02-003515CON Morton Plant Hospital Association, Inc., D/B/A North Bay Hospital vs. Agency For Health Care Administration And New Port Richey Hospital, Inc., D/B/A Community Hospital Of New Port Richey Status: Closed Recommended Order on Friday, March 19, 2004.

Summary: Respondent`s application to relocate its hospital five miles away satisfies, on balance, the rule and statutory criteria. Petitioner`s application does not.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

MORTON PLANT HOSPITAL )

ASSOCIATION, INC., d/b/a )

NORTH BAY HOSPITAL, )

)

Petitioner, )

)

vs. ) Case No. 02 - 3232CON

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION and NEW PORT )

RICHEY HOSPITAL, INC., d/b/a )

COMMUNITY HOSPITAL OF NEW )

POR T RICHEY, )

)

Respondents. )

_____________________________ )

__ )

NEW PORT RICHEY HOSPITAL, )

INC., d/b/a COMMUNITY )

HOSPITAL OF NEW PORT RICHEY, )

)

Petitioner, )

) Case No. 02 - 3233CON

vs. )

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION and MORTON )

PLANT HOSPITAL ASSOCIATION, )

INC., d/b/a NORTH BAY )

HOSPITAL, )

)

Respondents. )

_____________________________ )

__ )

TARPON SPRINGS HOSPITAL )

FOUNDATION, INC., d/b/a HELEN )

ELLIS MEMORIAL HOSPITAL, )

) Case No. 02 - 3234CON

Petitioner, )

)

vs. )

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION and NEW PORT )

RICHEY, INC., d/b/a COMMUNITY )

HOSPITAL OF NEW PORT RICHEY, )

)

Respondents. )

_____________________________ )

__ )

TARPON SPRINGS HOSPITAL )

FOUNDATION, INC., d/b/a HEL EN )

ELLIS MEMORIAL HOSPITAL, ) Case No. 02 - 3235CON

)

Petitioner, )

)

vs. )

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION and MORTON )

PLANT HOSPITAL ASSOCIATION, )

INC., d/b/a NORTH BAY )

HOSPITAL, )

)

Respondents. )

________________ _____________ )

__ ) Case No. 02 - 3236CON

TRUSTEES OF MEASE HOSPITAL, )

INC., )

)

Petitioner, )

)

vs. )

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION and NEW PORT )

RICHEY, INC., d/b/a COMMUNITY )

HOSPITAL OF NEW PORT RICHEY, )

)

Respondents. )

______________ _______________ ) Case No. 02 - 3237CON

__ )

TRUSTEES OF MEASE HOSPITAL, )

INC., )

)

Petitioner, )

)

vs. )

)

AGENCY FOR HEALTH CARE

ADMINISTRATION and MORTON

PLANT HOSPITAL ASSOCIATION,

INC., d/b/a NORTH BAY

HOSPITAL,

Respondents .

_____________________________ )

__ )

)

)

)

)

) Case No. 02 - 3515CON

)

)

MORTON PLANT HOSPITAL )

ASSOCIATION, INC., d/b/a )

NORTH BAY HOSPITAL, )

)

Petitioner, )

)

vs. )

AGENCY FOR HEALTH CARE

ADMINISTRATION and NEW PORT

RICHEY HOSPITAL, INC., d/b/a

COMMUNITY HOSPITAL OF NEW

PORT RICH EY,

Respondents.

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative

Hearings, by its designated Administrative Law Judge, William

R. Pfeiffer, held the final hearing in the above - styled case

on May 21, 22, 27, and 28, June 2, 4, 9 through 13, and 16

through 20, 2003, in Tallahassee, Florida.

APPEARANCES

For Agency for Health Care Admini stration:

Richard J. Saliba, Esquire

Agency for Health Care Administration

Fort Knox Building III, Mail Station 3

2727 Mahan Drive

Tallahassee, Florida 32 308

For Morton Plant Hospital Association, Inc., d/b/a North Bay

Hospital:

Robert A. Weiss, Esquire

Karen A. Putnal, Esquire

Parker, Hudson, Rainer & Dobbs, LLP

The Perkins H ouse, Suite 200

118 North Gadsden Street

Tallahassee, Florida 32301

For New Port Richey Hospital, Inc., d/b/a Community Hospital

of New Port Richey:

Stephen A. Ecenia, Esquire

R. David Prescott, Esquire

Richard M. Ellis, Esquire

Rutledge, Ecenia, Purnell & Hoffman, P.A.

215 South Monroe Street, Suite 420

Tallahassee, Florida 32301

For Tarpon S prings Hospital Foundation, Inc., d/b/a Helen

Ellis Memorial Hospital:

James C. Hauser, Esquire

R. Terry Rigsby, Esquire

Metz, Hauser & Husband, P.A.

215 South Monroe Street, Suite 505

Tallahassee, Florida 32301

For Trustees of Mease Hospital, Inc.:

Darrell White, Esquire

William B. Wiley, Esquire

McFarlain & Cassedy, P.A.

305 South Gadsden Street, Suite 600

Tallahassee, Florida 32301

STATEMENT OF THE ISSUES

Whether the certificate of need (CON) applications filed

by New Port Richey Hospital, Inc., d/b/a Community Hospital of

New Port Richey (Community Hos pital) (CON No. 9539), and

Morton Plant Hospital Association, Inc., d/b/a North Bay

Hospital (North Bay) (CON No. 9538), each seeking to replace

and relocate their respective general acute care hospital,

satisfy, on balance, the applicable statutory and ru le

criteria.

PRELIMINARY STATEMENT

In April 2002, Community Hospital and North Bay each

filed an application for a CON to replace and relocate their

respective general acute care hospitals in Pasco County, the

Agency for Health Care Administration's (AHC A) health planning

Sub - District 5 - 1. On June 28, 2002, in Volume 28, Number 26,

of the Florida Administrative Weekly , AHCA noticed its intent

to approve both applications.

Thereafter, North Bay timely filed a Petition for Formal

Administrative Hearing c hallenging Community Hospital's

preliminary approval, and Community Hospital filed a petition

pursuant to Florida Administrative Code Rule 59C - 1.012(2)(a),

requesting that its application be approved in the event that

the two applications were considered m utually exclusive.

Tarpon Springs Hospital Foundation, Inc., d/b/a Helen

Ellis Memorial Hospital (Helen Ellis), timely filed a Petition

for Formal Administrative Hearing challenging North Bay's and

Community Hospital's approval. Helen Ellis is an existi ng

hospital in Pinellas County located within AHCA's health

planning District 5.

Trustees of Mease Hospital, Inc. (Mease) also filed a

petition contesting North Bay's and Community Hospital's

approval. Mease is the licensee of Mease Countryside Hospital

and Mease Dunedin Hospital. Both hospitals are located in

District 5, within Pinellas County.

At the consolidated final hearing, Community Hospital

presented the testimony of Ernie Meier, CEO, expert in

hospital administration; Andy Capps, expert in he alth care

engineering with a specialty in mechanical and electrical

engineering; Matt Harrell, expert in health care architecture;

Steve Klein, expert in health care architecture; Robert

Pergolizzi, expert in transportation planning and land use

planning; Sharon Gordon -

Girvin, expert in health care planning; Richard Baehr, expert

in health care planning and health care finance; Jeffrey

Gregg, expert in health care planning; and Darryl Weiner,

expert in health care finance.

In addition, Community Hospital i ntroduced the deposition

transcripts of the following witnesses as exhibits: Samuel P.

Steffey, II; Jennifer Farias, R.N.; Barry Frazier; Michael H.

Carroll; Mary Jane Stanley; Sam Stebbins, P.E.; John Shim,

M.D.; Richard Miller, D.O.; Keith Giger; and Ja mes A.

Pfeiffer, no relation to the undersigned. Community

Hospital's Exhibits numbered 1 through 60 were received in

evidence.

At the final hearing, North Bay presented the testimony

of Lewis Friedland, expert in residential and commercial

development planning and residential and commercial growth and

development in Pasco County; William Jennings, expert in

hospital administration; Juan C. Vila, M.D., expert in

cardiology and internal medicine; Diana Davis, R.N., expert in

critical care nursing, post - a nesthesia recovery nursing and

unit management, and acute care hospital central sterile

processing and supply; John Clees, expert in health care

architecture; Ron Harn, expert in health care facilities

management; Robin Lapham, R.N., expert in acute care n ursing,

critical care nursing, rehabilitation nursing, and nursing

administration; Douglas Brooks, M.D., expert in family

medicine; Nancy Burden, expert in ambulatory care

services, operation and management; Rick Knapp, expert in

health care finance; Rama na V. Amar, M.D., expert in

rehabilitation medicine; Mark Richardson, expert in health

care planning; Ken Dickerman, expert in health care

architecture and design; and Roland Dove, expert in civil

engineering.

In addition, North Bay introduced deposition transcripts

of Elizabeth Ditzenberger and Tommy Inzina. North Bay's

Exhibits numbered 1 through 31 were received in evidence.

At the final hearing, Helen Ellis presented the testimony

of Peter Wozniak, expert in hospital operations, nursing and

quality of care assessment; Elizabeth Rugg, expert in health

planning; Chris Bell, expert in hospital architecture; and

Michael C. Carroll, expert in health care planning and health

care finance.

In addition, Helen Ellis introduced deposition

transcripts of the fo llowing witnesses as exhibits: Gerald

Seeber, Fred Metcalf, and Chief Dan Azzariti. Helen Ellis'

Exhibits numbered 1 through 22 were received into evidence.

At final hearing, Mease presented the testimony of

Richard Dutter, expert in land use and commun ity planning;

John Blassick, expert in health care architecture; Jay

Cushman, expert in health care planning; and Judy Horowitz,

expert in health care finance.

In addition, Mease introduced the deposition testimony of

Robert Friedman and Raymond Parham. Mease's Exhibits numbered

1 through 13 were received into evidence.

The hearing concluded on June 20, 2003. Following an

Order Granting an Extension of Time for Filing Proposed

Recommended Orders, each of the parties timely filed their

respective proposed recommended order's in December 2003, and

they have been duly considered.

Positions of the Parties

AHCA preliminarily approved both applications. Community

Hospital submits that both applications should be approved.

However, Community Hospital contends its application better

satisfies the applicable review criteria and should be

selected if only one application is approved. North Bay

argues that only its application should be approved. Helen

Ellis and Mease contend that both applications should be

deni ed.

Numeric Need

Neither application proposes to add licensed hospital

beds to Sub - District 5 - 1. Consequently, AHCA's numeric net

need calculation for acute care beds in Sub - District 5 - 1 is

not applicable in this case.

Pre - hearing Stipulations

The parti es stipulated to the following in their Joint

Pre - Hearing Stipulation:

With respect to Section 408.035(3), Florida Statutes

(2000), both Community Hospital and North Bay have a record of

providing high quality of care at their existing hospitals,

and ha ve the

ability to provide high quality of care at their replacement

hospitals. Both applicants reserved the right to offer

evidence concerning the impact of their proposed replacement

hospitals on quality of care.

With respect to Section 408.035(4), (5) , and (12),

Florida Statutes (2002), the parties stipulated that the

criteria are not applicable to this case.

With respect to Section 408.035(6), Florida Statutes

(2000), both Community Hospital and North Bay have available

health personnel and manageme nt personnel resources for

project accomplishment and operation. The compliance of the

two applications with Section 408.035(6), Florida Statutes

(2000), is otherwise in dispute.

The parties agree that the applicants' letters of intent

and CON application s were timely filed, and the project costs

in Schedule 1 in each application are sufficient for each of

the respective proposals. Furthermore, it is stipulated that

Schedule 6A in the applications, concerning staffing, is not

at issue or in dispute for ei ther of the two applications;

however, Mease challenges the ancillary staff projections in

North Bay's Schedule 6A. The parties agree that both

applicants can recruit the additional incremental staff for

implementation of their respective proposals. Fina lly, the

parties have not stipulated to the degree to which Helen Ellis

and Mease would be adversely affected by the approval of

either application.

FINDINGS OF FACT

I. The Parties

AHCA

1. AHCA is the single state agency responsible for the

administratio n of the CON program in Florida pursuant to

Chapter 408, Florida Statutes (2000). The agency separately

reviewed and preliminarily approved both applications.

Community Hospital

2. Community Hospital is a 300,000 square feet,

accredited hospital with 345 licensed acute care beds and 56

licensed adult psychiatric beds, located in southern New Port

Richey, Florida, within Sub - District 5 - 1. Community Hospital

is seeking to construct a replacement facility approximately

five miles to the southeast within a r apidly developing suburb

known as "Trinity."

3. Community Hospital currently provides a wide array of

comprehensive inpatient and outpatient services and is the

only provider of obstetrical and adult psychiatric services in

Sub - District 5 - 1. It is the la rgest provider of emergency

services in Pasco County with approximately 35,000 visits

annually. It is also the largest provider of Medicaid and

indigent patient days in Sub - District 5 - 1.

4. Community Hospital was originally built in 1969 and

is an aging facility. Although it has been renovated over

time, the hospital is in poor condition. Community Hospital's

average daily census is below 50 percent.

North Bay

5. North Bay is a 122 - bed facility containing 102

licensed acute care beds and 20 licensed comprehensive medical

rehabilitation beds, located approximately one mile north of

Community Hospital in Sub - District 5 - 1. It serves a large

elderly population and does not provide pediatric or

obstetrical care. North Bay is also an aging facility and

pr oposes to construct a replacement facility in the Trinity

area. Notably, however, North Bay has spent approximately 12

million dollars over the past three years for physical

improvements and is in reasonable physical condition.

Helen Ellis

6. Helen Ellis is an accredited hospital with 150

licensed acute care beds and 18 licensed skilled nursing unit

beds. It is located in northern Pinellas County,

approximately eight miles south of Community Hospital and nine

miles south of North Bay.

7. Helen Ellis p rovides a full array of acute care

services including obstetrics and cardiac catheterization.

Its daily census average has fluctuated over the years but is

approximately 45 percent.

Mease

8. Mease operates two acute care hospitals in Pinellas

County inc luding Mease Dunedin Hospital, located approximately

18 to 20 miles south of the applicants and Mease Countryside

Hospital, located approximately 16 to 18 miles south of

Community and North Bay. Each hospital operates 189 licensed

beds. The Mease hospita ls are located in the adjacent acute

care sub - district but compete with the applicants.

II. The Health Planning District

9. AHCA's Health Planning District 5 consists of

Pinellas and Pasco Counties. U.S. Highway 41 runs north and

south through the Dist rict and splits Pasco County into Sub -

District 5 - 1 and Sub - District 5 - 2. Sub - District 5 - 1, where

Community Hospital and North Bay are located, extends from

U.S. 41 west to the Gulf Coast. Sub - District 5 - 2 extends from

U.S. 41 to the eastern edge of Pasco County.

10. Pinellas County is the most densely populated county

in Florida and steadily grows at 5.52 percent per year. On

the other hand, its neighbor to the north, Pasco County, has

been experiencing over 15 percent annual growth in population.

The evidence demonstrates that the area known as Trinity,

located four to five miles southeast of New Port Richey, is

largely responsible for the growth. With its large, single -

owner land tracts, Trinity has become the area's fuel for

growth, while New

Port Richey, the older coastal anchor which houses the

applicants' facilities, remains static.

11. In addition to the available land in Trinity,

roadway development in the southwest section of Pasco County

is further fueling growth. For example, the Su ncoast Highway,

a major highway, was recently extended north from Hillsborough

County through Sub - District 5 - 1, west of U.S. 41. It

intersects with several large east - west thoroughfares

including State Road 54, providing easy highway access to the

Tampa a rea.

III. The General Proposals

Community Hospital's Proposal

12. Community Hospital's CON application proposes to

replace its existing, 401 - bed hospital with a 376 - bed state -

of - the - art facility and relocate it approximately five miles

to the southeas t in the Trinity area. Community Hospital

intends to construct a large medical office adjacent to its

new facility and provide all of its current services including

obstetrical care. It does not intend to change its primary

service area.

North Bay's Pro posal

13. North Bay's CON application proposes to replace its

existing hospital with a 122 - bed state - of - the - art facility and

also plans to relocate it approximately eight miles to the

southeast in the Trinity area of southwestern Pasco County.

North Bay intends to provide the same array of services it

currently offers its patients and will not provide pediatric

and obstetrical care in the proposed facility.

14. The proposed relocation site is adjacent to the

Trinity Outpatient Center which is owned by North Bay's parent

company, Morton Plant. The Outpatient Center offers a full

range of diagnostic imaging services including nuclear

medicine, cardiac nuclear stress testing, bone density

scanning, CAT scanning, mammography, ultrasound, as well as

many ot hers. It also offers general and specialty ambulatory

surgical services including urology; ear, nose and throat;

ophthalmology; gastroenterology; endoscopy; and pain

management. Approximately 14 physician offices are currently

located at the Trinity Outp atient Center.

IV. The Condition of Community Hospital

Facility

15. Community Hospital's core facilities were

constructed between 1969 and 1971. Additions to the hospital

were made in 1973, 1975, 1976, 1977, 1979, 1981, 1992, and

1999. With an area of approximately 294,000 square feet and

401 licensed beds, or 733 square feet per bed, Community

Hospital's gross area - to - bed ratio is approximately half of

current hospital planning standards of 1,600 square feet per

bed. With the exception of the "E" win g which was completed

in 1999, all of the clinical and support departments are

undersized.

Medical - Surgical Beds And Intensive Care Units

16. Community Hospital's "D" wing, constructed in 1975,

is made up of two general medical - surgical unit floors whi ch

are grossly undersized. Each floor operates 47 general

medical - surgical beds, 24 of which are in three - bed wards and

23 in semi - private rooms. None of the patient rooms in the

"D" wing have

showers or tubs so the patients bathe in a single facility

l ocated at the center of the wing on each floor.

17. Community Hospital's "A" wing, added in 1973, is

situated at the west end of the second floor and is also

undersized. It too has a combination of semi - private rooms

and three - bed wards without showers or tubs.

18. Community Hospital's "F" wing, added in 1979,

includes a medical - surgical unit on the second and third

floor, each with semi - private and private rooms. The second

floor unit is centrally located between a 56 - bed adult

psychiatric unit and the Surgical Intensive Care Unit (SICU)

which creates security and privacy issues. The third floor

unit is adjacent to the Medical Intensive Care Unit (MICU)

which must be accessed through the medical - surgical unit.

Neither intensive care unit (ICU) poss esses an isolation area.

19. Although the three - bed wards are generally

restricted to in - season use, and not always full, they pose

significant privacy, security, safety, and health concerns.

They fail to meet minimum space requirements and are a seriou s

health risk. The evidence demonstrates that reconfiguring the

wards would be extremely costly and impractical due to code

compliance issues. The wards hinder the hospital's acute care

utilization, and impair its ability to effectively compete

with other hospitals.

Surgical Department and Recovery

20. Community Hospital's surgical department is

separated into two locations including the main surgical suite

on the second floor and the Endoscopy/Pain Management unit

located on the first floor of "C" wing. Consequently, the

department cannot share support staff and space such as

preparation and recovery.

21. The main surgical suite, adjacent recovery room, and

central sterile processing are 25 years old. This unit's

operating rooms, cystoscopy rooms, st orage areas, work -

stations, central sterile, and recovery rooms are undersized

and antiquated. The 12 - bay Recovery Room has no patient

toilet and is lacking storage. The soiled utility room is

deficient.

22. In addition, the patient bays are extremely n arrow

and separated by curtains. There is no direct connection to

the sterile corridor, and staff must break the sterile field

to transport patients from surgery to recovery. Moreover,

surgery outpatients must pass through a major public lobby

going to a nd returning from surgery.

The Emergency Department

23. Community Hospital's existing emergency department

was constructed in 1992 and is the largest provider of

hospital emergency services in Pasco County, handling

approximately 35,000 visits per yea r. The hospital is also

designated a "Baker Act" receiving facility under Chapter 394,

Florida Statutes, and utilizes two secure examination rooms

for emergent psychiatric patients. At less than 8,000 total

square feet, the emergency department is severe ly undersized

to meet the needs of its patients.

24. The emergency department is currently undergoing

renovation which will connect the triage area to the main

emergency department. The renovation will not enlarge the

entrance, waiting area, storage, nur sing station, nor add

privacy to the patient care areas in the emergency department.

The renovation will not increase the total size of the

emergency department, but in fact, the department's total bed

availability will decrease by five beds. Similar to other

departments, a more meaningful renovation cannot occur within

the emergency department without triggering costly building

code compliance measures.

25. In addition to its space limitations, the emergency

department is awkwardly located. In 1992, t he emergency

department was relocated to the front of the hospital and is

completely separated from the diagnostic imaging department

which remained in the original 1971 building. Consequently,

emergency patients are routinely transported across the

hospi tal for imaging and CT scans.

V. Issues Relating to Replacement of Community Hospital

26. Although physically possible, renovating and

expanding Community Hospital's existing facility is

unreasonable. First, it is cost prohibitive. Any significant

ren ovation to the 1971, 1975, 1977, and 1979 structures would

require asbestos abatement prior to construction, at an

estimated cost of $1,000,000. In addition, as previously

noted, the hospital will be saddled with the major expense of

complying with all cu rrent building code requirements in the

40 - year - old facility. Merely installing showers in patient

rooms would immediately trigger a host of expensive, albeit

necessary, code requirements involving access, wiring, square

footage, fireproofing columns and beams, as well as

floor/ceiling and roof/ceiling assemblies. Concurrent with

the significant demolition and construction costs, the

hospital will experience the incalculable expense and loss of

revenue related to closing major portions, if not all, of the

hospital.

27. Second, renovation and expansion to the existing

facility is an unreasonable option due to its physical

restrictions. The 12'4" height of the hospital's first floor

limits its ability to accommodate HVAC ductwork large enough

to meet cur rent ventilation requirements. In addition, there

is inadequate space to expand any department within the

confines of the existing hospital without cannibalizing

adjacent areas, and vertical expansion is not an option.

28. Community Hospital's applicati on includes a lengthy

Facility Condition Assessment which factually details the

architectural, mechanical, and electrical deficiencies of the

hospital's existing physical plant. The assessment is

accurate and reasonable.

VI. Community Hospital's Proposed Replacement

29. Community Hospital proposes to construct a six -

story, 320 licensed beds, acute care replacement facility.

The hospital will consist of 548,995 gross square feet and

include a 56 - bed adult psychiatric unit connected by a hallway

to the f irst floor of the main hospital building. The

proposal also includes the construction of an adjacent medical

office building to centralize the outpatient offices and staff

physicians.

30. The evidence establishes that the deficiencies

inherent in Commun ity Hospital's existing hospital will be

cured by its replacement hospital. All patients will be

provided large private rooms. The emergency department will

double in size, and contain private examination rooms. All

building code requirements will be me t or exceeded. Patients

and staff will have separate elevators from the public.

31. In addition, the surgical department will have large

operating rooms, and adequate storage. The MICU and SICU will

be adjacent to each other on the second floor to avo id

unnecessary traffic within the hospital. Surgical patients

will be transported to the ICU via a private elevator

dedicated to that purpose. Medical - surgical patient rooms

will be efficiently located on the third through sixth floors,

in "double - T" con figuration.

VII. Community Hospital's Existing and Proposed Sites

32. Community Hospital is currently located on a 23 - acre

site inside the southern boundary of New Port Richey. Single -

family homes and offices occupy the two - lane residential

streets tha t surround the site on all sides.

33. The hospital buildings are situated on the northern

half of the site, with the main parking lot located to the

south, in front of the main entrance to the hospital. Marine

Parkway cuts through the southern half of t he site from the

west, and enters the main parking lot. A private medical mall

sits immediately to the west of the main parking lot and a

one - acre storm - water retention pond sits to the west of the

mall. A private medical office building occupies the sou th

end of the main parking lot and a four - acre drainage easement

is located in the southwest corner of the site.

34. Community Hospital's administration has actively

analyzed its existing site, aging facility, and adjacent

areas. It has commissioned stu dies by civil engineers, health

care consultants, and architects. The collective evidence

demonstrates that, although on - site relocation is potentially

an option, on balance, it is not a reasonable option.

35. Replacing Community Hospital on its exis ting site is

not practical for several reasons. First, the hospital will

experience significant disruption and may be required to

completely close down for a period of time. Second, the

site's southwestern large four - acre parcel is necessary for

storm - wa ter retention and is unavailable for expansion.

Third, a reliable cost differential is unknown given Community

Hospital's inability to successfully negotiate with the city

and owners of the adjacent medical office complexes to acquire

additional parcels. Fourth, acquiring other adjacent

properties is not a viable option since they consist of

individually owned residential lots.

36. In addition to the site's physical restrictions, the

site is hindered by its location. The hospital is situated in

a neighb orhood between small streets and a local school. From

the north and south, motorists utilize either U.S. 19, a

congested corridor that accommodates approximately 50,000

vehicles per day, or Grand and Madison Streets, two - lane

streets within a school zone. From the east and west,

motorists utilize similar two - lane neighborhood streets

including Marine Parkway, which often floods in heavy rains.

37. Community Hospital's proposed site, on the other

hand, is a 53 - acre tract positioned five miles from its

c urrent facility, at the intersection of two major

thoroughfares in southwestern Pasco County. The proposed site

offers ample space

for all facilities, parking, outpatient care, and future

expansion.

38. In addition, Community Hospital's proposed site

provides reasonable access to all patients within its existing

primary service area made up of zip codes 34652, 34653, 34668,

34655, 34690, and 34691. For example, the average drive times

from the population centers of each zip code to the existing

site of the hospital and the proposed site are as follows:

Zip code Existing site Proposed site

Difference

34652 3 minutes 14 minutes 11

minutes

34653 8 minutes 11 minutes 3

minutes

34668 15 minutes 21 minutes 6

minutes

34655 11 minutes 4 mi nutes - 7

minutes

34690 11 minutes 13 minutes 2

minutes

34691 11 minutes 17 minutes 6

minutes

39. While the average drive time from the population

centroids of zip codes 34653, 34668, 34690, and 34691 to the

proposed site slightly increases, it de creases from the

Trinity area, where population growth has been most

significant in southwestern Pasco County. In addition, a

motorist's average drive time from Community Hospital's

existing location to its proposed site is only 10 to 11

minutes, and pati ents utilizing public transportation will be

able to access the new hospital via a bus stop located

adjacent to the proposed site.

VIII. The Condition of North Bay

Facility

40. North Bay Hospital is also an aging facility. Its

original structure and po rtions of its physical plant are

approximately 30 years old. Portions of its major mechanical

systems will soon require replacement including its boilers,

air handlers, and chillers. In addition, the hospital is

undersized and awkwardly configured.

41. Despite its shortcomings, however, North Bay is

generally in good condition. The hospital has been

consistently renovated and updated over time and is

aesthetically pleasing. Moreover, its second and third floors

were added in 1986, are in good shape, and structurally

capable of vertical expansion.

Medical Surgical Beds and ICU Units

42. By - in - large, North Bay is comprised of undersized,

semi - private rooms containing toilet and shower facilities.

The hospital does not have any three - bed wards.

4 3. North Bay's first floor houses all ancillary and

support services including lab, radiology, pharmacy, surgery,

pre - op, post - anesthesia recovery, central sterile processing

and supply, kitchen and cafeteria, housekeeping and

administration, as well as t he mechanical, electrical, and

facilities maintenance and engineering. The first floor also

contains a 20 - bed CMR unit and a 15 - bed acute care unit.

44. North Bay's second and third floors are mostly

comprised of semi - private rooms and supporting nurs ing

stations.

Although the rooms and stations are not ideally sized, they

are in relatively good shape.

45. North Bay utilizes a single ICU with ten critical

care beds. The ICU rooms and nursing stations are also

undersized. A four - bed ICU ward and f ormer nursery are

routinely used to serve overflow patients.

Surgery Department and Recovery

46. North Bay utilizes a single pre - operative surgical

room for all of its surgery patients. The room accommodates

up to five patient beds, but has limited spa ce for storage and

pre - operative procedures. Its operating rooms are

sufficiently sized. While carts and large equipment are

routinely stored in hallways throughout the surgical suite,

North Bay has converted the former obstetrics recovery room to

surgic al storage and has made efficient use of other available

space.

47. North Bay operates a small six - bed Post Anesthesia

Care Unit. Nurses routinely prepare patient medications in

the unit which is often crowded with staff and patients.

The Emergency De partment

48. North Bay has recently expanded its emergency

department. The evidence demonstrates that this department is

sufficient and meets current and future expected patient

volumes.

IX. Replacement Issues Relating to North Bay

49. While it is cl ear that areas of North Bay's physical

plant are aging, the facility is in relatively good condition.

It is apparent that North Bay must soon replace significant

equipment, including cast - iron sewer pipes, plumbing, boilers,

and chillers which will cause some interruption to hospital

operations. However, North Bay's four - page written assessment

of the facility and its argument citing the need for total

replacement is, on balance, not persuasive.

X. North Bay's Proposed Replacement

50. North Bay propos es to construct a new, state - of - the -

art, hospital approximately eight miles southeast of its

existing facility and intends to offer the identical array of

services the hospital currently provides.

XI. North Bay's Existing and Proposed Sites

51. North Bay's existing hospital is located on an

eight - acre site with limited storm - water drainage capacity.

Consequently, much of its parking area is covered by deep,

porous, gravel instead of asphalt.

52. North Bay's existing site is generally surrounded by

r esidential properties. While the city has committed, in

writing, it willingness to assist both applicants with on - site

expansion, it is unknown whether North Bay can acquire

additional adjacent property.

53. North Bay's proposed site is located at the

intersection of Trinity Oaks Boulevard and Mitchell Boulevard,

south of Community Hospital's proposed site, and is quite

spacious. It contains sufficient land for the facilities,

parking, and future growth, and has all necessary

infrastructure in place, including utility systems, storm -

water structures, and roadways. Currently however, there is

no public transportation service available to North Bay's

proposed site.

XII. Projected Utilization by Applicants

54. The evidence presented at hearing indica tes that,

statewide, replacement hospitals often increase a provider's

acute care bed utilization. For example, Bartow Memorial

Hospital, Heart of Florida Regional Medical Center, Lake City

Medical Center, Florida Hospital Heartland Medical Center,

South Lake Hospital, and Florida Hospital - Fish Memorial each

experienced significant increases in utilization following the

opening of their new hospital.

55. The applicants in this case each project an increase

in utilization following the construction of t heir new

facility. Specifically, Community Hospital's application

projects 82,685 total hospital patient days (64,427 acute care

patient days) in year one (2006) of the operation of its

proposed replacement facility, and 86,201 total hospital

patient days (67,648 acute care patient days) in year two

(2007).

56. Using projected 2006 and 2007 population estimates,

applying 2002 acute care hospital use rates which are below 50

percent, and keeping Community Hospital's acute care market

share constant at its 2002 level, it is reasonably estimated

that Community Hospital's existing hospital will experience

52,623 acute care patient days in 2006, and 53,451 acute care

patient days in 2007. Consequently, Community Hospital's

proposed facility must attain 11 ,804 additional acute care

patient days in

2006, and 14,197 more acute care patient days in 2007, in

order to achieve its projected acute care utilization.

57. Although Community Hospital lost eight percent of

the acute care market in its service area be tween 1995 and

2002, two - thirds of that loss was due to residents of Sub -

District 5 - 1 acquiring services in another area. While

Community Hospital experienced 78,444 acute care patient days

in 1995, it projects only 64,427 acute care patient days in

year one. Given the new facility and population factors, it

is reasonable that the hospital will recapture half of its

lost acute care market share and achieve its projections.

58. With respect to its psychiatric unit, Community

Hospital projects 16,615 adul t psychiatric inpatient days in

year one (2006) and 17,069 adult inpatient days in year two

(2007) of the proposed replacement hospital. The evidence

indicates that these projections are reasonable.

59. Similarly, North Bay's acute care utilization rat e

has been consistently below 50 percent. Since 1999, the

hospital has experienced declining utilization. In its

application, North Bay states that it achieved total actual

acute care patient days of 21,925 in 2000 and 19,824 in 2001

and the evidence at hearing indicates that North Bay

experienced 17,693 total acute care patient days in 2002.

North Bay projects 25,909 acute care patient days in the first

year of operation of its

proposed replacement hospital, and 27,334 acute care patient

days in the se cond year of operation.

60. Despite each applicant's current facility

utilization rate, Community Hospital must increase its current

acute care patient days by 20 percent to reach its projected

utilization, and North Bay must increase its patient days b y

at least 50 percent. Given the population trends, service mix

and existing competition, the evidence demonstrates that it is

not possible for both applicants to simultaneously achieve

their projections. In fact, it is strongly noted that the

applicants' own projections are predicated upon only one

applicant being approved and cannot be supported with the

approval of two facilities.

XIII. Local Health Plan Preferences

61. In its local health plan for District 5, the

Suncoast Health Council, Inc., adop ted acute care preferences

in October, 2000. The replacement of an existing hospital is

not specifically addressed by any of the preferences.

However, certain acute care preferences and specialty care

preferences are applicable.

62. The first applica ble preference provides that

preference "shall be given to an applicant who proposes to

locate a new facility in an area that will improve access for

Medicaid and indigent patients." It is clear that the

majority of Medicaid and indigent patients live clo ser to the

existing hospitals. However, Community Hospital proposes to

move

5.5 miles from its current location, whereas North Bay

proposes to move eight miles from its current location. While

the short distances alone are less than significant, North

B ay's proposed location is further removed from New Port

Richey, is not located on a major highway or bus - route, and

would therefore be less accessible to the medically indigent

residents.

63. Community Hospital's proposed site will be

accessible using pu blic transportation. Furthermore,

Community Hospital has consistently provided excellent service

to the medically indigent and its proposal would better serve

that population. In 2000, Community Hospital provided 7.4

percent of its total patient days to Medicaid patients and 0.8

percent of its total patient days to charity patients.

Community Hospital provided the highest percentage and

greatest number of Medicaid patient days in Sub - District 5 - 1.

By comparison, North Bay provided 5.8 percent of its tot al

patient days to Medicaid patients and 0.9 percent of its total

patient days to charity patients. In 2002, North Bay's

Medicaid patients days declined to 3.56 percent. Finally,

given the closeness and available bed space of the existing

providers and t he increasing population in the Trinity area,

access will be improved by Community Hospital's relocation.

64. The second local health plan preference provides

that "[i]n cases where an applicant is a corporation with

previously awarded certificates of n eed, preference shall be

given to those which follow through in a timely manner to

construct and operate the additional facilities or beds and do

not use them for later negotiations with other organizations

seeking to enter or expand the number of beds the y own or

control." Both applicants meet this preference.

65. The third local health plan preference recognizes

"Certificate of Need applications that provide AHCA with

documentation that they provide, or propose to provide, the

largest percentage of Med icaid and charity care patient days

in relation to other hospitals in the sub - district."

Community Hospital provides the largest percentage of Medicaid

and charity care patient days in relation to other hospitals

in Sub - District 5 - 1, and therefore meets t his preference.

66. The fourth local health plan preference applies to

"Certificate of Need applications that demonstrate intent to

serve HIV/AIDS infected persons." Both applicants accept and

treat HIV/AIDS infected persons, and would continue to do s o

in their proposed replacement hospitals.

67. The fifth local health plan preference recognizes

"Certificate of Need applications that commit to provide a

full array of acute care services including medical - surgical,

intensive care, pediatric, and obs tetrical services within the

sub - district for which they are applying." Community Hospital

qualifies since it will continue to provide its current

services, including obstetrical care and psychiatric care, in

its proposed replacement hospital. North Bay discontinued its

pediatric and obstetrical programs in 2001, does not intend to

provide them in its proposed replacement hospital, and will

not provide psychiatric care.

XIV. Agency Rule Preferences

68. Florida Administrative Code Rule 59C - 1.038(6)

pro vides an applicable preference to a facility proposing "new

acute care services and capital expenditures" that has "a

documented history of providing services to medically indigent

patients or a commitment to do so." As the largest Medicaid

provider in Su b - District 5 - 1, Community Hospital meets this

preference better than does North Bay. North Bay's history

demonstrates a declining rate of service to the medically

indigent.

XV. Statutory Review Criteria

Section 408.035(1), Florida Statutes: The need f or the

health care facilities and health services being proposed

in relation to the applicable district health plan

69. District 5 includes Pasco and Pinellas County.

Pasco County is rapidly developing, whereas Pinellas County is

the most densely popula ted county in Florida. Given the

population trends, service mix, and utilization rates of the

existing providers, on balance, there is a need for a

replacement hospital in the Trinity area.

Section 408.035(2), Florida Statutes: The availability,

qualit y of care, accessibility, and extent of utilization

of existing health care facilities and health services in

the service district of the applicant

70. Community Hospital and North Bay are both located in

Sub - District 5 - 1. Each proposes to relocate to a n area of

southwestern Pasco County which is experiencing explosive

population growth. The other general acute care hospital

located in Sub - District 5 - 1 is Regional Medical Center Bayonet

Point, which is located further north, in the Hudson area of

wester n Pasco County. The only other acute care hospitals in

Pasco County are East Pasco Medical Center, in Zephyrhills,

and Pasco Community Hospital, in Dade City. Those hospitals

are located in Sub - District 5 - 2, east Pasco County, far from

the area proposed to be served by either Community Hospital or

North Bay.

71. District 5 includes Pinellas County as well as Pasco

County. Helen Ellis and Mease are existing hospital providers

located in Pinellas County. Helen Ellis has 168 licensed

beds, consisting of 150 acute care beds and an 18 - bed skilled

nursing unit, and is located 7.9 miles from Community

Hospital's existing location and 10.8 miles from Community

Hospital's proposed location. Access to Helen Ellis for

patients originating from southwestern Pasco County requires

those patients to travel congested U.S. 19 south to Tarpon

Springs. As a result, the average drive time from Community

Hospital's existing and proposed site to Helen Ellis is

approximately 22 minutes.

72. Helen Ellis is not a reasonable alternative to

Community Hospital's proposal. The applicants' proposals are

specifically designed for the current and future health care

needs of southwestern Pasco County. Given its financial

history, it is unknown whether Helen Ellis will be financial ly

capable of providing the necessary care to the residents of

southwestern Pasco.

73. Mease Countryside Hospital has 189 licensed acute

care beds. It is located 16.0 miles from Community Hospital's

existing location and 13.8 miles from Community Hospit al's

proposed location. The average drive time to Mease

Countryside is 32 minutes from Community Hospital's existing

site and 24 minutes from its proposed site.

74. In addition, Mease Countryside Hospital has

experienced extremely high utilization over the past several

years, in excess of 90 percent for calendar years 2000 and

2001. Utilization at Mease Countryside Hospital has remained

over 80 percent despite the addition of 45 acute care beds in

April 2002. Given the growth and demand, it is unknown

whether Mease can accommodate the residents in southwest Pasco

County.

75. Mease Dunedin Hospital has 189 licensed beds,

consisting of 149 acute care beds, a 30 - bed skilled nursing

unit, five Level 2 neonatal intensive care beds, and five

Level 3 neonat al intensive care beds. Its former 15 - bed adult

psychiatric unit has been converted into acute care beds. It

is transferring its entire obstetrics program at Mease Dunedin

Hospital to Mease Countryside Hospital. Mease Dunedin

Hospital is located approxi mately 18 to 20 miles from the

applicants' existing and proposed locations with an average

drive time of

35 - 38 minutes.

76. With their remote location, and the exceedingly high

utilization at Mease Countryside Hospital, neither of the two

Mease hospital s is a viable alternative to the applicants'

proposals.

77. In addition, the construction of a replacement

hospital would positively impact economic development and

further attract medical professionals to Sub - District 5 - 1. On

balance, given the proximit y, utilization, service array, and

accessibility of the existing providers, including the

applicants, the relocation of Community Hospital will enhance

access to health care to the residents.

Section 408.035(3), Florida Statutes: The ability of the

applic ant to provide quality of care and the applicant's

record of providing quality of care

78. As stipulated, both applicants provide excellent

quality of care. However, Community Hospital's proposal will

better enhance its ability to provide quality care. Community

is currently undersized, non - compliant with today's standards,

and located on a site that does not allow for reasonable

expansion. Its emergency department is inadequate for patient

volume, and the configuration of the first floor leads to

inef ficiencies in the diagnosis and treatment of emergency

patients. Again, most inpatients are placed in semi - private

rooms and three - bed wards, with no showers or tubs, little

privacy, and an increased risk of infection. The hospital's

waiting areas for fa milies of patients are antiquated and

undersized, its nursing stations are small and cramped and the

operating rooms and storage facilities are undersized.

79. Community Hospital's deficiencies will be

effectively eliminated by its proposed replacement hospital.

As a result, patients will experience qualitatively better

care by the staff who serve them.

80. Conversely, North Bay is in better physical

condition and not in need of replacement. It has more

reasonable options to expand or relocate its fac ility on site.

Quality of care at North Bay will not be markedly enhanced by

the construction of a new hospital.

Sections 408.035(4)and(5), Florida Statutes, have been

stipulated as not applicable in this case.

Section 408.035(6), Florida Statutes: The availability

of resources, including health personnel, management

personnel, and funds available for capital and operating

expenditures, for project accomplishment and operation

81. The parties stipulated that both Community Hospital

and North Bay have a vailable health personnel and management

personnel for project accomplishment and operation. In

addition, the evidence proves that both applicants have

sufficient funds for capital and operating expenditures.

82. Community Hospital proposes to rely on i ts parent

company to finance the project. Keith Giger, Vice - President

of Finance for HCA, Inc., Community Hospital's parent

organization, provided credible deposition testimony that HCA,

Inc., will finance 100 percent of the total project cost by an

inter - company loan at eight percent interest. Moreover, it is

noted that the amount to be financed is actually $20 million

less than the $196,849,328 stated in the CON Application,

since Community Hospital previously purchased the proposed

site in June 2003 wi th existing funds and does not need to

finance the land acquisition. Community Hospital has

sufficient working capital for operating expenditures of the

proposed replacement hospital.

83. North Bay, on the other hand, proposes to acquire

financing from B ayCare Obligated Group which includes Morton

Plant Hospital Association, Inc.; Mease; and several other

hospital entities. Its proposal, while feasible, is less

certain since member hospitals must approve the indebtedness,

thereby providing Mease with the ability to derail North Bay's

proposed bond financing.

Section 408.035(7), Florida Statutes: The extent to

which the proposed services will enhance access to health

care for residents of the service district

84. The evidence proves that either proposal will

enhance geographical access to the growing population in the

service district. However, with its provision of obstetrical

services, Community Hospital is better suited to address the

needs of the younger community. With respect to financial

access, both proposed relocation sites are slightly farther

away from the higher elderly and indigent population centers.

Since the evidence demonstrates that it is unreasonable to

relocate both facilities away from the down - town area,

Community Hospital's propo sal, on balance, provides better

access to poor patients. First, public transportation will be

available to Community Hospital's site. Second, Community

Hospital has an excellent record of providing care to the poor

and indigent and has accepted the agen cy's condition to

provide ten percent of its total annual patient days to

Medicaid recipients

85. To the contrary, North Bay's site will not be

accessible by public transportation. In addition, North Bay

has a less impressive record of providing care to the poor and

indigent. Although AHCA conditioned North Bay's approval upon

it providing 9.7 percent of total annual patient days to

Medicaid and charity patients, instead of the 9.7 percent of

gross annual revenue proposed in its application, North Bay

has consistently

provided Medicaid and charity patients less than seven percent

of its total annual patient days.

Section 408.035(8), Florida Statutes: The immediate and

long - term financial feasibility of the proposal

86. Immediate financial feasib ility refers to the

availability of funds to capitalize and operate the proposal.

See Memorial Healthcare Group, Ltd. d/b/a Memorial Hospital

Jacksonville vs. AHCA et al. , Case No. 02 - 0447 et seq.

Community Hospital has acquired reliable financing for th e

project and has sufficiently demonstrated that its project is

immediately financially feasible.

87. North Bay's short - term financial proposal is less

secure. As noted, North Bay intends to acquire financing from

BayCare Obligated Group. As a member of the group, Mease, the

parent company of two hospitals that oppose North Bay's

application, must approve the plan.

88. Long - term financial feasibility is the ability of

the project to reach a break - even point within a reasonable

period of time and at a reasonable achievable point in the

future. Big Bend Hospice, Inc. vs. AHCA and Covenant Hospice,

Inc. , Case No. 02 - 0455. Although CON pro forma financial

schedules typically show profitability within two to three

years of operation, it is not a require ment. In fact, in some

circumstances, such as the case of a replacement hospital, it

may

be unrealistic for the proposal to project profitability

before the third or fourth year of operation.

89. In this case, Community Hospital's utilization

proje ctions, gross and net revenues, and expense figures are

reasonable. The evidence reliably demonstrates that its

replacement hospital will be profitable by the fourth year of

operation. The hospital's financial projections are further

supported by credibl e evidence, including the fact that the

hospital experienced financial improvement in 2002 despite its

poor physical condition, declining utilization, and lost

market share to providers outside of its district. In

addition, the development and population trends in the Trinity

area support the need for a replacement hospital in the area.

Also, Community Hospital has benefited from increases in its

Medicaid per diem and renegotiated managed care contracts.

90. North Bay's long - term financial feasibi lity of its

proposal is less certain. In calendar year 2001, North Bay

incurred an operating loss of $306,000. In calendar year

2002, it incurred a loss of $1,160,000. In its CON

application, however, North Bay projects operating income of

$1,538,827 in 2007, yet omitted the ongoing expenses of

interest ($1,600,000) and depreciation ($3,000,000) from its

existing facility that North Bay intends to continue

operating. Since North Bay's proposal does not project beyond

year two, it is less certain whether it is financially

feasible in the third or fourth year.

91. In addition to the interest and depreciation issues,

North Bay's utilization projections are less reasonable than

Community Hospital's proposal. While possible, North Bay will

have a difficult task achieving its projected 55 percent

increase in acute care patient days in its second year of

operation given its declining utilization, loss of

obstetric/pediatric services and termination of two exclusive

managed care contracts.

Section 408.035(9) , Florida Statutes: The extent to

which the proposal will foster competition that promotes

quality and cost - effectiveness

92. Both applicants have substantial unused capacity.

However, Community Hospital's existing facility is at a

distinct competitive disadvantage in the market place. In

fact, from 1994 to 1998, Community Hospital's overall market

share in its service area declined from 40.3 percent to 35.3

percent. During that same period, Helen Ellis' overall market

share in Community Hospital's se rvice area increased from 7.2

percent to 9.2 percent. From 1995 to the 12 - month period

ending June 30, 2002, Community Hospital's acute care market

share in its service area declined from 34.0 percent to 25.9

percent. During that same period, Helen Ellis ' acute care

market share in Community Hospital's service area increased

from 11.7 percent to 12.0 percent.

93. In addition, acute care average occupancy rates at

Mease Dunedin Hospital increased each year from 1999 through

2002. Acute care average occ upancy at Mease Countryside

Hospital exceeded 90 percent in 2000 and 2001, and was

approximately 85 percent for the period ending June 30, 2002.

94. Some of the loss in Community Hospital's market

share is due to an out - migration of patients from its se rvice

area to hospitals in northern Pinellas and Hillsborough

Counties. Market share in Community's service area by out - of -

market providers increased from 33 percent in 1995 to 40

percent in 2002. Community Hospital's outdated hospital has

hampered its a bility to compete for patients in its service

area.

95. Mease is increasing its efforts to attract patients

and currently completing a $92 million expansion of Mease

Countryside Hospital. The project includes the development of

1,134 parking spaces on 3 0 acres of raw land north of the

Mease Countryside Hospital campus and the addition of two

floors to the hospital. It also involves the relocation of 51

acute care beds, the obstetrics program and the Neonatal

Intensive Care Units from Mease Dunedin Hospt ial to Mease

Countryside Hospital. Mease is also seeking to more than

double the size of the Countryside emergency department to

handle its 62,000 emergency visits.

96. With the transfer of licensed beds from Mease

Dunedin Hospital to Mease Countryside H ospital, Mease will

also convert formerly semi - private patient rooms to private

rooms at Mease Dunedin Hospital. The approval of Community

Hospital's relocated facility will enable it to better compete

with the hospitals in the area and promote quality an d cost -

effectiveness.

97. North Bay, on the other hand, is not operating at a

distinct disadvantage, yet is still experiencing declining

utilization. North Bay is the only community - owned, not - for -

profit provider in western Pasco County and is a valuable

asset to the city.

Section 408.035(10), Florida Statutes: The costs and

methods of the proposed construction, including the costs

and methods or energy provision and the availability of

alternative, less costly, or more effective methods of

constructi on

98. The parties stipulated that the project costs in

both applications are reasonable to construct the replacement

hospitals. Community Hospital's proposed construction cost

per square foot is $175, and slightly less than North Bay's

$178 proposal. The costs and methods of proposed construction

for each proposal is reasonable.

99. Given Community Hospital's severe site and facility

problems, the evidence demonstrates that there is no

reasonable, less costly, or more effective methods of

constructi on available for its proposed replacement hospital.

Additional "band - aide" approaches are not financially

reasonable and will not enable Community Hospital to

effectively compete. The facility is currently licensed for

401 beds, operates approximately 31 1 beds and is still

undersized.

100. The proposed replacement hospital will meet the

standards in Florida Administrative Code Rule 59A - 3.081, and

will meet current building codes, including the Americans with

Disabilities Act and the Guidelines for De sign and

Construction of Hospitals and Health Care Facilities,

developed by the American Institute of Architects.

101. The opponents' argue that Community Hospital will

not utilize the 320 acute care beds proposed in its CON

application, and therefore, a smaller facility is a less -

costly alternative. In addition, Helen Ellis' architectural

expert witness provided schematic design alternatives for

Community Hospital to be expanded and replaced on - site,

without providing a detailed and

credible cost acco unting of the alternatives. Given the

evidence and the law, their arguments are not persuasive.

102. While North Bay's replacement cost figures are

reasonable, given the aforementioned reasons, including the

fact that the facility is in reasonably good c ondition and can

expand vertically, on balance, it is unreasonable for North

Bay to construct a replacement facility in the Trinity area.

Section 408.035(11), Florida Statutes: The applicant's

past and proposed provision of health care services to

Medic aid patients and the medically indigent

103. Community Hospital has consistently provided the

most health care services to Medicaid patients and the

medically indigent in Sub - District 5 - 1. Community Hospital

agreed to provide at least ten percent of it s patient days to

Medicaid recipients. Similarly, North Bay agreed to provide

9.7 percent of its total annual patient days to Medicaid and

charity patients combined. North Bay, by contrast, provided

only 3.56 percent of its total patient days to Medicaid

patients in 2002, and would have to significantly reverse a

declining trend in its Medicaid provision to comply with the

imposed condition. Community Hospital better satisfies the

criterion.

Section 408.035(12) has been stipulated as not applicable

in th is case.

XVI. Adverse Impact on Existing Providers

104. Historical figures demonstrate that hospital market

shares are not static, but fluctuate with competition. No

hospital is entitled to a specific or historic market share

free from competition. Wh ile the applicants are located in

health planning Sub - District 5 - 1 and Helen Ellis and the two

Mease hospitals are located in health planning Sub - District 5 -

2, they compete for business. None of the opponents is a

disproportionate share, safety net, Medic aid provider. As a

result, AHCA gives less consideration to any potential adverse

financial impact upon them resulting from the approval of

either application as a low priority.

105. The opponents, however, argue that the approval of

either replacement hospital would severely affect each of

them. While the precise distance from the existing facilities

to the relocation sites is relevant, it is clear that neither

applicants' proposed site is unreasonably close to any of the

existing providers. In fact, Community Hospital intends to

locate its replacement facility three miles farther away from

Helen Ellis and 1.5 miles farther away from Mease Dunedin

Hospital.

106. While Helen Ellis' primary service area is

seemingly fluid, as noted by its chief operat ing officer's

hearing and deposition testimony, and the Mease hospitals are

located 15 to 20 miles south, they overlap parts of the

applicants' primary service areas. Accordingly, each

applicant concedes that the proposed increase in their patient

volume would be derived from the growing population as well as

existing providers.

107. Although it is clear that the existing providers

may be more affected by the approval of Community Hosptial's

proposal, the exact degree to which they will be adversely

impa cted by either applicant is unknown. All parties agree,

however, that the existing providers will experience less

adverse affects by the approval of only one applicant, as

opposed to two. Furthermore, Mease concedes that its hospitals

will continue to agg ressively compete and will remain

profitable. In fact, Mease's adverse impact analysis does not

show any credible reduction in loss of acute care admissions

at Mease Countryside Hospital or Mease Dunedin Hospital until

2010. Even then, the reliable evide nce demonstrates that the

impact is negligible.

108. Helen Ellis, on the other hand, will likely

experience a greater loss of patient volume. To achieve its

utilization projections, Community Hospital will aggressively

compete for and increase market sh are in Pinellas County zip

code 34689, which borders Pasco County. While that increase

does not facially prove that Helen Ellis will be materially

affected by Community Hospital's replacement hospital, Helen

Ellis will confront targeted competition. To m inimize the

potential adverse affect, Helen Ellis will aggressively

compete to expand its market share in the Pinellas County zip

codes south of 34689, which is experiencing population growth.

In addition, Helen Ellis is targeting broader service

markets, and has filed an application to establish an open -

heart surgery program.

109. While Helen Ellis will experience greater

competition and financial loss, there is insufficient evidence

to conclude that it will experience material financial adverse

impact as a result of Community Hospital's proposed

relocation. In fact, Helen Ellis' impact analysis is less

than reliable. In its contribution - margin analysis, Helen

Ellis utilized its actual hospital financial data as filed

with AHCA for the fiscal year Oct ober 1, 2001, to September

30, 2002. The analysis included total inpatient and total

outpatient service revenues found in the filed financial data,

including ambulatory services and ancillary services, yet it

did not include the expenses incurred in gener ating ambulatory

or ancillary services revenue. As a result, the overstated

net revenue per patient day was applied to its speculative

lost number of patient days which resulted in an inflated loss

of net patient service revenue.

110. Moreover, the ev idence indicates that Helen Ellis'

analysis incorrectly included operational revenue and excluded

expenses related to its 18 - bed skilled nursing unit since

neither applicant intends to operate a skilled nursing unit.

While including the skilled nursing un it revenues, the

analysis failed to include the sub - acute inpatient days that

produced those revenues, and thereby over inflated the

projected total lost net patient service revenue by over one

million dollars.

CONCLUSIONS OF LAW

111. The Division of Adm inistrative Hearings has

jurisdiction over the parties and the subject matter of this

case pursuant to Sections 120.569, 120.579(1), and 408.039(5),

Florida Statutes (2003). Based on the evidence presented,

Helen Ellis and the Mease hospitals have standin g in this

proceeding. § 408.039(5)(c), Fla. Stat. (2003). This is a de

novo proceeding and there is no presumption of correctness

attached to AHCA's preliminary decision. Florida Dept. of

Transportation v. J.W.C. , 396 So. 2d 778 (Fla. 1st DCA 1981).

11 2. An applicant for a CON has the burden of

demonstrating that its application should be granted. Boca

Raton Artificial Kidney Center v. Department of Health and

Rehabilitative Services , 475 So. 2d 250 (Fla. 1st DCA 1985).

The award of a CON must be bas ed on the balanced review and

consideration of the relevant statutory and rule criteria.

Department of Health and Rehabilitative Services v. Johnson

and Johnson Home Healthcare Inc. , 447 So. 2d 361 (Fla. 1st DCA

1984); Balsam v. Department of Health and R ehabilitative

Services , 486 So. 2d 1314 (Fla. 1st DCA 1988). The weight to

be given each criterion is not fixed, but varies depending on

the facts of each case. Collier Medical Center, Inc. v.

Department of Health and Rehabilitative Services , 462 So. 2d

83 (Fla. 1st DCA 1985).

113. While the two applications were both preliminarily

approved by AHCA, the evidence presented at the hearing proves

that, on balance, it is unreasonable to approve both

applications. Not only will a relocation of both hospital s

decrease the availability of health services in the down - town

area, it is financially irresponsible to approve the

construction of both hospitals given their proximity, service

areas, recent utilization rates, existing competition, and

scope of services.

114. Upon a careful weighing and balancing of the

applicable statutory and rule criteria, the evidence proves

that Community Hospital's proposal reasonably satisfies each

criterion and should be approved. While North Bay's proposal

has merit, it does no t, on balance, warrant approval.

115. The evidence proves that Community Hospital's

existing facility is in bad condition and needs to be

replaced. North Bay's facility placement does not. It is not

a prudent use of resources for Community Hospital to be

replaced or renovated on its current site.

116. The problems inherent in replacing an outdated

hospital on - site have been recognized by AHCA. See HCA Health

Services of Florida, Inc. d/b/a Oak Hill Hospital vs. AHCA and

HMA Hernando, Inc. d/b/a Br ooksville Regional Hospital , Case

No. 02 - 0454, __ F.A.L.R. __ (AHCA 2003). In Brooksville , the

following finding was made and adopted by AHCA:

Some deficiencies at Brooksville Regional's

existing site, lack of compliance with

various codes and the ADA, fl ooding due to

inadequate elevation, inadequate size, and

location on a two - lane street, cannot

reasonably be corrected onsite. Others

including electrical upgrades, improvements

in the HVAC system and enlarged spaces

would necessitate closing the hospital to

make substantial renovations. The only

cost - efficient alternative is relocation

and

construction of a new hospital, consistent

with Subsection 408.035(10), Florida

Statutes.

117. Similarly, many of Community Hospital's

deficiencies cannot reasonab ly be corrected onsite.

Renovation or replacement on - site is impractical and not cost -

effective. Its only cost - efficient alternative is relocation

and construction of a new hospital.

118. The evidence further proves that Community

Hospital's proposed facility will better serve the growing

population in the Trinity area, as well as the existing

residents in Sub - District 5 - 1, given its broad array of health

care services, utilization experience, historic and projected

care to the poor and medically indig ent, and location.

119. Finally, the evidence proves that Community

Hospital's projected utilization is reasonable, its proposal

is financially feasible in the short and long - term, and it

will foster healthy competition. While existing providers

will f ace a more competitive market and the potential loss of

revenue, there is insufficient evidence to conclude that any

provider will be substantially adversely affected. On

balance, Community Hospital's proposal satisfies the current

statutory review criter ia of Section 408.035, Florida Statutes

(2000), and should be approved.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions

of law, it is

RECOMMENDED that :

1. Community Hospital's CON Application No. 9539, to

establish a 376 - bed repla cement hospital in Pasco County, Sub -

District 5 - 1, be granted; and

2. North Bay's CON Application No. 9538, to establish a

122 - bed replacement hospital in Pasco County, Sub - District 5 -

1, be denied.

DONE AND ENTERED this 19th day of March, 2004, in

Tallah assee, Leon County, Florida.

S

WILLIAM R. PFEIFFER

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 19th day of March, 2004.

COPIES FURNISHED :

James C. Hauser, Esquire

R. Terry Rigsby, Esquire

Metz, Hauser & Husband, P.A.

215 South Monr oe Street, Suite 505

Post Office Box 10909

Tallahassee, Florida 32302

Stephen A. Ecenia, Esquire

R. David Prescott, Esquire

Richard M. Ellis, Esquire

Rutledge, Ecenia, Purnell & Hoffman, P.A.

215 South Monroe Street, Suite 420

Post Office Box 551

Tallaha ssee, Florida 32302 - 0551

Richard J. Saliba, Esquire

Agency for Health Care Administration

Fort Knox Building III, Mail Station 3

2727 Mahan Drive

Tallahassee, Florida 32308

Robert A. Weiss, Esquire

Karen A. Putnal, Esquire

Parker, Hudson, Rainer & Dob bs, LLP

The Perkins House, Suite 200

118 North Gadsden Street

Tallahassee, Florida 32301

Darrell White, Esquire

William B. Wiley, Esquire

McFarlain & Cassedy, P.A.

305 South Gadsden Street, Suite 600

Tallahassee, Florida 32301

Lealand McCharen, Agency Clerk

Agency for Health Care Administration

2727 Mahan Drive, Mail Station 3

Tallahassee, Florida 32308

Valda Clark Christian, General Counsel

Agency for Health Care Administration

2727 Mahan Drive, Mail Station 3

Tallahassee, Florida 32308

Rhonda M. M edows, M.D., Secretary

Agency for Health Care Administration

2727 Mahan Drive, Mail Station 3

Tallahassee, Florida 32308

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days from the date of this R ecommended Order. Any

exceptions to this Recommended Order should be filed with the

agency that will issue the Final Order in this case.