The Issue The issue presented is whether the applications for certificates of need filed by Petitioners Beverly Enterprises-Florida, Inc. d/b/a Beverly Gulf Coast- Florida, Inc.; JFK Medical Center, Inc.; and Manor Care of Boynton Beach, Inc., should be granted.
Findings Of Fact Petitioner Beverly Enterprises-Florida, Inc., d/b/a Beverly Gulf Coast- Florida, Inc. (hereinafter "Beverly"), is a wholly-owned subsidiary of Beverly- California Corporation which is a wholly-owned subsidiary of Beverly Enterprises, Inc., one of the largest providers of long-term care services in the country. Beverly operates 41 nursing homes in the state of Florida, with all of these facilities receiving substantial financial, managerial, operational, and program support from Beverly's Florida regional office. Three of those nursing homes are located in Palm Beach County, Florida. Beverly proposes in its certificate of need (hereinafter "CON") application #7372 to construct a 120-bed community nursing home in zip code 33414, which is the Wellington area of Palm Beach County, to be known as Wellington Terrace. The facility would provide high acuity nursing services with an emphasis on rehabilitation. The proposed special programs include an adult day care program, respite care services, and an Alzheimer's unit, and the facility will accept patients with AIDS. The proposed facility will encompass 53,348 square feet and will have a total project cost of approximately $5.6 million. The facility is designed to minimize institutional effects and emphasize a home-like atmosphere for residents, featuring such amenities as a large day room with an aquarium and wide-screen television and VCR, a screened gazebo, and a greenhouse. Quality of life enhancements will be a consideration in all aspects of the facility. The building will meet or exceed all licensure requirements for construction and safety codes. Beverly's goal is to achieve a superior-rated facility. Beverly has agreed, if it is awarded a CON in this proceeding, that its CON for this facility will be conditioned upon the facility having a 25-bed Medicare-certified sub-acute unit which will include 4 beds dedicated to ventilator-dependent care. Wellington Terrace's CON will also be conditioned upon the provision of 56 percent of its annual patient days to Medicaid patients, and Beverly will give Florida State University's Institute on Aging a grant in the amount of $10,000 to be used for gerontological research. Petitioner Manor Care of Boynton Beach, Inc. (hereinafter "Manor Care"), is a Florida-based operating subsidiary of Manor Care Healthcare Corporation, one of the largest operators of nursing homes in the country. Manor Care Healthcare Corporation is a wholly-owned subsidiary of Manor Care, Inc., a publicly-traded company listed on the New York Stock Exchange. Through its corporate structure, Manor Care, Inc., devotes substantial financial, manpower, and other resources to its individual nursing homes. The individual facilities are directed by corporate policies in the areas of finance, quality of care, quality assurance, prototype services, structural design, and all areas of nursing home operations. Manor Care's parent owns 10 nursing homes and 4 adult congregate living facilities in Florida. Two additional nursing homes are under construction in Florida, including one in Palm Beach County. In the last 4 years, Manor Care has constructed and opened 2 nursing homes in Florida, and both received superior-rated licenses as soon as they were eligible. Manor Care seeks in its CON application #7375 to construct a 120-bed community nursing home in the Lake Worth area of Palm Beach County. The facility is a one-story fully equipped nursing center, using a design which conforms with all federal, state, and local regulations. It incorporates residential features to meet the physical, social, and psychological needs of the residents and promote independence. The space-efficient design emphasizes a home-like atmosphere which ensures quality of care and quality of life. The design is patterned after Manor Care's "prototype" facility and is very similar to Manor Care's two newest Florida nursing centers in Hillsborough and Pinellas Counties. The facility encompasses approximately 49,500 square feet and has a total project cost of approximately $6.8 million. The facility will contain 16 private rooms and 52 semi-private rooms. The proposed facility includes a 30-bed self-contained unit for residents with Alzheimer's disease and a 15-bed self-contained sub-acute unit. The sub-acute unit will be adjacent to speech, physical and occupational therapy/rehabilitation/dining spaces to facilitate patient recovery. The therapy spaces are 50 percent larger than Manor Care's standard therapy spaces to better accommodate the sub-acute patients. Like Beverly's, the proposed facility will offer skilled care, intermediate care, rehabilitative care, respite care, restorative care, sub- acute care, and specialized care for Alzheimer's disease and related dementia. It will also provide the following support services: pre-admission screening, appropriateness review, resident care plans, discharge plans, quality assurance, pharmacy, consulting (for physician visits, and dental, radiology, podiatry, and other diagnostic evaluations), community outreach, family programs, and chaplaincy. Beverly offers similar support services. Manor Care has agreed, if it is awarded a CON in this proceeding, to condition its CON on its 30-bed dedicated, secured Alzheimer's unit and its 15- bed sub-acute unit. Manor Care has also agreed to condition its project on providing a minimum of 55.5 percent of its total patient days to Medicaid residents, and on providing an adult Alzheimer's day-care program, a respite care program, and 2.8 nursing hours per patient day for the Alzheimer's unit. Petitioner JFK Medical Center, Inc. (hereinafter "JFK"), is a general acute care hospital located in the Atlantis/Lake Worth area, in central Palm Beach County. It is licensed to operate 369 beds. JFK enjoys tax-exempt status under Section 501(c)(3) of the Internal Revenue Code. JFK provides services to patients of high acuity. Its overall case mix index, which serves to measure acuity, is 1.56. The normal case mix for acute care hospitals is 1.0. JFK's case mix index places it among the top five percent of all hospitals in the state. JFK focuses its acute care services in three specific areas. It serves as a regional referral center for cardiovascular services. It serves as a regional referral center for oncology and is the only hospital in Palm Beach County accredited by the American College of Surgeons as a comprehensive cancer center. JFK also has a large orthopedic surgery program. JFK serves predominantly an elderly patient population. Approximately 75 percent of its patients exceed 65 years of age. JFK's patient population includes many patients with multiple system medical problems. Such patients are more difficult to care for than patients with single system problems. In addition to acute care services, JFK provides a full range of outpatient and ambulatory services. JFK operates a diagnostic breast institute, an ambulatory surgery center, an outpatient cancer center, and a home health agency. JFK also employs twenty-three primary care physicians. JFK's outpatient and physician services constitute a portion of JFK's continuum of care, as do its acute care services. Sub-acute services are the only link missing from JFK's continuum of care. By its CON application #7374, JFK seeks authority to convert 26 existing adult psychiatric and substance abuse beds to establish a 20-bed sub- acute skilled nursing unit. JFK proposes to treat patients: (1) who have experienced an episode of acute care; (2) who no longer have need for acute care; and, (3) whose medical needs require higher intensity of care than is provided in a community nursing home. These "sub-acute care" patients fit somewhere in the continuum between acute care and nursing home care. The project involves 14,100 square feet of renovated space, a capital expenditure of $633,285 to be funded from internal sources, and the conversion of underutilized beds to a highly-utilized service. Sub-acute care is a comprehensive inpatient care program designed for patients who have experienced an acute illness or injury. Sub-acute care is designed to treat complex medical conditions through coordinated complex medical treatments. The rendition of sub-acute care requires an interdisciplinary team of professionals and paraprofessionals. In order to render sub-acute care to its patient population, the JFK program will provide the following staffing and service components: 24-hour registered nurse coverage; 5-6 hours of hands-on nursing care daily per patient, which is twice the care required of a community nursing home; and, 7 day/week, 24-hour access to all of JFK's ancillary services, including laboratory, pharmacy, respiratory therapy, blood transfu- sions, emergency services, and physician services. The JFK program will provide a full range of rehabilitative, restorative, and therapeutic services to patients, including radiation therapy, intravenous therapy, chemotherapy, complex tracheotomy, ventilator, and hyperalimentation care. JFK will provide services to the following patient groups: orthopaedic patients including joint replacement, fracture or amputation patients, cerebrovascular patients including stroke and other CVA accident patients, post-operative open-heart surgery patients requiring transitional care, oncology/radiation therapy patients requiring high level sub-acute care, pulmonary disorder patients including respiratory/ventilator dependent or other chronic pulmonary disease patients, patients with drug resistant infections including MRSA or tuberculosis patients, HIV-infected patients, patients with severe decubitus ulcers, and psychiatric patients with skilled medical care requirements. The JFK program is not designed to compete with community nursing homes. JFK proposes in its application a condition that 90 percent of the patients served in the sub-acute unit will originate from within JFK. JFK also proposes a condition that 90 percent of the patient days provided in the unit be provided to Medicare patients, or non-Medicare patients requiring physician certified rehabilitative or restorative care. JFK also proposes a condition that it serve high acuity or "heavy care" patients. In order to be awarded a CON, an application must be evaluated to determine compliance with the priorities or preferences stated in the appropriate District or Local Health Plan and in the State Health Plan. The District 9 Local Health Plan includes 3 allocation factors to be used in evaluating nursing home applications. The first states that priority should be given to applicants for new nursing homes or expansion of existing homes who agree to provide a minimum of 30 percent Medicaid days to their patients. Both Manor Care and Beverly comply with this priority in that they have committed to a minimum of 55.5 percent and 56 percent, respectively. The slight difference in their commitments does not give Beverly an advantage. JFK is not specifically proposing to provide care to Medicaid patients in its sub-acute unit. JFK's proposal is to serve primarily Medicare patients with the remaining patients being without resources or having other insurance. Medicaid-eligible patients occasionally need sub-acute services, and Medicaid does reimburse currently for nursing services provided in hospital-based skilled nursing beds. However, at the time that JFK filed its CON application, Medicaid did not reimburse hospitals for such services. More importantly, the allocation factor does not apply to JFK's application since it only applies to applicants for new nursing homes or expansion of existing homes, and JFK is neither. The second allocation factor in the District 9 Local Health Plan provides that priority shall be given to applicants who demonstrate (a) a documented history of providing good residential care; (b) staffing ratios, particularly for registered nurses and aides, that exceed the minimum requirements; (c) provision for the treatment of residents with mental health problems; and (d) the inclusion of intensive rehabilitation services for those short-stay patients who require rehabilitation below the level of an acute care hospital. Manor Care meets this allocation factor better than Beverly. As to the first criterion in the second allocation factor, during some of the 36 months prior to the filing of its application, two of Manor Care's ten Florida nursing homes held a conditional license. Currently, nine of those ten nursing homes hold superior licenses, and the other holds a standard license. Manor Care's two nursing homes opened most recently received superior licenses as soon as they were eligible. On the other hand, during some of the 36 months prior to the filing of its application, 17 of Beverly's 41 Florida facilities held a conditional license. Beverly's most recent composite shows that 31 of its 41 Florida facilities are superior-rated, with three of those 41 facilities rated conditional. Hospitals do not provide residential care, and JFK, therefore, has no history of "residential care" to evaluate; however, JFK has met stringent quality of care requirements by obtaining accreditation by the Joint Commission on Accreditation of Healthcare Organizations. The second criterion in the second allocation factor is met by the staffing ratios of all three applicants. Similarly, all three applicants will treat residents with mental health problems, the third criterion. The last criterion of the second allocation factor seeks applicants offering intensive rehabilitation services below the level of an acute care hospital. All three applicants comply with this criterion since JFK's application is for a sub-acute unit including intensive rehabilitation services, and Manor Care and Beverly each include such a unit within their proposed nursing home facilities. The Local Health Plan's third allocation factor seeks applicants proposing to serve a distinct population that is currently not being served within the subdistrict, Palm Beach County. As written, none of the applicants meets the third allocation factor since none has identified a distinct patient population that is not being served. However, the Agency interprets this allocation factor as being fulfilled by an applicant who addresses a distinct population which is being underserved rather than unserved. As interpreted by the Agency, all three applicants meet this allocation factor, Manor Care and Beverly with their Alzheimer's units, and all three applicants with their sub- acute units. Both services are greatly needed by Palm Beach County residents. Beverly suggests that it meets the third allocation factor as it is written because it will provide Jewish services, Kosher food, care to AIDS patients, and bi-lingual services. However, there are facilities with bi- lingual and multi-lingual employees, and patients with AIDS are receiving services. Further, there are dedicated Jewish nursing homes in Palm Beach County, and Beverly's project design does not include a Kosher kitchen. Beverly also suggests that its application is more consistent with the Local Health Plan than Manor Care's. Beverly relies on language within the Plan which states an interest in increasing access to nursing home services to the westernmost region of Palm Beach County. First, that language is not contained in any of the allocation factors utilized by the Agency in reviewing CON applications. Second, Beverly does not include the westernmost regions of the county in its primary service area for the proposed facility. Third, Beverly's Royal Manor facility is already serving the area which Beverly proposes as the primary service area for its Wellington Terrace facility. The State Health Plan contains 12 allocation factors. The first states that preference shall be given to applicants proposing to locate a nursing home in areas within the subdistrict with occupancy rates exceeding 90 percent. Palm Beach County has an occupancy rate in excess of 90 percent, and all applicants meet this preference. The second allocation factor states that preference shall be given to an applicant who proposes to serve Medicaid residents in proportion to the average subdistrict-wide percentage of the nursing homes in the same subdistrict. It further provides that exceptions shall be considered for applicants who propose to exclusively serve persons with similar ethnic and cultural backgrounds, or who propose the development of multi-level care systems. The average percentage of nursing home Medicaid patients in the Palm Beach County subdistrict is 55.44 percent. Since Manor Care proposes a minimum of 55.5 percent and Beverly proposes a minimum of 56 percent, they both meet this preference. Beverly's reliance on a higher state-wide average to obtain an advantage over Manor Care as to this factor is misplaced since the factor does not call for any statewide average but rather speaks to the Medicaid commitment of the specific facility being proposed. Although JFK, as a hospital, does not meet the average subdistrict-wide percentage of Medicaid usage, JFK is still entitled to preference under this allocation factor since its proposal is specifically for the development of a multi-level care system. JFK specifically proposes its sub-acute unit to fill in the only gap in its vertical continuum of care. The third allocation factor in the State Health Plan gives preference to an applicant proposing to provide specialized services to special care residents, including AIDS residents, Alzheimer's residents, and the mentally ill. All applicants meet this allocation factor. JFK meets this factor with its unique hospital-based sub-acute unit proposal. Manor Care meets this factor with its dedicated, secured Alzheimer's unit, sub-acute unit, and comprehensive rehabilitation program. Beverly meets this factor with its sub-acute unit and comprehensive rehabilitation program and its Alzheimer's unit. Further, all three applicants will provide services to AIDS patients and to the mentally ill. Factor four gives preference to applicants proposing a continuum of services to community residents including, but not limited to, respite care and adult day care. Manor Care will provide Alzheimer's adult day care, respite care, a 30-bed Alzheimer's unit, and a 15-bed sub-acute unit. It will provide skilled and intermediate care, rehabilitative care, hospice care, restorative care, telephone re-assurance, referral and counseling services, and various community outreach programs. Manor Care meets this allocation factor. Beverly proposes a continuum of services, including its sub-acute unit, Alzheimer's unit, adult day care, and respite care. Beverly proposes an outpatient adult day care program for up to eight guests, with services available five days a week. The Wellington Terrace design allocates 735 square feet to multi-purpose space for adult day care. Direct care staff, consisting of a nursing assistant and a part-time activity aide along with volunteer programs staff, meals, and snacks will be offered in conjunction with the full array of recreational, personal care, therapeutic, and social services activities available at the facility. Manor Care also offers a full array of services to the participants in its Alzheimer's day care program. Although Manor Care has fewer slots available, its program will operate seven days a week. The respite care programs offered by both Beverly and Manor Care provide short-term nursing and therapeutic care for elderly adults who require care currently provided by family and other caretakers but whose caretakers require relief from their care-giving activities. All of the services available to in-patients will be available to respite residents. Although JFK's proposal does not include respite care or day care, its proposal would result in a continuum of services to community residents ranging from acute care services through home health care services. JFK, accordingly, also meets this preference. The fifth allocation factor gives preference to applicants proposing to construct facilities which provide maximum residents' comfort and quality of care. The factor states that the special features may include, but are not limited to, larger rooms, individual rooms, temperature control, visitors' rooms, recreation rooms, outside landscaped recreation areas, physical therapy rooms and equipment, and staff lounges. This allocation factor envisions services offered in a traditional community nursing home rather than services provided in a hospital-based skilled nursing unit. JFK, like any hospital, cannot meet the portion of this preference which evaluates the level of comfort in a residential, custodial setting, but it does meet the portion relating to quality of care. Beverly's facility seeks to minimize the effects of institutionalization on residents through patient rooms which exceed state requirements, private toilets in each room, a physical therapy suite with a physical therapy gym and hydrotherapy area, an outdoor ambulation court, outside courtyard with screened gazebo, and a solarium/greenhouse. Private dining space and separate areas for visitation are provided, and thermostat controls are placed in every room. Its Wellington Terrace facility will feature 50 semi- private rooms and 20 private resident rooms in a single-story structure. Manor Care's facility would have many of these amenities. Its design incorporates residential features that support the physical, social, and psychological needs of the residents and which emphasizes a comfortable atmosphere that ensures quality of care and quality of life for the residents. Both Beverly and Manor Care meet this factor. The sixth allocation factor in the State Health Plan gives preference to applicants proposing to provide innovative therapeutic programs which have been proven effective in enhancing the residents' physical and mental functional level and which emphasize restorative care. All three applicants meet this preference. Beverly's comprehensive rehabilitation program at Wellington Terrace will encompass physical therapy, occupational therapy, and speech/language pathology. Rehabilitation programs will be offered seven days per week in order to provide continuity, decrease the time associated with recovery and rehabilitation, and serve the increased needs for rehabilitation services attendant to the sub-acute patient. Upon admission, every resident will be screened by all therapies to assess the need for specific services with periodic screenings during all stays. Out-patient rehabilitation services will be offered to the community in a physical therapy suite with a separate entrance. Manor Care envisions a similar comprehensive rehabilitation program offering the same therapies with the same intended results. Its rehabilitation program for its sub-acute unit offers one advantage not proposed by Beverly, i.e., the patients in the sub-acute unit will receive care under the supervision of a physiatrist. Manor Care's physical and occupational therapy will be designed to increase tolerance and maximize function in relation to the disease process. The frequency and duration of therapy will increase as the patient's tolerance, skill level, and confidence improve. Manor Care will provide a restorative and normalizing program to enable each resident to achieve maximum functioning and independence. An inter- disciplinary team of specialists will develop an individualized resident care plan. Restorative care for sub-acute patients will incorporate the same approach and will focus on achieving medical stability and discharging patients to their homes. Beverly's Wellington Terrace will provide therapeutic programs which enhance the residents' physical and mental functioning and emphasize restorative care. Specialized rehabilitation programs, a restorative nursing program, and normalizing activities are three main components of Beverly's approach. Its therapists work as a team to develop a treatment program designed to improve the residents' ability. Training is provided in the use of prostheses, pain management, rehabilitative dining, and other restorative therapies. Allocation factor number seven gives preference to applicants proposing charges which do not exceed the highest Medicaid per diem rate in the subdistrict. Exceptions shall be considered for facilities proposing to serve upper income residents. Both Manor Care and Beverly meet this preference. JFK has not proposed a specific charge for Medicaid patients since it expects to serve few of them, and it is anticipated that its Medicaid charges would be higher than those in a community nursing home. JFK does not meet this factor in that it will be serving Medicare patients, and the cost of providing care to Medicare skilled patients is higher than the cost of providing services to Medicaid patients. Allocation factor number eight gives preference to applicants with a record of providing superior resident care programs in existing facilities in Florida or other states and calls for consideration of the current licensure ratings of Florida facilities. Nine of the ten Manor Care facilities in Florida are rated superior, and its two newest facilities received superior ratings as soon as they were eligible. Accordingly, Manor Care has a documented history of providing superior resident care programs to its residents in Florida. On the other hand, Beverly has a superior rating for 31 of its 41 Florida facilities, and three of the facilities are rated conditional. Manor Care better meets this allocation factor than Beverly. JFK does not have a record of providing residential nursing home care, but JFK does provide a high quality of patient care as evidenced by its accreditation by the Joint Commission on Accreditation of Healthcare Organizations. The ninth allocation factor gives a preference to applicants proposing staffing levels which exceed the minimum staffing standards contained in licensure administrative rules and further provides that applicants proposing higher ratios of RNs and LPNs to residents than other applicants shall be given preference. All three applicants propose staffing levels exceeding state minimum standards. As to the higher ratios, Manor Care's Schedule 6 for Year 2 shows 8.4 RNs and 14.9 LPNs. In comparison, Beverly's schedule 6 for Year 2 shows 8 RNs and 10 LPNs. Thus, Manor Care has a greater number of RNs and LPNs even though Beverly projects more utilization than Manor Care, and Manor Care is entitled to preference over Beverly on this factor. Allocation factor number ten gives preference to applicants who will use professionals from a variety of disciplines to meet the resident needs for social services, specialized therapies, nutrition, recreation activities, and spiritual guidance. It provides that the professionals used shall include physical therapists, mental health nurses, and social workers. All three applicants propose an interdisciplinary approach to meet the residents' needs in nursing, all therapies, nutrition, social services, and spiritual guidance, and JFK is likely to have a wider variety of professionals available than the two community nursing home applicants. The eleventh allocation factor of the State Health Plan states that preference shall be given to an applicant who provides documentation as to how it will ensure residents' rights and privacy, use resident councils, and implement a well-designed quality assurance and discharge planning program. All three applicants ensure residents' rights and privacy, and all have a well- designed quality assurance program in addition to a detailed discharge planning program. All three applicants meet this preference. The twelfth allocation factor gives preference to an applicant proposing lower administrative costs and higher resident care costs compared to the average nursing home in the district. This factor is difficult to accurately assess because the terms "administrative costs" and "resident care costs" are not defined, and there is no uniformity in reporting by county nursing homes. For example, some facilities such as Manor Care include salary benefits as an administrative cost, while others such as Beverly include that considerable expense as a resident care cost. Although it is also unknown how those costs are reported by the "average nursing home" or even what an average nursing home is, it is apparent that this factor seeks to encourage nursing homes to devote resources for direct delivery of care. Manor Care and Beverly comply with this preference. However, their applications in Schedule 6 reflect that Manor Care will have more staff for nursing, ancillary, and dietary services than Beverly and that Manor Care will have overall more full-time employees than Beverly. JFK will have higher resident care costs than the average nursing home, but any hospital-based program will have higher administrative costs than a free-standing nursing home because of the infrastructure required to operate a hospital. To the extent that this factor is intended to apply to a hospital-based skilled nursing unit, JFK cannot meet this factor. There is a need for the proposed Manor Care facility in Palm Beach County. First, Manor Care proposes to locate its facility in the west Lake Worth area of Palm Beach County. This area has a very high concentration of elderly people. In zip code 33467 (the western Lake Worth area), 14.7 percent of the projected 1997 population will be 75 years of age or older. It is good health planning to locate a new facility there. Second, there is a great need for additional Alzheimer's nursing home beds in a dedicated, secured unit. While the demand for Alzheimer's beds is substantially increasing, there are only a few dedicated Alzheimer's units in the entire county. Manor Care's 30- bed unit would help meet this need. Third, there is a need for additional sub- acute beds. Manor Care's proposed 15-bed unit will help meet this need particularly where Manor Care proposes to locate its facility. Fourth, Manor Care's commitment to provide a minimum of 55.5 percent Medicaid will enhance access to nursing home services. Fifth, Manor Care's application includes many letters of support from health care providers and practitioners, which substantiate the need and demand for another Manor Care nursing home in the county. It is not required for a CON applicant to propose a specific site for its facility. However, Beverly's application asserts that its proposed facility, Wellington Terrace, will be located in zip code 33414, which is the zip code for Wellington, a planned unit development. Beverly's witnesses also asserted that the facility would be built in Wellington, and Beverly's vice president in charge of nursing home development offered in his testimony to add as a condition for the award of a CON in this proceeding that Beverly would build its facility in Wellington. Beverly's proposed facility is not needed in the Wellington area of Palm Beach County. First, Beverly's proposed facility would not promote Medicaid access. Zip code 33414 has the highest income per elderly resident in Palm Beach County. Locating nursing home beds in the wealthiest elderly section of the county does not promote Medicaid access. Second, the small elderly population in Wellington does not show need for a new nursing home. The 75+ age cohort is that population group which truly demands nursing home services. Only 2.5 percent of the zip code 33414 residents are 75+. In comparison, the Palm Beach County average is 10.8 percent and the Lake Worth area where Manor Care proposes to locate is 14.7 percent. The other four zip codes in Beverly's primary service area (33414, 33411, 33470, 33467, and 33413) do not show need for the facility in Wellington. Zip codes 33470 and 33413 are scantly populated. Zip code 33411 is where Beverly's Royal Manor facility is located. Zip code 33467 is where Manor Care proposes to locate. Third, the closest nursing home to the proposed Beverly facility is Beverly's Royal Manor facility, which is only five miles from the proposed facility. Royal Manor already serves the Wellington area. The two Beverly facilities would be inappropriately competing with each other and duplicating each other's services, which is not logical given the limited elderly population in that area of the county. Fourth, Beverly is currently developing a sub- acute unit at Royal Manor and has indicated that unit might include ventilator- dependent beds. Royal Manor, therefore, already serves the limited sub-acute care and ventilator-dependent needs of elderly patients in that area. There is no need for an additional 25-bed sub-acute unit just five miles from Royal Manor. Also, Royal Manor currently has in place the same rehabilitative program proposed by Beverly in its new facility. Fifth, maximizing the resources at Royal Manor is a better alternative than building a new facility in zip code 33414. Notably, Beverly's application includes letters of support for a bed addition at Royal Manor, not the new proposed facility at Wellington. Beverly proposes a condition of a 25-bed Medicare-certified sub-acute level unit as a integral part of its project, following a company-wide focus which began in 1991. The goal for sub-acute residents is functional improvement rather than wellness. The majority of sub-acute patients will be discharged home or into an assisted living center. Beverly describes its sub-acute program as a level of medical/rehabilitative health services rendered to individuals who have completed the acute phase of recovery. The individual is medically stable, but continues to require complex medical intervention from nurses and therapists. Frequent diagnoses/conditions include post-operative fractured hip, renal failure (dialysis), cardiac rehabilitation, spinal cord injury, and respiratory conditions. Many patients will need IV therapy, parenteral nutrition and chemotherapy. A physician specializing in pulmonary medicine serves as medical director of the unit. That physician supervises a unit staff consisting of an RN, clinical coordinator, licensed nurses with critical care experience, and respiratory services contractual staff. As a condition to the award of a CON in this proceeding, Beverly will dedicate four of its sub-acute beds to a respiratory recovery program for ventilator-dependent patients. An RN with critical care/ventilator experience and a respiratory therapist will be on duty at the facility seven days per week, 24 hours per day. The ventilator-dependent residents will be those with a strong potential for being weaned from the respirator, with an average length of stay from four to six months. The goal is to discharge these patients to their homes or to a setting offering a lower level of care. The four rooms in the sub-acute unit closest to the nursing station will be equipped with headwall units, containing oxygen, vacuum, and compressed air systems. Four beds for ventilator-dependent patients is a good aspect of Beverly's application but does not approach the need of Palm Beach County residents for ventilator beds. The proposed 15-bed sub-acute unit at Manor Care is patterned on its "prototype" sub-acute program. This prototype provides a progressive therapeutic environment for patients who require medical monitoring along with an aggressive rehabilitation program. The interdisciplinary approach establishes measurable functional outcomes while avoiding re-hospitalization. The program is individualized and geared toward assisting patients and their families in coping with traumatic injury and disease to assist them in their return home. There are six primary features to Manor Care's prototype. First is a special physical layout of the unit, including a separate entrance, which creates an atmosphere for short-term stay. The second is a separate unit director who has both clinical and administrative experience. The third feature is the staffing model of the unit, which provides a minimum of 5.0 nursing hours per patient day. Most of the nursing hours are provided by licensed staff. The fourth feature is a case manager who is assigned to insure individualized treatment for each resident. The fifth feature is a dedicated staff for the unit, who have specific education and background in sub-acute care. The sixth feature is a physiatrist who oversees the operation of the unit. Manor Care's clinical profile of diagnoses to be treated in its sub- acute include: cardiac disorders, wound/skin care, renal disorders, general rehabilitation needs, pulmonary disease, brain injury, neurological disorder, medical, post-surgical, and orthopedic. Manor Care's prototype has been very successful; 83 percent of all sub-acute residents are discharged directly home. Many of Manor Care's sub- acute units are accredited by the Commission for Accreditation of Rehabilitation Facilities. On the other hand, Beverly's witnesses did not even know that CARF accreditation was available for comprehensive rehabilitation services in nursing homes. Further, while Beverly is still in the development stages of its sub- acute program, Manor Care has an established prototype with measured outcome. Lastly, Beverly's prototype does not include a physiatrist, and Manor Care's does. Alzheimer's disease affects the ability to remember, to communicate properly, and to perform activities of daily living. The needs of Alzheimer's patients are distinct from other nursing home residents. Their special needs require them to be treated in specialized units. Beverly will offer Alzheimer's services in an 18-bed area specifically designed for Alzheimer's patients. The unit includes separate dining and activity areas with an enclosed courtyard. This design allows for controlled wandering, with Wanderguard alarms placed on all exit doors throughout the facility. The goal of the program is to maintain the resident's sense of dignity and improve his or her quality of life. Mealtimes and therapeutic activities will be focused in small groups and will allow for individual assistance and partialization of activities. The program will have its own dedicated staff, trained to understand the symptoms and manifestations of Alzheimer's residents. Beverly currently operates similar Alzheimer's programs in Florida. Manor Care created a task force which lead to the development of Manor Care's prototype Alzheimer's unit. Currently, the Manor Care group operates over 90 dedicated units throughout the country. Manor Care's prototype encompasses five components: environment, staffing and training, programming, specialized medical services, and family support. The proposed 30-bed unit is self-contained, with its own dining room, activities room, lounge, quiet/privacy room, nurses' sub-station, director's office, day care lounge, and outdoor courtyard. A separate lounge area is provided for family visits. The enclosed, outdoor courtyard allows residents to walk outside freely. The unit is especially designed to reduce environmental stress. Manor Care's Alzheimer's unit has specialized staff including a unit director, activities director, and nursing staff. The unit is staffed with a high "nurse to resident" ratio. The staffing patterns emphasize continuity to ensure that residents receive individualized care. The goal of programming and activities is to improve quality of life. This specialized programming results in reducing the use of medications and restraints necessary to manage these residents. The activity program is success-oriented. The use of consultant medical specialists is an integral part of Manor Care's program. Specialists provide diagnostic treatment services for the Alzheimer's resident upon admission to the unit and thereafter when deemed medically appropriate. Families are very supportive of the unit programming and have benefited from the understanding and support available to them. The benefits of Manor Care's prototype Alzheimer's unit include: minimizing the use of physical restraints, decreasing the use of medications, improvement in residents' nutrition, reduction in agitation and combative behavior, a freer and safer living environment, an increase in independence and functional abilities, enhancement of family involvement, and better guarantor satisfaction. The uncontroverted medical evidence is that Manor Care's Alzheimer's unit is state-of-the-art and Beverly's is not. In addition to being dedicated and self-contained, Manor Care's unit is secured, i.e., the doors are locked, preventing the Alzheimer's patients from leaving that unit unaccompanied. On the other hand, Beverly proposes to use the Wanderguard system which sounds an alarm when an Alzheimer's patient leaves the unit or facility. The alarm alerts staff that they must stop what they are doing and go after the Alzheimer's resident to return the patient to the proper location. Although other nursing homes use the Wanderguard system, such is done only when Alzheimer's patients are distributed throughout the facility. It is not used in conjunction with a dedicated unit where all the Alzheimer's residents are located in one area. Accordingly, Manor Care's Alzheimer's unit is superior to Beverly's. Manor Care establishes links with state and local health care providers to maintain a continuum of care for admissions, treatment, referral, and discharge coordination. In addition to building upon the linkages already established by Manor Care's two facilities in Palm Beach County, Manor Care will pursue working relationships, referral arrangements, and transfer agreements with advocacy groups, adult day care groups, home health services, hospitals, recreational and senior citizen organizations, and respite care centers. Beverly establishes similar links and can utilize the linkages already established by its nearby Royal Manor facility. Manor Care will affiliate with local nursing schools, such as the South County Vocational Technical Center, Palm Beach County Community College, and the North County Vocational Technical Center to promote clinical rotations and internship programs at its facility. Through working relationships with health professional training programs, students will benefit from the training and practical experience gained within an operating facility. The proposed facility will offer the advantage of training in specialty Alzheimer's care and sub-acute care programs. Additionally, the research programs at Manor Care's parent company will assist the proposed facility in its provision of nursing home services, particularly in the areas of Alzheimer's care and sub-acute care, by developing new programs and services for its nursing centers. Manor Care has a team of staff, outside consultants, and other research entities conducting studies of health care needs, including studies on rehabilitation programs, sub-acute programs, diabetes programs, wound care management, adult day care, and Alzheimer's disease. This multi-disciplinary task force researches new technologies, with the ultimate goal of providing the highest quality of care. Beverly will also use Wellington Terrace as a clinical rotation training site for long-term care nursing students. Arrangements for training rotations have been made with the Institute on Aging and School of Nursing at Florida State University. Further, if Beverly is awarded a CON in this proceeding, it will establish a research fund of $10,000 allocated to a long- term care issue to be determined in conjunction with the Institute on Aging. Manor Care's project cost of $6,835,130 is reasonable. The costs and methods of construction, including energy provision, are reasonable and appropriate. There are no less costly or more effective methods of construction available. Its project cost is similar to the cost of a 120-bed facility that Manor Care currently has under construction in Palm Beach County, which gives Manor Care a credible benchmark for estimating its project cost. The estimated project cost is broken out by cost items, which, in turn, are reasonable. Manor Care estimates a total land cost of $1.42 million. Of this, $900,000 is for the purchase of land, and $520,000 is for land improvement costs. In evaluating land, Manor Care considers the distribution of other Manor Care nursing homes in the county, whether there are utilities available to service the land, and whether there is sufficient zoning and land use approval to develop the land for a nursing home. There are several available 5-acre sites in the west Lake Worth area that meet these land eligibility requirements, all in the range of $900,000. The estimate of $520,000 for land improvement is based on Manor Care's experience in Palm Beach County. These improvement costs include water and sewer hook-up. Manor Care estimates approximately $3.87 million for the building cost and $840,000 for total equipment costs: $150,000 for fixed equipment and $690,000 for movable equipment. These costs are reasonable and based on Manor Care's experience in Florida, including the facility under construction in Palm Beach County. Equipping a sub-acute unit is more expensive than regular residents' rooms. It requires more expensive beds, diagnostic machines, special support tables, and expensive nurse station equipment. Manor Care's total equipment cost includes appropriate equipment for its 15-bed sub-acute unit. Manor Care reasonably projects $67,000 for development costs and $339,000 for construction interest. It estimates $300,000 in start-up costs: $125,000 for pre-opening salaries and recruitment, $125,000 for marketing, and $50,000 for pre-opening inventories and miscellaneous costs. The expenses are reasonable and consistent with Manor Care's recent experience in opening two nursing homes in Florida. To the contrary, Beverly's projected project cost is likely understated due to the questionable reasonableness of several components. First, Beverly commits to locating its facility in zip code 33414. There is no land available in that zip code with the necessary zoning and the necessary land use designation for nursing home development. Beverly would have to obtain a change in zoning and may also have to obtain a change in the land use designation which requires a modification of the Palm Beach County Comprehensive Land Use Plan, which requires approval of both the county and the state. Beverly's chances for success are speculative. Further, of the four sites which Beverly has considered for locating its facility, one of those sites is smaller than the five acres which Beverly requires to develop its facility. Another of those sites does not have utilities in place to service the site, an expense Beverly has not included in its projected costs. Two of the sites are not located in zip code 33414. Even if land is available in Beverly's selected zip codes, Beverly's estimate of $350,000 for the purchase of land is unreasonably low. Second, Beverly underestimated its land development costs. For example, Beverly included no monies for water, sewer, or utility hook-up. In comparison, Manor Care assumed $165,000 for such hook-ups. Third, Beverly's total equipment cost appears understated. Equipping a sub-acute room is substantially more expensive than a normal room. Beverly proposed ten more sub- acute beds than Manor Care, yet its total equipment cost is almost $200,000 less. Fourth, Beverly's building cost per square foot is significantly less than Manor Care's. In three applications for a CON filed six months later than the one involved in this proceeding, Beverly estimates its construction cost as being $400,000 greater than the instant project for the same nursing home design. In explanation of this disparity, Beverly presented evidence that the subsequent applications were for an improved facility which would have a steel frame instead of the wood frame to be utilized at Wellington Terrace, and the HVAC system would be enhanced. Constructing its intended facility at Wellington rather than using the improved construction materials Beverly will use elsewhere is not a reason to approve Beverly's CON application in this proceeding. Fifth, Beverly's start-up cost of $75,000 is unreasonably low. That figure does not represent a calculation of specific items; rather, it is simply an aggregate figure which Beverly used. Beverly did not adequately explain the disparity between its start-up cost and Manor Care's $300,000 start-up cost, which is a reasonable figure. Finally, Beverly's construction period interest has not been shown to be reasonable and its application is not consistent with regard to financing and equity contribution. Although the Agency can authorize a cost overrun of up to 10 percent of an applicant's project cost, it is uncertain that Beverly has underestimated its project cost by only 10 percent. It is not good health planning to approve a project which will, in turn, require further Agency approval to implement. Further, this proceeding is a comparative review of the applications filed and the representations made therein. It would be inappropriate to approve an application containing projections which are suspect. Since both Manor Care and Beverly are able to secure the financing necessary for project accomplishment, both of their proposals have immediate financial feasibility. Manor Care's proposal also has long-term financial feasibility. The financial projections for Years 1 and 2 are based on reasonable utilization, revenue, and expense assumptions. Manor Care reasonably projects that it will be profitable in Year 2 of operation. Beverly is a large corporation with substantial resources. Because of this, it can be expected that Beverly's project, which will likely cost substantially more than Beverly projected, will be financially feasible in the long term although perhaps not as early as Year 2. Either Manor Care's or Beverly's project would enhance the existing long-term care system in Palm Beach County by providing needed skilled nursing services, services for Alzheimer's and related dementia disorders, sub-acute services, respite care, and adult day care. Both applicants have a corporate quality assurance program which is utilized and implemented at all nursing homes operated by that applicant. Those programs are intended to promote quality of life and quality of care for the residents. Both facilities would enjoy high utilization, and both proposed charges which are reasonable. Both projects will utilize corporate resources in a cost-efficient and cost-effective manner. Both Manor Care and Beverly have committed as a condition to the award of a CON to provide more Medicaid patient days than the nursing home average for Palm Beach County. Thus, both proposals promote access to Medicaid residents for nursing home services. Although Beverly's county-wide and statewide Medicaid averages are higher than Manor Care's, each facility of either applicant has met its CON condition regarding its Medicaid commitment. As required, JFK's application has been reviewed against the state and local health plan allocation factors as set forth in this Recommended Order. Its application meets the majority of those allocation factors. Moreover, some of those factors require that preference be given to programs which are of the specific nature proposed by JFK. Patients with a documented need for sub-acute skilled nursing services of the type proposed by JFK have been denied access to licensed but unoccupied skilled community nursing home beds in Palm Beach County. Those patients' needs for sub-acute skilled nursing services are documented in physician orders and plans of care contained in the patients' medical records. Generally, patients requiring a high level of nursing and restorative care have been denied access. Further, there are several specific categories of patients who have been unable to obtain timely discharges to skilled nursing facilities in Palm Beach County. These categories include: patients with chronic illness; patients who are ventilator dependent; diabetic patients; terminally ill patients; patients who require chemotherapy; AIDS patients; and patients with chronic obstructive lung disease. The difficulty in discharging these patients is a "daily to weekly" issue at JFK. Ventilator-dependent patients requiring skilled nursing care are routinely denied access to licensed but unoccupied skilled nursing beds in Palm Beach County. There are no long-term care beds in Palm Beach County that provide ventilator services, although some purport to do so. Palm Beach County patients who require long-term ventilator care must seek admission to Vencor Hospital in Fort Lauderdale, which is approximately forty-five miles from JFK. During peak season, Vencor generally does not have beds readily available. Patients who require long-term ventilator care often remain in acute care beds at JFK longer than warranted by their medical condition because there are not available appropriate facilities in Palm Beach County for their post-acute care. Patients discharged from JFK to Vencor for long-term ventilator care lose contact with their attending physicians, which impairs the continuity of care rendered to those patients. Patients placed at Vencor are further compromised by their family and friends' inability to travel to Fort Lauderdale to visit them. The support of family and friends is important in helping ventilator-dependent patients to wean themselves from the ventilator. JFK has experienced and anticipates it will continue to experience a significant increase in the number of its patients whose care is reimbursed under managed care plans. JFK's 1995 budget projects that 33 percent of the hospital's patient days will be attributable to managed care patients. Managed care plans have exerted pressure on JFK physicians to discharge patients as quickly as possible. Accordingly, patients discharged from JFK are often in a more acute phase of illness or injury than were comparable patients in past years. Patients discharged from JFK who require a heavier level of care have not, as a rule, been adequately served by Palm Beach County skilled nursing facilities. Community nursing homes in Palm Beach County do not offer sub-acute care of the nature proposed by JFK. As a result of patients being discharged "quicker and sicker" from JFK to community nursing facilities, JFK has experienced an increase in the rate of readmissions from community nursing facilities to JFK. The number of readmissions has grown from 115 in JFK's fiscal year 1991 to greater than 200 during its fiscal year 1993. This evidence confirms that existing community nursing home facilities do not serve as adequate or appropriate discharge alternatives for many JFK patients who require sub-acute care. JFK has the ability to provide a high quality of care to patients requiring sub-acute services. The Agency has determined JFK's quality assurance, utilization review, and resident care plans to be acceptable. JFK proposes a substantially higher number of nursing hours than required by licensure rules. Moreover, JFK proposes to provide RNs on a 24-hour basis, and to make available on a 24-hour basis to sub-acute patients its full panoply of ancillary and support services. The development of JFK's sub-acute unit will enhance the post-acute care provided to patients discharged from JFK's acute care beds. JFK has available the financial resources necessary to implement its sub-acute program and will be able to recruit the nursing and technical staff necessary. There is sufficient demand for the JFK program to assure that the program will be highly utilized. JFK's project will be financially feasible in the immediate and in the long-term. JFK's program will result in several cost related benefits, both to JFK and to the community it serves. First, because JFK will be able to discharge certain patients more rapidly to the sub-acute unit, it will avoid substantial operational expenses associated with caring for those patients in acute care beds. Based solely on the sample of patients referenced in JFK Exhibit 5, JFK would have avoided approximately $600,000 in annual operational expenses had a sub-acute unit been available at the hospital during 1992 and 1993. A contractual adjustment is the difference between the amount a hospital charges for a service and the amount it actually receives in payment for the service. The contractual adjustment is exacerbated where a patient's acute care length of stay extends beyond the number of days necessary to care for the acute needs of the patient. During the period March 1992-March 1994, JFK experienced a contractual adjustment of approximately $3,000,000 relative to the sample of 287 patients reflected in JFK Exhibit 5. That contractual adjustment is significant from a health care reimbursement perspective. JFK's contractual adjustments relative to patients who require post-discharge sub- acute care would be reduced if JFK were to establish a sub-acute unit, which would ameliorate JFK's financial losses associated with that category of patients. The development of a sub-acute program at JFK will benefit the Palm Beach County health care delivery system. The marginal or operational cost per day of providing acute care services at JFK is $350-$400 higher than the projected marginal cost per day of providing sub-acute care services. For every day that a JFK patient receives services in JFK's sub-acute unit, rather than in an acute care unit, the health care delivery system will save money. As JFK will incur significantly less expense in providing services to patients in a sub-acute unit, JFK will not have to subsidize the care it currently provides to sub-acute patients in the acute care setting. Accordingly, the development of JFK's sub-acute unit will have a downward pressure on future JFK rate increases, promoting cost containment, and will lower the cost of providing the sub-acute care services proposed by JFK. The development of JFK's sub-acute unit will allow the hospital to allocate its resources more efficiently, which further promotes cost containment. Further, the development of JFK's sub-acute unit constitutes an innovation in the delivery of health care services, which innovation will have a positive effect on competition. JFK is a not-for-profit hospital. It is JFK's policy to care for all persons regardless of financial condition, and JFK has outreach programs for persons with limited financial resources. While JFK's general admissions policy will apply to the sub-acute unit, JFK does not propose to serve a large number of Medicaid and indigent patients in that unit. JFK anticipates that Medicare will be the primary payor for approximately 90 percent of the patients served in the unit, given the unit's emphasis on restorative and rehabilitative care. Beverly or Manor Care will provide a majority of its services to Medicaid patients, thereby complementing JFK's proposal. JFK provides a full array of inpatient and outpatient health care services, including a diagnostic breast institute, an ambulatory surgery center, an outpatient comprehensive cancer center, primary care physician services, and home health services. Each of those services constitutes part of JFK's continuum of care. Sub-acute care services are the only link missing. The approval of its application will allow JFK to achieve full "vertical integration" i.e., a multi-level health care system, in that JFK will be able to provide its patients with services appropriate to their needs from pre-admission to JFK through post-discharge. Achieving vertical integration will enhance JFK's ability to contract with managed care companies, who endeavor to contract with organizations that offer a full continuum of care. JFK's establishment of a sub-acute unit will allow it to meet managed care companies' demand for capitated relationships, wherein the insurer pays an organization a flat amount, per covered life, to provide complete health care to its insured. The establishment of a sub-acute unit at JFK will allow the organization to reduce the cost of providing health care services to patients throughout its multi-level health care system and allow it to respond to the growing capitation market. Placing patients in the sub-acute environment, where they will consume fewer resources, will enable JFK to decrease the cost of providing health care to managed care companies and their subscribers. Finally, approval of JFK's application will allow JFK's patients to be followed by the same physicians who attended to them during their acute care hospitalization. Those patients who are capable of being transported elsewhere and are transferred to a sub-acute unit at a nursing home will seldom receive follow-up care from the physicians who performed their surgeries and otherwise attended to them during their acute episode. The overwhelming support of JFK's proposed sub-acute unit by the primary care and other specialized physicians at JFK, as evidenced by their testimony during the final hearing or by deposition admitted in evidence, is based upon their concern for their inability to follow up on their patient's care if those patients are elsewhere than in JFK. Those doctors who run office practices and work at JFK cannot spend a great deal of their day traveling around Palm Beach County from nursing home to nursing home to assure that their patients' recovery is progressing in addition to the time they spend visiting patients in the hospital and performing surgery and otherwise treating patients. Those physicians do not favor retaining the patients in acute care beds longer than is necessary, and that concern is not a result of concern for their personal incomes as was suggested by the Agency. Physicians are reimbursed at a higher rate for hospital visits than for visits to patients in skilled nursing units. Both continuity of care and successful outcome for the patient relate to continued care by the same physician.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered Granting Manor Care's CON application # 7375; Denying Beverly's CON application # 7372; and Granting JFK's CON application # 7374. DONE and ENTERED this 7th day of March, 1995, at Tallahassee, Florida. LINDA M. RIGOT Hearing Officer Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 7th day of March, 1995. APPENDIX TO RECOMMENDED ORDER Beverly's proposed findings of fact numbered 5, 6, 8, 9, 13-19, 21, 23, 25-27, 31, 32, 34-43, 45-47, 51-54, 57, 60, 61, and 81 have been adopted either verbatim or in substance in this Recommended Order. Beverly's proposed findings of fact numbered 1, 3, 4, 63, and 67 have been rejected as not constituting findings of fact. Beverly's proposed findings of fact numbered 2, 24, 28, and 80 have been rejected as being irrelevant. Beverly's proposed findings of fact numbered 7, 22, 44, 48, 59, 64-66, 69-72, 75, 76, 82, and 84 have been rejected as not being supported by the weight of the evidence. Beverly's proposed findings of fact numbered 10, 11, 20, 29, 30, 33, 49, 50, 55, 56, 58, 62, 68, 73, 74, 77, and 78 have been rejected as being subordinate to the issues to be determined. Beverly's proposed findings of fact numbered 12, 79, and 83 have been rejected as being unnecessary. JFK's proposed findings of fact numbered 14-59 have been adopted either verbatim or in substance in this Recommended Order. JFK's proposed findings of fact numbered 1-13 have been rejected as being unnecessary. Manor Care's proposed findings of fact numbered 1-6, 13-42, 44-57, 59- 78, 82, 83, 89-114, 116, 118-120, 122-125, and 128-131 have been adopted either verbatim or in substance in this Recommended Order. Manor Care's proposed findings of fact numbered 8-12, 43, 115, and 117 have been rejected as not constituting findings of fact. Manor Care's proposed findings of fact numbered 7, 79, 80, 87, and 88 have been rejected as being unnecessary. Manor Care's proposed finding of fact numbered 58 has been rejected as not being supported by the weight of the evidence. Manor Care's proposed findings of fact numbered 81, 84-86, 121, 126, and 127 have been rejected as being subordinate to the issues to be determined. The Agency's proposed findings of fact numbered 1-6, 9-26, 28, 34, 38, 39, 53, 54, 57-61, and 65-69 have been adopted either verbatim or in substance in this Recommended Order. The Agency's proposed findings of fact numbered 7, 41, 55, 62, and 63 have been rejected as being subordinate to the issues to be determined. The Agency's proposed finding of fact numbered 8 has been rejected as being unnecessary. The Agency's proposed findings of fact numbered 27, 29-33, 35-37, 40, 42-46, 48-52, 56, and 70 have been rejected as not being supported by the weight of the evidence. The Agency's proposed finding of fact numbered 47 has been rejected as not constituting a finding of fact. The Agency's proposed finding of fact numbered 64 has been rejected as being irrelevant. COPIES FURNISHED: James C. Hauser, Esquire Parker, Skelding, Labasky, Corry, Eastman & Hauser, P.A. 318 North Monroe Street Tallahassee, Florida 32301 Douglas L. Mannheimer, Esquire Broad & Cassel 215 South Monroe Street, Suite 400 Post Office Drawer 11300 Tallahassee, Florida 32302 Robert A. Weiss, Esquire 118 North Gadsden Street, Suite 200 The Perkins House Tallahassee, Florida 32301 Lesley Mendelson, Esquire Agency for Health Care Administration The Atrium Building, Suite 301 325 John Knox Road Tallahassee, Florida 32303-4131 Sam Power, Agency Clerk Agency for Health Care Administration The Atrium Building, Suite 301 325 John Knox Road Tallahassee, Florida 32303-4131
Findings Of Fact At all times relevant hereto Respondent was licensed as a physician in the State of Florida having been issued license number ME0040318. Respondent completed a residency in internal medicine and later was a nephrology fellow at Mayo Clinic. He was recruited to Florida in 1952 by Humana. In 1984 he became associated with a Health Maintenance Organization (HMO) in an administrative position but took over treating patients when the owner became ill. This HMO was affiliated with IMC who assimilated it when the HMO had financial difficulties. At all times relevant hereto Respondent was a salaried employee of IMC and served as Assistant Medical DIRECTOR in charge of the South Pasadena Clinic. On October 17, 1985, Alexander Stroganow, an 84 year old Russian immigrant and former cossack, who spoke and understood only what English he wanted to, suffered a fall and was taken to the emergency Room at a nearby hospital. He was examined and released without being admitted for inpatient treatment. Later that evening his landlady thought Stroganow needed medical attention and again called the Emergency Medical Service. When the ambulance with EMS personnel arrived they examined Stroganow, and concluded Stroganow was no worse than earlier when he was transported to the emergency Room, and refused to again take Stroganow to the emergency Room. The landlady then called the HRS hotline to report abuse of the elderly. The following morning, October 18, 1985, an HRS case worker was dispatched to check on Stroganow. Upon arrival, she was admitted by the landlady and found an 84 year old man who was incontinent, incoherent, and apparently paralyzed from the waist down, with whom she could not engage in conversation to determine his condition. She called for a Cares Unit team to come and evaluate Stroganow. An HRS Cares Unit is a two person team consisting of a social worker and nurse whose primary function is to screen clients for admission to nursing homes and adult congregate living facilities (ACLF). The nurse on the team carries no medical equipment such as stethoscope, blood pressure cuff, or thermometer, but makes her evaluation on visual examination. Upon arrival of the Cares Unit, and, after examining Stroganow, both members of the team agreed he needed to be placed where he could be attended. A review of his personal effects produced by his landlady revealed his income to be above that for which he could qualify for medicaid placement in a nursing home; that he was a member of IMC's Gold-Plus HMO; his social security card; and several medications, some of which had been prescribed by Dr. Dayton, Respondent, a physician employed by IMC at the South Pasadena Clinic. The Cares team ruled out ACLF placement because Stroganow was not ambulatory, but felt he needed to be placed in a hospital or nursing home and not left alone with the weekend approaching. To accomplish this, they proceeded to the South Pasadena HMO clinic of IMC to lay the problem on Dr. Dayton, who was in charge of the South Pasadena Clinic, and, they thought, was Stroganow's doctor. Stroganow had been a client of the South Pasadena HMO for some time and was well known at the clinic as well as by EMS personnel. There were always two, and occasionally three, doctors on duty at South Pasadena Clinic between 8:00 and 5:00 daily and, unless the patient requested a specific doctor he was treated by the first available doctor. Stroganow had not specifically requested to be treated by Respondent. When the Cares unit met with Respondent they advised him that Stroganow had been taken to Metropolitan General Hospital Emergency Room the previous evening but did not advise Respondent that the EMS squad had refused to return Stroganow to the emergency Room when they were recalled for Stroganow the same evening. Respondent telephoned the Metropolitan General Emergency Room and had the emergency Room medical report on Stroganow read to him. With the information provided by the Cares unit and the hospital report, Respondent concluded that Stroganow needed emergency medical treatment and the quickest way to obtain such treatment would be to call the EMS and have Stroganow taken to an emergency Room for evaluation. When the Cares unit arrived, Respondent was treating patients at the clinic. A clinic, or doctors office, is not a desirable or practical place to have an incontinent, incoherent, and non-ambulatory patient brought to wait with other patients until a doctor is free to see him. Nor is the clinic equipped to perform certain procedures that may be required for emergency evaluation of an ill patient. At a hospital emergency Room such equipment is available. EMS squads usually arrive within minutes of a call being placed to 911 for emergency medical treatment and it was necessary that someone be with Stroganow when the EMS squad arrived. Accordingly, Respondent suggested that the Cares team return to Stroganow and call 911 to transport Stroganow to an emergency Room for an evaluation. Upon leaving the South Pasadena clinic the Cares team returned to Stroganow. Enroute they stopped to call a supervisor at HRS to report that the HMO had not solved their problem with Stroganow. The supervisor then called the Administrator at IMC Tampa Office to tell them that one of their Gold-Plus HMO patients had an emergency situation which was not being property handled. Respondent left the South Pasadena Clinic around noon and went to IMC's Tampa Office where he was available for the balance of the afternoon. There he spoke with Dr. Sanchez, the INC Regional Medical Director, but Stroganow was not deemed to be a continuing problem. By 2:00 p.m. when no ambulance had arrived the Cares Unit called 911 for EMS to take Stroganow to an emergency Room. Upon arrival shortly thereafter the EMS squad again refused to transport Stroganow. The Cares team communicated this to their supervisor who contacted IMC Regional Office to so advise. At this time Dr. Sanchez authorized the transportation of Stroganow to Lake Seminole Hospital for admission. Although neither Respondent nor Sanchez had privileges at Lake Seminole Hospital, IMC had contracted with Lake Seminole Hospital to have IMC patients admitted by a staff doctor at Lake Seminole Hospital. Subsequent to his meeting with the Cares team Respondent received no further information regarding Stroganow until well after Stroganow was admitted to Lake Seminole Hospital. No entry was made on Stroganow's medical record at IMC of the meeting between Respondent and the Cares Unit. Respondent was a salaried employee whose compensation was not affected by whether or not he admitted an IMC Gold-Plus patient to a hospital.
The Issue The issue for determination is whether Respondent committed the offenses set forth in the Amended Administrative Complaint and, if so, what action should be taken.
Findings Of Fact At all times material hereto, Harmony Health Center was a skilled nursing facility operating at 9820 North Kendall Drive, Miami, Florida, and was licensed under Chapter 400, Florida Statutes. On December 5, 2003, AHCA conducted a survey of Harmony Health Center during which three deficiencies were found, one Class I deficiency and two Class II deficiencies. As a result of the deficiencies being found, AHCA filed an Administrative Complaint against Harmony Health Center. Subsequently, AHCA filed an Amended Administrative Complaint, citing two Class II deficiencies. Count I: Failure To Ensure That A Resident Entering The Facility Without A Pressure Sore Does Not Develop One Resident No. 31 was admitted to Harmony Health Center on May 9, 2003. Her records at Harmony Health Center indicate that she had suffered a stroke, paralyzing her on the left side, and that she had a swallowing problem, abnormally high blood pressure, and a feeding tube. Resident No. 31's records did not indicate that she had a pressure sore upon admission. An initial nursing assessment was performed on Resident No. 31 at the time of admission. Relating to pressure sores, the nursing assessment indicates that a Braden Scale for Predicting Pressure Sore Risk (Braden Scale) was performed. The Braden Scale is scored, with the lowest being 6 and the highest being 23, and has six categories, which are Sensory Perception-- ability to respond meaningfully to pressure-related discomfort; Moisture--degree to which skin is exposed to moisture; Activity- -degree of physical activity; Mobility--ability to change and control body position; Nutrition--usual food intake pattern; and Friction and Shear. As to Friction and Shear, Resident No. 31 received a score of one, which designates a "Problem" and states as follows: "Requires moderate to maximum assistance in moving. Complete lifting without sliding against sheets is impossible. Frequently slides down in bed or chair, requiring frequent repositioning with maximum assistance. Spasticity, contractures, or agitation leads to almost constant friction." Resident No. 31 received a total score of 12 on the Braden Scale. As to scoring, the Braden Scale provides, among other things, that a total score of 18 or below indicates that a resident is considered a risk and that "CAN Daily Skin Checks FFWP008 must be initiated." Recognizing the risk of Resident No. 31 developing pressure sores, Harmony Health Center ordered a heel protector for her right foot to prevent pressure sores. Resident No. 31's wound treatment and progress records for May 11, June 18, and July 1, 2003 do not reflect the presence of a pressure sore. The first mention of any pressure sore in Resident No. 31's medical records was on August 8, 2003, when a family member, not a staff person, observed a wound on Resident No. 31's right inner heel and pointed it out to a member of the nursing staff. The wound was described in the progress notes as a "blister like area." Resident No. 31's medical records refer to this wound as "in-house acquired." Harmony Health Center admits that Resident No. 31 developed a pressure sore while a resident but characterizes the pressure sore as "unavoidable." On August 8, 2003, Resident No. 31's physician ordered a podiatric consult. A progress note on August 12, 2003, indicates that the pressure sore was at Stage II. The podiatrist, Ann Marie Millar, DPM (Dr. Millar),who was at Harmony Health Center at least twice a week, usually performs consults within 24 hours. However, the consult did not occur until October 10, 2003, approximately two months after the consult was ordered. Dr. Millar was not contacted for the consult when the physician ordered the consult. The wound care nurse requested and the treating physician authorized the consult by Dr. Millar. No evidence was presented to explain why approximately two months elapsed before the consult was performed. When the consult was performed on October 10, 2003, the pressure sore had progressed to Stage IV, which is the most serious classification for a pressure sore. On October 15, 2003, Resident No. 31 was sent to the hospital for debridement of the wound to promote healing. The process of debridement involved either the chemical or surgical removal of necrotic (dead) tissue of the wound. In December 2003, the pressure sore was eventually resolved. Resident No. 31's medical records do not show that another pressure sore presented itself. Dr. Millar testified1 that Harmony Health Center did all that it could to prevent the pressure sore. Resident No. 31 had a heel protector and a Geo mat. Dr. Millar also testified that she was certain that the staff turned or rotated Resident No. 31; however, no documented evidence or any other testimony was presented which showed that the staff turned or rotated Resident No. 31 or which showed the actual care provided to Resident No. 31 by Harmony Health Center prior to the discovery of the pressure sore. According Dr. Millar, Resident No. 31's clinical condition causes contractures, which in turn causes more pressure to the affected heel and, unless the patient can be suspended, causes a heel ulcer. As a result, according to Dr. Millar, a heel ulcer, as experienced by Resident No. 31, is unavoidable. Dr. Millar further testified that Harmony Health Center had additional interventions, other than those used by it, to prevent a pressure sore. However, according to Dr. Millar, the other interventions were "not covered," as to being cost-covered, and, therefore, were not ordered or used. A registered nurse of 25 years, Eleanore Kennedy (RN Kennedy), performed the survey of Harmony Health Center for AHCA. RN Kennedy testified that for a family member, and not staff, to observe and report a pressure sore is unusual; and that, with protective equipment and proper turning, no reason existed for Resident No. 31 to develop a pressure sore. Consequently, according to RN Kennedy, Resident No. 31's pressure sore was avoidable. A registered nurse of 16 years, Jennifer Mata (RN Mata) testified, as an expert in nursing home care, on behalf of Harmony Health Center. RN Mata was also Harmony Health Center's director of nursing. RN Mata opined that Resident No. 31's pressure sore was unavoidable because, in essence, a resident in a nursing home with Resident No. 31's clinical condition develops pressure sores. The undersigned finds the testimony of RN Kennedy to be more credible than RN Mata. The evidence is irrefutable that the pressure sore developed after the admission of Resident No. 31 to Harmony Health Center. The evidence presented was insufficient to satisfactorily explain why a staff person had not observed the skin area at Resident No. 31's heel if Resident No. 31 had a heel protector, was being rotated or turned, and was having daily skin checks, as required by the Braden Scale. Furthermore, a lack of documented evidence exists showing that Resident No. 31 was turned or rotated and that her skin was checked daily although the evidence showed that her skin was checked weekly. This lack of sufficient evidence and lack of evidence causes the undersigned to find the testimony of RN Kennedy more credible. Further, RN Kennedy's testimony is found to be more credible than Dr. Millard’s as to whether the pressure sore was avoidable. The evidence was insufficient to satisfactorily explain why approximately two months elapsed before Dr. Millar was called to perform a consult on Resident No. 31. Furthermore, a lack of documented evidence exists to show that Resident No. 31 was turned or rotated and that her skin was checked daily although the evidence shows that her skin was checked weekly. This lack of sufficient evidence and lack of evidence causes the undersigned to find the testimony of RN Kennedy more credible. Hence, a finding is made that Harmony Health Center failed to prevent Resident No. 31's pressure sore and that, therefore, the pressure sore was avoidable. Count II: Failure To Implement Measures To Protect A Resident From Ongoing Falls, Resulting In Actual Harm To The Resident Resident No. 18 was admitted to Harmony Health Center on April 5, 2002. Resident No. 18's nursing assessment upon admission indicated that she had several conditions and needs. She had Alzheimer's Disease and right-side weakness. Her decision- making was severely impaired, with her never or rarely making any decisions. Resident No. 18 was a wanderer, moving with no rational purpose, seemingly oblivious to needs or safety. She required the assistance of two persons in her daily living activities (ADLs)--ambulation, transfer, bed mobility, eating, toileting, personal hygiene, and bathing. Resident No. 18 also used a wheelchair. Upon admission, Harmony Health Center identified Resident No. 18 as being at risk for falls and injury and prepared an Interdisciplinary Resident Care Plan (Care Plan) for her regarding falls. On April 5, 2002, the Care Plan indicated that she was at risk for falls and injury and indicated nine interventions to lessen her risk for falls, which were implemented. The interventions were as follows: (1) access/record full risk factors; (2) report to M.D. incidence of fall; (3) monitor possible causes of fall; (4) bed in low position; (5)items within easy reach; (6) maintain environment clutter-free; (7) call bell within reach; (8) provide PT/OT therapy evaluation and treatment as prescribed; and (9) orient to surroundings as needed. In spite of the interventions, Resident No. 18 fell six times at Harmony Health Center. Falls were documented on the Care Plan for April 15, 2002 (ten days after admission), June 5, 2002, August 28, 2002, May 22, 2003, June 25, 2003, and August 11, 2003. At the time of each fall, the documentation indicates that Resident No. 18 was found on the floor in her room. The Care Plan for Resident No. 18 indicates that another intervention was added on June 5, 2002, after the fall on the same day; on August 28, 2002, after the fall on the same day; on May 22, 2003, after the fall on the same day; on June 26, 2003, after the fall on June 25, 2003; and on August 11, 2003, after the fall on the same day. The intervention on June 5, 2002, was to use one-half side rails, to instruct her to use call light when needed, and to assist with ADLs; on August 28, 2002, was to place in well-supervised area; on May 22, 2003, was to instruct her to use call light when needing help; on June 26, 2003, was to have close supervision; and on August 11, 2003, was to monitor closely and frequently. As to the intervention added on June 5, 2002, the staff at Harmony Health Center was aware that Resident No. 18 would, on her own, get out of bed and go to the bathroom. One- half side rails make it easier for and assist a resident to get out of bed. Consequently, the one-half side rails made it easier for Resident No. 18 to get out of bed, which would contribute to her falling. Based on the evidence presented, this intervention to reduce the risk of falls was unreasonable for Resident No. 18, who was a high risk for falls. As to instructing Resident No. 18 to use the call light when needed, this intervention was essentially contained in the original Care Plan before her falls. As a result, this intervention on June 5, 2002, was not a new or different intervention. Further, Harmony Health Center was aware that Resident No. 18 was cognitively confused and suffered from sundowner's syndrome, which meant that she became more confused at night. An example of Resident No. 18's confusion and sundowner's syndrome occurred during the fall of August 11, 2003, when she was questioned, after the fall, as to where she was going; she responded that she was going to visit her sister. Based on the evidence presented, to instruct Resident No. 18 to use a call light, as an intervention to lessen the risk of falls, was unreasonable. A nursing assessment for Resident No. 18 was performed on July 17, 2003, a little over 15 months after her admission and after five falls. The nursing assessment indicates that, as to bed mobility (moving to and from lying position, turning side to side, and positioning body while in bed), Resident No. 18 required limited assistance, with one person assistance; and that, as to transfer (moving between surfaces to and from the bed, chair, wheelchair, and standing position), she required extensive assistance, with one person assistance. Further, the nursing assessment indicates that, as to cognitive skills for daily decision making (making decisions regarding tasks of daily life), Resident No. 18’s cognitive skills were independent (decisions were consistent and reasonable). The restorative nurse for Harmony Health Center, Adrienne Underwood, LPN, provided a service to Resident No. 18. Nurse Underwood's role was to maintain or increase Resident No. 18's level of care after Resident No. 18 completed rehabilitation. Nurse Underwood testified that Resident No. 18 could ambulate independently but could not recall when Resident No. 18 became independent. No medical records or assessments or Care Plan entered into evidence supports Nurse Underwood's testimony as to Resident No. 18's independence in mobility and/or transfer. Nurse Underwood's testimony, as to Resident No. 18's ability to ambulate independently, is found not to be credible. Regarding the falls on June 26, 2003 and August 11, 2003, for which the interventions of close supervision and to monitor closely and frequently, respectively, were added, Harmony Health Center's expert, RN Mata opined that the two interventions were appropriate. However, RN Mata also testified that Harmony Health Center was already performing these interventions, before the falls. A finding is made that the interventions added on June 26, 2003, and August 11, 2003, were not new or different interventions. Related to close supervision is the intervention on August 28, 2002, which was placing Resident No. 18 in a well- supervised area. As aforementioned, Harmony Health Center was already closely supervising and monitoring Resident No. 18 before the falls. Consequently, a finding is made that this intervention was not a new or different intervention. Restraining Resident No. 18 to lessen her risk of falls was not an option available to Harmony Health Center. She had no physician order for restraints. Without a physician order, Harmony Health Center could not and would not restrain Resident No. 18. No determination, as to the cause of Resident No. 18's falls, was made by either AHCA or Harmony Health Center. AHCA made no determination in its survey. Neither Resident No. 18's records presented into evidence nor testimony presented showed that Harmony Health Center determined the cause of the falls. AHCA did not contact the physician for Resident No. 18 regarding her falls as to whether the interventions were adequate or the cause of the falls. Whether to contact a physician is a judgment call for AHCA's consultants. AHCA's consultant made a judgment call not to contact Resident No. 18's physician. As an intervention, AHCA suggests that Harmony Health Center could have used bed alarms. Harmony Health Center does have bed alarms for some residents. RN Mata testified that bed alarms are used for residents who have a history of falling out of bed, i.e., from the bed to the floor. Furthermore, according to RN Mata, the purpose of bed alarms is to alert the staff to assist a resident before the resident falls. Resident No. 18's records indicate that she was found on the floor in her room. No evidence was presented that Resident No. 18 was found on the floor next to her bed, which would be an indication that she fell moving from the bed to the floor. However, the evidence does show that Resident No. 18 needed assistance to ambulate. An inference is drawn and a finding is made that, based on Resident No. 18's fall history, her cognitive ability, her need for assistance to ambulate, and the failure of prior interventions, a bed alarm would have been a reasonable intervention.2 Regarding Resident No. 18's fall on August 12, 2003, which was at 3:00 a.m., she sustained an injury, i.e., a hematoma to the right frontal area of her head. After the fall on August 12, 2003, Resident No. 18 was a total care resident. According to Harmony Health Center, the interventions were added after Harmony Health Center investigated each fall, the treating physician was contacted, and a team of Harmony Health Center's personnel reviewed each investigation and reached a consensus as to how to address the falls. To Harmony Health Center, the interventions were appropriate and adequate. No evidence was presented to indicate that an investigation of a resident's fall would not produce the cause of the fall. Based on the evidence presented, an inference is drawn and a finding is made that the investigations were inadequate and not thorough and failed to produce sufficient information to assist Harmony Health Center in determining the cause of Resident No. 18's falls. AHCA has no expectation that a facility will prevent all falls. AHCA has no rule or requirement that a new or different intervention must be developed and implemented for every fall by a resident at a nursing home. Based on the evidence presented, a finding is made that all the interventions added in Resident No. 18's Care Plan after her falls, except for the interventions on June 5, 2002, found to be new and different, were not new or different from the interventions developed by Harmony Health Center, before the falls. Based on the evidence presented, a finding is made that the interventions added after Resident No. 18's falls failed to lessen the risk of her falls and were, therefore, inadequate and inappropriate.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter a final order: Finding Ayintove Associates, LLC, d/b/a Harmony Health Center, f/k/a Integrated Health Services at Greenbriar in violation of Counts I and II for two Class II deficiencies. Imposing a fine of $5,000. Upholding the issuance of a conditional license. DONE AND ENTERED this 22nd day of March 2005, in Tallahassee, Leon County, Florida. S ERROL H. POWELL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 22nd day of March, 2005.
The Issue Whether, under Section 381.494-381.499, Florida Statutes, Humana, Inc., d/b/a Kendall Community Hospital, is entitled to a Certificate of Need to construct a 150-bed acute care hospital in the west Kendall area of south Dade County, Florida.
Findings Of Fact HUMANA is an investor-owned, multi-institutional hospital system which owns and operates more than 90 hospitals, most of which are medical/surgical facilities. (DHRS Ex.1, p.10). HUMANA applied for a Certificate of Need from DHRS to construct a 150- bed acute care community hospital in the west Kendall area of south Dade County, Florida. The specific area to be served is bounded on Miller Drive to the north, southwest 177th Avenue to the west, Coral Reef Drive to the south, and Calloway Road to the east. The proposed 150-bed hospital includes 100 medical/surgical beds, 20 pediatric beds, 20 Level II obstetric beds, 10 intensive care/critical beds, and a Level II nursery in conjunction with the obstetric unit. (TR 277). The proposal includes a 24-hour, physician-staffed emergency room and a "dedicated" outpatient surgery department, with separate recovery room. Surgery suites are specifically designed and reserved only for outpatient surgery, thereby facilitating outpatient scheduling and efficient operations. (TR 279). The outpatient surgery unit is intended to reduce the costs of health care by providing a cost-effective alternative modality of health care delivery. (TR 278). Finally, the proposal contemplates a full-body CT Scanner, digital radiography and general state-of-the-art ancillary equipment. (TR 278). If built, it would be the westernmost hospital in south Dade County. It is a "community" hospital, designed to provide hospital care to the rapidly growing population of the west Kendall area, but not serve as a major referral center for patients living elsewhere. (DHRS Ex. 1, pp. 32-34; TR 250, 280). The local health planning agency, then the Health Systems Agency ("HSA") of South Florida, Inc., 1/ reviewed HUMANA's application for a Certificate of Need, along with four other similar applications, and recommended that all five be denied because of asserted inconsistency with the HSA's Health System Plan. ("HSP") 2/ (DHRS Ex. 1, TR 77). The applications were then submitted to DHRS, the single state agency empowered to issue or deny Certificates of Need. 381.493(3)(a) and 381.494(8), Fla.Stat. (Supp. 1982). DHRS reviewed the HSA recommendation, conducted its own evaluation, and then denied all five applications, including HUMANA's. DHRS concluded: None of the five proposed projects are in compliance with the adopted Goals, Criteria, Standards and Policies of the Health Systems Agency of South Florida, as stated in the Health Systems Plan (HSP) and Annual Implementation Plan (AIP). A need to add acute care hospital beds to Dade County does not exist at the present time. The proposed projects would add to excess capacity and underutilization of hospital beds that now exist in Dade County. There are only five hospitals in Dade County that are at the recommended occupancy level of 80 percent based on licensed beds (none of which are located in South Dade), and the number of beds per 1000 population. The primary alternative would be not to construct any of the proposed projects. While all of the proposed projects represent some degree of financial feasibility, none are felt to be cost effective because increased bed capacity would result in costs and revenue higher than those projected for existing "High Cost" hospitals in 1984 as determined by the Hospital Cost Containment Board. (DHRS Ex. 1, p. 404) Thereafter, HUMANA timely instituted Section 120.57(1) proceedings challenging DHRS's denial; HUMANA's standing to do so is uncontested. HUMANA's position, maintained throughout, is that its proposed 150-bed hospital satisfies every legal criterion for the issuance of the applied-for Certificate of Need. Intervenor Baptist Hospital Intervenor BAPTIST HOSPITAL will be substantially affected if HUMANA is granted a Certificate of Need. BAPTIST is a fully licensed and accredited 513- bed, general acute care hospital located within HUMANA's proposed service area, at 8900 North Kendall Drive, Miami, Florida. (STIP-para. 8). If the proposed hospital is built, it would significantly and adversely affect the patient census and revenues of BAPTIST HOSPITAL. (TR 16, VOL 4). In 1982, BAPTIST drew 36.7 percent of its patients from HUMANA's proposed service area. (TR 15, 16, VOL 4). Fifty percent of the residents of the proposed service area (who were admitted to hospitals in Dade County) were admitted to BAPTIST HOSPITAL. (TR-440). It is estimated that BAPTIST would lose 15,047 patient days to the new HUMANA hospital and would experience significant adverse economic impacts. (TR 88-89, VOL 5). The proposed hospital would also adversely impact BAPTIST's ability to hire and retain nursing and technical personnel. BAPTIST has experienced difficulty in hiring and retaining these personnel. (TR 18, 60-73, VOL 4). Historically, the opening of a new hospital has adversely affected the hiring and retention of such personnel in nearby hospitals. (TR 72-73, VOL 4). Here, approximately 84 percent of BAPTIST's nurses live near HUMANA's proposed cite, thus increasing the likelihood that BAPTIST will be adversely affected in this manner. (TR 135, VOL 5). BAPTIST opposes the issuance of a Certificate of Need for HUMANA's proposed hospital, and supports DHRS's initial denial. Intervenor American Hospital Similarly, intervenor AMERICAN HOSPITAL would be significantly affected if the proposed HUMANA hospital is built. AMERICAN is a fully licensed and accredited 513-bed, general acute care hospital located and operated within HUMANA's proposed service area, at 11750 Bird Road, Miami, Florida, (STIP-para 8). AMERICAN currently draws 41 percent of its patients from HUMANA's proposed service area. The proposed hospital will cause AMERICAN to lose an estimated 5,300 patient days. (TR 76, VOL 5). This translates into an approximate loss of $4.1 million in potential revenues, based upon HUMANA's achieving a 75 percent occupancy rate and 41,000 patient days. (TR 75-76, VOL 5). Such a revenue loss may result in higher costs, which in the health care system, are normally translated into higher patient charges. (TR 86, VOL 5) HUMANA's proposed hospital would also aggravate AMERICAN's continuing shortage in nursing personnel. (Currently AMERICAN has approximately 50 full- time registered nurse vacancies.) (TR 134, VOL 5). It is reasonable to expect that HUMANA will hire a significant number of its nurses away from nearby hospitals. Over a six-month period, HUMANA's four existing hospitals in south Florida hired 112 registered nurses, 32.1 percent of whom were hired away from other hospitals in the area. (TR 783). AMERICAN, likewise, opposes the issuance of a Certificate of Need to HUMANA, and supports DHRS's initial denial. II. STATUTORY CRITERIA FOR CERTIFICATES OF NEED Section 381.494(6)(c) and (d), Florida Statutes (Supp. 1982), prescribes standards for evaluating applications for Certificates of Need. Those standards pertinent to HUMANA's application include: The need for the health care facilities and services . . . being proposed in relation to the applicable district plan, annual implementation plan, and state health plan adopted pursuant to Title XV of the Public Health Service Act, except in emergency circumstances which pose a threat to the public health. The availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care services . . . in the applicant's health service area. 7. The availability of resources, including health manpower, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation; the effects the project will have on clinical needs of health professional training programs in the service area; the extent to which the services will be accessible to schools for health professions in the service area for training purposes if such services are available in a limited number of facilities; the availability of alternative uses of such resources for the provision of other health services; and the extent to which the proposed services will be accessible to all residents of the service area. 11. The probable impact of the proposed project on the costs of providing health services proposed by the applicant, upon consideration of factors including, but not limited to, the effects of competition on the supply of health services being proposed and the improvements or innovations in the financing and delivery of health services which foster competition and service to promote quality assurance and cost-effectiveness. In considering HUMANA's application, specific consideration must also be given to whether: . . .less costly, more efficient, or more appropriate alternatives to such inpatient services are . . . available and the development of such alternatives has been studied and found not practicable. . . . existing inpatient facilities providing inpatient services similar to those proposed are being used in an appropriate and efficient manner. . . . alternatives to new construction, for example, modernization or sharing arrangements, have been considered and have been implemented to the maximum extent practicable. . . . patients will experience serious problems in obtaining inpatient care of the type proposed, in the absence of the proposed new service. 381.494(6)(d) Fla.Stat. (Supp. 1982). The controversy here is whether in 1988 (using a five-year planning horizon) there will be a need for HUMANA's proposed 150-bed hospital in the west Kendall area of south Dade County. DHRS, BAPTIST, and AMERICAN say that there will be no need: that existing hospitals serving the area have excess capacity and are underutilized--and that this condition will persist through 1988. HUMANA contends otherwise. As the applicant for a license, the burden of proving entitlement rests squarely upon HUMANA. 3/ The most accurate and reliable method for determining bed-need in this case, the historical demand-based method, requires the following: (1) identify planning area boundaries; (2) from historical population data, project population for the planning area using the five-year horizon for hospital services; (3) calculate a hospital use rate or the rate at which patients in the service area have used hospitals in terms of patient days per thousand; (4) project patient days by multiplying the use rate times the area population, and divide by 365 to yield a projected bed need; (5) compare projected bed-need with the licensed bed capacity of area hospitals and, using an appropriate occupancy standard, determine whether there will be an excess or shortage of hospital beds in the proposed planning area. (TR 55, VOL 5). Selecting a Health Planning Area The first step in determining whether a new hospital will be needed is selection of the appropriate health planning area. In 1982, the now-defunct HSA of South Florida adopted a Regionalization Plan for south Florida dividing HSA IX, a region, into five districts. (AM Ex. 4). Although not specifically mentioning hospitals, this plan implies that hospital bed-need determinations should be made on a district basis. The Kendall area, extending east and west, generally is denominated as "District D," and is, in turn, subdivided into three subdistricts. "D-1" encompasses Coral Gables and South Miami; "D-2" and "D-3" include Weschester, Kendall, Killian, and the west central Dade areas, the boundaries of which are U.S. 1 and the Palmetto Expressway on the east, Coral Reef Drive and Eureka Drive on the south, conservation area on the west, and the East-West Expressway, and Tamiami Trail on the north. (HU Ex. 4). HUMANA chose "D-2" and "D-3" as the appropriate health care planning area for determining need for its proposed hospital. District "D," however, is a more appropriate and reasonable area to use in determining need for the proposed HUMANA hospital. (TR 203, 258; 145-146, VOL 4; 56-57, VOL 5). The entire area of District "D" may be traversed, by car, in approximately 30 minutes, the roads are adequate, and there are numerous hospitals in the district which are easily accessible to its residents. (TR 57-58, 66, 77-78, VOL 5). Hospitals located in one part of District "D" are readily accessible to patients who reside in other areas of the District. HUMANA's bed-need analysis fails to adequately take into account hospitals within "D-1" or which are outside the District but are readily accessible (within 30-minutes driving time) to the majority of residents in "D- 2" and "D-3." (TR 145-146, VOL 4). Existing hospitals which are readily accessible to residents of a proposed service area cannot be reasonably excluded merely because they are located outside a theoretical boundary line. (TR 145- 146, VOL 4). A health planning area should be the area where most of the residents seek health care. (TR 615; 78-79, VOL. 5). Hence, a proposed health planning area should be tested against the actual hospital use of its residents and the accessibility of existing hospitals to those residents. The residents of District "D" travel freely within District "D" in seeking hospital care. South Florida Hospital Association Utilization and Patient Origin Program ("HUPOP") data show that approximately 60 percent of the patients residing in subdistricts "D-2" and "D-3" seek inpatient hospital care elsewhere. (TR 72, VOL 5; 616; AM Ex. 7 p. 19). 4/ There is a corresponding inflow of residents from outside "D- 2" and "D-3" who seek hospital care within "D-2" and "D-3". (TR 72, VOL 5). In comparison, approximately 70 percent of the residents of District "D" seek hospital care within the boundaries of the District and--of all the districts within the region-- District "D" has the highest percentage of residents who seek in-district hospital care. (TR 72-73, 79, VOL 5; AM Ex. 7, p. 19). In actual practice, then, the residents of District "D" heed the District boundaries but largely disregard subdistrict "D-2" and "D-3" boundaries. The residents of "D-2" and "D-3" have ready access to numerous hospitals providing a broad range of medical services. (TR 78, VOL 5). BAPTIST is a large general hospital with tertiary, secondary, and primary care services. With the exceptions of a burn center and a Level III neotology unit, virtually all health care services are provided. BAPTIST, AMERICAN, Coral Reef, South Miami, and Larkin hospitals provide health care services to residents of "D-2" and "D-3," within a 20-minute travel time. (BH Ex. 10, p. 1-13-19; BH Ex. 5 and 7). The few specialized services not available at these hospitals are provided at Jackson Memorial Hospital, within a 30-minute travel time. (BH Ex. 10, p. 1- 13). Accessibility of Existing Acute Care Hospitals Section 381.494(6)(c)(2), Florida Statutes (Supp. 1982), requires examination of the accessibility of existing health care facilities providing similar services to the same health service. The generally accepted standard for determining accessibility, found appropriate here, is whether general hospital beds are available to the service area's population within 30-minutes travel time by automobile, under average traffic conditions and for non- emergency purposes. This standard is used by HSAs and DHRS is used by federal health care planners, and is widely used by professional health care planners. (DHRS Ex. 1; BH Ex. 10, p. 1-10-13; TR 90, 123, 144, 166, 193; 85, 133-134, VOL 4; 58, 77, VOL 5). Applying this standard, seven hospitals are reasonably accessible to residents of HUMANA's proposed service area: AMERICAN, BAPTIST, Coral Reef Hospital, South Miami Hospital, Larkin Hospital, Doctors' Hospital, and Jackson Memorial Hospital. District "D" contains eleven hospitals, with a total of 2,882 licensed beds. (AM 3, p. 41; 4, p. D-3). Moreover, five of these, AMERICAN, BAPTIST, Coral Reef, Larkin, and South Miami, are even closer, within 20-minutes average travel time. (BH 5, p. 11). There is no evidence that the residents of "D-2/D-3", or District "D," as a whole, have any difficulty using or gaining access to these hospitals. Beds are available. The five hospitals closest to HUMANA's proposed service area, AMERICAN, BAPTIST, Coral Reef, South Miami, and Larkin, have a total of 1,825 licensed beds, 326 of which are not in service; of the 1,499 beds in service, 109 are not used. So there are 435 licensed beds, within 20-minutes of "D-2/D-3," not in service or not in use due to lack of demand. (BH Ex.10, p. I- 26, 5, 7, 10, p. I-26-28). Occupancy Standard for Determining Need The generally accepted occupancy standard for hospitals, used in deciding if additional beds are needed, is the 80 percent average annual occupancy rate. This standard is included in the 1981 Florida State Health Plan, is used by DHRS and HSAs, and is widely used by professional health care planners. Its use is appropriate here. (AM 135, VOL 2; TR 90-91; 95-97, 118, 132, 140, 165, 172, 313, 469; 141, VOL 4). In application, it means that additional hospitals should not be built until existing hospitals providing acceptable care to the proposed service area are operating at or above an 80 percent occupancy rate--the level at which hospitals, generally, operate most efficiently. In 1982, none of the eleven hospitals in District "D" met the 80 percent occupancy standard. (DHRS Ex. 1, AM Ex. 3, p. 7). In 1981, the five hospitals closest to HUMANA's proposed site had an average annual occupancy rate of 60.9 percent. (BH Ex. 10, p. I-24). Moreover, this excess is sufficient to meet the future health care needs of residents of "D-2/D-3" and District "D," as a whole. BAPTIST and AMERICAN will not achieve 80 percent occupancy until after 1988; AMERICAN is projected to have an occupancy of only 63.61 percent in 1990. (AM Ex. 3, p. 8; BH Ex. 10, p. 10, I-24). Availability of Resources to Build and Support Proposed Hospital Section 381.494(6)(c)(7) also requires consideration of whether there will be available adequate resources to support a new hospital, including manpower and financial resources. The evidence establishes, without contradiction, that HUMANA has sufficient funds to construct and operate its proposed hospital. The projected cost of the hospital, including equipment, is $29,175,500--70 percent to be funded by debt, the remainder by equity funds. HUMANA has, on hand, approximately $225 million in cash and cash equivalents. (TR 709, HU Ex. 2). The design of the proposed hospital will be based on HUMANA's "prototype" 150-bed facility, developed from years of experience in hospital design construction, and operation. The design is efficient and economical, and will permit a 50-bed expansion without further construction. (TR 714-716, 720, 719, HU Ex. 9). The parties agree that HUMANA has the ability to enlist or employ sufficient physicians and management personnel to staff the proposed hospital. (STIP, para. 3). HUMANA also has the ability to hire and retain an adequate nursing and technical staff. It recruits such personnel, routinely, on a national basis and transfers employees within its hospital system. Moreover, it has a mobile nurse corps, a group of nurses which are available on an as-needed basis, to help staff its south Florida hospitals during peak winter months. Historically, HUMANA has successfully recruited and retained nurses in its south Florida hospitals. (TR 772, 776-777, 781-782, 801-802, VOL 4). Projected Population of Service Area As already mentioned, under the preferred demand-based bed-need methodology, population is projected over a five-year planning horizon, for hospital facilities. This is because an increase in a service area's population will generate a need for more beds. The population of the Kendall area of south Dade County has been growing rapidly, and is expected to continue to do so through 1990. This population is younger than the population of Dade County or HSA IX, as a whole. The population projections for District "D" (the appropriate health planning area for the proposed hospital) by age groups are: District D 1987 1990 Under 15 92,301 96,506 15 to 64 357,567 327,652 65 and over 52,188 55,822 TOTAL (AM 3; TR 59-61, VOL 5; 488 VOL 3) 502,056 529,980 I. Hospital Use Rate Under the demand-based methodology, found acceptable here, once the planning area is designated and the population projected over a five-year planning horizon, a hospital "use rate" is calculated. The "use rate" is the rate at which people use hospitals, expressed in terms of the number of patient days per thousand residents residing in the health service area. This rate can be derived using various factors. Those factors most appropriate for use in this case are "age" and "service-specific" uses. (TR 66 VOL 5; 497-498 VOL 3). "Age-specific" use rates, reflecting historic hospital use rates by age group, are applied to the projected population to determine total patient days. This factor takes into account the fact that people 65 or older utilize hospitals at a rate three to four times that of people under 65. This is particularly significant here since the Kendall area population is younger than the population of Dade County, HSA IX, or the state, as a whole. (TR 58-59, VOL 5; AM 3, p. 12). In 1981, the age-specific use rate for HSA IX reflects a use rate of 1,524.6 patient days per thousand population. (AM 3, p. 63). "Service-specific" use rates are derived from historical use of particular hospital services, such as psychiatry, obstetrics, pediatrics, and medical-surgical. (AM 3, pp. 14-15, 70-72). The 1981 service-specific use rate, covering all services, for HSA IX was 1,524.6 patient days per thousand--a figure equal to the age-specific use rate. (AM 3, p. 14-15, 71). J. Calculation of Future Bed Need for District "D" In 1982, there were 2,882 licensed non-federal beds in District "D." Taking into account an 80 percent occupancy rate, and applying the HSA age- specific use rate to the projected population of District "D" yields a need for only 2,282 beds per day in 1987, and 2,419 beds per day in 1990. Hence, there will be an excess of 600 beds in District "D" in 1987; 554 in 1988; and 463 in 1990. (AM 3, p. 41, 69; TR 63, VOL 5). Similarly, applying the HSA IX service- specific use rate to the projected District "D" population results in a bed excess of 232 beds in 1987 and 87 in 1990. (AM 3, p. 74). Significantly, these projected bed excesses are, if anything, understated. This is because the HSA IX hospital use rate was utilized. Hospital use is greater in HSA IX, with its older population, than in District "D," where the population is younger and less likely to be hospitalized. (TR 61-62, VOL 5). HUMANA, in its analysis, applied age and service-specific use rates to the projected population of "D-2/D-3," concluding that there would be a need for 238 additional beds in 1988. This conclusion, however, is unconvincing since "D-2/D-3" is unduly restrictive and the 235 unused beds of South Miami and Larkin Hospitals, both located in "D-1," are not fully considered. (DHRS 1, p. 370; AM 3, p. 18). (Both hospitals are within a 20-minute average travel time from selected points in "D-2/D-3.") (TR 544, VOL 3; 612, VOL 4). By failing to properly account for empty beds at nearby hospitals, and by unreasonably limiting its planning area, HUMANA overstates the need for additional hospital beds in District "D." Moreover, even assuming the propriety of "D-2/ D-3," HUMANA failed to properly take into account the 260 beds of Coral Reef Hospital, a "D-2" hospital. If Coral Reef Hospital beds are correctly included within "D-2/D-3," HUMANA's projected bed-need decreases from 238 to 129 beds in 1988. (TR 80, VOL 5). Finally, Thomas W. Schultz, HUMANA's health care planning expert, admitted that a figure of 1,038 patient days per thousand patients would be "useful" in establishing bed-need for "D-2/D-3." (TR 501, VOL 3). Applying that use rate, and correctly including Coral Reef Hospital, results in a projected "D-2/D-3" need of 36 additional beds in 1988. (TR 83-84, VOL 5). HUMANA does not propose to construct a 36-bed hospital and such a hospital has not been shown to be feasible.
Recommendation Based on the foregoing, it is RECOMMENDED: That HUMANA's application for a Certificate of Need to construct a hospital in the west Kendall area of Dade County, Florida, be denied. DONE and ENTERED this 25th day of May, 1983, in Tallahassee, Florida. R. L. CALEEN, JR. Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 25th day of May 1983.
