeking new construction, is better met by Baptist. FWBMC will construct an additional 1670 square feet and renovate 1100 square feet, and Baptist will renovate 5700 square feet of existing space. Preference four, favoring joint ventures and shared services that mutually increase existing resource efficiency over unilateral CON applications, is of limited value in distinguishing between the applications of Baptist and FWBMC, because both are unilateral applications. Through the influence of Cardiology Consultants, more shared cardiology services currently exist between Baptist and Sacred Heart, and could continue for at least two years, subject to the terms of an proposed agreement which has not been negotiated or accepted by the Boards of Directors of the hospitals. West Florida and FWBMC also have the potential for cooperation due to their common ownership. Although AHCA's initial reviewer gave Baptist full credit for meeting the preference, AHCA's expert testified at hearing that she would not have given Baptist that credit. Financial access is the concern embodied in preference five, for CON applicants demonstrating a commitment to the provision of services regardless of the ability of patients to pay; preference six, for CON applications specifying the greatest percentage of services to Medicaid and indigent patients; and preference seven, for applicants with the best history of Medicaid and indigent service. The preferences do not necessarily apply solely to assure the availability of OHS to Medicaid and indigent patients, most of whom are children or women below the age of 65, who are less likely to need OHS than older persons. In District 1, for example, an annual average of 2.8 percent of OHS patients are covered by Medicaid. One health planning expert described the preferences as rewarding a provider of charity services with an off-setting potentially profitable service, as demonstrated by the applicants' pro formas, although the trend towards managed care is limiting the ability of hospitals to do such "cost sharing". See, also, Subsection 408.035(1)(n), Florida Statutes. Baptist is a disproportionate share Medicaid provider, FWBMC is not. FWBMC noted that it has served more patients in the self-pay category, which includes most uninsured patients who are ultimately categorized as bad debt or charity. In 1994, self-pay at Baptist was 5.85 percent and 9.98 percent at FWBMC. At FWBMC, Medicaid was approximately 12 percent, and charity care was approximately 1.7 percent of the total in 1994. By contrast, in 1994, Baptist's Medicaid patient days were 17 percent of its total, or 19 percent when Medicaid health maintenance organizations ("HMOs") are included. At the same time, charity care was 3.8 percent of the total at Baptist. Baptist proposes to serve four Medicaid and six self-pay patients of the total number of 175 patients in year one, and four Medicaid and seven self- pay of the 227 patients in year two. FWBMC proposes to serve three percent Medicaid and two percent indigent of its projected total of 203 patients in year one, and of 221 patients in year two. Although the Baptist and FWBMC commitments are comparable in terms of combined total number of Medicaid and indigent patients, Baptist better meets the financial access preferences due to its commitment, combined with its history and status as a disproportionate share Medicaid provider. Local health plan preferences which are inapplicable to or fail to distinguish between the CONs at issue are: 8, for bed expansions; 9, on bed distribution; 10 and 11, on bed occupancy rates; 12, related to subdistrict case loads; 13, for facility occupancy rate projections; 14, for pediatric unit conversion; 15, for ICU/CCU conversions; 16, 17, 18, 19, and 20, related to technology and major equipment applications. Local health plan preference 21, for applicants demonstrating a history and willingness to serve AIDS patients, is met by both Baptist and FWBMC. Baptist served more HIV+/AIDS patients in 1994, having admitted 88 people with illnesses classified in the DRGs related to AIDS, for 808 of its total of 88,423 patient days. At the same time, FWBMC admitted 14 patients in the same DRGs for 185 of its total of 35,648 patient days. Mortality rates for AIDS, as an indicator of the incidence of HIV and AIDS, are considerably lower in Okaloosa than in Escambia County. Baptist meets preference 22, as the District 1 hospital which has provided the greatest percentage of patient days to AIDS patients. The first state health plan preference supports the establishment of OHS programs in larger counties within a district where the percentage of elderly is higher than the statewide average and the total population exceeds 100,000. Although the populations of both Escambia and Okaloosa Counties exceed 100,000, neither exceeds the statewide average percentage of elderly (defined as residents age 65 and older). Escambia County had approximately 275,000 residents, compared to approximately 157,000 in Okaloosa County. The statewide percentage of the population 65 and over was 18.6 percent in 1995, but only 12 percent in Escambia, and 10 percent in Okaloosa. The second state preference is given for new OHS programs clearly demonstrating an ability to perform more than 350 OHS procedures annually within three years of initiating the program. There is a direct relationship between higher volumes of cases and better outcomes in OHS. Using a New York study, the ACC/AHA guidelines for cardiovascular surgeons set a minimum of 100 to 150 OHS cases a year in which the surgeon performs as the primary surgeon, and an institutional minimum of 200 to 300 cases for each OHS program. The institutional minimum set by AHCA for OHS programs in Florida is 350 OHS cases a year. Baptist projects that 175 OHS and 239 PTCAs will be performed at Baptist Hospital in the first year of operation, and 227 OHS and 243 PTCAs in the second year. The actual number of direct Baptist patient transfers (from bed to bed, without an interim discharge) for OHS was 116 in 1993, 129 in 1994, and 88 in the first 9 months of 1995. Because Baptist would be keeping most of the existing transfers and splitting the existing and growing Sacred Heart volume of over 800 cases projected by the year 2000, performed by the same cardiovascular surgeons who have the ability to re-direct up to 75 to 80 percent of that volume, Baptist demonstrated that it has the ability to reach 350 procedures within three years. Most of the OHS performed at FWBMC would, in the absence of a FWBMC OHS program, be performed at West Florida. FWBMC projects that it will reach volumes of 203 OHS and 215 PTCAs in 1997, and 221 OHS and 234 PTCAs in 1998. The projections assume that FWBMC will be able to capture 76 percent of the OHS patients residing in Okaloosa and Walton Counties in year one and 80 percent in year two, which is the historical market share for West Florida. FWBMC would expect to keep most of its current acute transfer (bed-to-bed) patients for OHS or angioplasties, of which there were 167 in 1994, and 200 in the first 8 months of 1995. In addition, FWBMC expects to have an additional five percent in- migration, which appears to be a conservative estimate when compared to the current twelve to fourteen percent in-migration to District 1 for cardiac cath services, and twenty to twenty-five percent in-migration for OHS. The current in-migration is, however, to Pensacola not to Okaloosa County. In less than a year, from 1994 to the first ten months of 1995, Sacred Heart, as a result of its and Cardiology Consultants' out-reach programs, more than doubled its referrals from Fort Walton Beach, shifting referrals away from West Florida. The underlying assumption that FWBMC can attract over 75 percent of the Okaloosa/Walton resident market in year one and 80 percent in year two, based on West Florida's historical market, is rejected as not supported by the evidence. Although both FWBMC and West Florida are Columbia facilities, the new program at FWBMC will have no track record, will admittedly continue to transfer more complex cases, has not yet identified cardiovascular surgeons and, therefore, has no OHS referral relationships with cardiologists and primary care physicians in the district. Baptist estimates that FWBMC reasonably can expect to perform between a third and a half of the OHS from Okaloosa/Walton residents, resulting in 108 to 164 OHS in 1997, 110 to 167 in 1998. FWBMC did not demonstrate that it can reach 350 OHS cases within three years of initiating the program. State health plan preference three for improved access to OHS for persons currently seeking services outside the district is not a significant factor in distinguishing between the applicants, due to the relatively small out-migration experienced in District 1. More out-migration does occur from Walton and Okaloosa than from Escambia and Santa Rosa Counties, which supports FWBMC's claim that its location better enhances accessibility within the district. Preference four, for a hospital which meets the Medicaid disproportionate share criteria, and provides charity care, and otherwise serves patients regardless of their ability to pay, favors the Baptist application. Preferencefive applies to an applicant that can offer the service at the least expense, while maintaining high quality of care standards. The health plan preference further suggests that the physical plant of larger facilities can usually accommodate the required operating and recovery room specifications with lower capital expenditures than smaller facilities, and that the larger hospital generally has the greater pool of specialized personnel. FWBMC presented evidence that other hospitals its size, for example Columbia-affiliate Bayonet Point in Hudson, Florida, operate successful OHS programs. Nevertheless, Baptist is entitled to the preference based on its size, renovation plans, project costs, and existing depth of specialized and tertiary services. Preference six, favors hospitals with protocols for the use of innovative techniques as alternatives to OHS, such as PTCA and streptokinase therapy. Baptist, as a grandfathered provider and by virtue of protocols approved by AHCA does provide PTCA. Both Baptist and FWBMC offer streptokinase and other alternative thrombolytic therapies. FWBMC will be able to expand cardiac cath lab services to include PTCA, if approved for OHS. Beyond PTCA, the application and testimony do not indicate the scope of angioplasty procedures proposed by FWBMC. On balance, Baptist's application better meets the need for an additional adult OHS program in relation to the applicable local and state health plans. Section 408.035(1)(b) - availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care services in the district; (1)(b) - accessibility to all district residents; (2)(b) - appropriate and efficient use of existing inpatient facilities, and (2)(d) - serious problems in obtaining inpatient care without the proposed service. AHCA has established, by rule, that OHS is a tertiary service not intended to be available necessarily at every qualified hospital. Rule 59C- 1.033(4)(a), Florida Administrative Code, sets the objective of having OHS available to at least 90 percent of the population of each district within a maximum two hour drive under average travel conditions. With the existing providers in District 1, the access standard is met. Because the geographic access standard of the rule is met in District 1, Baptist's expert asserts that geographic access is relatively insignificant in distinguishing between the applications in this case. That position is rejected as inconsistent with the statute. Although transfers are inherent in the concept of tertiary services, enhancing access to decrease transfers and the distance and time required for transfers is a valid basis for distinguishing between competing applicants. AHCA's expert testified that "assuming that everything else is equal, then . . . avoid[ing] more transfers . . . could be important." Using weighted average travel times for residents, based on the 1995 adult (15 and over) population, Okaloosa County residents are 62.35 minutes from the closer of the two existing district OHS providers. That would be reduced to 17.42 minutes if an OHS program is established at FWBMC. Walton County residents' average travel times would decrease from 79.7 minutes to 47.89 minutes with a program at FWBMC. For Santa Rosa residents, the improvement would be approximately one and a half minutes, from 25.85 to 24.43 minutes. If Baptist's application were approved, the travel time for Escambia County residents would improve from 15.8 to 11.17 minutes. Currently, 75 percent of district residents are within an hour of an OHS program. The establishment of a program at FWBMC would improve geographic access by increasing to 98 percent the number of district residents within one hour of an OHS program. The establishment of an OHS program at FWBMC also will assist in alleviating the current mal-distribution of cardiac resources. The program would attract more interventional cardiologists to the eastern areas of district, where there currently is one, and would attract cardiovascular surgeons, where there are none. County OHS use rates varied in 1994, from 1.72 discharges per thousand population in Okaloosa County to 2.12 in Escambia. Angioplasty use rates were 1.84 for Escambia and 1.55 for Okaloosa residents. The difference is attributable to the relative accessibility of OHS in Escambia, the population difference of more people over 65 in Escambia, and the availability of fifteen cardiologists at Baptist and Sacred Heart, as compared to five at FWBMC. There is no evidence of inefficiency or quality of care concerns at the existing providers, after the decline in 1993 mortality rates at Sacred Heart. The extent of utilization of the existing providers and the evidence regarding capacity demonstrates that available OHS capacity exists in District 1, and will continue to exist through the year 2000, based on all of the parties' projections. Due the overlap in medical staff, referral sources, market shares, and physical proximity, the approval of a new program at Baptist is reasonably expected to have the greatest adverse impact on the volume of OHS performed at Sacred Heart. For the year ending in September 1995, approximately 564 cases were referred to Sacred Heart by Cardiology Consultants, 91 by Gulf Coast Cardiology, 44 by Fort Walton Beach Cardiology Group, and another 44 from various other sources. Using Baptist's current 43.8 percent share of the combined Baptist/Sacred Heart MDC-5 market, and the projected total volumes, Baptist would have 339 of the combined 776 OHS in 1997, and 355 of 811 in 2000. The remaining cases would leave Sacred Heart at or below 1993 levels, when its mortality rates were statistically significantly higher than those at West Florida, although there is no evidence that volume was the cause of the 1993 mortality rates. Sacred Heart witnesses testified that they assume that the minimum volume assured for Sacred Heart would be 350 cases, as referenced in the OHS rule, but the Baptist/Sacred Heart agreement has not been negotiated. Any minimum volume agreement is also directly dependent on Cardiology Consultants' ability to retain their share of the OHS market and their ability to allocate cases between the two hospitals. Baptist emphasized that the programs at Baptist and Sacred Heart ultimately will become competitors. The establishment of an OHS program at FWBMC, Baptist asserts, will reduce OHS volume at West Florida below 350, and will redirect OHS patients from Bay Medical Center in Panama City, which has not reached the 350 minimum. The projected volume of OHS at Bay Medical was 332 procedures in 1995. The loss of Bay Medical cases, according to Baptist's expert, will occur because Columbia facilities, including Gulf Coast Community Hospital in Panama City, will refer patients to FWBMC. Baptist's expert relied on 1994-1995 (third quarter) data which demonstrated that more referrals were made to West Florida than to Bay Medical in some areas of District 1 which are closer to Bay Medical. However, the total number of Bay County residents receiving OHS in District 1 was nine, three at Sacred Heart and six at West Florida. Virtually no overlap exists between the service areas of Bay Medical and FWBMC, while substantial staff overlap exists between Bay Medical and Gulf Coast. All eight cardiologists on the staff of Gulf Coast are also on the staff of Bay Medical. It is not reasonable to conclude that the cardiologists will make referrals for OHS to more distant hospitals where they have no staff privileges. FWBMC projects that one quarter of one percent of its discharges will come from Bay County. In 1994, there were 3 OHS cases at Bay Medical from Okaloosa and Walton Counties. Baptist's assertions that referral patterns in Districts 1 and 2 are dictated by the presence of Columbia facilities in various communities, and that Bay Medical would be affected adversely by the establishment of an OHS program at FWBMC are rejected as not supported by the evidence. An OHS program at FWBMC will reduce the volume of OHS cases at West Florida. Using FWBMC's estimates that it will have 203 OHS in 1997 and 221 in 1998, retaining many patients who would have required transfers to Sacred Heart and West Florida, with five percent in-migration, and assuming that the volume ranges from 483 to 550 cases at West Florida, then West Florida can remain marginally above 350 cases. The remaining volume is inadequate to provide the minimum 100 to 150 OHS for each of the four cardiovascular surgeons, to assure a high quality program without reducing the number of surgeons. Section 408.035(1)(c) - applicant's quality of care Both Baptist and FWBMC provide high quality of care in existing programs, as reflected, in part, by their JCAHO accreditations. Baptist's application better documents its ability to establish a high quality OHS program, to the detriment of that at Sacred Heart. FWBMC does not document its ability to establish a quality OHS program, due to its size, relative lack of tertiary programs, lack of some supplementary diagnostic and therapeutic cardiac services, and failure to identify cardiovascular surgeons and interventional cardiologists who will perform OHS and angioplasties at FWBMC. Section 408.035(1)(d) - availability of alternatives to inpatient care There are no alternatives to inpatient angioplasty and OHS care. Section 408.035(1)(e) - economics of joint, cooperative and shared health care resources Baptist would benefit from duplicating the program at Sacred Heart and, presumably, from Sacred Heart's clinical management of the Baptist program for the first two years. The precise nature of Sacred Heart's contribution to the Baptist program is subject to the terms of an agreement which has not been negotiated and, therefore, is impossible to evaluate. FWBMC would also benefit from the experiences of other Columbia affiliates which are OHS providers. Although both applicants address quality of care benefits of cooperation, neither demonstrates any economic benefit. Section 408.035(1)(f) - district need for special equipment or services not accessible in adjoining areas Baptist and FWBMC are proposing to provide equipment and services which are already available in District 1 and the adjoining areas. Section 408.035(1)(g) - need for medical research and educational and training programs; and (1)(h) - use for clinical training and by schools for health professionals Neither Baptist nor FWBMC proposed to meet a need for research, educational, or training programs. Section 408.035(1)(h) - availability of personnel and funds The parties stipulated that each applicant has the ability and means to fund the accomplishment and implementation of their projects. The parties also stipulated that proposed non-physician staffing is available and that staffing levels, salaries, and benefits are reasonable. FWBMC's physician recruitment proposals are unclear and too incomplete to conclude that it can adequately support an OHS and angioplasty program. Section 408.035(1)(i) - immediate and long-term financial feasibility The parties stipulated that each proposal is financially feasible in the immediate and long term if the volume projections are proven. Baptist's volume projections are supported by the evidence that the OHS and angioplasty cases can be shifted from Sacred Heart to Baptist. FWBMC failed to show that it can achieve projected volumes by similarly shifting cases from West Florida due to distance, the absence of overlapping cardiology staff, increased competition from Sacred Heart, and the need to continue to refer complex cases to more established programs. Therefore, FWBMC's proposed OHS program is not found financially feasible in the long term. Section 408.035(1)(j) - special needs of health maintenance organizations (HMOs) Neither Baptist nor FWBMC proposes to meet the special needs of HMOs. Section 408.035(1)(k) - needs of entities which provide substantial services to individuals not residing in the service district Neither applicant asserted at hearing that its proposal is based on the provision of substantial services to non-residents. The parties did demonstrate that over 20 percent of OHS are performed on non-residents, many from surrounding areas in Alabama. Section 408.035(1)(l) - cost-effectiveness, innovative financing, and competition FWBMC proposed an innovative system for charging for OHS services. The explanation of how one affiliate hospital implemented the alternative charging system and how FWBMC would do so was, however, incomplete and inadequate, when compared to evidence of its existing high costs for cardiology services and limited payor group benefit. Section 408.035(1)(m) - construction costs and methods The parties stipulated that the project costs, schedules, and architectural designs are established and reasonable. Section 408.035(1)(o) - multi-level continuum of care The parent corporations of both applicants include clinics, nursing homes, as well as other acute care facilities within their organizations. Section 408.035(2)(a) - less costly, more efficient alternatives studied and found not practicable; and 2(c) alternatives to new construction considered The utilization of OHS and angioplasty programs at existing providers when compared to their available capacity, and the direct correlation between higher volumes and higher quality, indicate that the least costly, most efficient practicable alternative is to rely on existing providers to meet the need for OHS and angioplasty services in District 1. On balance, the statutory criteria for evaluating CON proposals which focus on problems in existing services do not support the need for an additional adult OHS program at either Baptist or FWBMC. Criteria related to geographic access favor FWBMC. Criteria related to quality of care and long term financial feasibility (due to volume projections) favor Baptist. Rule Criteria AHCA has promulgated Rule 59C-1.033, Florida Administrative Code, which imposes additional requirements on OHS programs. By proposing to use the group of cardiovascular surgeons who currently perform OHS at Sacred Heart, Baptist demonstrated the ability to provide the range of OHS procedures required by rule, including valve repair or replacement, congenital heart defect repair, cardiac revascularization, intrathoracic vessel repair or replacement, and cardiac trauma treatment. FWBMC can recruit cardiovascular surgeons who are qualified to perform the required range of operations. As stipulated by the parties, both Baptist and FWBMC demonstrated the ability to implement and apply circulatory assist devices, such as intra-aortic balloon assist and prolonged cardiopulmany partial bypass. Both Baptist and FWBMC have the supporting departments needed for OHS, including existing hematology, nephrology, infectious disease, anesthesiology, radiology, intensive and emergency care, inpatient cardiac cath, and non- invasive cardiographics. Baptist has more historical experience with innovative cardiology services and a greater range of cardiographic services than FWBMC. OHS programs must be available for elective surgeries 8 hours a day for 5 days a week, with the capability for rapid mobilization, within 2 hours, 24 hours a day for 7 days a week. Baptist can meet the service accessibility requirement of the rule, but FWBMC failed to show that it can. FWBMC's inconsistency concerning the composition of its OHS team and initial low volumes result in uncertainty whether it can meet the requirements for hours of operation. The residents of District 1 are well served by the existing OHS programs, which have the capacity to meet projected need through the year 2000. AHCA's expert testified that FWBMC's application essentially states that ". . . we are going to get patients who would otherwise have gone to the two existing programs; . . . There was no documentation or even discussion that patients requiring the service weren't able to get the service now, or were having to leave the district to do so." The same is true of the Baptist proposal. In this case, need arises solely from the numeric need publication, and the pool of patients treated in the cardiology department at Baptist, whose transfer to Sacred heart for OHS can be avoided if a program exists at Baptist. At some level between AHCA's minimum of 350 and Sacred Heart's maximum capacity of 980 OHS cases, an additional OHS program is needed and Baptist is the provider which has better demonstrated its ability to operate an OHS program. The major disadvantage in the approval of the OHS program at Baptist is the risk that approval is premature and, therefore, detrimental to the quality of OHS services at Sacred Heart absent the implementation of the safeguards proposed by Sacred Heart in the following letter: Sacred Heart Hospital Office of the President 5151 N. Ninth Avenue P.O. Box 2700 Pensacola, FL 32513-2700 May 1, 1995 Mr. James F. Vickery President Baptist Health Care Corporation Post Office Box 17500 Pensacola, FL 32522-7500 Dear Jim: Please accept this letter of support from Sacred Heart Hospital for your March 1995 Certificate of Need application to establish an adult open heart surgery services program in District I. Sacred Heart Hospital recognizes that there is a net need for an additional open heart surgery program in District I, and we believe that the most efficient and cost-effective way to develop such a program is using resources currently available at Baptist Hospital. Sacred Heart Hospital is willing to work with Baptist Hospital in the establishment of the ----proposed open heart surgery program, in a relationship which includes, but may not be limited to, the following: the establishment of a cooperative program involving open heart surgery, angio- plasty and cardiac catheterization performed at both facilities; the sharing of cardiology staff including open heart surgery team personnel in a manner which will result in the most efficient use of resources between the two hospitals and which will also assure that each member participates in a minimum volume of surgical cases necessary for the achievement of quality standards; the coordination of other resources, including facilities and equipment, in an effort to avoid duplication to the greatest extent practical and feasible; the provision of initial and on-going training of open heart surgery personnel at both facilities by Sacred Heart Hospital; the provision of on-going oversight by Sacred Heart Hospital of utilization review and quality improvement programs, procedures and protocols for the cooperative cardiology program for a minimum of two years; and the clinical management by Sacred Heart Hospital of the cooperative cardiology program for a minimum of two years. I am attaching a copy of the action taken by the Executive Committee of our Board of Directors at its meeting on April 28, 1995, if you are in need of such a document. In order to have a complete record of this proposal, to include your acceptance and agreement with the above plan, please con- firm in writing that it will be the ground rules with which we will begin and work towards a first-class Cardiology Program sponsored by our two institutions. Should your March 1995 application be approved by the Agency for Health Care Administration, we anticipate a productive working relationship that will benefit the residents of District I. Sincerely, Sister Irene President and CEO Enclosure There is no proof of record that Baptist responded or agreed to Sacred Heart's proposal, although Baptist relies on these conditions to support the approval of its application. See, Baptist's proposed findings of fact 34.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the application of Fort Walton Beach Medical Center, Inc., be denied, and that the application of Baptist Hospital, Inc., be approved on condition that Baptist provide annually 1.8 percent of total open heart surgery patient days to Medicaid patients and .9 percent to charity, and that Baptist, prior to commencing an OHS program, enter into an agreement with Sacred Heart consistent with the terms proposed in the letter of May 1, 1995. DONE AND ENTERED this 8th day of August, 1996, in Tallahassee, Leon County, Florida. ELEANOR M. HUNTER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 8th day of August, 1996. APPENDIX TO RECOMMENDED ORDER, CASE NO. 95-4171 To comply with the requirements of Section 120.59(2), Florida Statutes, the following rulings are made on the parties' proposed findings of fact: Petitioner, Fort Walton Beach's Proposed Findings of Fact. Accepted in Findings of Fact 5. Accepted in Findings of Fact 2. Accepted in Findings of Fact 2 and 4. Accepted in Findings of Fact 4, 26, and 95. Accepted in Findings of Fact 4. Accepted in or subordinate to preliminary statement and Findings of Fact 13. 7-10. Accepted in or subordinate to Findings of Fact 2-5. 11-13. Accepted in or subordinate to Findings of Fact 11, 34, and 68. 14-28. Accepted in or subordinate to Findings of Fact 65 - 76. 29-51. Accepted in or subordinate to Findings of Fact 34 and 66 (with travel time distinguished from transfer times). 52. Rejected in Findings of Fact 73. 53-65. Accepted in or subordinate to Findings of Fact 5, 9- 11, 26, and 93. 66-72. Accepted in Findings of Fact 25-26, 70 and 93. 73-75. Accepted in or subordinate to Findings of Fact 9. Accepted in or subordinate to Findings of Fact 26. Accepted in or subordinate to Findings of Fact 58. Accepted in Findings of Fact 24. Rejected conclusion in first sentence of Findings of Fact 65-66. Accepted in Findings of Fact 25, 70 and 93. 81-83. Accepted in or subordinate to Findings of Fact 26. 84. Accepted in Conclusions of Law 93 and 108-110. 85-88. Accepted in Findings of Fact 93 and Conclusions of Law 108-110. 89. Accepted in Findings of Fact 9, 12 and 13. 90-93. Accepted in or subordinate to Findings of Fact 2, 5, and 65-69. Rejected Conclusions of Law in Findings of Fact 108-110. Rejected first sentence in Conclusions of Law 108 and second sentence in Findings of Fact 64, 87, and 92. 96-97. Accepted in or subordinate to Findings of Fact 29. 98-102. Accepted in part to Findings of Fact 33, 34, 35 and 59. Accepted in or subordinate to Findings of Fact 34 and 37. Rejected in Finding of Fact 25 and 26. Accepted, except first sentence in Preliminary Statement. Rejected in part in Findings of Fact 35, and 88-92. 107-110. Accepted in part in Findings of Fact 57-59. 111-114. Rejected in Findings of Fact 59. 115. Accepted, but see No. 80. 116-118. Accepted in or subordinate to Findings of Fact 57. 119. Accepted in or subordinate to Findings of Fact 62. 120-121. Accepted in or subordinate to Findings of Fact 58. 122. Accepted, except last sentence in Findings of Fact 58. 123-125. Accepted in or subordinate to Findings of Fact 73. 126-128. Accepted in or subordinate to Findings of Fact 72. 129-137. Accepted in or subordinate to Findings of Fact 71. 138-143. Rejected conclusion in Findings of Fact 42-45. 144-154. Accepted in or subordinate to Findings of Fact 49-51 and recommended conditions. 155-174. Accepted in or subordinate to Findings of Fact 12, 13, 26, 28, 58, 71, 93 and 95 and Conclusions of Law 98-104. 175. Rejected as inconsistent with testimony and rules. 176-178. Accepted in or subordinate to Findings of Fact 12, 13, 26, 28, 58, 71, 93 and 95 and Conclusions of Law 98-104. Rejected as inconsistent with testimony and rules. Rejected Conclusions of Law in Findings of Fact 109. Respondent, Baptist Hospital's Proposed Findings of Fact. Accepted in Findings of Fact 2 and 4. Accepted in Findings of Fact 22. Accepted in or subordinate to Findings of Fact 24. Accepted in Findings of Fact 22. Accepted in or subordinate to Findings of Fact 27 and 47. Accepted in Findings of Fact 29, 36, and 47. Accepted in or subordinate to Findings of Fact 5 and 8. Accepted in or subordinate to Findings of Fact 5 and 14. Accepted in or subordinate to Findings of Fact 7. Accepted in Findings of Fact 65. Accepted in or subordinate to Findings of Fact 63. Accepted in Findings of Fact 65. Accepted, except last sentence, in Conclusions of Law 110. Accepted in Preliminary Statement. Accepted in preliminary statement and Findings of Fact 41-45. 16-23. Accepted in or subordinate to Findings of Fact 25. 24-33. Accepted in or subordinate to Findings of Fact 11 and 26. Accepted in Findings of Fact 95. Accepted in or subordinate to preliminary statement and Findings of Fact 71. 36-37. Accepted in or subordinate to Findings of Fact 11 and 26. Accepted in Findings of Fact 95. Accepted in or subordinate to preliminary statement and Findings of Fact 71. Accepted in Findings of Fact 70. Accepted in or subordinate to Findings of Fact 11 and 26. Issue not reached. 43-46. Accepted in or subordinate to Findings of Fact 25. 47. Accepted in Findings of Fact 9. 48-49. Subordinate to Findings of Fact 11, 25, 26, and 95. Accepted in or subordinate to Findings of Fact 58. Accepted in or subordinate to Findings of Fact 92. Accepted in or subordinate to Findings of Fact 49. 53-60. Accepted in or subordinate to Findings of Fact 29-39. 61. Accepted in preliminary statement and Findings of Fact 95. 62-73. Accepted in or subordinate to Findings of Fact 57-59. 74-99. Accepted in or subordinate to Findings of Fact 6 and 7 and/or 10-12 and/or 58-59. 100-104. Issue not reached or deemed irrelevant. 105-106. With "serious" deleted, rejected in or subordinate to Findings of Fact 65-69 107-108. Accepted in part or subordinate to Findings of Fact 65-69. 109-110. Accepted in part or subordinate to Findings of Fact 56, and 65-69. 111-112. Rejected, except "serious", in part in or subordinate to Findings of Fact 65-69. 113-114. Accepted in or subordinate to Findings of Fact 65-69. 115. Accepted in Findings of Fact 60. 116. Accepted in or subordinate to Findings of Fact 65-69. 117. Accepted in Findings of Fact 65. 118-122. Rejected conclusions in part in Findings of Fact 59. 123. Accepted in Findings of Fact 59. 124-126. Accepted in part in Findings of Fact 59. 127. Not at issue. 128-129. Subordinate to Findings of Fact 59. 130. Accepted in Findings of Fact 59. 131-132. Subordinate to Findings of Fact 59. 133. Accepted in Findings of Fact 59. 134-135. Subordinate to Findings of Fact 59. 136-137. Accepted in Findings of Fact 33 and 91. 138. Subordinate to Findings of Fact 59. 139-140. Accepted in or subordinate to Findings of Fact 59. 141. Rejected as not having been demonstrated as solely residents' decision. 142-149. Accepted in or subordinate to Findings of Fact 59. 150. Rejected word "gimmick" in Findings of Fact 42-45. 151-152. Accepted in or subordinate to Findings of Fact 59. Accepted in Findings of Fact 58. Accepted in or subordinate to Findings of Fact 58, 71 and 95. Rejected in or subordinate to Findings of Fact 59 and 73. Accepted in or subordinate to Findings of Fact 59 and 73. Accepted in Findings of Fact 14 and 15. 158-159. Rejected in Findings of Fact 72. 160-161. Accepted in or subordinate to Findings of Fact 79. 162-165. Rejected conclusion in Findings of Fact 79. 166. Rejected in Findings of Fact 9, 12, 70, 93. 167. Accepted. 168. Rejected as not supported by the evidence. 169-180. Accepted in or subordinate to Findings of Fact 24 and 49-51. 181-190. Accepted in or subordinate to Findings of Fact 41-45. 191-192. Accepted in Findings of Fact 70 and 93. (Footnote rejected.) 193. Accepted in Findings of Fact 65. 194-195. Rejected in Findings of Fact 66-68. 196. Accepted in Findings of Fact 65. 197-199. Issue not reached. 200. Accepted in or subordinate to Findings of Fact 13, 71 and 95. 201. Rejected in Findings of Fact 13, 71 and 95. 202. Accepted in or subordinate to Findings of Fact 40-45. 203. Accepted in or subordinate to Findings of Fact 47. 204. Accepted in or subordinate to Findings of Fact 48. 205-206. Accepted in or subordinate to Findings of Fact 49. 207. Subordinate to Findings of Fact 52. 208. Accepted in Findings of Fact 71 and 95. 209. Subordinate to Findings of Fact 52. 210-213. Accepted in general in Findings of Fact 26 as compared to Findings of Fact 37. 214. Accepted in Findings of Fact 53 and 54. 215. Accepted in Findings of Fact 52. 216. Accepted in Findings of Fact 57-59. 217. Accepted in Findings of Fact 60. COPIES FURNISHED: Richard Patterson, Senior Attorney Agency for Health Care Administration 325 John Knox Road, Suite 301 Tallahassee, Florida 32303-4131 Michael J. Cherniga, Esquire David C. Ashburn, Esquire Greenberg, Traurig, Hoffman Lipoff, Rosen and Quentel Post Office Box 1838 Tallahassee, Florida 32302 John Radey, Esquire Jeffrey Frehn, Esquire 101 North Monroe Street, Suite 1000 Post Office Drawer 11307 Tallahassee, Florida 32302 R. S. Power, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building 3, Suite 3431 Tallahassee, Florida 32308-5403 Jerome W. Hoffman, General Counsel Agency For Health Care Administration 2727 Mahan Drive Fort Knox Building 3, Suite 3431 Tallahassee, Florida 32308-5403
Findings Of Fact St. Mary's Hospital, Inc. ("St. Mary's"), is a certificate of need ("CON") applicant for an adult open heart surgery program in Department of Health and Rehabilitative Services ("HRS"), District IX. The Agency for Health Care Administration ("AHCA") is the state agency responsible for the administration of CON laws. Intervenor, Martin Memorial Hospital Association, Inc., d/b/a Martin Memorial Medical Center ("Martin Memorial") has standing to intervene as a CON applicant for an open heart surgery program in HRS District IX. Intervenors, JFK Medical Center, Inc., ("JFK") and Palm Beach Gardens Community Hospital, Inc., d/b/a Palm Beach Gardens Medical Center ("Palm Beach Gardens") have standing to intervene as existing providers of open heart surgery services in HRS District IX. AHCA published a net need projection for zero additional adult open heart surgery programs in HRS District IX, with the following notice: Any person who identifies any error in the fixed need pool numbers must advise the agency of the error within ten (10) days of publication of the number. If the agency concurs in the error, the fixed need pool number will be adjusted prior to or during the grace period for this cycle. Failure to notify the agency of the error during this ten day time period will result in no adjustment to the fixed need pool number for this cycle and a waiver of the person's right to raise the error at subsequent proceedings. See, Volume 18, Number 32, Florida Admiministrative Weekly, at page 4501 (August 7, 1992). By letter dated August 14, 1992, St. Mary's notified AHCA that it believed an error had been made in the fixed need pool projection for adult open heart surgery programs in HRS District IX. This letter was hand delivered to AHCA on August 14, 1992, within the ten days required by the fixed need pool publication. All of the parties to this proceeding agree with St. Mary's that the numeric need formula in Rule 10-5.033(7), Florida Administrative Code (subsequently, renumbered as Rule 59C-1.033(7), showed a need for one additional adult open heart surgery program in District IX, except that AHCA determined that the provisions of subsection 7(a)2. were not met. St. Mary's letter also asserted that there was evidence that all existing adult open heart surgery providers performed in excess of 350 adult open heart surgery operations during the applicable base period calendar year 1991. The minimum of 350 operations in each existing program is an additional prerequisite to the publication of need for a new open heart surgery program in subsection 7(a)2. of Rule 59C-1.033, which the parties refer to as a "default" provision. The default provision is invoked in this case because JFK reported fewer than 350 operations. The subsection provides that a new adult open heart surgery program will not normally be approved if: One or more of the operational adult open heart surgery programs in the district that were operational for at least 12 months as of 6 months prior to the beginning date of the quarter of the publication of the fixed need pool performed less than 350 adult open heart surgery operations during the 12 months ending 6 months prior to the beginning date of the quarter of the publication of the fixed need pool. (Emphasis added). In its letter of August 14, 1992, St. Mary's stated that: According to the information provided by JFK to the local health council JFK performed 347 adult open heart surgery operations during the applicable base period (calendar year 1991). Notwithstanding the data reported by JFK to the local health council, data obtained from the Health Care Cost Containment Board for the same 12 month period reflects a total of 356 adult open heart surgery discharges from JFK. All parties agree that for calendar year 1991, JFK Medical Center, Inc. ("JFK"), reported a total of 356 discharges within DRG's 104 through 108 to Florida's Health Care Cost Containment Board and, for the same period of time, JFK reported 347 adult open heart surgery operations to the Treasure Coast Health Council, Inc. Based on the data provided by JFK to the HCCB, St. Mary's requests that AHCA enter a final order finding that there is a need for one additional open heart surgery program in District IX in the September, 1992 review cycle. The determinative factual issue, in this proceeding, is whether the term "discharge" is equivalent to the term "operation" and, if it is, should the HCCB data be accepted as more reliable than the Health Council data. The term "open heart surgery operation" is defined by Rule 59C- 1.033(2)(g), Florida Administrative Code, to mean: Surgery assisted by a heart-lung by-pass machine that is used to treat conditions such as congenital heart defects, heart and coronary artery diseases, including replacement of heart valves, cardiac vascularization, and cardiac trauma. One open heart surgery operation equals one patient admission to the operating room. Open heart surgery operations are classified under the following diagnostic related groups (DRGs): DRGs 104, 105, 106, 107, 108, and 110. (Emphasis added). The definition of "open heart surgery operation" was also considered in Humhosco, Inc. v. Department of Health and Rehabilitative Services, 14 FALR 245 (DOAH 1991). The hearing officer found that: [D]iagnostic related groups, or "DRGs," are a health service classification system used by the Medicare System. The existing rule does not include the reference to DRG classifications. Some confusion had been expressed by applicants as to whether certain organ transplant operations which utilized a bypass machine during the operation should be reported as open heart operations or as organ transplantation operations. The amendment was intended to clarify that only when the operation utilizes the bypass machine and falls within one of the enumerated categories should it be considered an open heart surgery operation. The inclusion of the listed DRGs was meant to clarify the existing definition by limiting the DRG categories within which open heart surgery services may be classified. There is no dispute that the primary factor in defining an open heart surgery procedure is the use of a heart-lung machine. Florida Hospital argued that the proposed definition is ambiguous and vague because not all procedures which fit into the listed DRG categories necessarily involve open heart surgery. Florida Hospital's fear that the new language would seem to indicate that each procedure falling into the listed DRGs qualifies as an open heart surgery operation is unfounded. While the provision could have been written in a simpler and clearer manner, the definition adequately conveys the intent that the use of a heart-lung bypass machine is an essential element to classify an operation as open-heart surgery. Humhosco, supra, at 255. (Emphasis added).
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter a final order determining that the fixed need pool publication, dated August 7, 1992, for Department of Health and Rehabilitative Services District IX for the July 1994 planning horizon is accurate. DONE and ENTERED this 22nd day of December, 1992, at Tallahassee, Florida. ELEANOR M. HUNTER Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 22nd day of December, 1992. APPENDIX Both parties have submitted Proposed Recommended Orders. The following constitutes my rulings on the proposed findings of fact submitted by the parties. The Petitioner's Proposed Findings of Fact Proposed Finding Paragraph Number in the Findings of Fact of Fact Number in the Recommended Order Where Accepted or Reason for Rejection. Accepted in Findings of Fact 5 and 6. Subordinate to Findings of Fact 13. Accepted in Findings of Fact 11, conclusion rejected in Findings of Fact 13-15. Accepted in Findings of Fact 15, conclusion rejected in Conclusions of Law 18-19. Rejected in Conclusions of Law 17-19. Rejected in Findings of Fact 13-15. Accepted in Conclusions of Law 1. Accepted in Findings of Fact 7 and 9. Accepted in Findings of Fact 7 and 9. Accepted, in part, and rejected, in part in Findings of Fact 10 and 11. Rejected in Findings of Fact 11 and 13-15. The Respondent's Proposed Findings of Fact Proposed Finding Paragraph Number in the Findings of Fact of Fact Number in the Recommended Order Where Accepted or Reason for Rejection. Accepted in Findings of Fact 5. Accepted in Findings of Fact 5. Accepted in Findings of Fact 6. Preliminary Statement Accepted in Preliminary Statement. Accepted in Preliminary Statement. Accepted in Preliminary Statement. Accepted in Preliminary Statement. Accepted in Preliminary Statement. Accepted in Findings of Fact 7 and 9. Accepted in Findings of Fact 10 and 11. Accepted in relevant part in Findings of Fact 4. Subordinate to Findings of Fact 9 and 11. Subordinate to Findings of Fact 7. Subordinate to Findings of Fact 12. Subordinate to Findings of Fact 12. Subordinate to Findings of Fact 12. Subordinate to Finding of Fact 11. Accepted in Conclusions of Law 17. Accepted in Findings of Fact 13-15. Accepted in Findings of Fact 13-15. COPIES FURNISHED: W. David Watkins, Esquire Oertel, Hoffman, Fernandez & Cole, P.A. 2700 Blair Stone Road Tallahassee, Florida 32301 Lesley Mendelson, Esquire Agency for Health Care Administration 2727 Mahan Drive Tallahassee, Florida 32308 Byron B. Mathews, Jr., Esquire 201 S. Biscayne Boulevard Suite 2200 Miami, Florida 33131 Gerald M. Cohen, P.A. Steel Hector & Davis 4000 Southeast Financial Center Miami, Florida 33131-2398 Robert A. Weiss, Esquire John M. Knight, Esquire Parker, Hudson, Rainer & Dobbs The Perkins House 118 N. Gadsden Street Tallahassee, Florida 32301 Sam Power, Agency Clerk Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303 Harold D. Lewis, General Counsel Agency for Health Care Administration The Atrium, Suite 301 325 John Knox Road Tallahassee, Florida 32303
