03-000337CON University Community Hospital, Inc., D/B/A University Community Hospital And University Community Hospital, Inc., D/B/A University Community Hospital At Carrollwood vs. Agency For Health Care Administration And St. Joseph`s Hospital, Inc., D/B/A St. Joseph`s Hospital Status: Closed Recommended Order on Tuesday, July 20, 2004.

Summary: Respondent, St. Joseph`s Hospital, sufficiently proved that its proposed new 76-bed satellite hospital should be approved.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

UNIVERSITY COMMUNITY HOSPITAL, )

INC., d/b/a UNIVERSITY )

COMMUNITY HOSPITAL and )

UNIVERSITY COMMUNITY HOSPITAL, )

INC., d/b/a UNIVERSITY )

COMMUNITY HOSPITAL AT )

CARROLLWOOD, )

)

Petitioners, )

)

vs. ) Case No. 03 - 0337CON

)

AGENCY FO R HEALTH CARE )

ADMINISTRATION and ST. JOSEPH'S )

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

JOSEPH'S HOSPITAL, )

)

Respondents. )

_______________________________ )

FLORIDA HEALTH SCIENCES CENTER, )

INC., d/b/a TAMPA GENERAL )

HOSPITAL, )

)

Petitioner, )

)

vs. ) Case No. 03 - 0338CON

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION and ST. JOSEPH'S )

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

JOSEPH'S HOSPITAL, )

)

Respondents. )

_______________________________ )

REC OMMENDED ORDER

Pursuant to notice, a final hearing was held in the above -

styled case on October 15 through 28, 2003, in Tallahassee,

Florida, before William R. Pfeiffer, a duly - designated

Administrative Law Judge of the Division of Administrative

Hearings (DOAH).

APPEARANCES

For University Community Hospital:

James C. Hauser, Esquire

R. Terry Rigsby, Esquire

Metz, Hauser & Husband, P.A.

Post Office Box 10909

Tallahassee, Florida 32302

For Tampa General Hospital:

Elizabeth McArthur, Esquire

Radey, Thomas, Yon & Clark, P.A.

313 North Monroe Street, Second Floor

Post Office Box 10967

Tallahassee, Florida 32301

For Agency for Health Care Administration:

Lori C. Desnick, Esquire

Agency for Health Care Administration

Fo rt Knox Building III, Suite 3431

2727 Mahan Drive

Tallahassee, Florida 32308

For St. Joseph's Hospital:

Robert A. Weiss, Esquire

Karen A. Putnal, Esquire

Parker, Hudson, Rainer & Dobbs, LLP

The Perkins House, Suite 200

118 North Gadsden Street

Tallahassee, Florida 32301

STATEMENT OF THE ISSUE

Whether the Certificate of Need (CON) A pplication No. 9610,

filed by St. Joseph's Hospital to establish a new 76 - bed acute

care satellite hospital in Hillsborough County, through the

transfer of 76 acute care beds from the existing St. Joseph's

Hospital, should be approved.

PRELIMINARY STATEME NT

St. Joseph's Hospital, Inc. (SJH), filed with the Agency

for Health Care Administration (AHCA or Agency), CON Application

No. 9610, in the second CON batching cycle of 2002. SJH seeks

to establish a primary acute care satellite hospital in the

northwe st sector of suburban Hillsborough County, through the

relocation of 76 existing acute care beds from SJH's main

hospital campus, located in the urban center of Tampa, Florida.

SJH does not propose to add any acute care beds to the inventory

of licensed a cute care beds in the sub - district, therefore, the

Agency's bed need methodologies, including the fixed need pool

and the "not normal" need methodology, do not apply.

After reviewing the CON application of SJH and applying the

relevant statutory and re gulatory criteria, AHCA preliminarily

approved the application.

On or about January 30, 2003, DOAH was advised that

University Community Hospital, Inc., d/b/a University Community

Hospital at Fletcher (UCH Fletcher); University Community

Hospital Carroll wood (UCH Carrollwood); and Tampa General

Hospital, Inc., d/b/a Tampa General Hospital (TGH), had

requested an administrative hearing challenging the Agency's

preliminary decision.

Following assignment and consolidation of the cases, the

parties engaged in discovery and entered into and filed a Joint

Pre - hearing Stipulation. Thereafter, a final hearing was held.

At the final hearing, SJH presented the testimony of the

following witnesses: Isaac Mallah, CEO of SJH, an expert in

health care administration ; David Thomas Travis, Quality

Management Chief of Hillsborough County Fire Rescue, an expert

in emergency medical services, quality assurance,

administration, and delivery; Anthony I. Pidala, Jr., M.D., an

expert in emergency medicine; Lee Clark Kirkman, M.D., board -

certified in pulmonary, critical care, and internal medicine;

Mark D. Vaaler, M.D., SJH's vice president for medical affairs,

and board - certified in pulmonary diseases and internal medicine,

and an expert in critical care, quality assurance, an d

improvement; Bruce S. Houghton, AIA, an expert in healthcare

architecture, design, and project management; Sanford R. Dolgin,

M.D.; Diane Yates, R.N., Chief Nursing Officer of SJH, an expert

in hospital nursing and nursing administration; Patricia

Teeuwe n, Director of Human Resources for St. Joseph's Baptist

Health Care; Mark Monroe Richardson, an expert in health

planning; Rick Knapp, an expert in healthcare finance; and

Robert Pergolizzi, AICP, an expert in traffic engineering and

land use planning.

S JH also presented the deposition testimony of Fleury

Yelvington, Chief Operating Officer of SJH; George Wallace, CFO

of SJH; Rodney L. Cadwell, hospital equipment expert; Paula

McGuiness, Director of Ambulatory Care for SJH; Jeram Kankotia,

M.D., internal medicine; Richard Dillon, M.D., obstetrics and

gynecology; Chris Dausch, P.E., civil engineer; Rodney Randall,

M.D., interventional cardiology, board - certified in internal

medicine and cardiovascular disease; and Barbara Uzenoff,

manager, Hillsborough Cou nty Trauma Agency. SJH Exhibits 1

through 25, and 27 through 53 were received into evidence.

AHCA presented the testimony of Jeffrey N. Gregg, Chief of

AHCA's Division of Health Quality Assurance, and CON Bureau

Chief, and an expert in health planning and CON program policy,

administration, and management for the State of Florida. AHCA's

Exhibit 1 was admitted into evidence.

UCH called the following witnesses: Wallace Gregory

Wilkerson, M.D., obstetrics and gynecology; Katherine Marie

Spirk, R.N.; Marjor ie Mueller Boyer, R.N., nursing obstetrics;

Christopher Bell, AIA; Fred Ian Lipschutz, M.D., pediatric

medicine; William Edward Oliver, an expert in traffic

engineering and transportation studies; Deborah Martoccio, R.N.,

an expert in nursing & nursing adm inistration; Judith L.

Horowitz, financial analyst; Paul Reagain Winters, M.D.,

neurologist; Hershel Howard Franklin, M.D., an expert in

emergency medicine; and Patricia Greenberg, an expert in health

care planning and health care finance. UCH Exhibits nu mbered 1

through 23, 25 through 28, and 32 through 63 were received into

evidence.

TGH called the following two witness: Steven L. Durbin, an

expert in human resources administration and Daniel J. Sullivan,

an expert in healthcare planning and healthcare finance. TGH

also presented the deposition testimony of Jan Gorrie. TGH

Exhibits numbered 1 through 26 were received into evidence.

The 15 - volume Transcript of the hearing was filed on

December 16, 2003.

FINDINGS OF FACT

The Parties

Agency for Health Care Administration

1. AHCA is the single state agency responsible for

administration of the CON program in Florida, pursuant to

Section 408.034, Florida Statutes (2003). AHCA reviewed SJH's

application to build a new, 76 - bed, satellite hospital and

prel iminarily approved it.

St. Joseph's Hospital, Inc.

2. SJH is a Florida not - for - profit corporation, licensed

to operate three existing hospitals on a single urban campus in

District 6 including St. Joseph's Hospital, St. Joseph's Women's

Hospital, and Tamp a Children's Hospital. Although SJH has

unused bed capacity, it is licensed to operate 883 beds

distributed among its three hospitals and is one of Florida's

largest acute care, safety - net providers. SJH has approximately

1,200 physicians on its active o r senior active medical staff.

3. The main adult SJH facility offers a full range of

adult medical and surgical specialties and subspecialties,

including adult open heart surgery, comprehensive oncology

treatment and therapy, interventional radiology, i npatient

psychiatric services, comprehensive neurological and orthopedic

services, pulmonary rehabilitation, and hyper - baric services,

including wound care. It is accredited by the Joint Commission

of Health Care Organizations (JCAHO).

4. St. Joseph' s Women's Hospital is the only free - standing

women's hospital in Florida, and is comprised of 234 acute care

beds. It offers a comprehensive array of women's acute care

medical and surgical services, including obstetrics, and Level

II and Level III Neonat al Intensive Care Unit (NICU) services.

St. Joseph's Women's Hospital provides the highest number of

births among all District 6 obstetrics providers, with over

6,000 births in 2001.

5. Tampa Children's Hospital is comprised of 111

medical/surgical p ediatric rooms, and offers comprehensive

pediatric and pediatric specialty services, including pediatric

intensive care and pediatric open heart surgery. Tampa

Children's Hospital's medical staff includes over 80 pediatric

specialists practicing in 20 spe cialties and sub - specialties.

6. SJH is a member of BayCare Health System which operates

seven independent, affiliated hospitals in the Tampa Bay area.

BayCare Health System coordinates quality standards among its

member hospitals, promotes community ac cess to health care, and

facilitates joint operating efficiencies through combined

purchasing, economies of scale, and consolidation of

duplicative, non - patient - care services, such as administration,

human resources, information management, and financial s ervices.

7. SJH is affiliated with and jointly manages South

Florida Baptist Hospital (SFBH), a 147 - bed primary acute care

hospital in Plant City, Florida, in eastern Hillsborough County.

SFBH provides Level I obstetrics services. SJH and SFBH operate

under a single chief medical officer and board of directors, and

utilizes similar policies and procedures. SFBH is accredited by

JCAHO with high standing, and is certified by the Medicare and

Medicaid programs.

University Community Hospital, Inc.

8. Un iversity Community Hospital, Inc., is another

hospital provider in District 6. It is a not - for - profit entity

licensed to operate UCH Fletcher and UCH Carrollwood. UCH

Fletcher is a 431 - bed Class I general hospital that provides a

full range of acute care hospital services, including open heart

surgery, obstetrics, and Level II and Level III NICU services.

It is located in the southeastern portion of the SJH satellite

proposed service area and has unused bed capacity.

9. UCH Carrollwood is a 120 - bed p rimary acute care

hospital located in North Tampa. It provides ICU and

medical/surgical services, but not obstetrics. It too has

unused bed capacity.

Tampa General Hospital

10. TGH is an 846 - bed Class I general hospital located in

South Tampa on Davis Island. It is a not - for - profit hospital

that provides a comprehensive range of services, including

general acute care, organ transplant, open heart surgery, and

NICU care. It is a designated teaching hospital and a Level I

trauma and burn treatment cente r. TGH is an important safety -

net hospital and a large provider of Medicaid and indigent care.

SJH Proposal

11. SJH proposes to establish a 76 - bed, acute care

satellite hospital in North Hillsborough County on a site

acquired twenty years ago. It seek s to transfer 76 acute care

beds from the SJH Main urban campus to the new suburban hospital

site. The proposed location is in an area of rapid population

growth where SJH annually draws 8,000 admissions.

12. The SJH satellite will be integrated with a nd function

as a satellite of SJH Main. It will incorporate state - of - the

art technology, including the Path Speed Picture Archive &

Communications System (PACS) that is currently in use at SJH

enabling physicians at the satellite facility to simultaneousl y

review digital diagnostic images and medical records with

physicians at SJH Main. The SJH satellite will be a primary

acute care facility with obstetrics, and will not duplicate the

tertiary or other specialized services provided at SJH Main.

13. Sin ce acquiring the site for the proposed satellite,

SJH has established several outpatient, primary care, and home

health services in the satellite proposed service area.

HealthPoint Medical Group, a physician group affiliated with and

managed by SJH, and c omprised of approximately 56 physicians,

currently has three offices in the proposed service area and

plans to expand. SJH also operates two outpatient imaging

centers in the area.

14. The SJH proposal seeks to enhance access to acute care

and eme rgency medical services for SJH's existing patients

residing in the proposed service area and serve future

population growth in the rapidly developing northwest

Hillsborough County area. It seeks to alleviate some of the

volume in the SJH Main ER, allow f or conversion of semi - private

rooms to private rooms, and mitigate parking congestion.

Relevant Statutory Criteria

Section 408.035(1), Florida Statutes (2003). The need for

SJH proposed satellite hospital project in relation to the

applicable district h ealth plan.

15. The review of SJH's proposal does not involve the

traditional calculation and determination of need for the 76

beds proposed at the satellite since the applicant intends to

transfer existing beds within the sub - district. The Agency's

fix ed need pool determination does not apply to SJH's proposal,

nor is SJH required to demonstrate "not - normal" circumstances

for approval.

16. However, need is reviewed in relation to the local

district health plan. The District 6 Local Health Plan (LHP)

identifies six factors applicable to proposed bed transfers.

First, the plan considers whether a transfer will help indigent

patients. Although the transfer may slightly enhance access to

the poor, there is minimal access problems for indigent

patients. Second, the plan considers whether a bed transfer is

needed so an existing hospital can meet licensure standards.

SJH is not seeking to meet any new licensure standards. The

third factor is whether a bed transfer includes a proposed

reduction in excess bed capacity. SJH is reducing excess bed

capacity in the downtown area of Tampa and transferring beds to

a growing area with increasing demand.

17. The fourth factor considered in the LHP is whether a

bed transfer adversely impacts a disproportionate provider of

Medicaid/indigent care by taking away paying patients. While

the transfer may reduce, to some degree, paying patient volume

at TGH, the transfer will increase the volume at SJH, another

safety net provider. The fifth factor is whether the pro posed

bed transfer will improve the existing hospital's physical

plant. SJH Main, and its patients will benefit from the

ultimate renovation, increased space and single patient rooms.

Finally, the plan considers whether the bed transfer is more

cost - effi cient than improving the existing hospital. The

options are incomparable. SJH is seeking to construct a

satellite hospital and expand its market area, not merely

transfer beds to an existing facility. It is unknown and

virtually incalculable whether the proposed satellite facility

will be more cost - efficient than an improvement to the existing

hospital.

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

quality of care, accessibility and extent of utilization of

existing facilities and health services in the service

district.

18. Undoubtedly, health services exist and are available

in the service district. In fact, nearly all of the residents

of SJH's proposed service area live within 45 minutes of an

existing hospital.

19. However, North west Hillsborough County is experiencing

rapid growth. Many of its major roads and arteries are already

congested and overcapacity. The expected growth in the proposed

service area will inevitably aggravate the problem.

20. More importantly, despite t he fact that virtually all

of the residents in the proposed service area live within 45

minutes of an existing hospital, the population growth is

affecting health care delivery. Hospital departments, including

many of the emergency rooms, are experiencing similar congestion

and acute care patients often wait several hours for treatment

upon arrival.

21. UCH is experiencing capacity constraints. The demand

for general acute care and emergency room services in the area

is high and reasonably expected to increase throughout the

foreseeable future. UCH Fletcher has experienced significant

growth in utilization since 1999, and UCH Carrollwood has

experienced consistent gains over the same time period.

22. During the first four months of 2003, UCH Fletc her

operated near 75 percent capacity overall, and 85 percent

capacity in its general medical/surgical beds. Moreover, the

hospital ER was at or near capacity. UCH Fletcher's ER, which

is comprised of 39 beds, experienced 65,000 patient visits in

2002 an d exceeded 70,000 visits in 2003. During peak periods,

Fletcher ER patients have often been required to wait in the ER

six to eight hours for an inpatient bed.

23. UCH's birth volume has also increased with the rapid

population growth in the service ar ea and is less affected by

seasonal residents. In fact, UCH recently built a new women's

center and expanded its obstetrics capacity to accommodate

between 3,000 and 3,500 births annually and projects it will

achieve 3,100 births by the end of 2004, and o perate at 90

percent of capacity.

24. SJH also experiences capacity issues. SJH Main is

completely comprised of semi - private rooms. It's composition

makes it less attractive and competitive in the market and less

able to maximize its utilization of existing acute care beds.

25. However, SJH Main experiences a huge demand for

emergency services at its urban campus. The emergency

department is one of the busiest in Florida and increasing each

year. In 2002, SJH treated 104,000 ER patients, approx imately

300 each day, and nearly 18,000 of those treated originated from

the satellite hospital's proposed service area.

26. SJH's emergency department is a large, urban ER with

58 beds. It is organized into separate patient treatment areas,

including a 23 - bed adult treatment area, an eight - bed pediatric

treatment area with a separate ER entrance, a four - bed adult

psychiatric emergency treatment area, a 13 - bed First Care unit,

and a ten - bed Clinical Decision Unit.

27. While SJH historically has pro vided excellent quality

of care in its ER, its increasing volumes often result in

patients receiving or waiting for treatment in corridors while

more critical patients occupy the ER treatment rooms. In peak

season, hallways are temporarily used for patien t care.

28. SJH has actively sought to improve the delivery of

emergency care. It invested substantial capital towards

improvements and expansion of its existing ER. It established a

unique service known as "First Care," that provides quick

emergency care to less critical ER patients, such as patients

with sore throats, sprains, and simple lacerations. It created

a ten - bed Clinical Decision Unit to supplement the existing ER

by converting hospital space adjacent to the ER into a permanent

nursing unit . In addition, it increased ER staffing and

physician coverage, and implemented protocols to improve the ER

receiving and treatment processes.

29. Despite its efforts, the SJH ER continues to

experience difficulties with extremely high patient volume.

30. In addition to the capacity constraints at UCH and in

SJH's ER, ER bypass in Hillsborough County presents additional

problems for emergency personnel, providers, and patients.

Hospital bypass or diversion occurs when a hospital requests

that emerge ncy medical transport teams bypass the hospital's ER

because the hospital lacks capacity to treat additional patients

or categories of emergency patients.

31. In response to the increasing problems associated with

hospital ER bypass, the Hillsborough County Trauma Agency

established a committee to analyze the situation, establish

protocols, and recommend solutions. In addition, Hillsborough

County implemented an Internet - based system whereby hospitals

electronically place themselves on and off bypass without a

dispatcher.

32. Hospital ER bypass adversely impacts the availability

and accessibility of acute care services, particularly emergency

services in Northwest Hillsborough County. The credible

evidence demonstrates that hospitals in Hillsboroug h County go

on bypass as often as every day during peak season, and

frequently several hospitals are concurrently on bypass. Of the

hospitals in Northwest Hillsborough County, UCH Fletcher and UCH

Carrollwood together had the highest incidence of hospital

bypass in the first six months of 2003.

33. In an effort to minimize the problems associated with

transport, Hillsborough County Fire Rescue (HCFR) tracks all of

its calls. It provides all Advanced Life Support emergency

transport services in the coun ty and responds to approximately

55,000 emergency calls annually, or about 4,300 calls each

month. Approximately half, or 27,000 calls annually, originate

in HCFR's Northwest Hillsborough County area and nearly 10,000

of those calls result in transport of a patient to an acute care

facility.

34. HCFR currently has 12 stations in Northwest

Hillsborough County and is scheduled to open four additional

stations in the northwest area in the near future. Hospital ER

bypass is an obstacle for HCFR that causes delays in transport,

emergency care, and return to service.

35. The applicant's proposed satellite facility will

improve access to patients in need of emergency services in

Northwest Hillsborough County and alleviate some of the capacity

problems at U CH and SJH, as well as problems caused by frequent

or extended periods of hospital ER bypass.

Section 408.035(3), Florida Statutes. The ability of SJH

to provide quality of care and its record of quality of

care.

36. Pursuant to the parties' stipulation , SJH's record of

providing quality of care at its existing hospital is

applicable, but not in dispute. SJH's ability to provide

quality of care at the proposed new satellite hospital is in

dispute.

37. In general, SJH has consistently provided excellent

quality of care in the provision of a sophisticated range of

services. It is accredited by JCAHO and certified by the

Medicare and Medicaid programs. It has received consistent

recognition for its provision of high quality of care and has

been awarded t he Consumer Choice Award in health care in Tampa

for eight consecutive years.

38. SJH's proposed satellite hospital will be able to

provide excellent quality of care and serve the vast majority of

patients seeking acute care and emergency services.

39. SJH's proposed satellite hospital will enhance access

and quality of care for residents of the Northwest Hillsborough

County area. Although it will not provide tertiary services,

emergency patients will receive immediate, high - quality care at

the facility. In addition, the smaller subset of emergency

patients requiring immediate tertiary - level services will

continue to have access to the tertiary hospital providers. In

fact, HCFR has developed sophisticated transport protocols

designed to ensure that all patients are safely delivered to the

appropriate facility as efficiently as possible, and HCFR

paramedics are highly skilled and trained to assess the

condition of each patient.

40. In addition, the evidence indicates that SJH will

provide high - quality Level I obstetrics services at its

satellite facility. While the opponents assert that the

proposed program will not match the quality or scope of

obstetric services provided at SJH and UCH, the evidence

indicates that the SJH obstetrical program will not be sub - par

or beneath the standard of care in the area. While an on - site

NICU program is clearly preferable, the need for quality Level I

obstetric providers is not obviated. SJH will provide quality

obstetrical care.

41. Moreover, SJH's exis ting quality management policies,

protocols, and processes will be instituted at the satellite

hospital. It will be operated under the same quality management

personnel team currently responsible for quality at SJH Main.

Section 408.035(4), Florida Statu tes. The need in the

service district for special health care services

reasonably and economically accessible in adjoining areas.

42. AHCA and SJH demonstrated that that the proposed

satellite does not intend to offer nor impact special health

care serv ices that may be reasonably and economically accessible

in adjoining areas. The criterion is not applicable.

Section 408.035(5), Florida Statutes. The needs of

research and educational facilities, including, but not

limited to, facilities with institutio nal training programs

and community training programs of health care

practitioners and for doctors of osteopathic medicine and

medicine at the student, internship, and residency training

levels.

43. This criterion is not applicable.

Section 408.035(6), Florida Statutes. The availability of

resources, including health personnel, management

personnel, and funds for capital and operating expenditures

for project accomplishment and operation.

44. The evidence demonstrates that SJH has the necessary

resou rces and experience to provide quality health and

management personnel to the satellite hospital. While there is

some shortage of available nurses in Florida, including the

Tampa area, the vacancy rate at SJH, including RNs and staff

positions, is consist ently below the state average. SJH has a

well - developed nurse recruitment and retention program and has

achieved steady increases in the retention rate of its RNs.

Management has developed a flexible pool of employed nurses

enabling it to maintain approp riate and cost - effective staffing

based on patient day levels.

45. In addition, SJH has successfully recruited and

retained an enormous number of recent nurse graduates as well as

experienced nurses without resorting to the use of agency or

contract nur ses. It is also working closely with several local

colleges to increase nursing enrollment. SJH will develop,

recruit, and retain necessary staff to implement its proposal.

46. While SJH competes with other hospitals for nursing

personnel, the proposed satellite will have little impact on

competing hospitals. UCH and TGH have consistently been able to

obtain sufficient nursing staff to provide high - quality care at

their facilities. UCH and TGH have impressive R.N. retention

rates and are well below the state and national averages.

47. Finally, SJH has sufficient funds for capital and

operating expenditures to complete and operate the proposed

satellite hospital. SJH will provide half of the $75 million

project cost and finance the balance throu gh the BayCare system.

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.

48. In many ways, the SJH satellite hospital will enhance

access to acute ca re and emergency services for the vast

majority of patients residing in its proposed service area.

First, commuting time will significantly decrease. Annually,

the satellite's proposed service area supplies SJH Main with

over 8,000 admissions from reside nts who endure significant

traffic congestion and lengthy delays. Commuting time from the

residential neighborhoods in the proposed service area to SJH

Main has nearly doubled over the past ten years and is currently

45 minutes to an hour. The reliable t ravel time evidence

demonstrates that the SJH satellite will significantly reduce

travel times to acute care services for residents in Northwest

Hillsborough County, including those in the Cheval, Northdale,

Ehrlich Road, Lutz, and Lake Magdelane residenti al areas.

49. Second, SJH's satellite hospital will significantly

enhance patient access to emergency care and relieve pressure on

the UCH Fletcher and SJH Main ERs. The SJH Main ER annually

treats nearly 18,000 patients who originate from the satellite 's

proposed service area. It is reasonable to expect many of those

patients to be redirected to the SJH satellite.

50. Third, the SJH satellite proposal will provide another

point of delivery access to HCFR and facilitate faster service

to ER patients and improve "back - in - service" times for HCFR.

51. Fourth, the availability of another ER in Northwest

Hillsborough County will minimize the adverse effects of

hospital bypass, and likely reduce the frequency of bypass by

diverting volume from existing E Rs.

52. Fifth, the relocation of 76 acute care beds from SJH

Main to the satellite will enable SJH to convert many of its

underutilized, semi - private rooms into more usable, attractive,

private rooms.

53. Finally, redirection of volume from the urban SJH Main

campus to a satellite campus in a high - growth, suburban area

will reduce traffic congestion, minimize parking problems, save

time, and save lives.

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

long - term financial feasibility of t he proposal.

54. With respect to the project's short - term financial

feasibility, SJH demonstrated that it can immediately finance

the construction and implementation of the proposed satellite

hospital project and meet its existing capital obligations. T he

satellite proposal is immediately financially feasible.

55. With respect to the satellite's long - term financial

feasibility, while the opponents argue that SJH's projected

volumes, revenues, and expenses are inaccurate and unreasonable,

SJH, on balance, sufficiently proved that the proposed satellite

is financially feasible.

56. Specifically, SJH's utilization projections are

reasonable. As its basis for the projections, SJH relied on the

expected population growth in the proposed service are a and its

historic levels of similar service in that area. Without doubt,

the satellite's proposed service area, located in the northwest

sector of Hillsborough County, is a region of rapid population

growth and development. The population in the propose d service

area has increased by 35 percent over the past ten years and is

projected to grow much faster over the next three years. The

area is being invaded by young adults, and the demand for

obstetric services is dramatically increasing.

57. SJH's hi storic levels of similar service in the area

are persuasive. According to the un - refuted evidence, nearly

8,000 patient admissions, or 20 percent of SJH's existing

inpatient volume, originated from the SJH satellite proposed

service area, and 18,000 ER pa tient visits, or 17 percent of the

entire SJH Main ER volume, derived from the proposed service

area in 2002.

58. In addition, SJH's strong presence in the proposed

service area has enabled it to capture 32 percent of the patient

days originating in the proposed service area. Given the

existing patient days and expected population growth in the

area, after culling out the tertiary and dissimilar services

that the satellite will not provide, it is reasonable to expect

that there will be over 121,000 avail able patient days in the

proposed service area in 2007.

59. The evidence also demonstrates that it is reasonable

to expect the new satellite hospital to capture 40 percent of

the patient days otherwise served at SJH Main. Moreover, given

its market p osition, it is not unreasonable to expect the

satellite to capture 15 percent of the available pool of non -

tertiary patient days in the proposed service area by the second

year of operation.

60. In addition, SJH can expect 7.5 percent of the

satell ite patient days to originate from outside the service

area thereby providing it with a reasonable projected

utilization of nearly 20,000 patient days.

61. Although the opponents argue otherwise, the evidence

demonstrates that SJH's projected revenues a re also reasonable.

Again, SJH based the satellite's projected revenues, with some

minor errors, on historic revenues for non - tertiary, non -

specialty patients at SJH Main and conservatively assumed that

it will achieve 90 percent of the 19,688 patient day utilization

projections, or 17,800 patient days.

62. After multiplying the financial - class - specific patient

revenue per patient day by the financial - class - specific

incremental patient days at the satellite facility, and applying

a three percent annual inflation factor, the satellite

reasonably expects approximately $1,604 in net revenue per

adjusted patient day. The figure is consistent with the

projected net revenue per adjusted patient day of $1,832 at SJH

Main, $1,672 at UCH Fletcher, $1,432 at UCH Carrollwood and

$1,408 at SFBH.

63. SJH's projected expenses for its satellite hospital

are also reasonable. SJH modeled its projections on similar

historical expenses and determined that it will incur fewer

maintenance expenses at the new hospital fac ility. Its pro

forma allowances for plant operations and non - labor expenses per

adjusted patient day are reasonable and consistent with the

actual experience of UCH, UCH Carrollwood, Helen Ellis,

Suncoast, SFBH, and Tampa General hospitals.

64. SJH's staffing projection for new FTEs is also

reasonable. The redirection of patient volume from SJH Main to

the satellite will enable SJH to transfer some of its

experienced FTEs to the satellite. New FTEs will be hired at

the 2001 area market average salary rate for new registered

nurses annually inflated by three percent.

65. With respect to the reasonableness and appropriateness

of SJH's pro forma , the opponents also argue that SJH fatally

failed to include financial projections for the satellite on a

stand - alone basis and, thereby, made it impossible to determine

its long - term financial feasibility.

66. The opponents assertions, while interesting, are not

persuasive. AHCA's CON application forms require applicants to

demonstrate the financial im pact of the proposed project on the

CON applicant. Within Schedules 7a and 8a of its application,

SJH reasonably demonstrated the satellite's effect on SJH.

67. Specifically, the first presented set of Schedules 7a

and 8a entitled "Main" demonstrates S JH without the satellite

hospital and provides a clear current baseline financial

position for SJH. The second presented set of Schedules 7a and

8a, entitled "Satellite Hospital," demonstrates the projected

financial benefit to SJH and the incremental inc rease in patient

days when the satellite hospital is operational. SJH

appropriately demonstrated the incremental financial benefit of

the proposed project to the applicant, SJH.

68. Furthermore, SJH's pro forma illustrate that even with

an immediate loss in revenues to SJH arising from the transfer

of patient days from SJH Main to the satellite, the project will

generate revenues in excess of expenses in the long term.

Logically, and obviously understood in the application pro

forma , had SJH included a third pro forma showing the positive

financial gain to the satellite relating to the additional

revenues from the cannibalized patient days, the overall project

would have shown even greater profitability. SJH's pro forma

include and account for all re venues and expenses associated

with implementation and operation of the satellite hospital.

69. Moreover, AHCA supports SJH's method of presentation

of the financial pro forma information in its CON application,

and argues that it meets the Agency's requirements and is

consistent with the method employed by other approved CON

applicants.

70. In light of the evidence, SJH's proposed satellite

hospital project will achieve long - term financial feasibility.

Section 408.035(9), Florida Statutes. The e xtent to which

the project will foster competition that promotes quality

and cost effectiveness.

71. SJH's proposed satellite hospital will foster

competition that promotes quality and cost effectiveness without

significantly adversely affecting existing providers. The

evidence demonstrates that the opponents will remain strongly

competitive.

72. Specifically, TGH is financially secure and will not

be placed at material risk by the satellite hospital. While TGH

is a safety - net provider and relies, in - part, on government

funding, it achieved a net profit of $10.8 million in 2001,

$56.2 million in 2002, and $25.7 million through May 2003,

annualized to approximately $40 million. It also increased its

admissions 10 percent from 2000 to 2002 and expects further

gains.

73. Furthermore, TGH marginally serves the rapidly

developing area where the satellite will draw most of its

patients. In fact, TGH receives less than one percent of its

non - tertiary admissions in six of the nine ZIP codes which

compris e SJH's proposed service area.

74. TGH's projected adverse impact by the satellite

hospital is overstated and unreliable. It is based on a

contribution margin of $5,997 per adjusted admission and is

completely inconsistent with SJH's margin for 2001 of $2,664,

UCH Fletcher's contribution margin of $2,367, and UCH

Carrollwood's contribution margin of $2,622.

75. Similarly, UCH will experience only minor adverse

effect from the satellite. UCH is financially strong and has

limited capacity to absorb the anticipated growth in demand for

acute care services. Although UCH's net profit numbers have

fluctuated from 2001 through the second quarter of 2002, UCH is

expecting a net profit greater than $5 million in 2003 and a net

profit of $7.3 million in 200 4. In addition, its inpatient

admissions increased seven percent from 2000 to 2002.

76. UCH's loss projections are patently overstated. It

erroneously used a 4.2 average length of stay and exaggerated

its projected lost admissions by nearly 20 perce nt. It admitted

that the satellite would have its lowest admissions in the

service area in the ZIP codes proximate to UCH, yet argued the

satellite would draw admissions equally from all zip codes in

the proposed service area including those immediately a djacent

to UCH. It admitted that its obstetrical program will remain

near capacity when the satellite is actually constructed, but

argued that the satellite will substantially drain obstetric

patients away.

77. Although the satellite will inevitably d raw some

admissions away from UCH and TGH, the projected growth in

patient days in the service area will offset any potential

material adverse impact. The satellite will foster healthy

competition, promote cost effectiveness, and provide faster

quality he alth care in the area.

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

methods of the proposed construction, including the costs

and methods of energy provision and the availability of

alternative, less costly, or more effective methods of

constr uction.

78. On balance, the proposed costs and methods of

construction are reasonable. The construction of the proposed

satellite facility is projected to cost $49,560,000, or $652,105

per bed, which includes a 15 percent construction contingency.

The s atellite is expected to cost $175 per gross square foot and

is reasonable, given the existing range in the area.

79. While the total per bed "project cost" is nearly

$1 million, as shown in Schedule 9, Line S, the figure is

misleading. It includes nearl y $20 million in equipment and

other expensive, non - construction cost items.

80. SJH also plans to construct a medical office building

and imaging center prior to construction of the hospital. Upon

completion of the hospital, a portion of the square f ootage of

the imaging center will be integrated with the hospital, at

minimal cost, and serve as the inpatient radiology department.

SJH has committed to construct the building and has obtained the

necessary permits. Although it is not CON reviewable, t he

construction cost for the facility, approximately $155 per

square foot, is reasonable.

81. Finally, the proposed architectural design for the

satellite hospital is reasonable and satisfies applicable

building codes. It consists of three medical - surg ical pods of

16 beds each, one 14 - bed intensive care pod, one 14 - bed

obstetrics pod, and one 16 - bed observation pod. While the non -

integrated, designed facility is rather large given its bed

capacity, approximately 211,000 gross square feet, the satellite

will consist of all private rooms and allow for future addition

of licensed beds without major expansion or new construction.

The design provides easy access and convenient parking.

82. Notwithstanding the reasonableness of the construction

costs and de sign, the opponents argue that there are less costly

alternatives. First, the project could be rejected and the

community could resort to the status quo. Given the evidence,

including emergency data, denial is unreasonable.

83. Second, the applicant c ould build a freestanding ER

and/or an additional non - urgent care facility and minimize some

of the existing problems. Given the evidence, including

population trends and existing providers, the limited approach

is unreasonable.

84. Third, the applicant could be approved to build a

scaled down version of its proposal. Although the facility is

appropriate and reasonable as proposed in the application, a

scaled down facility is clearly a less costly method of

construction. However, there is insufficient e vidence to

determine whether a smaller version is a reasonable alternative.

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

past and proposed provision of health care services to

Medicaid patients and the medically indigent.

85. SJH has an impr essive record of service to Medicaid

patients and the medically indigent. It has long been

recognized as a "safety net" provider of acute care services.

In 2002, nearly 19 percent of SJH's total patient days were

rendered to Medicaid - eligible patients.

86. SJH also provides $40 million each year in

uncompensated services to the community. It is a voluntary

participant in the Hillsborough County Health Plan that provides

funding for medically indigent or uninsured patients who do not

qualify for Medica id benefits. Consistent with its commitment

to the community, SJH has conditioned approval of its CON on

providing at least 15.6 percent of the satellite patient days to

Medicaid and charity patients.

Section 408.035(12), Florida Statutes. The applica nt's

designation as a Gold Seal Program nursing facility

pursuant to s. 400.235, when the applicant is requesting

additional nursing home beds at that facility.

87. This criterion is not applicable.

CONCLUSIONS OF LAW

88. The Division of Administrative Hearings has

jurisdiction over the parties to and the subject matter of these

proceedings. §§ 120.569 and 120.57(1), Fla. Stat. (2003).

89. SJH has the burden of proving that its application

should be approved. Boca Raton Artificial Kidney Center v. HRS ,

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

90. Despite the opponents arguments regarding phantom

beds, SJH is not adding beds to the District and is not required

to demonstrate "need" for the proposed project. See Fla. Admin.

Code R. 59C - 1.038(4)(a). Moreo ver, in Central Florida Regional

Hospital v. Daytona Beach General Hospital , 475 So. 2d 974, 975

(Fla. 1st DCA 1985), the court specifically negated intra -

district proof of need and reasoned:

The futility of applying bed need

methodology by rule when tra nsferring beds

within a sub - district is apparent. If there

are 100 licensed beds in a sub - district

which are moved to another sub - district, the

total number of beds remains the same; there

are no "new or additional beds."

See also Memorial Healthcare Gro up, Inc., d/b/a Memorial

Hospital Jacksonville v. AHCA , 25 FALR 2808, 2870 - 2871 (AHCA

April 8, 2003).

91. The CON award must be based on a balanced

consideration of all applicable statutory and rule criteria.

Humana, Inc. v. Dept. of Health and Re habilitative Services , 469

So. 2d 889 (Fla. 1st DCA 1985); Dept. of Health and

Rehabilitative Services v. Johnson & Johnson , 447 So. 2d 361,

363 (Fla. 1st DCA 1984). No single criterion is determinative

of the outcome, and the weight to be given to each i s not fixed,

but depends on the facts and circumstances of each case.

Collier Medical Center, Inc. v. Dept. of Health and

Rehabilitative Services , 462 So. 2d 83 (Fla. 1st DCA 1985);

Holmes Regional Medical Center, et al., v. AHCA , 23 FALR 1280,

1283 (AHCA November 21, 2000).

92. On balance, SJH's proposal satisfies and is not

inconsistent with the applicable local health plan criteria.

§ 408.035(1), Fla. Stat. (2003).

93. SJH's proposal will enhance the availability, quality

of care, and geographical a ccess to acute care, including ER

services, for current and future residents of the proposed

service area. Notwithstanding the availability of a few

reasonably accessible hospitals in the existing and adjacent

service district, the area is rapidly growing and the proposal

will enhance access in the service area. SJH's proposal, on

balance, is reasonable and satisfies Subsections 408.035(2)

and (7), Florida Statutes (2003), as well as Florida

Administrative Code Rule 59C - 1.030(2)(f). See HCA Health

Servic es of Florida v. Agency for Health Care Administration , 25

FALR 1089, 1101 (AHCA, February 21, 2003).

94. SJH established its historical record of providing

quality health care and demonstrated its ability to provide

quality of care at the satellite f acility. § 408.035(3), Fla.

Stat. (2003).

95. Subsections 408.035(4) and (5), Florida Statutes

(2003), are not applicable.

96. SJH has the necessary resources to implement and

operate its proposed satellite hospital. § 408.035(6), Fla.

Stat. (2003) .

97. SJH demonstrated, on balance, that its proposal is

financially feasible in the short and long - term. § 408.035(8),

Fla. Stat. (2003).

98. SJH demonstrated that the satellite will foster

competition that promotes quality and cost - effectiveness. Th e

satellite facility will not have a material adverse impact on

any of its competitors, including UCH or TGH. The projected

growth in the service area will offset any reasonably expected

degree of adverse impact. § 408.039(9), Fla. Stat. (2003).

99. SJH demonstrated that the project costs and methods of

construction are reasonable. There is insufficient evidence to

determine whether any reasonable less costly, or more effective

methods of construction exist. § 408.035(10), Fla. Stat.

(2003).

100. SJH demonstrated its commitment to the provision of

care to Medicaid and medically indigent patients through its

historic service record and its commitment to condition approval

of its application on a high level of service to these

populations. § 408.035(11 ), Fla. Stat. (2003).

101. SJH's correction of a clerical error on Schedule 9 is

not an impermissible amendment to the application. HCA Health

Services , 25 FALR at 1102. Similarly, SJH's explanation of its

staffing plan at the final hearing, using the i nformation

presented within the four corners of the application, does not

constitute an amendment. HCA Health Services , supra .

102. SJH's inadvertent omission of $200,000 from its

Schedule 2 is not a material error and does not affect the

fairness of the proceeding or the correctness of the Agency's

preliminary decision. § 408.039(5)(d), Fla. Stat. (2003).

103. SJH presented its financial pro forma in a manner

acceptable to the Agency and consistent with Agency CON

application forms. UCH contends how ever, that SJH's financial

pro forma were inadequate based on Wuesthoff v. Agency for

Health Care Administration , 22 FALR 956 (AHCA, January 13, 2000)

(Recommended Order at 20 FALR 1267). In that case, the CON

applicant sought approval to construct a pati ent bed tower that,

when complete, would convert a separately - approved outpatient

diagnostic and treatment center into an acute care hospital.

The applicant in Wuesthoff 2000 omitted substantial staffing and

supply costs, including all hospital ancillary personnel from

its pro forma , as well as bad debt and substantial interest

expense. Wuesthoff 2000 , 20 FALR at 1277.

104. In the case at hand, SJH included in its pro forma

all expenses and revenues associated with implementation of the

satellite. It presented the necessary information to assess

financial feasibility and on balance, its application satisfies

the applicable CON statutory and rule criteria.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is

RECOMMENDED that a final order be issued to approve the

application.

DONE AND ENTERED this 20th day of July, 2004, in

Tallahassee, Leon County, Florida.

S

WILLIAM R. PFEIFFER

Administrative Law Judge

Division of Administrative Heari ngs

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 20th day of July, 2004.

COPIES FURNISHED :

Lori C. Desnick, Esquire

Agency for Health Care Administration

Fort Knox Building III, Suite 3431

2727 Mahan Drive

Tallahassee, Florida 32308

James C. Hauser, Esquire

R. Terry Rigsby, Esquire

Metz, Hauser & Husband, P.A.

Post Office B ox 10909

Tallahassee, Florida 32302

Elizabeth McArthur, Esquire

Radey, Thomas, Yon & Clark, P.A.

313 North Monroe Street, Second Floor

Post Office Box 10967

Tallahassee, Florida 32301

Robert A. Weiss, Esquire

Karen A. Putnal, Esquire

Parker, Hudson, Ra iner & Dobbs, LLP

The Perkins House, Suite 200

118 North Gadsden Street

Tallahassee, Florida 32301

Kenneth W. Gieseking, Esquire

Agency for Health Care Administration

2727 Mahan Drive, Mail Station 3

Tallahassee, Florida 32308

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

Fort Knox Building, Suite 3116

2727 Mahan Drive

Tallahassee, Florida 323 08

Alan Levine, Secretary

Agency for Health Care Administration

Fort Knox Building, Suite 3431

2727 Mahan Drive

Tallahassee, Florida 32308

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within

15 days fro m 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.