04-000444CON Select Specialty Hospital - Marion, Inc. vs. Agency For Health Care Administration Status: Closed Recommended Order on Monday, October 31, 2005.

Summary: The applicant for a Long Term Care Hospital did not prove the need on a district basis. In addition, its case is plagued by internal inconsistency.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

SELECT SPECIALTY HOSPITAL - )

MARION, INC., )

)

Petitioner, )

)

vs. ) Case No. 04 - 0444CON

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent , )

)

a nd )

)

KINDRED HOSPITAL - BAY AREA - )

TAMPA, )

)

Intervenor . )

)

RECOMMENDED ORDER

This case was heard by David M. Maloney, Administrative Law

Judge of the Division of Administrative Hearings on May 24 and

25, 2005, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Mark A. Emanuele, Esquire

Brett R. Frankel, Esquire

Panza, Maurer, & Maynard, P.A.

Bank of America Building, Third Floor

3600 North Federal Highway

Fort Lauderdale, Florida 33308

For Respondent: Kenneth W. Gieseking, Esquire

Agency for Health Care Administration

2727 Mahan Drive, Mail Station 3

T allahassee , Florida 32308

For Intervenor: M. Christopher Bryant, Esquire

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

301 South Bronough Street, Fifth Floor

Post Office Box 1110

Tallahassee, Florida 32302 - 1110

STATEMENT OF THE ISSUE S

Select Specialty Hospital - Marion, Inc.'s CON Application

9710, filed with the Agency for Health Care Administration,

seeks establishment of a 44 - bed Long Term Care Hospital (an

"LTCH") in Polk Co unty, AHCA Health Care Planning District 6.

The Agency preliminarily denied the application. Select - Marion

has challenged the denial and Kindred - Bay Area seeks

intervention in the proceeding.

The issue s in this case are two: whether Kindred - Bay Area

ha s proven it has standing to intervene in the proceeding and

whether the application should be approved.

PRELIMINARY STATEMENT

On February 9, 2004, the Agency for Health Care

Administration ("AHCA" or the "Agency") filed a Notice with the

Division of Admin istrative Hearings ("DOAH"). The notice

advised DOAH that AHCA had received a request for a formal

hearing from Select Specialty Hospital - Marion, Inc. (Select -

Marion). The Agency further requested that DOAH assign the

matter to an a dministrative l aw j udg e to conduct all proceedings

required by law including submission of a recommended order to

the Agency.

Attached to the notice was Select - Marion's petition. It

requested appropriate administrative relief , including approval

of Select - Marion's CON Applica tion No. 9710.

On February 10, 2004, the undersigned was designated as the

administrative law judge to conduct the proceedings and an

I nitial O rder was sent to the parties. Shortly thereafter , the

case was consolidated with DOAH Case No. 04 - 0460 CON initi ated by

a petition f ro m Semper C are Hospital of Lakeland, Inc.

Semper C are had filed an application for an LTCH in the same

service district in which Select - Marion sought approval of its

CON application and in the same batching cycle . Its application

also had been denied by the Agency.

A Notice of H earing was issued on February 25, 2004 . It

set final hearing for a four - week period in November 2004. In

the meantime, P etitions to I ntervene were filed in both cases by

Kindred Hospital - Central Tampa and Kind red Hospital - Bay Area -

Tampa ("Kindred - Bay Area") and Select - Marion's P etition to

I ntervene in DOAH Case No. 04 - 0460 CON were granted subject to

proof of standing at hearing. The case was continued and final

hearing was set to take place in April 2005.

On February 22, 2005, Kindred Hospital - Central Tampa

dismissed its P etition to I ntervene in the two cases. A motion

for continuance was granted without objection and the case was

scheduled for two weeks in May 2005. In April 2005, Semper C are

filed a volunta ry dismissal of its petition and DOAH Case No.

04 - 0460 CON was closed.

This case proceeded to final hearing on May 24 and 25,

2005. Select - Marion proceeded first. It presented the

testimony of three witnesses: Marsha Medlin, an expert in

fields of nursi ng, LTCH nursing, ICU nursing, and LTCH

operations; Gregory Sassman, an expert in the field of LTCH

development; and Patricia Greenberg, an expert in the fields of

health care planning, health care finance and financial

feasibility. Ten exhibits were mark ed for identification

sequentially as Select Nos. 1 - 10. All were admitted into

evidence except for Select No. 6 , which was not offered into

evidence.

The Agency presented the testimony of Jeffrey Gregg, AHCA's

Chief of the Bureau of Health Facility Regul ation, and offered

three exhibits marked for identification as Agency Nos. 1 - 3.

The three exhibits of the Agency were admitted into evidence.

Kindred - Bay Area presented the testimony of one witness,

Sally Hoffman, an expert in the field of long - term hosp ital

administration. It offered nine exhibits, marked for

identification as Kindred Nos. 1 - 9, all of which were admitted

into evidence.

At the conclusion of the final hearing, the parties agreed

to file proposed recommended orders by Monday, July 18, 200 5.

The three - volume transcript of the final hearing, however, was

not filed at DOAH until July 15, 2005. At the urging of either

Select - Marion or Kindred - Bay Area, several motions for

extensions of time to file the proposed recommended orders were

filed or made ore tenus , without objection. The motions were

granted. Proposed recommended orders were filed by Select -

Marion and Kindred - Bay Area on August 9, 2005. This R ecommended

O rder follows.

FINDINGS OF FACT

The Parties

1. Select - Marion, the applican t, is a wholly - owned

subsidiary of Select Medical Corporation. Select Medical

Corporation provides long - term acute care services at 99 LTCHs

in 26 states through various subsidiaries. In addition, Select

Medical Corporation operates 741 outpatient clinic s and has more

than 400 "contract therapy locations for freestanding

rehabilitation hospitals[.]" (Tr. 65 . ) Select has

approximately 21,000 employees.

2. The Agency is the state agency responsible for the

administration of the Certificate of Need progr am in Florida.

See § 408.034(1), F la . S tat .

3. Kindred - Bay Area operates a 73 - bed freestanding, long -

term care hospital in Tampa, Hillsborough County, Florida , in

AHCA District 6 , the health services planning district in which

Select - Marion hopes to con struct and operate the applied - for

project . Kindred - Bay Area is owned and operated by Kindred

Hospitals, East, LLC, which also owns and operates a number of

other long - term hospitals in Florida and other states.

LTCH Services

4. The length of stay in an acute care hospital (a "short -

term hospital" or a "general hospital") for most patients is

three to five days. Some hospital p atients , however, are in

need of acute care services on a long - term basis . A long - term

basis is 25 to 30 days of additional acu te care service after

the typical three to five day stay in a short - term hospital .

Although some of these patients are "custodial" in nature ( see

paragraph 19 , below) and not in need of LTCH services, many of

these long - term patients are better served in an LTCH than in a

traditional acute care hospital.

5. In the health care continuum, LTCH care constitutes a

component dedicated to catastrophically ill and medically

complex patients in need of acute care services that exceed by a

considerable amount the average length of stay for those

patients in a general hospital. Typically medically unstable

for the entire time of stay in the general hospital, these

patients require extensive nursing care with daily physician

oversight usually accompanied by some ty pe of technologically

advanced support. Quite commonly, the technological support

includes a ventilator.

6. Most often elderly, LTCH patients may be younger if

victims of severe trauma. Whatever the age of the patients, f or

a variety of reasons , once t hey exceed the short - term length of

stay in a general hospital intensive care unit ("ICU"), they

rarely receive the health care treatment that is most

appropriate for them in health care settings other than an LTCH .

7 . LTCH patients are not able to toler ate, for example,

the three hours per day of therapy associated with comprehensive

medical rehabilitation and so are not appropriate for

Comprehensive Medical Rehabilitation ("CMR") units or hospitals.

As compared to LTCH patients, moreover, CMR patients usually

require significantly less nursing care. They receive on

average 4 to 4.5 hours of nursing care per patient day, as

compared to the average eight hours of nursing care per patient

day required by LTCH patients.

8 . The services in an LTCH are dis tinct from those

provided in a skilled nursing facil i ty ("SNF") or a skilled

nursing unit ("SNU") i n that more nursing hours are dedicated to

the patient and physician oversight is provided with more

regularity, that is, on a daily basis. Patients in SNFs or SNUs

are not likely to receive daily physician visits and observation

or, in terms of hours, the intensity in nursing services

required by the patient appropriate for LTCH care.

9 . The level of care provided in an LTCH is analogous to

that provided i n an ICU progressive care unit in a short - term

acute care hospital. But staff orientation at an ICU in a

short - term care hospital is different from LTCH staff

orientation. The ICU staff is focused on stabilizing the

patient and moving the patient to the next level of care within

the continuum of care. With such a focus, it is difficult for

the ICU in a general hospital to sustain the level of care for

the long - term as required by a patient in need of long - term

intensive care. Furthermore, when a patient has "fall en off

. . . [ the ] clinical pathway" (tr. 19 ) and does not leave the

ICU within the short time projected for the standard short - term

acute care patient, the patient is viewed as a failure by the

ICU staff. Staff perspective that there is litt le hope for the

patient's recovery dampens the motivation necessary to provide

consistently the service the patient requires over the long - term

if the patient is to recover.

Federal Government Recognition of LTCHs

10 . T he federal government recognizes th e distinct place

based on the high level of patient acuity occupied by LTCHs in

the continuum of care. The Prospective Payment System ("PPS")

of the federal government treats LTCH care as a discrete form of

care. LTCH care therefore has its own system of diagnostic

related groups ("DRGs") and case mix reimbursement that provides

Medicare payments at rates different from what PPS provides for

other traditional post - acute care providers.

1 1 . Effective October 1, 2002, the Centers for Medicare

and Medicaid Services ("CMS") implemented categories of payment

designed specifically for LTCHs, the "LTC - DRG." The LTC - DRG is

a decisive sign of the recognition by CMS and the federal

government of the differences between general hospitals and

LTCHs when it comes to patient population, costs of care,

resources consumed by the patients and health care delivery.

CON Application Process

1 2 . Select - Marion submitted CON Application 9710 in the

second CON Application Review Cycle of 2003. The application

was reviewed in comparison with CON Application 9709, submitted

by SemperCare Hospital of Lakeland, Inc., through which

SemperCare - Lakeland sought a 30 - bed "hospital in a hospital" at

Lakeland Regional Medical Center in Polk County.

1 3 . The Agency evaluated the applica tions in a State

Agency Action Report ("SAAR") . The SAAR recommended denial of

both applications. A basis for the denial of Select - Marion's

application is summed up as follows:

The applicant contends that Polk County LTCH

appropriate patients are remaini ng in acute

care hospitals within the county as no

appropriate or available alternatives exist

with an acceptable distance. The applicant

did not demonstrate that Polk County

residents are being denied access to

existing appropriate post - acute care

servic es including LTCH services. There are

two licensed LTCHs with an average occupancy

in calendar year 2002 below 75 percent

located in adjacent Hillsborough County.

Travel distances to existing LTCHs, skilled

nursing facilities, comprehensive medical

rehab ilitation facilities, or any

appropriate provider of post - acute care were

not demonstrated to be unreasonable.

AHCA Ex. 2, p. 34. The SAAR also recommended denial of

SemperCare - Lakeland's application.

1 4 . On December 10, 2003, authorized representative s of

AHCA adopted the recommendation contained in the SAAR and

released it. See id. , p. 37.

1 5 . Both Select - Marion and SemperCare - Lakeland timely

challenged the denials of their respective applications. The

petitions of the two were referred to DOAH an d consolidated for

purposes of hearing. SemperCare - Lakeland subsequently withdrew

its challenge . A n order was entered closing the DOAH file on

the Sempercare challenge , s ee DOAH Case No. 04 - 0460CON , leaving

this case to proceed on its own .

Issues

1 6 . A side from the standing issue with regard to Kindred -

Bay Area, t he issue in this case is approval of Select - Marion's

application. This primary issue breaks into related sub - issues

reflected in the provision of the SAAR, quoted above. Has

Select - Marion dem onstrated that there is need for an LTCH in

Polk County despite the existence of other LTCHs in the district

and given their less - than - optimal occupancy rates? If so, w ould

an LTCH in Polk County enhance access to LTCH service for

District 6 residents and specifically for those who reside or

are hospitalized in Polk County? Put another way, is there a

legally cognizable barrier to access for Polk County patients to

LTCH beds available elsewhere in the district that would justify

approval of the applicatio n?

LTCH Need Methodology and AHCA's Concerns

1 7 . The Agency has not adopted a need methodology for LTCH

services. Consequently, it does not publish fixed need pools

for LTCHs.

1 8 . In response to a rise in LTCH applications over the

last several years, the Agency has consistently voiced concerns

about identification of the patients that appropriately comprise

the LTCH patient population. Because of a lack of specific data

from applicants with regard to the composition of LTCH patient

population, the Ag ency is not convinced that there is not an

overlap between the LTCH patient population and the population

of patients served in other healthcare settings. In the absence

of data identifying the LTCH patient population, AHCA has

reached the conclusion "tha t there are other options available

to those patients [the population targeted by the LTCH

applicant], depending on . . . things such as physician

preference." (Tr. 175 . )

1 9 . Another expression of the Agency's view is that LTCH

applicants have taken an "overly - broad" ( id. ) approach to

determining the LTCH patient population with an emphasis on long

lengths of stay in general hospitals. The Agency accepts that

the candidate population for placement in a long - term care

hospital includes at least some of t hose patients with extended

lengths of stay in an acute care setting. But " in the absence

of better data that evaluated severity of illness, as well, "

AHCA fears that the approval of an LTCH application "has a

tendency to allow less severely ill people to drift into these

otherwise very expensive facilities [that is, LTCHs]."

(Tr. 175 - 176 . ) A better approach in AHCA's view would be to

focus on severity of illness because some long stay patients in

general hospitals whose stays are more custodial in natur e are

not appropriate candidates for LTCH services. These long stay

"custodial" patients are neither catastrophically ill nor

medically complex. For them, rather than the more specialized

and highly technological - based services accompanied by intensive

n ursing care required by the LTCH patient, fewer services of

less complexity suffice.

20 . When there is an oversupply of LTCH beds, moreover,

they tend to attract less severely ill patients than those who

are appropriate for LTCH services.

2 1 . The Agenc y draws support for its concerns from a

report to the Congress in June 2004 by MedPAC . 1 MedPAC's concern

about LTCHs stems from the cost associated with LTCH serv ices:

a cost that is higher tha n other skilled nursing facilities or

inpatient rehabilitatio n facilities. Just as the Agency has

concluded, MedPAC expects LTCHs with an oversupply of LTCH beds

to attract patients who are not severely ill enough to be

appropriate for LTCH care. In a setting whose costs are higher

than is appropriate for them, mo re Medicare dollars are expended

on these patients than is necessary.

22 . The Agency's concerns about LTCH applications in

general are compounded in this case by declining occupancies in

LTCHs in District 6. "For the calendar year 2002, they were at

74. 47 % , and for calendar year 2004 they're at 66.65 % , according

to our [AHCA] records." (Tr. 178 . )

Existing LTCHs in District 6

2 3 . There are currently two licensed LTCHs operating in

District 6: Kindred Hospital - Central Tampa, and the Intervenor

in this case, Kindred - Bay Area. Kindred - Bay Area is

approximately 50 to 60 miles, and within an hour's drive of the

Winter Haven Area where Select - Marion intends to locate its

proposed LTCH ; Kindred Hospital - Central Tampa is 5 to 7 miles

closer to Winter Haven th an is Kindred - Bay Area.

2 4 . Kindred - Central Tampa is a 102 - bed LTCH. It is JCAHO

accredited. The recent trend in its average occupancy is a

declining one. In 2002 , the average occupancy rate was 79.4 % .

In 2003, it fell to 70.6 % . In 2004, it fell, ye t again,

although the decline was less dramatic, to 69.6 % . On the

average day, Kindred - Central Tampa had 30 to 32 beds available

to accommodate additional patients.

2 5 . Kindred - Bay Area is a 73 - bed LTCH in Hillsborough

County. Also JCAHO accredited, it is licensed as an acute care

hospital and is designated as an LTCH by the Medicare program.

It offers a variety of long - term care services:

respiratory/ventilator services, IV services, neurological

services, wound care, dialysis and others. Kindred ha s a 4 - bed

ICU, an 8 - bed "step down" unit, and 61 med - surg beds.

Need Demonstration: the Applicant's Responsibility

26 . It is the applicant's responsibility to demonstrate

under Florida Administrative Code Rule 59C - 1.008(2)(e)2., that

there is a need for the services for which approval is sought.

The Agency analyzes LTCH applications on a district basis. The

approach offered by Select - Marion, however, was a different one

from the Agency’s. The approach is outlined in Select - Marion’s

application. Exten sive testimony about the approach , moreover,

was offered at hearing through Select - Marion's expert health

planner, Patricia Greenberg.

Select - Marion’s Application and Proposal

27 . Submitted in the second application cycle for 2003,

Select - Marion’s applic ation was assigned CON 9710.

2 8 . Select - Marion estimates its total project costs to be

approximately $11,244,000. It has not yet acquired the site for

its proposed LTCH but anticipates that the facility will be

located near or in Winter Haven in the c entral eastern region of

Polk County. Select - Marion, however, has not conditioned its

application on the location of the facility in the Winter Haven

area. It has only offered to condition the application on the

location of the facility in Polk County.

2 9 . If located in the Winter Haven area, the proposed LTCH

will be within 20 miles of the existing acute care providers in

the county, a location sufficiently close to the major referral

sources for the facility.

Uncontested Statutory and Rule Criteria

30 . By stipulation of the parties it has been agreed that

Select - Marion's application meets most of the statutory and rule

criteria applicable to CONs or that those criteria are not

applicable . The primary exception to the parties' agreement is

need. As t estified at hearing by the Agency's sole witness, the

applicant's alleged failure to demonstrate need is the sole

reason the application was denied. ( See T r. 169 .)

Ms. Greenberg's Testimony

31 . Patricia Greenberg is the President of National Health

Care Associates, "a health care consulting firm that specializes

in health care planning, health care finance and health care

operations." ( Tr. 100. ) She has extensive experience as a

consultant on health care projects "including Certificate of

Need work." ( Tr. 101. )

32 . Since the Agency does not have an LTCH need

methodology in rule nor an Agency policy on LTCH need

methodology in place, Select - Marion is responsible for

demonstrating need through a needs assessment methodology which

must include, at a min imum, consideration of the following

topics:

a. Population, demographics and dynamics;

b. Availability, utilization and quality of

like services in the district, sub - district

or both;

c . Medical treatment trends; and,

d. Market conditions.

See the testimony of Ms. Greenberg at tr. 115 and Florida

Administrative Code Rule 59C - 1.008(2)(e). Select - Marion

addressed each of these topics in its application.

33 . On the basis of the each of the above - quoted topics

and using several numeric need methodol ogies that follow general

health planning principles, generally accepted by AHCA in other

contested LTCH CON cases, as testified by Ms. Greenberg, there

is a need for at least 44 LTCH beds in Polk County.

34. Ms. Greenberg's analysis does not overlook th e beds

that are available elsewhere in the district, that is, in

Hillsborough County where Kindred - Central Tampa and Kindred - Bay

Area are located. But in her words, "[t]he facilities in the

neighboring county [Hillsborough] are not accessible to this

[the Polk County] population." (Tr. 135 . ) Ms. Greenberg

elaborated on this point later in her testimony when discussing

the extent of impact to Kindred - Bay Area that might occur should

the application be granted , " Kindred - Bay Area may have beds, but

they're not accessible to that population, or they would be

using them . " (Tr. 150 . )

35. The gist of th e testimony with regard to accessibility

was reiterated by Ms. Greenberg when asked directly whether the

Kindred facilities in Tampa are "reasonable alternativ es to the

patients in Polk County" :

No, they are not reasonable alternatives at

all. [The two Kindred facilities] have beds

that are available. The physicians that

support the need for the project, in the

depositions I have reviewed [2] , say they're

not a n alternative, they're not sending

patients to them, they only get a few

patients going [to the Kindred facilities]

because of the family hardship, continuity

of care, . . . . They're not an alternative

at all for that patient population.

(Tr. 162, 163 . )

3 6 . In contrast to the approach of Select - Marion to need

on a "Polk County" basis, as explained by Ms. Greenberg in her

testimony, AHCA, however, does not approach LTCH need on a sub -

district basis. The Agency approaches LTCH need on a district

basis. Polk County is but one county in the multi - county health

planning district in which it is located: District 6.

District 6

3 7 . At the time of filing of the application, the

population in District 6 was over 1,955,700. The population

included 323,869 in the age cohort of 65 and over, the age

cohort eligible for Medicare services, and the cohort that

contains patients primarily served by LTCHs.

3 8 . The population of Polk County at the time of the

filing of the application was 507,839, including 94,950 i n the

age cohort, 65 and over. Approximately one - third of the

District’s Medicare eligible population lives in Polk County.

3 9 . Polk County is one of five counties that comprise AHCA

Health Care Planning District 6. (The other four are

Hillsborough, Ma natee, Hardee , and Highlands Counties.) The two

LTCHs that presently exist in the District are Kindred - Central

Tampa and Kindred - Bay Area. Evidence was presented as to

Kindred - Bay Area's Patient Recruitment and Admissions Practices,

the sources of its ad missions, market conditions and impacts to

Kindred - Bay Area's census and the adverse impact to Kindred - Bay

Area.

Kindred - Bay Area’s Patient Recruitment and Admissions Practices

40 . Kindred - Bay Area has “clinical liaisons” who serve to

educate health care providers as to the availability of

Kindred’s services to build relationships with potential

referral sources, and to gather information for the evaluation

of potential LTCH patients from other health care facilities.

The majority of Kindred’s referrals and admissions come from

short - term acute care hospitals, primarily intensive care units

within such hospitals but also the med - surg units.

41 . The clinical liaison’s job includes conducting “in -

service training” to educate hospital staff as well as

phys icians and other health care professionals of the services

and treatments Kindred offers, and the types of patients for

whom Kindred may be an appropriate placement option. Kindred -

Bay Area’s clinical liaison for Polk County, Mindy Wright, has

been perfor ming in - service training in Winter Haven for ten

years, typically once a year but more frequently if turnover

demands. She attempts a visit to the Winter Haven area at least

every two weeks and frequently for periods of every week.

42 . The clinical liai son also gathers information

concerning potential referrals to Kindred from acute care

hospitals in the Winter Haven area. The clinical liaison

transmits this information to the hospital and the information

is evaluated by a team consisting of the hospita l’s CEO, CFO,

internal case manager, and a nurse or physician to make a

decision on admission.

43 . There is an incentive for LTCHs to admit patients who

me e t medical criteria for admission. Reimbursement from

Medicaid and Medicare programs may be deni ed if a patient has

not me t appropriate admission criteria. Reimbursement,

moreover, may be reduced if the patient initially met

appropriate criteria but then turns out to have a relatively

short length of stay in the LTCH.

44 . Some patients are denied ad mission to Kindred - Bay Area

for clinical reasons. For example, the patient may not meet

Interqual criteria for admission. Failure to meet clinical

admission criteria can occur if the patient has been kept in the

short - term acute care hospital too long, p ossibly even for

several months, when the patient should have been referred to

Kindred much sooner.

45 . The majority of patients referred to Kindred - Bay Area

are admitted.

46 . Patients are also denied admission to Kindred for

financial reasons. On pri nciple, Select does not decry such a

practice, acknowledging that it also seeks to assure that some

revenue stream is available to assist in providing the expensive

care that comprises LTCH services.

Sources of Admissions to Kindred - Bay Area

47 . Kindred - Bay Area draws the majority of its patients

(60 to 75 % ) from Hillsborough and Polk Counties and specifically

from the cities of Tampa and Lakeland and the Brandon and Winter

Haven areas. It has also drawn patients from the Orlando/Orange

County area, othe r areas of Polk County, and from as far south

as the Naples Area.

48 . In 2003, Kindred - Bay Area underwent renovations. The

renovations limited the number of patients it could admit. In

2004, Mindy Wright, the clinical liaison responsible for the

Orange County and Polk County areas, was on maternity leave for

four months. Her absence significantly reduced Kindred’s

presence in Polk County health care facilities. The hospital

did not replace Ms. Wright. Although other clinical liaisons

provided some co verage in her area, it was not as effective as

Ms. Wright had been. The result was not unexpected; when

clinical liaisons are not in regular contact with short - term

acute care hospitals and other providers, referrals and

admissions to the LTCH from such f acilities usually drop

significantly.

49 . In addition to renovations and Ms. Wright's absence,

there were several other factors that had an impact on

admissions to Kindred - Bay Area in the last few years. First,

several hurricanes in 2004 had an impact o n Central Florida.

They seriously disrupted the delivery of health care services,

particularly in Polk County. The disruption resulted in a drop

in referrals and admissions to Kindred - Bay Area from Polk

County. Second, turnover in staffs at hospitals to which

Ms. Wright was assigned, including Winter Haven, had an impact

on referrals. If the social worker at the hospital does not

know about Kindred and its capabilities, the social worker may

not identify patients meeting Kindred’s criteria for admission .

50 . The conditions that led to declining admissions to

Kindred - Bay Area from Polk County were temporary. So far in

2005, the downward trend in admissions between 2002 and 2004 has

been reversed. Admissions through the first four months of 2005

at Kin dred - Bay Area have been 20 % higher for the same period in

2004, higher than the same period in 2003 and nearly at the same

level for the period in 2002.

51 . Admissions f rom Orange County, on the other hand, have

dropped and are not likely to rebound. Or ange County admissions

went from 50 in 2002 to 28 in 2003 and only 10 in 2004. An LTCH

operated by SemperCare, subsequently acquired by Select Medical

Corporation, opened in Orange County in June 2003 (at a location

about an hour’s drive from Winter Haven ) . The drop in Orange

County admissions is likely to be exacerbated by the opening of

another CON - approved Select facility in Orange County, a 40 - bed,

freestanding facility.

LTCH Market Conditions and Impact on Census

52 . Kindred - Bay Area's census has d eclined in recent

years, from an average daily census of 52 patients (72 %

occupancy) in 2002 to 48 patients (66 % ) in 2003 to 46 patients

(63 % ) in 2004. On the average day in 2004, Kindred - Bay Area had

beds available to accommodate another 27 patients. At the time

of final hearing, Kindred - Bay Area's occupancy level was at 60 %

or about 44 beds. Optimal occupancy for Kindred - Bay Area would

be 69 to 70 patients or about 95 % occupancy.

53 . The existence of a decline in occupancy rates for

District 6 LTCHs is supported by AHCA data which shows a decline

from about 74.5 % in 2002 to 66.7 % in 2004. It is also

reasonable to assume that some patients from eastern Polk County

will follow historic trends and flow to the existing LTCH and

approved LTCH in Orange Co unty. The combination of declining

occupancy in District 6 LTCHs and possible outmigration of

eastern Polk County residents to Orange County for LTCH services

diminish Select - Marion's claim that an LTCH is needed in Polk

County.

54 . Other changes in the LTCH market are also likely to

impact Kindred - Bay Area in terms of referrals and admissions

from other areas. Select has won a recommendation for approval

for an LTCH in Lee County in a formal administrative proceeding.

At the time of filing of proposed recommended orders in this

proceeding the recommended order in the Lee County proceeding

was pending. Kindred - Bay Area maintains a clinical liaison in

Lee County to seek referrals in much the same manner as

conducted by Ms. Wright. If a Select facility opens in F t.

Myers, it will have an impact on the referrals that Kindred - Bay

Area receives from Ft. Myers and surrounding areas.

55 . In addition, HealthSouth has received CON approval for

an LTCH in Sarasota expected to open in August 2005. Kindred -

Bay Area does not directly market to the Sarasota area. Another

Kindred Hospital, Kindred - St. Petersburg markets in that area.

It is reasonable to assume that the areas south of Sarasota

toward Ft. Myers will begin to refer patients to the closer

HealthSouth - Sarasota facility rather than continuing referrals

to Kindred - Bay Area. Further, as HealthSouth - Sarasota seeks to

establish its present in the market, it will likely engage in

some marketing in the Tampa Bay area, in areas currently served

by Kindred - Bay Area.

56 . Kindred - Bay Area's sister hospital, Kindred - Central

Tampa, no longer a party to this proceeding, does not contend

that the opening of a Select facility would result in the loss

of patients to Kindred - Central Tampa. Kindred - Central Tampa,

howe ver, is available to accept referrals from Polk County

health care providers, either directly or at the request of

Kindred - Bay Area. Kindred - Bay Area, like Kindred - Central Tampa,

has an open medical staff and any physician can apply for

admitting or consu lting privileges and would be granted them if

they met qualifications. Further, declining occupancy levels at

Kindred - Central Tampa, a 102 - bed facility, demonstrates that

there is available capacity at Kindred - Central Tampa to absorb

patients from Polk Co unty, just as there is capacity at Kindred -

Bay Area to absorb additional patients from Polk County who are

in need of LTCH services.

Adverse Impact on Kindred

57 . For the periods of calendar years 2002 and 2003 and

the first half of 2004, the gross reven ue impact on Kindred - Bay

Area attributable to the number of patients from Polk County

that Kindred - Bay Area would have lost to Select - Marion's

proposed facility ranged from $1.75 million to $4.7 million.

58 . In terms of net revenue and after - tax margin, however,

the losses would be substantially smaller. For the 32 patients

from Polk County admitted to Kindred - Bay Area in 2004, the total

after - tax margin impact would be only $240,000.

59 . Furthermore, Kindred - Bay Area is not likely to lose

all of its P olk County patients if the proposed project is

located in the Winter Haven area since Lakeland area patients,

located closer to Tampa than Winter Haven, might still ch o ose

LTCH services at Kindred - Bay Area over the proposed Select

facility.

60 . As found earlier in this order, however, Select - Marion

has not conditioned its CON on locating the proposed facility in

Winter Haven. A Winter Haven facility, moreover, with a primary

service area with a 20 - mile radius would capture Lakeland in its

primary service area.

61 . On balance, t he impact of the proposed facility

located in Polk County on Kindred is not substantial enough to

confer standing on Kindred - Bay Area .

The SAAR

62 . Following its review of Select's application, AHCA

issued its State Agency Actio n Report (the "SAAR") recommending

that CON 9710 be denied. Following the signature of officials

at the Agency indicating approval of the recommendation, the

SAAR became the preliminary action of the Agency subject to

challenge under Chapter 120, Florida Statutes.

63 . At trial, the Agency, through its witness,

Jeffrey Gregg, Chief of the Agency's Bureau of Health Facility

Regulation, testified that the only reason the application was

denied is the Select - Marion's failure in AHCA's view to

demonstrate nee d for the facility.

64 . Select - Marion's expert health care planner testified

that there is need in Polk County for the facility. The need is

based on need methodologies that are both reasonable and

appropriate from a health planning perspective and that are

consistent with methodologies approved by final orders of the

Agency.

65 . As discussed, above, however, t here is a critical

difference in the application of the need methodologies in this

case from other cases . In this case the need methodologies

d eveloped by Select - Marion applied only to Polk County and not

to the district as a whole. The Agency determines need on a

district - wide basis.

66 . Select - Marion maintains that there are barriers to

Polk County patients' access to existing LTCH facilitie s. The

barriers are described as geographical based on physician

referral patterns and family participation in rehabilitation.

Patient and Physician Preference and Practice

67 . Select - Marion largely bases its case for need on

allegations of the prefere nces of patients, family members and

their physicians.

68 . As to family members, it is not to be doubted that

family members wish to avoid the burdens of travel. To the

extent, however, that family members value specialized care,

they are more likely to have the patient travel the distance

necessary to receive it. Indeed, some Polk County families of

LTCH patients are willing to travel the distance necessary to

visit family members who are patients outside Polk County.

69 . With regard to referring p hysicians, t he majority of

referring physicians choose not to serve as the attending

physician for their patients once referred to an LTCH, even when

the LTCH is located in the same city as the referring physician.

Typically, a referring physician relies upon another doctor or a

practice group to attend to his or her patient in the LTCH

setting.

CONCLUSIONS OF LAW

70 . The Division of Administrative Hearings has

jurisdiction over the parties to and the subject matter of this

proceeding. § § 120.568, 120.5 7 and 408.039(5), Fla . Stat.

71 . Select - Marion has the burden to prove by a

preponderance of the evidence that its CON application should be

approved. See Boca Raton Artificial Kidney Center, Inc. v.

Department of Health and Rehabilitative Services , 475 So. 2d 260

(Fla. 1st DCA 1985). In order to intervene, Kindred - Bay Area

has the burden of proving that its substantial interests would

be affected if Select - Marion's CON application is approved.

Neither Kindred - Bay Area nor Select - Marion ha s met its

res pective burden of proof .

Intervention by Kindred - Bay Area

72 . Based on the evidence and this order's findings of

fact, Kindred - Bay Area does not have standing to intervene in

this proceeding. It has not proven that an established program

of Kindred - Bay Area's will be substantially affected by the

approval of Select - Marion's application. See § 408.039(5)(c),

Fla . Stat.

The Merits of Select - Marion's Case

73 . In light of the parties' stipula tion, the issue s to be

addre s sed concern need for the proposed f acility under Section

408.035(2) and (7) , Florida Statutes , and Florida Administrative

Code Rule 59C - 1.008(2)(e)2. Appropriately, Select - Marion has

addressed and emphasized these statutory and rule provisions in

its case. But its case falls short.

74 . There are two problems with Select - Marion's case. The

first is that its need methodology is keyed to need in Polk

County rather than need at - large in District 6 , the health

service planning district of concern in this case and

established by Section 408. 032(5):

"District" means a health service planning

district composed of the following counties:

* * *

District 6. -- Hillsborough, Manatee, Polk,

Hardee, and Highlands Counties.

The plain meaning of the language in Section 408.032(5), Florida

Statutes , indicates intent that health planning is to be

conducted on a district - wide basis . No statute or rule has been

shown in this administrative proceeding to allow LTCH planning

to be done on a county basis when the county is in a multi -

county health servic es planning district as is Polk County.

75 . Consistent with the definition of "district" quoted

above, the Agency evaluat es LTCH applications on a district - wide

basis . Aside from the clear indication of legislative intent

found in the statute's definiti on of "district" that health

planning be conducted on a district - wide basis, when it comes to

issues of availability, utilization and access, t he Agency's

approach is required by Section 408.035(2), Florida Statutes, a

provision whose application is square ly at issue in this

proceeding:

408.035 Review Criteria. -- The agency shall

determine the reviewability of applications

and shall review applications for

certificate - of - need determinations for

health care facilities and health services

in context with the f ollowing criteria:

* * *

(2) The availability, quality of care,

accessibility, and extent of utilization of

existing health care facilities and health

services in the service district of the

applicant .

(emphasis supplied). The service district of the applicant in

this case is District 6. Beds are available in District 6. I t

has not been proven , however, that there is a legally cognizable

barrier impeding access by Polk County patients to LTCH beds

available in District 6, which leads to the secon d problem with

Select - Marion's case.

76 . A second basis for determining that Select - Marion did

not carry the burden of proof in this case, is an internal

inconsistency in its case with regard to the access issue it

raises , an inconsistency which is neith er adequately explained

nor resolved .

77 . The excess LTCH bed capacity in District 6 are beds

available at the two Kindred LTCH facilities in Hillsborough

County . According to Select - Marion there is a n access problem

to the Kindred beds because they are located an hour or so

driving distance away from the location of the patients in Polk

County . Distance creates a problem from two perspectives: from

the points of view of the patients families and the patients'

physicians. First, it creates hardship for the patients '

families who wish to visit them and monitor their hospital stay.

Second, Select - Marion posits that physicians in Polk County will

not refer their potential LTCH patients in Polk County to

Kindred's facilities both because of the hardship cr eated for

families by the distance and on the basis of continuity of care .

With regard to the latter point, Select - Marion argued that if a

patient enters an LTCH and is not attended - to in some form or

fashion by the treating physician in the general hospi tal then,

according to Select - Marion, continuity of care is disrupted .

This latter contention , however, was not supported by the

evidence.

78 . As for hardship, r equiring physician and family

members to travel the distances from Polk County, particularly

from the Winter Haven area, to Tampa c ould very well be a

hardship. But hardship is a relative term.

79 . There is little question that referring physician s in

Polk County are not likely to travel the distance to attend to

an LTCH patient at a District 6 LTCH facility outside of Polk

County. But if LTCH services are valued by physicians, the

physician will relinquish attending to the patient in need of

LTCH services . The patient's treating physician in a general

care hospital usually relinquishes care of the patient to LTCH

physicians when it is not difficult for the physician to travel

to the LTCH . If continuity of care is not a concern in these

cases, there was no reason offered for why it should be a

concern when the LTCH is not easily accessible to the referring

physician.

80 . For family members, travel can certainly be a

hardship. Where, however, for family members is the line drawn

between convenience and true lack of accessibility ? If LTCH

services are valued by family members, the relatively short

distance between Polk County and available LTCH beds, however

inconvenient for the family, should not be an impediment unless

in the judgment of the family member, the LTCH services are not

worth the relatively minor inconvenience.

81 . More damagi ng to the consistency of Select - Marion's

argument than the value placed on LTCH services by patients '

families is the value they a ppear to be accorded by physicians

who refuse to refer Polk County patients that are candidates for

LTCH services to Kindred's facilities where LTCH beds are

available. If a patient really needs LTCH services in the

judgment of a treating physician at the general hospital , it

would seem that the physician would refer the patient to a

facility less than two hours driving time awa y despite the

hardship to the families and any continuity of care issue.

Perhaps the physicians are making the judgment that contact with

the patients family provides therapeutic value outweighed by

LTCH services but any such contention was n either advanc ed nor

proven in this case . Quite simply, there is inadequate data in

this proceeding to reach any of the conclusion s Select - Marion

advances as the basis for why potential LTCH patients in Polk

County are not utilizing the Kindred beds available elsewhere in

the district .

82 . The testimony of Select - Marion's Health Care Planner,

in essence, is that if access were not a problem, then Polk

County patients in need of LTCH services would utilize the beds

in an adjacent county less than two hours driving time away.

This straightforward assertion, as obvious as it may be, is not

enough data , however, to explain the underlying reason for why

Polk County patients in need of LTCH services choose to go

without such services rather than to make use of the beds

avai lable in the health services planning district or to justify

a conclusion in the context of a CON proceeding that access is a

problem.

83 . Without better data than t hat offered in this case for

justifying a problem of access by potential LTCH Polk County

patients to LTCH beds available elsewhere in the d istrict, this

case appears to support the fears consistently expressed by AHCA

since LTCH applications increased in the last few years. Beds

are available but not used; concerns for family hardship and

ph ysician reluctance, in the context of the data offered in this

case, indicate that LTCH services may not be as valued as they

have appeared to be in other cases or as some of the re st of the

evidence in this case suggests. The internal inconsistency in

Se lect - Marion's case should defeat its application.

84 . A side from the internal inconsistency in Select -

Marion's case , th ere is a legal impediment to departing from the

Agency's approach to bed need on a district basis, rather than

the Polk County " sub - dis trict " approach used by Select - Marion in

its need methodology . Select - Marion has the burden of proof in

this case. It has not met it.

RECOMMENDATION

Based on the foregoing F indings of F act and C onclusions of

L aw, it is recommended that the Agency for He alth Care

Administration deny CON 9710 filed by Select Specialty - Marion,

Inc.

DONE AND ENTERED this 31st day of October, 2005, in

Tallahassee, Leon County, Florida.

S

DAVID M. MALONEY

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 31st d ay of October, 2005.

ENDNOTE S

1/ The Medicare Payment Advisory Commission ("MedPAC") is an

independent federal body established by the Balanced Budget Act

of 1997 (P.L. 105 - 33) to advise the U.S. Congress on issues

affecting the Medicare program. The Commission's statutory

mandate is quite broad: In addition to advising the Congress on

payments to private health plans participating in Medicare and

providers in Medicare's traditional fee - for - service program,

MedPAC is also tasked with analyzing access to care, quality of

care, and other issues affecting Medicare.

2/ Depositions of physicians were introduced into evidence by

Select - Marion . See Select Exhibits 8 and 9. These two

depositions support Ms. Greenberg's testimony that the distance

between W inter Haven hospitals and the Hillsborough LTCHs are

both problematic for the families of patients and for referring

physicians and caused concerns about the disrupt ion of

continuity of care. See Select Ex. 8, Deposition of

Christopher Lopez, M.D., pgs. 9 and 12 and Select Ex. 9,

Deposition of Jose Martinez - Salas, M.D., pgs. 13, 14 , and 17.

Dr. Martinez - Salas also offered that , on occasion, there were

legal impediments to patients receiving needed LTCH services and

that Kindred, on occasion, refused to ac cept patients "for one

reason or another . . . . " Id. , p. 14. Elizabeth Starling's

deposition, Select Ex. 10, generally supported this same line of

testimony.

COPIES FURNISHED :

Mark A. Emanuele, Esquire

Brett R. Frankel, Esquire

Panza, Maurer, & Mayna rd, P.A.

Bank of America Building, Third Floor

3600 North Federal Highway

Fort Lauderdale, Florida 33308

M. Christopher Bryant, Esquire

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

301 South Bronough Street, Fifth Floor

Post Office Box 1110

Tallahassee, Flori da 32302 - 1110

Kenneth W. Gieseking, Esquire

Agency for Health Care Administration

2727 Mahan Drive, Mail Station 3

Tallahassee, Florida 32308

Richard Shoop, Agency Clerk

Agency for Health Care Administration

2727 Mahan Drive, Mail Station 3

Tallahassee , Florida 32308

Christa Calamas, General Counsel

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 Recommended Order. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.