96-004031CON Fmc Hospital, Ltd. vs. The North Broward Hospital District, D/B/A Broward General Medical Center And Agency For Health Care Administration Status: Closed Recommended Order on Tuesday, April 21, 1998.

Summary: North Broward Hospital District d/b/a Broward General met criteria for issuance of certificate of need (CON) to convert acute care to psychiatric beds; recommended denial based on request for twice as many beds as needed.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

FMC HOSPITAL, LTD., )

)

Petitioner, )

)

vs. ) Case No. 96-4031

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION and THE NORTH )

BROWARD HOSPITAL DISTRICT, )

d/b/a BROWARD GENERAL MEDICAL )

CENTER, )

)

Respondents. )

_______________________________)

RECOMMENDED ORDER

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

on October 28-31, and November 3, 1997, in Tallahassee, Florida,

before Eleanor M. Hunter, a duly designated Administrative Law

Judge of the Division of Administrative Hearings.

APPEARANCES

For Petitioner FMC Hospital, Ltd:

David C. Ashburn, Esquire

Gunster, Yoakley, Valdes-Fauli

& Stewart

215 South Monroe Street, Suite 830

Tallahassee, Florida 32301

For Respondent North Broward Hospital District:

Stephen A. Ecenia, Esquire

R. David Prescott, Esquire

Rutledge, Ecenia, Underwood

Purnell & Hoffman, P.A.

Post Office Box 551

Tallahassee, Florida 32302-0551

For Respondent Agency for Health Care Administration:

Paul Vazquez, Esquire

Agency for Health Care Administration

Fort Knox Building 3

2727 Mahan Drive, Suite 3431

Tallahassee, Florida 32308-5403

STATEMENT OF THE ISSUES

Whether the certificate of need application to convert

30 acute care beds to 30 adult psychiatric beds at Broward

General Medical Center meets the statutory and rule criteria for

approval.

PRELIMINARY STATEMENT

The North Broward Hospital District (NBHD) submitted a

certificate of need (CON) application to the Agency for Health

Care Administration (AHCA) in the first hospital batching cycle

of 1996. In that application, NBHD proposed to convert 30 acute

care beds to 30 adult psychiatric beds at Broward General

Medical Center (Broward General). NBHD owns and operates

Broward General in AHCA District 10, Broward County, Florida.

AHCA reviewed and preliminarily decided to approve the

application and to issue CON Number 8425 to the NBHD. See 22

Florida Administrative Weekly 29 (7/19/96). On August 9, 1996,

FMC Hospital, Ltd. (FMC) filed a Petition for Formal

Administrative Proceedings challenging the issuance of CON 8425.

AHCA referred the Petition to the Division of Administrative

Hearings for formal hearing.

At the hearing, NBHD presented the testimony of Ruth

Eldridge, expert in hospital administration; Michael Elwell,

expert in mental health care program administration; Linda

Berger, expert in health care planning and health care finance;

Edward L. Hengtgen, Jr., expert in health care architecture;

Mariamma Pyngolil, expert in mental health program development

and administration; Sharon Gordon-Girvin, expert in health care

planning; Timothy P. Menton, expert in hospital administration

and health care finance; and Elizabeth Dudek, expert in health

care planning who was also a witness for AHCA. NBHD's

Exhibits 1-20 were received in evidence.

FMC presented the testimony of Margaret D. DeNarvaz, expert

in hospital administration; Joanne Correia Kent, expert in

psychiatric clinical operations, psychiatric program

development, and psychiatric program administration; Merle Bass,

expert in health care finance and accounting; and Patricia

Greenberg, expert in health planning. FMC's Exhibits 1-11 were

received in evidence.

The transcript of the hearing was received on November 21,

1997. Following the granting of a Motion for Extension of Time,

the parties filed proposed findings of fact and conclusions of

law on December 31, 1997.

FINDINGS OF FACT

1. The North Broward Hospital District (NBHD) is a special

taxing district established by the Florida Legislature in 1951

to provide health care services to residents of the northern

two-thirds of Broward County. NBHD owns and operates four acute

care hospitals: Coral Springs Medical Center, North Broward

Medical Center, Imperial Point Medical Center (Imperial Point),

and Broward General Medical Center (Broward General). NBHD also

owns

and/or operates primary care clinics, school clinics, urgent

care centers, and a home health agency.

2. FMC Hospital, Ltd., d/b/a Florida Medical Center (FMC)

is a 459-bed hospital with 74 inpatient psychiatric beds,

51 for adults separated into a 25-bed adult unit and a 26-bed

geriatric psychiatric unit, and 23 child/adolescent psychiatric

beds. FMC is a public Baker Act receiving facility for children

and adolescents and operates a mental health crisis

stabilization unit (CSU) for children and adolescents. FMC also

operates separately located facilities which include a partial

hospitalization program, an adult day treatment program, and a

community mental health center. At Florida Medical Center

South, FMC operates another day treatment program and partial

hospitalization program.

3. The Agency for Health Care Administration (AHCA) is the

state agency which administers the certificate of need (CON)

program for health care services and facilities in Florida.

4. The NBHD applied for CON Number 8425 to convert 30

acute care beds to 30 adult psychiatric beds at Broward General.

Broward General operates approximately 550 of its total 744

licensed beds. It is a state Level II adult and pediatric

trauma center and the tertiary referral center for the NBHD,

offering Level II and III neonatal intensive care, pediatric

intensive care, cardiac catheterization and open heart surgery

services. Broward General has 68 adult psychiatric beds and is

a public Baker Act receiving facility for adults.

5. Public Baker Act receiving facilities have state

contracts and receive state funds to hold involuntarily

committed mental patients, regardless of their ability to pay,

for psychiatric evaluation and short-term treatment. See

Subsections 394.455(25) and (26), Florida Statutes. Although

they serve different age groups, both FMC and Broward General

are, by virtue of contracts with the state, public Baker Act

facilities. When a Baker Act patient who is an indigent child

or adolescent arrives at Broward General, the patient is

transferred to FMC. FMC also typically transfers indigent Baker

Act adults to Broward General.

6. At Broward General, psychiatric patients are screened

in a separate section of the emergency room by a staff which has

significant experience with indigent mental health patients. If

hospitalization is appropriate, depending on the patient's

physical and mental condition, inpatient psychiatric services

are provided in either a 38-bed unit on the sixth floor or a 30-

bed unit on the fourth floor of Broward General.

7. In July 1995, Broward General also started operating a

20-bed mental health CSU located on Northwest 19th Street in

Fort Lauderdale. Prior to 1995, the County operated the 19th

Street CSU and 60 CSU beds on the grounds of the South Florida

State Hospital (SFSH), a state mental hospital. Following an

investigation of mental health services in the County, a grand

jury recommended closing the 60 CSU beds at SFSH because of

"deplorable conditions." In addition, the grand jury

recommended that the County transfer CSU operations to the NBHD

and the South Broward Hospital District (SBHD). As a result,

the SBHD assumed the responsibility for up to 20 CSU inpatients

a day within its existing 100 adult psychiatric beds at Memorial

Regional Hospital.

8. The NBHD assumed the responsibility for up to 40 CSU

inpatients a day, including 20 at the 19th Street location. The

additional 20 were to be redirected to either the 68 adult

psychiatric beds at Broward General or the 47 adult psychiatric

beds at Imperial Point.

9. CSU services for adult Medicaid and indigent patients

in the NBHD service area were transferred pursuant to contracts

between the NBHD and Broward County, and the NBHD and the State

of Florida, Department of Children and Family Services

(formerly, the Department of Health and Rehabilitative

Services). Based on the agreements, the County leases the 19th

Street building in which Broward General operates the CSU. The

County also pays a flat rate of $1.6 million a year in monthly

installments for the salaries of the staff which was transferred

from the County mental health division to the NBHD. The

County's contract with the NBHD lasts for five years, from

December 1995 to September 2000. Either party may terminate the

contract, without cause, upon 30 days notice.

10. The State contract, unlike that of Broward County,

does not provide a flat rate, but sets a per diem reimbursement

rate of approximately $260 per patient per day offset by

projected Medicaid revenues. The State contract is renewable

annually, but last expired on June 30, 1997. The contract was

being re-negotiated at the time of the hearing in

November 1997. Based on actual experience with declining

average lengths of stay for psychiatric inpatients, the contract

was being re-negotiated to fund an average of 30, not a maximum

of 40 patients a day.

11. If CON 8425 is approved, NBHD intends to use the

additional 30 adult psychiatric beds at Broward General to meet

the requirements of the State and County contracts, while

closing the 19th Street CSU and consolidating mental health

screening and stabilization services at Broward General. NBHD

proposes to condition the CON on the provision of 70 percent

charity and 30 percent Medicaid patient days in the 30 new

beds. By comparison, the condition applicable to the existing

68 beds requires the provision of 3 percent charity and 25

percent Medicaid. When averaged for a total of 98 beds, the

overall condition would be 23.5 percent charity and 26.5 percent

Medicaid, or a total of 51 or 52 percent.

12. The proposed project will require the renovation of

10,297 gross square feet on the fourth floor of Broward General

at a cost of approximately $450,000. The space is currently an

unused section of Broward General which contains 42

medical/surgical beds. Twelve beds will be relocated to other

areas of the hospital. The renovated space will include

seclusion, group therapy, and social rooms, as well as 15 semi-

private rooms. Twelve of the rooms will not have separate

bathing/showering facilities, and seven of those will also not

have toilets within the patients' rooms.

Need in Relation to State and District

Health Plans - Subsection 408.035(1)(a), Florida Statutes

13. The District 10 allocation factors include a

requirement that a CON applicant demonstrate continuously high

levels of utilization. The applicant is given the following

evidentiary guidelines:

a. patients are routinely waiting for

admissions to inpatient units;

b. the facility provides significant

services to indigent and Medicaid

individuals;

c. the facility arranges transfer for

patients to other appropriate facilities;

and

d. the facility provides other medical

services, if needed.

14. Broward General does not demonstrate continuously high

utilization by having patients routinely waiting for admission.

Broward General does meet the other criteria required by

allocation factor one.

15. The second District 10 allocation factor, like

criterion (b) of the first, favors an applicant who commits to

serving State funded and indigent patients.

16. Broward General is a disproportionate share Medicaid

provider with a history of providing, and commitment to continue

providing, significant services to Medicaid and indigent

patients. In fact, the NBHD provides over 50 percent of both

indigent and Medicaid services in District 10. See also

Subsection 408.035(1)(n), Florida Statutes.

17. Allocation factor three for substance abuse facilities

is inapplicable to Broward General which does not have substance

abuse inpatient services.

18. Allocation factor 4 for an applicant with a full

continuum of acute medical services is met by Broward General.

See also Rule 59C-1.040(3)(h), Florida Administrative Code.

19. Broward General complies with allocation factor 5 by

participating in data collection activities of the regional

health planning council.

20. The state health plan includes preferences for

(1) converting excess acute care beds; (2) serving the most

seriously mentally ill patients; (3) serving indigent and Baker

Act patients; (4) proposing to establish a continuum of mental

health care; (5) serving Medicaid-eligible patients; and

(6) providing a disproportionate share of Medicaid and charity

care. Broward General meets the six state health plan

preferences. See also Rule 59C-1.040(4)(e)2., Florida

Administrative Code, and Subsection 408.035(1)(n), Florida

Statutes.

21. Broward General does not meet the preference for acute

care hospitals if fewer than .15 psychiatric beds per 1000

people in the District are located in acute care hospitals. The

current ratio in the District is .19 beds per 1,000 people.

Rule 59C-1.040(4)(3)3, Florida Administrative Code, also

requires that 40 percent of the psychiatric beds needed in a

district should be allocated to general hospitals. Currently,

approximately 51

percent, 266 of 517 licensed District 10 adult inpatient

psychiatric beds are located in general acute care hospitals.

22. On balance, the NBHD and Broward General meet the

factors and preferences of the health plans which support the

approval of the CON application. See also Rule 59C-

1.040(4)(e)1. and Rule 59C-1.030, Florida Administrative Code.

Numeric Need

23. The parties stipulated that the published fixed need

pool indicated no numeric need for additional adult inpatient

psychiatric hospital beds. In fact, the numeric need

calculation shows a need for 434 beds in District 10, which has

517 beds, or 83 more than the projected numeric need. In 1994-

1995, the District utilization rate was approximately 58

percent.

24. The NBHD asserts that the need arises from "not

normal" circumstances, specifically certain benefits from

closing the 19th Street CSU, especially the provision of better

consolidated care in hospital-based psychiatric beds, and the

establishment of a County mental health court.

25. The NBHD acknowledges that AHCA does not regulate CSU

beds through the CON program and that CSU beds are not intended

to be included in the calculation of numeric need for adult

psychiatric beds. However, due to the substantial similarity of

services provided, NBHD contends that CSU beds are de facto

inpatient psychiatric beds which affect the need for CON-

regulated psychiatric beds. Therefore, according to the NBHD,

the elimination of beds at SFSH and at the 19th Street CSU

require an increase in the supply of adult psychiatric beds.

The NBHD also notes that approval of its CON application will

increase the total number of adult psychiatric hospital beds in

Broward County, but will not affect the total number of adult

mental health beds when CSU and adult psychiatric beds are

combined. After the CSU beds at SFSH closed, the total number

of adult mental health beds in the County has, in fact, been

reduced.

26. NBHD projected a need to add 30 adult psychiatric beds

at Broward General by combining the 1995 average daily census

(ADC) of 48 patients with its assumption that it can add up to

10, increasing the ADC to 58 patients a day in the existing 68

beds. Based on its contractual obligation to care for up to 40

CSU inpatients a day, the NBHD projects a need for an additional

30 beds.

27. The projection assumed that the level of utilization

of adult inpatient psychiatric services at Broward General would

remain relatively constant. With 40 occupied beds added to the

48 ADC, NBHD predicted an ADC of 88 in the new total of 98 beds,

or 90 percent occupancy.

28. The assumption that the ADC would remain fairly

constant is generally supported by the actual experience with

ADCs of 48.1, 51.5, and 45.8 patients, respectively, in 1995,

1996, and the first seven months of 1997. NBHD's second

assumption, that an ADC of 40 CSU patients will be added is not

supported by the actual experience. Based on the terms of the

State and County contracts, up to 20 CSU patients have already

been absorbed into the existing beds at the Imperial Point or

Broward General, which is one explanation for the temporary

increase in ADC in 1996, while up to 20 more may receive

services at the 19th Street location. In 1996 and 1997, the ADC

in the 19th Street CSU beds was 15.3 and 14.2, respectively,

with monthly ranges in 1997 from a high of 17 in April to a low

of 12 in June. The relatively constant annual ADCs in

psychiatric and CSU beds are a reflection of increasing

admissions but declining average lengths of stay for psychiatric

services.

29. The NBHD also projects that it will receive referrals

from the Broward County Mental Health Court, established in June

1997. The Court is intended to divert mentally ill defendants

with minor criminal charges from the criminal justice system to

the mental health system. Actual experience for only three

months of operations showed 7 or 8 admissions a month with

widely varying average lengths of stay, from 6 to 95 days. The

effect of court referrals on the ADC at Broward General was

statistically insignificant into the fall of 1997. Newspaper

reports of the number of inmates with serious mental illnesses

do not provide a reliable basis for projecting the effect of the

mental health court on psychiatric admissions to Broward

General, since it is not equipped to handle violent felons.

30. One of Broward General's experts also compared

national hospital discharge data to that of Broward County. The

results indicate a lower use rate in Broward County in 1995 and

a higher one in 1996. That finding was consistent with the

expert's finding of a growth in admissions and bed turnover rate

which measures the demand for each bed. The expert also

considered the prevalence of mental illness and hospitalization

rates. The data reflecting expected increases in admissions,

however, was not compared to available capacity in the County

nor correlated with declining lengths of stay.

31. The District X: Comprehensive Health Plan 1994

includes an estimate of the need for 10 CSU beds per 100,000

people, or a total of 133 CSU beds needed for the District. FMC

argues that the calculation is incorrect because only the adult

population should be included. Using only adults, FMC

determined that 116 CSU beds are needed which, when added to 434

adult psychiatric beds needed in the February 1996 projection,

gives a bed need for all mental health beds of 550. That total

is less than the actual combined total number of 567 mental

health beds, 517 adult psychiatric beds plus 50 CSU beds in

1995. Whatever population group is appropriate, the projection

of the need for CSU beds is not reliable based on the evidence

that, since the end of 1995, CSU services have been and,

according to NBHD, should continue to be absorbed into hospital-

based adult psychiatric units. For the same reason, the

increase in adult psychiatric bed admissions from 1995 to 1996

does not establish a trend towards increasing psychiatric

utilization, but is more likely attributable to the closing of

CSU beds at SFSH.

32. FMC's expert's comparison of data from three selected

months in two successive years is also not sufficient to

establish a downward trend in utilization at the 19th Street

CSU, neither is the evidence of a decline in ADC by one patient

in one year. Utilization is relatively static based on ADCs in

existing Broward County adult psychiatric beds and in CSU beds.

FMC established Broward General's potential to decrease average

lengths of stay by developing alternative non-inpatient services

as FMC has done and Broward General proposes to do. See Finding

of Fact 37.

33. Based on local health council reports, FMC's data

reflects a rise in the ADC at Broward General to 52.7 in 1996,

and a return to 46 in the first seven months of 1997. Using a

14.2 ADC for the 19th Street CSU, FMC projects that Broward

General will reach an ADC of approximately 60 in the first year

of operations if the CON is approved, not 88 as projected.

34. Broward General acknowledged its capacity to add 10

more patients to the ADC without stress on the system. Having

already absorbed 20 of up to 40 CSU patients at Imperial Point

and Broward General in 1996 and 1997 resulting in an ADC of 48,

and given the capacity to absorb 10 more, the NBHD has

demonstrated a need to accommodate an ADC of 10 more adult

psychiatric patients at Broward General, or a total ADC of 68

patients. The need to add capacity to accommodate an additional

10 patient ADC was not shown to equate to a need for 30

additional beds, which would result in an ADC of 68 patients in

98 beds, or 69 or 70 percent occupancy.

Special Circumstances - Rule 59C-1.040(4)(d)

35. The psychiatric bed rule provides for approval of

additional beds in the absence of fixed numeric need. The

"special circumstance" provision applies to a facility with an

existing unit with 85 percent or greater occupancy. During the

applicable period, the occupancy at Broward General was 74.15

percent. However, occupancy rates have exceeded 95 percent in

the CSU beds on 19th Street.

36. If up to 20 patients on 19th Street are added to the

48 ADC at Broward General, the result is that the existing 68

beds will be full. A full unit is operationally not efficient

or desirable and allows no response to fluctuations in demand.

Therefore, the state has established a desirable standard of 75

percent occupancy for psychiatric units, a range which supports

the addition of 10 to 15 psychiatric beds at Broward General.

Available Alternatives - Subsection 408.035(1)(b)

and (d), Florida Statutes, and Rule 59C-1.040(4)(e)4.,

Florida Administrative Code

37. The psychiatric bed rule provides that additional beds

will "not normally" be added if the district occupancy rate is

below 75 percent. For the twelve months preceding the

application filing, the occupancy rate in 517 adult psychiatric

beds in District 10 was approximately 58 percent. FMC's expert

noted that each day an average of 200 adult psychiatric beds

were available in District 10. Broward General argues that the

occupancy rate is misleading. Five of the nine facilities with

psychiatric beds are freestanding, private facilities, which are

ineligible for Medicaid participation. Historically, the

freestanding hospitals have also provided little charity care.

One facility, University Pavilion, is full.

38. Of the four acute care hospitals with adult

psychiatric beds, Memorial Hospital in the SBHD, is not

available to patients in the NBHD service area. Imperial Point,

the only other NBHD facility with adult psychiatric beds, is not

available based on its occupancy rate for the first seven months

of 1997 of approximately 81 percent, which left an average of 9

available beds in a relatively small 47-bed unit. That leaves

only Broward General and FMC to care for Medicaid and indigent

adult psychiatric patients. FMC is the only possible

alternative provider of services, but Broward General was

recommended by the grand jury and was the only contract

applicant. The occupancy rate in FMC's 51 adult beds was

approximately 80 percent in 1995, 73 percent in 1996, and 77

percent for the first seven months in 1997. FMC has reduced

average lengths of stay by having patients "step down" to

partial hospitalization, day treatment and other outpatient

services of varying intensities. The same decline in average

lengths of stay is reasonably expected when Broward General

implements these alternatives.

39. Adult psychiatric services are also accessible in

District 10 applying the psychiatric bed rule access standard.

That is, ninety percent of the population of District 10 has

access to the service within a maximum driving time of forty-

five minutes.

40. The CSU license cannot be transferred to Broward

General. Broward County holds the license for CSU beds which,

by rule, must be located on the first floor of a building.

Although Broward General may not legally hold the CSU license

and provide CSU services on the fourth floor of the hospital,

there is no apparent legal impediment to providing CSU services

in psychiatric beds.

Quality of Care - Subsection 408.035(1)(c), Florida Statutes

and Rule 1.040(7), Florida Administrative Code

41. Broward General is accredited by the Joint Commission

on Accreditation of Health Care Organizations. The parties

stipulated that Broward General has a history of providing

quality care. Broward General provides the services required by

Rule 59C-1.040(3)(h), Florida Administrative Code.

Services Not Accessible in Adjoining Areas;

Research and Educational Facilities; Needs of HMOs;

Services Provided to Individuals Beyond the District;

Subsections 408.035(1)(f),(g),(j), and (k), Florida Statutes

42. Broward General does not propose to provide services

which are inaccessible in adjoining areas nor will it provide

services to non-residents of the district. Broward General is

not one of the six statutory teaching hospitals nor a health

maintenance organization (HMO). Therefore, those criteria are

of no value in determining whether this application should be

approved.

Economics and Improvements in Service from

Joint Operation - Subsection 408.035(1)(e), Florida Statutes

43. The consolidation of the psychiatric services at

Broward General is reasonably expected to result in economies

and improvements in the provision of coordinated services to the

mentally ill indigent and Medicaid population. Broward General

will eliminate the cost of meal deliveries and the transfer of

medically ill patients, but that potential cost-saving was not

quantified by Broward General.

Staff and Other Resources - Subsection 408.035(1)(h),

Florida Statutes

44. The parties stipulated that NBHD has available the

necessary resources, including health manpower, management

personnel, and funds to implement the project.

Financially Feasibility - Subsection 408.035(1)(h) and (i),

Florida Statutes

45. The parties stipulated that the proposed project is

financially feasible in the immediate term. The estimated total

project cost is $451,791, but NBHD has $500,000 in funds for

capital improvements available from the County and $700,000 from

the Florida Legislature. As stipulated by the parties, NBHD has

sufficient cash on hand to fund the project.

46. Regardless of the census, the County's contractual

obligation to the NBHD remains fixed at $1.6 million. The State

contract requires the prospective payment of costs offset by

expected Medicaid dollars. If the number of Medicaid eligible

patients decreases, then state funding increases

proportionately. The state assumed that 20 percent of the

patients would qualify for Medicaid, therefore it reimburses the

per diem cost of care for 80 percent of the patients. One audit

indicated that 30 percent of the patients qualified for

Medicaid, so that State payments for that year were higher than

needed. The State contract apparently makes no provision to

recover excess payments.

47. The application projects a net profit of $740,789 for

the first year of operations, and a net profit of $664,489 for

the second year. If the State contract with NBHD is renewed to

contemplate an average of 30 patients per day as opposed to up

to 40 patients per day, then annual revenue could be reduced up

to $400,000. Projected net profit will, nevertheless, exceed

expenses when variable expenses are reduced correspondingly.

48. If 20 state funded patients are already in psychiatric

beds, and 20 more could be transferred from 19th Street, the

result is an ADC of 68. Based on the funding arrangements,

there is no evidence that the operation of a total of 98 beds

could not be profitable, even with an ADC of 68, although it

would be wasteful to have 30 extra beds.

Impact on Competition, Quality Assurance

and Cost-Effectiveness - Subsection 408.035(1)(l),

Florida Statutes

49. With a maximum of 68 inpatients or more realistically,

under the expected terms of a renegotiated State contract, 58 to

60 inpatients in 98 beds, Broward General will reasonably

attempt to expand the demand for its inpatient psychiatric

services. Within the NBHD's legal service area, one-third of

adult psychiatric patients not admitted to Broward General are

admitted to FMC.

50. Assuming a proportionate impact on competitors, FMC's

expert projected that one-third of approximately 30 unfilled

beds at Broward General will be filled by patients who would

otherwise have gone to FMC. The projection of a loss of 9

patients from the ADC of FMC is reasonably based on an analysis

showing comparable patient severity in the most prevalent

diagnostic category. Given the blended payor commitment of

approximately 51 or 52 percent total for Medicaid and charity in

98 beds, Broward General will be able to take patients from

every payor category accepted at FMC.

51. The loss of 9 patients from its ADC can reduce

revenues by $568,967 at FMC. The impact analysis is reasonably

based on lost patient days since most payers use a per diem

basis for compensating FMC. For example, although Medicare

reimbursement is usually based on diagnosis regardless of length

of stay, it is cost-based for the geriatric psychiatric unit.

Net profit at FMC, for the year 1996-1997, was expected to be

approximately $4.5 million.

52. FMC will also experience increased costs in

transporting indigent patients from FMC to Broward General for

admission and treatment. Because of the additional distance,

the cost to transfer indigent patients is $20 more per patient

from FMC to Broward General than it is from FMC to the 19th

Street CSU. FMC typically stabilizes indigent adult psychiatric

inpatients, then transfers them to either the 19th Street CSU or

Broward General. From March through September of 1997, FMC

transported approximately 256 indigent patients from FMC to the

19th Street CSU.

53. In terms of quality assurance, the consolidation of

psychiatric services at Broward General will allow all patients

better access to the full range of medical services available at

Broward General.

54. The NBHD's operation of the 19th Street CSU is

profitable. Approval of the CON application should reasonably

eliminate all costs associated with operation of the 19th Street

facility, and shift more revenues from the State and County

contracts to Broward General. Some savings are reasonably

expected from not having meal deliveries to 19th Street or

patient transfers for medical care. The NBHD did not quantify

any expected savings.

Costs and Methods of Construction

- Subsection 408.035(1)(m), Florida Statutes

55. Broward General will relocate 12 of 42

medical/surgical beds and convert 30 medical/surgical beds to 30

adult psychiatric beds on one wing of the fourth floor, which is

currently unused. Fifteen semi-private medical/surgical patient

rooms will be converted into semi-private adult psychiatric

rooms. Existing wards will be converted to two social rooms,

one noisy and one quiet. With the removal of the walls of some

offices, the architect designed a group therapy room. An

existing semi-private room will be used as a seclusion room. Of

the fifteen semi-private rooms, twelve will not have bathing or

showering facilities and seven will not have toilets within the

patients' rooms. At the time the hospital was constructed, the

state required only a lavatory/sink in each patient room.

AHCA's architect agreed to allow Broward General to plan to use

central bathing and toilet facilities to avoid additional costs

and diminished patient room sizes. Because the plan

intentionally avoids construction in the toilets, except to

enlarge one to include a shower, there is no requirement to

upgrade to Americans With Disabilities Act (ADA) standards.

Therefore, the $23,280 construction cost contingency for code

compliance is adequate.

56. Although the projected construction costs are

reasonable and the applicable architectural code requirements

are met, the design is not the most desirable in terms of

current standards. Patient privacy is compromised by the lack

of toilets for each patient room.

Past and Proposed Provision of Services to Promote

a Continuum of Care in a Multi-level System -

Subsection 408.035(1)(o), Florida Statutes

57. Broward General is a tertiary acute care facility

which provides a broad continuum of care. Because it already

operates the CSU and provides CSU services in adult psychiatric

beds, the proposal to relocate patients maintains but does not

further promote that continuum of care. Broward General's plan

to establish more alternatives to inpatient psychiatric care

does promote and enhance its continuum of care.

Capital Expenditures for New Inpatient Services -

Subsection 408.035(2), Florida Statutes

58. Broward General is not proposing to establish a new

health service for inpatients, rather it is seeking to relocate

an existing service without new construction. The criteria in

this Subsection are inapplicable.

Factual Conclusions

59. Broward General did not establish a "not normal"

circumstance based on the grand jury's findings and

recommendations. The grand jury did not recommend closing 19th

Street facility. Broward General did generally establish not

normal circumstances based on the desirability of consolidating

mental health services at Broward General to provide a single

point of entry and to improve the quality of care for the 19th

Street facility patients.

60. Broward General failed to establish the need to add 30

beds to accomplish the objective of closing the 19th Street

facility. Although the existing beds at Broward General may

reasonably be expected to be full as a result of the transfer of

19th Street patients, the addition of 30 beds without sufficient

demand results in an occupancy rate of 69 or 70 percent, from an

ADC of 68 patients in 98 beds. Broward General has requested

approximately twice as many beds as it demonstrated it needs.

61. Broward General's CON application on balance satisfies

the local and state health plan preferences. In general, FMC is

the only alternative facility in terms of available beds, but is

not the tax-supported public facility which the grand jury

favored to coordinate mental health services. Broward General

meets the statutory criteria for quality of care, improvements

from joint operations, financial feasibility, quality assurance,

cost-effectiveness, and services to Medicaid and indigent

patients.

62. The proposal is not the most desirable architecturally

considering current standards. More importantly, Broward

General did not demonstrate that it can achieve its projected

occupancy without an adverse impact on FMC. The NBHD proposal

will add too many beds to meet the targeted state occupancy

levels in relatively a static market.

63. Broward General's application does not include a

partial request for fewer additional beds which would have

allowed the closing of 19th Street, while maintaining some empty

beds for demand fluctuations and avoiding an adverse impact on

FMC.

CONCLUSIONS OF LAW

64. The Division of Administrative Hearings has

jurisdiction over the subject matter of and parties to this

proceeding pursuant to Subsections 120.57(1) and 408.039(5),

Florida Statutes.

65. As the applicant, the NBHD has the burden of

demonstrating its entitlement to the CON based on a balanced

consideration of the statutory and rule criteria. Boca Raton

Artificial Kidney Center v. Department of Health and

Rehabilitative Services , 475 So. 2d 260 (Fla. 1st DCA 1985).

Florida Department of Transportation v. JWC Company, Inc. , 396

So. 2d 178 (Fla. 1st DCA 1981).

66. FMC has standing, pursuant to Subsection

408.039(5)(c), Florida Statutes, as an existing provider of

adult inpatient psychiatric services in District 10 which will

be substantially adversely affected by the issuance of CON 8425.

67. There is no fixed numeric need for psychiatric beds in

District 10. The lack of numeric need is not determinative of

the outcome of any CON case, particularly one like this in which

"not normal" circumstances are demonstrated. Sarasota County

Public Hospital Board v. Department of Health and Rehabilitative

Services , 11 FALR 6248 (DHRS November 17, 1989).

68. The special or not normal circumstances demonstrated

by the NBHD are the improvements in quality assurance and cost

efficiency, the enhanced quality of services to mental health

patients at Broward General, and the combined occupancy rates in

the CSU and the adult psychiatric beds. See Rule 59C-

1.040(4)(d), Florida Administrative Code; and Humana, Inc. v.

Department of Health and Rehabilitative Services , 469 So. 2d 889

(Fla. 1st DCA 1985).

69. The proposal, is generally consistent with the factors

and preferences in the district and state health plans, as

required by Subsection 408.035(1)(a), Florida Statutes.

70. Broward General has a history of providing quality

care and the range of services required for psychiatric

patients, in compliance with Rule 59C-1.040(3)(h), Florida

Administrative Code, and Subsection 408.035(1)(c), Florida

Statutes.

71. Subsections 408.035(1)(f), (g),(j), and (k) are

inapplicable or not met by Broward General. Without a competing

applicant which is a teaching hospital or an HMO, those criteria

do not assist in determining whether the CON should be issued.

72. Although not quantified, Broward General is reasonably

expected to derive an economic benefit from providing

psychiatric care at a single location, consistent with

Subsection 408.035(1)(e), Florida Statutes.

73. NBHD has the resources to accomplish the proposed

project and to operate it in a financially feasible manner in

the immediate and long term. Subsections 408.035(1)(h), and

(i), Florida Statutes.

74. The proposal to create excess capacity at Broward

General is not the most cost-effective and will substantially

and adversely affect that at FMC, which is inconsistent with

Subsection 408.035(1)(l), Florida Statutes.

75. The design of the psychiatric unit is the least

costly, but not the most effective in terms of patient care and

privacy. Subsection 408.035(l)(m), Florida Statutes.

76. Broward General and NBHD have a commendable record of

providing care to Medicaid and indigent patients, in compliance

with Subsection 408.035(1)(n), Florida Statutes.

77. Broward General plans to expand alternatives to

inpatient psychiatric care. Subsection 408.035(1)(o), Florida

Statutes.

78. The addition of 30 beds at Broward General is not

supported by the need to close 20 beds at the 19th Street CSU

nor the speculative impact of the mental health court.

Therefore, the proposal will not achieve the desired average

annual occupancy rate of 75 percent, set in Rule 59C-

1.040(4)(c)5., Florida Administrative Code.

79. The approval of beds in excess of those needed is

risky. That excess capacity can be detrimental to a worthy

applicant in a future batching cycle. See Beverly Enterprises-

Florida, Inc., etc. v. Agency for Health Care Administration ,

DOAH Case No. 92-6656 (F.O. 10/17/94).

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Agency for Health Care

Administration deny the application of the North Broward

Hospital District for Certificate of Need Number 8425 to convert

30

medical/surgical beds to 30 adult psychiatric beds at Broward

General Medical Center.

DONE AND ENTERED this 21st day of April, 1998, in

Tallahassee, Leon County, Florida.

___________________________________

ELEANOR M. HUNTER

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 21st day of April, 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

Paul Vazquez, Esquire

Agency For Health Care Administration

Fort Knox Building 3

2727 Mahan Drive, Suite 3431

Tallahassee, Florida 32308-5403

Stephen A. Ecenia, Esquire

R. David Prescott, Esquire

Rutledge, Ecenia, Underwood,

Purnell & Hoffman, P.A.

Post Office Box 551

Tallahassee, Florida 32302-0551

David C. Ashburn, Esquire

Gunster, Yoakley, Valdes-Fauli

& Stewart, P.A.

215 South Monroe Street, Suite 830

Tallahassee, Florida 32301

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.