96-001029CON Bethesda Memorial Hospital, Inc. vs. Agency For Health Care Administration Status: Closed Recommended Order on Tuesday, February 24, 1998.

Summary: Minimum bed unit size from agency rule should not bar approval of this CON as applicant has demonstrated not normal circumstances sufficient to grant application.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

BETHESDA MEMORIAL HOSPITAL, INC., )

)

Petitioner, )

)

vs. ) Case No. 96-1029

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

__________________________________)

RECOMMENDED ORDER

Pursuant to notice, a formal hearing was held in this case

on November 19 through 21, 1997, in Tallahassee, Florida, before

J. D. Parrish, a designated Administrative Law Judge of the

Division of Administrative Hearings.

APPEARANCES

For Petitioner: Kenneth F. Hoffman, Esquire

M. Christopher Bryant, Esquire

Oertel, Hoffman, Fernandez & Cole, P.A.

Post Office Box 6507

Tallahassee, Florida 32314-6507

For Respondent: Richard A. Patterson, Esquire

Agency for Health Care Administration

Fort Knox Building 3

2727 Mahan Drive, Suite 3407B

Tallahassee, Florida 32308-5403

STATEMENT OF THE ISSUES

Whether the Petitioner, Bethesda Memorial Hospital, Inc.,

(Bethesda) is entitled to a certificate of need (CON) in order to

convert three general acute care beds for use as Level III

neonatal intensive care unit (NICU) beds.

PRELIMINARY STATEMENT

This case began when Bethesda filed an application with the

Agency for Health Care Administration (AHCA or Agency) for a CON

to develop a three-bed Level III NICU. This CON was assigned

number 8235. The proposed NICU was to be located at Bethesda’s

existing facility in Palm Beach County, Florida, the Agency’s

District 9. In its preliminary review of the request, the Agency

denied the application, and the instant proceeding ensued as

Bethesda timely filed a Petition for Formal Administrative

Hearing.

Prior to hearing, the parties filed a Prehearing Stipulation

which outlined statutory and rule criteria which the applicant

has met, or which are not at issue in this proceeding. More

specifically, as stipulated, the following criteria are met, or

are not at issue: Section 408.035(1)(a), ( c), (e), (f), (g),

(h), (i), (j), (k), (m), (n), and (o), Florida Statutes; Section

408.035(2)( c) and (e), Florida Statutes; Rule 59C-1.042(3)(e),

(f), (g), (h), and (k), Florida Administrative Code; Rules 59C-

1.042(4), (6), (8), (9), (10), (11), (12), and (13), Florida

Administrative Code. Accordingly, the findings of fact herein

address only those provisions which remain at issue.

At the hearing, the parties offered witnesses and exhibits

which are more particularly chronicled in the transcript of these

proceedings. Such transcript was filed with the Division of

Administrative Hearings on December 15, 1997. By stipulation,

the parties agreed to file their Proposed Recommended Orders by

January 14, 1998. Such proposals have been considered in the

preparation of this order.

Additionally, Petitioner filed as supplemental authority, a

copy of a recent pleading from the appeal of DOAH Case No. 97-

1161. Such document was filed on February 13, 1998, and, as it

related to the issue of whether the Agency may deviate from its

rule-mandated unit size, has been considered in the preparation

of this order.

On February 17, 1998, the Florida Statutory Teaching

Hospital Council, Public Health Trust of Dade County, Florida, as

Jackson Memorial Hospital, Miami Children's Hospital, and All

Children's Hospital filed an Amicus Argument in response to the

Proposed Recommended Order submitted by Bethesda. Such argument

has not been considered. None of the hospitals named therein

filed for, nor received, leave to file such Amicus Argument in

the instant proceeding.

FINDINGS OF FACT

1. The Agency for Health Care Administration is the state

agency charged with the responsibility of reviewing applications

such as the one at issue in this proceeding.

2. The parties have stipulated that whether or not the

subject application should be approved must be decided upon a

weighing and balancing of all pertinent statutory and rule

criteria.

3. Bethesda’s letter of intent and application for CON were

timely filed in an appropriate batching cycle.

4. Bethesda is a 362-bed acute care hospital located in

Boynton Beach, Palm Beach County, Florida. As such, it is

located within the Agency’s District 9.

5. The approval of the CON at issue would allow Bethesda to

convert three of its existing acute care beds to Level III NICU

beds.

6. This approval would expand Bethesda’s existing NICU from

12 beds, which are designated Level II NICU beds, to a total of

15 beds for the combined NICU.

7. Bethesda received a CON for its existing NICU in 1985.

From its inception, the unit has been staffed and equipped for

the highest level of NICU care and, in fact, performed Level III

care until 1995 when the Agency ordered it to stop admitting

babies of less than 1000 grams in weight.

8. At the time of the original approval of the Bethesda

NICU, the Agency did not distinguish between Level II and Level

III NICU beds. Nevertheless, Bethesda staffed and equipped its

unit based upon the highest level of care because of the

population it has historically served.

9. Later, as the Agency developed more distinct guidelines

between Level II and Level III NICU beds (as well as a statewide

bed-need methodology), Bethesda found it could not technically

continue to do what it had historically done, i.e., serve a Level

III newborn.

10. Bethesda has historically served these Level III

newborns because it is under contract with the Palm Beach County

Public Health Unit (PHU) to care for indigent mothers and at-risk

babies.

11. This agreement to serve indigent mothers and at-risk

babies has resulted in a significant number of babies being

delivered at Bethesda requiring neonatal intensive care at all

levels.

12. Until 1989, Bethesda was the only hospital to provide

obstetrical care in the southern portion of Palm Beach County,

much less make exceptional provision for indigent birth mothers.

13. As it developed, Bethesda provided quality obstetrical,

pediatric, and neonatology services in an area of Palm Beach

County where other providers were less than enthusiastic about

the market.

14. Except for St. Mary’s Hospital in the northern portion

of the county, no other provider has extended services to the

indigent as demonstrated by Bethesda.

15. Moreover, Bethesda has offered to condition its CON

approval on the provision that it render a minimum of 35 percent

of the facility’s entire NICU patient days, including Level II

and Level III, to Medicaid/charity patients. Thus, a major

emphasis of this application is care for the indigent.

16. Of all patients cared for in the south Palm Beach

County neonatal programs, ninety-nine percent are indigent.

While a provider may receive reimbursement for certain services

(from Medicaid or local health district funds), the patients

themselves (birth mothers and babies) are indigent.

17. Additionally, one-third of the pregnancies processed

through the PHU are high-risk due to diabetes, infectious

diseases, or other complications.

18. As a logical consequence of the complications with the

birth mother, the babies born through the PHU program tend to be

sicker than average.

19. While Palm Beach County has demonstrated a remarkable

improvement in providing pre-natal care to birth mothers and

thereby improving at-risk results, Bethesda continues to play a

critical role in extending care to this needy population.

20. Bethesda is the exclusive hospital used by the PHU in

south Palm Beach County. It is utilized because it is

geographically located near the patient population. Further,

Bethesda’s reputation in this community makes it attractive to

those in need.

21. Bethesda is engaged in a three-way partnership with St.

Mary's Hospital and the PHU to lower infant mortality in the

county. They have created an integrated care plan for south Palm

Beach County maternity patients. Bethesda, physicians in the

community (including obstetricians, gynecologists, neonatologists

and pediatricians), and the PHU have worked together for 11 years

to make sure that protocols are available so that pre-natal care

is available to all who need it. These parties work closely with

Healthy Mothers/Healthy Babies and other voluntary organizations

to bring patients to the PHU or to Bethesda.

22. The PHU physicians and midwives deliver between 800 and

1,000 babies a year. About 25 percent of these babies from the

southern portion of the county will require some kind of Level II

or Level III NICU care during their stay in the hospital. Thus,

200 to 250 babies needing NICU care come through the PHU each

year.

23. It would also be expected that non-indigent mothers

from the southern portion of the county would deliver babies

requiring NICU care.

24. Bethesda plans to open outlying health clinics to

enhance services offered to local communities within the Bethesda

zip codes. These programs or clinics are expected to result in

an estimated 20 percent increase in the volume of indigent

pregnant women served by Bethesda.

25. The availability of services to the local communities

may also assist patients to keep their scheduled appointments.

There is a difference between the number of patients scheduled to

see PHU physicians and those who actually show up, due to the

inconvenience and financial burden of getting to the health unit.

Having the clinic locations readily available may alleviate the

inconveniences to the indigent mother.

26. Under the present circumstances, when a Level III baby

is delivered at Bethesda it must be transferred to another

facility.

27. These transfers create a major burden for the birth

mother. Remembering that the mother would not typically be

transferred with the child (and would not require the extended

stay some neonates demand), the issue of transportation for the

parent may be insurmountable.

28. For example, in order to leave a convenient location to

visit once or twice a day, an indigent mother must arrange

transportation to and from the Level III facility where the baby

has been sent. This may entail additional expenses for the

parent such as lost wages or extending times for babysitters

watching other children in the home. These additional expenses

may be more than the indigent family can bear.

29. The nearest Level III NICU provider to whom Bethesda

now transfers patients is St. Mary’s Hospital. This facility is,

by automobile, approximately 30-40 minutes from Bethesda

depending on traffic conditions. Bus transportation directly

connecting one site to the other, if it were available (which it

is not), would presumably take longer.

30. Currently, even when it is determined that a maternity

patient should be sent to St. Mary's Hospital for pre-natal care,

the mothers are presenting for delivery at Bethesda. This occurs

because Bethesda is geographically located in the area where they

live. The baby is born at Bethesda and a decision must be made

how best to deal with the health issues of the child.

31. Of the patients referred from Bethesda to St. Mary's

Hospital for pre-natal care, only 5 percent deliver at St.

Mary's. Ninety-five percent return to Bethesda for delivery even

though they were told to go to St. Mary's.

32. The main reason for this failure of patients to follow

up at St. Mary's Hospital is the lack of affordable

transportation. Many indigent women do not have cars or access

to them. The existing facilities in Palm Beach County for Level

III care are not reasonably available, appropriate, or accessible

alternatives for these patients.

33. AHCA District 9 has only three Level III NICU

providers. They are all in Palm Beach County, with St. Mary's

Hospital and Good Samaritan Hospital (now owned by the same

company) in the northern part of the county (West Palm Beach) and

West Boca in the southern part (Boca Raton).

34. West Boca is not a reasonable alternative for the NICU

patient population served by Bethesda. West Boca does not serve

the lower income patients. In fact, West Boca transfers patients

without financial resources to Bethesda. West Boca transfers

indigent women in labor early enough so that COBRA regulations

are met. Pertinent to this case, historically, West Boca

transferred indigent Level III NICU patients to Bethesda until

1994.

35. During the last three years, Level III NICU utilization

at Good Samaritan and St. Mary's Hospital has averaged better

than 90 percent. To average 90 percent means that the beds are

often full or there are more patients than there are beds.

Accordingly, these providers are operating at what is essentially

capacity.

36. It is, therefore, not surprising that St. Mary's

Hospital supports Bethesda's CON application in this proceeding.

No existing provider within District 9, including West Boca,

formally opposed the instant application.

37. A primary service area is the area from which a

hospital draws the overwhelming majority of its patients for a

given service and is defined by zip code level information. The

primary service area of Bethesda for providing newborn and

neonatal services is wholly within what has been described in

this record as the southern portion of Palm Beach County.

38. The primary service areas of West Boca and Bethesda for

newborn and neonatal services do not significantly overlap. In

fact, 40 percent to 45 percent of these services provided by West

Boca have been to residents of Broward County. In this regard,

West Boca's neonatal services compete more directly with those of

Broward General Hospital than Bethesda.

39. Bethesda's NICU is currently staffed and equipped for

Level III services. From a medical standpoint, the CON proposal

will result in a quality 15-bed dual unit, which is very

efficient from the neonatologist's standpoint.

40. The neonatologists staffing the Bethesda NICU are

associated with the same group serving St. Mary's Hospital and

Broward General Hospital, both Regional Perinatal Intensive Care

Centers (RPICC). This helps assure proficiency with large

volumes at more than one program.

41. The nursing staff at Bethesda all have at least two

years of Level III experience, and no nurse is currently hired

for the NICU without that level of experience.

42. From a neonatal nursing care standpoint, the addition

of the three Level III beds would result in quality, cost-

efficient care. The proposed combined unit would allow for

flexibility of making daily staff assignments and would enhance

care for the babies.

43. The combined 15-bed NICU is large enough to provide

quality, cost-effective Level II and III care. Bethesda has the

physician staffing, nurse and therapist staffing, equipment,

facilities, and hospital services to provide proper quality

tertiary care for these newborns.

44. Since 1993, Mease Hospital in Dunedin, Florida, has

operated a five-bed Level III NICU combined with a five-bed Level

II NICU in one room. It has proven to be a quality program with

a low mortality rate. The five-bed Level III NICU provides cost-

efficient care. There is no reason Bethesda cannot duplicate the

record Mease has demonstrated.

45. High quality, neonatal intensive care may be easier to

achieve with Level II and III beds in the same room than with any

other configuration of beds.

46. Bethesda will not be able to treat every sick baby. It

cannot care for babies requiring open heart surgery (Bethesda

does not have an open heart surgery program), for those needing

extra-corporeal membrane oxygenation (ECMO), nor those seeking

pediatric cardiac catheterization.

47. None of the three existing Level III facilities in

District 9, however, has open heart surgery or ECMO available.

Like Bethesda they, too, must transfer out for these services.

48. Fortunately, the Agency rule allows a provider to make

written arrangements with other Level III providers to provide

those services in the same or nearest service area. AHCA has

stipulated that Bethesda has the appropriate written transfer

agreements pursuant to Rule 59C-1.042(12), Florida Administrative

Code.

49. For the number of babies to be served by Bethesda, the

ability to serve Level III babies will improve the quality of

care. There are medical risks in transferring babies from one

facility to another. When adequate staffing and facilities are

available at the hospital of birth, transferring the infant to

another provider may pose an unnecessary risk.

50. The risks inherent in transfers do not always outweigh

the benefit. For example, transferring the child may delay

certain treatments such as use of "surfactants" which protect a

baby's lungs. Other risks such as those associated with

maintaining the infant's blood pressure or body temperature make

transfers difficult and, in some instances, medically

questionable.

51. Bethesda’s application for the instant CON meets the

applicable local and state health plans.

52. Bethesda has an established record of providing quality

care and will be well able to provide quality of care for the

services allowed by the proposed addition of three Level III NICU

beds.

53. It is unrealistic for Bethesda to refuse admission to

patients requiring Level III NICU services given the historical

and current patterns of births for this District.

54. Bethesda’s proposed addition of three Level III beds to

its NICU is financially feasible both in the short- and long-

term.

55. Bethesda’s Level III NICU beds will be programmatically

accessible to its patient population.

56. Although 90 percent of the District 9 population is

within two hours ground travel time of an existing Level III NICU

bed, such accessibility does not consider the unique

characteristics of the indigent population the proposed beds at

Bethesda will serve. Moreover, the provider who would otherwise

serve the Level III patient under such scenario supports this

application.

57. The existing facilities providing care to the indigent

population operate at capacity and are fully utilized. The only

facility not fully utilized (West Boca) has no significant

history of providing care to the Medicaid/indigent population.

58. The proposed construction or renovation of the Bethesda

unit to accommodate fifteen NICU stations is reasonable. While

Bethesda will have to meet certain minimum licensing standards in

the configuration of the NICU, it is anticipated that such

standards will be met with little difficulty or significant

expense to Bethesda.

59. The unchallenged fixed-need pool for the batching cycle

applicable to this case was one Level III bed.

60. Bethesda has met all Agency requirements regarding

“Emergency Transportation,” “Transfer Agreements,” and “Data

Reporting Requirements.”

61. The Agency’s rule regarding minimum unit size for a

Level III NICU has not been met. However, this requirement has

not been adhered to by the Agency in several instances.

62. In AHCA District 9, there are three hospitals with NICU

Level III programs. Not one of these programs has 15 beds. St.

Mary's Hospital (a RPICC) has ten beds, Good Samaritan has eight

beds, and West Boca has five beds. The quality of care at these

providers is presumably adequate despite the fact that they were

approved and licensed by the Agency with less than fifteen beds.

63. Moreover, the Agency has never considered the 15-bed

minimum an absolute bar to the application for, or the review of,

lesser-numbered beds.

64. In fact, the Agency approved new Level III NICU beds at

Mease Hospital (a five-bed unit), West Boca Hospital (a five-bed

unit), and Miami Baptist Hospital (a seven-bed unit) after the

rule was promulgated. Additionally, the total number of all NICU

beds at Mease and West Boca is less than fifteen.

65. Thus, as stipulated in South Miami Hospital, Inc. v.

Agency for Health Care Administration , Case No. 97-04875,

currently pending before the First District Court of Appeal, the

Agency has “consistently interpreted those unit size rule

provisions as permissive.”

66. Bethesda has presented not normal circumstances

supporting this CON application which are hereby accepted. Such

circumstances include: accessibility issues for indigent or

Medicaid mothers and babies; the lack of Level III beds in the

southern portion of the county where 60 percent of all resident

live births are delivered; the fact that approximately one-third

of the low birth weight mothers reside in the service area for

Bethesda yet the majority of the Level III beds are in the

northern portion of the county; and the fact that 30 percent of

Bethesda’s patients are clients from the PHU.

67. The average occupancy rate for Level III NICU beds for

the year applicable to this application was 80.9 percent. As a

result, the rule mandated minimum average occupancy rate has been

met.

CONCLUSIONS OF LAW

68. The Division of Administrative Hearings has

jurisdiction over the parties to, and the subject matter of,

these proceedings.

69. As the applicant, Bethesda has the burden of proof to

establish its entitlement to the CON sought. Boca Raton

Artificial Kidney Center, Inc. v. Department of HRS , 475 So. 2d

260 (Fla. 1st DCA 1985).

70. More specifically, as stipulated by the parties,

Bethesda must establish, upon a weighing of all applicable and

statutory rule criteria, whether its application for a CON to

convert three general acute care beds for use as Level III NICU

beds should be approved.

71. Having weighed such criteria, it is concluded Bethesda

has met its burden.

72. Utilizing the methodology contained in Rule 59C-

1.042(3)(e), Florida Administrative Code, there is insufficient

numeric need for the proposed beds sought by Bethesda. Under the

need methodology, only one Level III bed could be approved.

73. Nevertheless, this applicant has demonstrated not

normal circumstances justifying the addition of three Level III

NICU beds.

74. The applicant has demonstrated that, when reviewed in

the context of availability, quality of care, efficiency,

accessibility, past utilization, projected utilization, and the

adequacy of other providers to meet the needs for the service

district, this proposal will meet the not normal circumstances of

this district.

75. Except as to the minimum size of the proposed Level III

NICU, this applicant has demonstrated compliance with the

applicable statutory or rule criteria. The rule criteria setting

forth a minimum size of 15 beds for a new Level III NICU cannot

be met.

76. Rule 59C-1.042(5), Florida Administrative Code,

provides:

Minimum Unit Size. Hospitals proposing the

establishment of new Level III neonatal

intensive care services shall propose a Level

III neonatal intensive care unit of at least

15 beds, and should have 15 or more Level II

neonatal intensive care unit beds. A

provider shall not normally be approved for

Level III neonatal intensive care services

only. Hospitals proposing the establishment

of new Level II neonatal intensive care

services only shall propose a Level II

neonatal intensive care unit with a minimum

of 10 beds. Hospitals under contract with

the Department of HRS' Children's Medical

Services Program for the provision of

regional perinatal intensive care center or

step-down neonatal special care unit care are

exempt from these requirements.

77. Notwithstanding the clear language of this rule, the

Agency has allowed and granted applications for new Level III

NICU beds below the 15-bed minimum size. The instant application

must be reviewed in the same context given the Agency’s decisions

wherein it has granted Level III NICU beds below the minimum

size. As such, it must be concluded the Agency has the authority

to grant approval of the instant application.

78. Neither Mease Hospital nor West Boca will offer the

level of indigent care to which this applicant proposes to be

bound. Neither unit had more expertise nor quality of care than

that as demonstrated by Bethesda. Neither facility was

contractually obligated to provide services through a county-wide

network seeking to assure adequate medical accessibility for its

residents. Bethesda’s application seeks to serve the population

needing its services most.

79. NICU services are defined as a tertiary health service.

Section 408.032(20), Florida Statutes, provides:

(20) "Tertiary health service" means a health

service which, due to its high level of

intensity, complexity, specialized or limited

applicability, and cost, should be limited

to, and concentrated in, a limited number of

hospitals to ensure the quality,

availability, and cost-effectiveness of such

service. Examples of such service include,

but are not limited to, organ

transplantation, specialty burn units,

neonatal intensive care units, comprehensive

rehabilitation, and medical or surgical

services which are experimental or

developmental in nature to the extent that

the provision of such services is not yet

contemplated within the commonly accepted

course of diagnosis or treatment for the

condition addressed by a given service. The

agency shall establish by rule a list of all

tertiary health services.

80. In this case, Bethesda has demonstrated there will be

sufficient volume and proper expertise to ensure quality of care

for the proposed Level III NICU beds. Moreover, the unit size

should be sufficient to promote quality care. The combined

fifteen-bed unit will perform with enhanced efficiency and

scheduling. All NICU babies should benefit from this approach.

In this instance, limiting these services to other providers will

serve no purpose.

81. Having considered the evidence presented and the

argument of counsel, it is concluded Bethesda has demonstrated by

a preponderance of the competent, substantial evidence, that the

Agency should grant CON application Number 8235 and allow this

applicant to convert three general acute care beds to three Level

III NICU beds, so that its combined NICU will total 15 beds.

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 approving CON application Number 8235 with the condition

that Bethesda provide indigent/Medicaid care as proposed in the

application.

DONE AND ENTERED this 24th day of February, 1998, in

Tallahassee, Leon County, Florida.

___________________________________

J. D. PARRISH

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 24th day of February, 1998.

COPIES FURNISHED:

Sam Power, Agency Clerk

Agency for Health Care Administration

Fort Knox Building 3

2727 Mahan Drive, Suite 3431

Tallahassee, Florida 32308-5403

Paul J. Martin, General Counsel

Agency for Health Care Administration

Fort Knox Building 3

2727 Mahan Drive, Suite 3431

Tallahassee, Florida 32308-5403

Richard A. Patterson, Esquire

Agency for Health Care Administration

Fort Knox Building 3

2727 Mahan Drive, Suite 3407B

Tallahassee, Florida 32308-5403

Kenneth F. Hoffman, Esquire

M. Christopher Bryant, Esquire

Oertel, Hoffman, Fernandez & Cole, P.A.

Post Office Box 6507

Tallahassee, Florida 32314-6507

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within 15

days from the date of this Recommended Order. Any exceptions to

this Recommended Order should be filed with the agency that will

issue the Final Order in this case.