05-000319CON Select Specialty Hospital - Escambia, Inc. vs. Agency For Health Care Administration Status: Closed Recommended Order on Friday, June 17, 2005.

Summary: Petitioner established need for a proposed 54-bed, long-term care hospital in Escambia County. Recommend that the Certificate of Need application be approved.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

SELECT SPECIALTY HOSPITAL - )

ESCAMBIA, INC., )

)

Petitioner, )

)

vs. ) Case No. 05 - 0319CO N

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

)

RECOMMENDED ORDER

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

on March 1 - 2, 2005, in Tallahassee, Florida, before T. Kent

Wetherell, II , the designated Administrative Law Judge of the

Division of Administrative Hearings.

APPEARANCES

For Petitioner: Mark A. Emanuele, Esquire

Brett 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, Esquir e

Agency for Health Care Administration

2727 Mahan Drive, Mail Station No. 3

Tallahassee, Florida 32308

STATEMENT OF THE ISSUE

The issue is whether the Agency for Health Care

Administration should approve Petitioner’s application for a

C ertificate of Need to establish a 54 - bed freestanding long - term

care hospital in Escambia County.

PRELIMINARY STATEMENT

Petitioner, Select Specialty Hospital - Escambia, Inc.

(Select - Escambia), filed Certificate of Need (CON) applications

in the second batching cycle of 2003 (CON 9701), the first

batching cycle of 2004 (CON 9746), and the second batching cycle

of 2004 (CON 9800), each of which proposed the establishment of

a long - term care hospital (LTCH) in Escambia County.

Respondent, Agency for Health Care Administ ration (Agency),

denied each of the applications, and Select - Escambia timely

petitioned the Agency for administrative hearings on the

denials.

The Agency referred the petitions to the Division of

Administrative Hearings (Division) , where they were assign ed

DOAH Case Nos. 04 - 0455CON (CON 9701), 04 - 3148CON (CON 9746), and

05 - 0319CON (CON 9800). DOAH Case No. 04 - 0455CON was

consolidated with DOAH Case No. 04 - 0462CON, which was SemperCare

Hospital of Pensacola, Inc.’s (SemperCare - Pensacola) challenge

to the Agency’s denial of its co - batched CON application in the

second batching cycle of 2003 . DOAH Case No. 04 - 3148CON was

consol idated with DOAH Case No. 04 - 313 7CON, which was

SemperCare - Pensacola’s challenge to the Agency’s denial of its

co - batched CON applic ation in the first batching cycle of 200 4 .

SemperCare - Pens acola voluntarily dismissed its challenges ,

a nd the Division’s files in DOAH Case Nos. 04 - 0 462CON and 04 -

31 3 7CON were closed through Orders dated December 2, 2004.

Thereafter , the three cases inv olving Select - Escambia’s

applications were consolidated through an Order dated

February 3, 2005.

At the outset of the final hearing, Select - Escambia

voluntarily dismissed its petitions challenging the Agency’s

denial of CON 9701 and CON 9746 , and withdrew those

applications. The hearing proceeded on CON 9800 only, and the

Division’s files in the cases involving the other applications -

- DOAH Case No. 04 - 0455CON and 04 - 3148CON - – were closed through

an Order dated March 3, 2005.

At the hearing, Select - Escam bia presented the testimony of

Gregory Sassman, who was accepted as an expert in LTCH

development; Marsha Webb - Medlin, who was accepted as an expert

in nursing, LTCH nursing, intensive care unit (ICU) nursing, and

LTCH operations; and Sharon Gordon - Girvin, who was accepted as

an expert in health care planning. Select - Escambia also

presented the deposition testimony of Jeffrey Gregg (Exhibit P5)

and Karen Rivera (Exhibit P6). Select - Escambia’s Exhibits P1

through P6 were rece ived into evidence. The Agency presented

the testimony of Jeffrey Gregg, who was accepted a s an expert in

health planning . The Agency’s Exhibits A - 1 through A - 3 were

received into evidence.

Official recognition was taken of pages 48916 and 49191

through 49214 of the Federal Register , as published on

August 11, 2004 1 ; the Recommended and Final Orders in Kindred

Hospitals, LLC v. Agency for Health Care Administration , Case

No. 01 - 2712CON (DOAH July 23, 2002; AHCA Nov. 1, 2002) ; Select

Specialty Hospital - Sarasota, Inc. v. Agency for Healt h Care

Admininstration , Case No. 03 - 2484CON (DOAH Mar. 15, 2004; AHCA

May 20, 2004) (hereafter “ Select - Sarasota ”) ; Select Specialty

Hospital - Marion, Inc. v. Agency for Health Care Administration ,

Case Nos. 03 - 2483CON and 03 - 2810CON (DOAH July 14, 2004; AHC A

Sep. 15, 2004) (hereafter “ Select - Marion ”); and the State Agency

Action Report (SAAR) for CON 9596 and CON 9597 , through which

the Agency approved the LTCH in Panama City .

The two - volume Transcript of the final hearing was filed on

March 16, 2005. The p arties initially requested and were given

20 days from that date to file their proposed recommended orders

(PROs). However, t he filing deadline for the PROs was

subsequently extended to May 20 , 2005, upon the parties’

motions . The parties' PROs were time ly filed and have been

given due consideration.

FINDINGS OF FACT

A. Parties

1. Select - Escambia is a subsidiary of Select Medical

Corporation (Select), which has been in the business of

operating LTCHs since the 1980’s.

2. Select currently operates 9 9 LTCHs in 27 states,

including three in Florida.

3. Select’s Florida LTCHs are located in Orlando, Miami,

and Panama City. The Orlando and Panama City LTCHs were

formerly operated by SemperCare, Inc. (SemperCare), which Select

acquired in January 2005 .

4. Three other Select LTCHs – - in Tallahassee, Orlando,

and Alachua County -- have been approved by the Agency, but are

not yet operational. The Tallahassee LTCH, which was also

formerly a SemperCare facility, was originally projected to open

in 2006, but that date is no longer certain.

5. The Agency is the state agency responsible for

administering the CON program and for licensing LTCHs and other

health care facilities.

B. Application Submittal and Review

and Preliminary Agency Action

6. In the s econd batching cycle of 2004 for hospital beds

and facilities, Select - Escambia filed with the Agency an

application for a CON to establish a 54 - bed freestanding LTCH in

Escambia County.

7. There were no co - batched applications comparatively

reviewed by the Agency with Select - Escambia's application, CON

9800.

8. Select - Escambia’s application was complete, and it

satisfied the applicable submittal requirements in the statutes

and the Agency 's rules.

9. The Agency’s review of Select - Escambia’s application

complied with the applicable statutory and rule requirements .

10. The Agency’s review culminated in a SAAR issued on

December 10, 2004. The SAAR recommended denial of CON 9800,

primarily based upon Select - Escambia’s failure to demonstrate to

the Agency’ s satisfaction that there is a need for the proposed

Escambia County LTCH.

11. The determination in the SAAR that Select - Escambia

failed to adequately demonstrate need for its proposed LTCH was

largely based upon a 2004 report by MedPAC, which is an

organ ization that advises Congress on issues related to

Medicare. The MedPAC report concluded that LTCH patients need

to be better defined so as to ensure that the patients treated

at LTCHs are of the highest severity and cannot be more cost -

effectively treate d in other care settings.

12. The Agency formally published notice of its intent to

deny CON 9800 in the Florida Administrative Weekly , and Select -

Escambia thereafter timely filed a petition challenging the

Agency’s denial of its application.

13. The Age ncy reaffirmed its opposition to Select -

Escambia’s application at the hearing through the testimony of

Jeffrey Gregg, the bureau chief over the Agency’s CON program.

C. LTCHs

(1) Generally

14. An LTCH is defined by statute and Agency rule as “a

hospita l licensed under chapter 395 which meets the requirements

of 42 C.F.R. s. 412.23(e) and seeks exclusion from the Medicare

prospective payment system for inpatient hospital services.”

15. LTCHs provide extended medical and rehabilitative care

to patients w ith multiple, chronic, and/or clinically complex

acute medical conditions . T hey serve a patient population whose

average length of stay (ALOS) exceeds 25 days.

16. There are two types of LTCHs: hospital - within - a -

hospital (HIH) and freestanding. Both typ es are accepted in the

industry, and both types are found in Florida and nationwide.

17. HIH LTCHs are located in the same building or on the

same campus as a traditional acute care hospital, which is

referred to as the “host hospital . ” HIH LTCHs contrac t with the

host hospital for ancillary services such as laboratory and

radiology services.

18. HIH LTCHs get the vast majority of their admissions

from the host hospital, whereas freestanding LTCHs tend to get

their admissions from a number of different hospitals.

19. LTCHs fit into the continuum of care between

traditional acute care hospitals and traditional post - acute care

facilities such as nursing homes, skilled nursing facilities

(SNFs), hospital - based skilled nursing units (SNUs), and

comprehensiv e medical rehabilitation (CMR) facilities.

20. LTCHs are designed to serve patients that would

otherwise have to be maintained in a traditional acute care

hospital ( often in the ICU ) where the reimbursement rates may be

insufficient to cover the costs ass ociated with a lengthy stay,

or be moved to a traditional post - acute care facility where the

patient may not receive the level of care needed.

21. Patients with co - morbidities, complex medical

conditions, or frailties due to age are typically appropriate

LTCH patients, particularly if the patient would otherwise

remain in the ICU of a traditional acute care hospital. For

such patients, an LTCH is likely the most appropriate setting

from both a financial and patient - care standpoint.

22. There is a distinc t population of patients who,

because of the complexity or severity of their medical

condition, are best served in an LTCH . H owever, there is an

overlap between the population of patients that can be served in

an LTCH and the population of patients that c ould also be well -

served in the ICU of an acute care hospital or a traditional

post acute care setting with ventilator capability. Indeed, as

noted in the MedPAC report, “[i]n the absence of LTCHs,

clinically similar patients are principally treated in ac ute

hospitals or in freestanding SNFs that are equipped to handle

patients requiring a high level of care.”

23. Because of the overlap in patients, it is important

for LTCHs to adopt detailed admission criteria to ensure that

the LTCH (rather than a SNF, SNU, or CMR) is the most

appropriate care setting for the patient .

24. InterQual, which is a private organization that

establishes standards for quality of care for a variety of

health care settings, has developed model admission criteria for

LTCHs.

25. The Interqual criteria are designed to ensure that the

LTCH is the most appropriate care setting for the patient, and

they are referenced in the MedPAC report as an example of the

type of admission criteria that LTCHs should adopt to ensure

that they are not treating patients that should be treated in

another setting.

26. Mr. Gregg and Karen Rivera, the supervisor of the CON

program, acknowledged in their deposition testimony that an

LTCH’s use of the InterQual criteria would, at least to some

degree, ad dress the Agency’s concern that LTCH s might be serving

patients that should be served in a more t raditional, less -

intensive ( and /or less - costly ) , post - acute care setting.

27. Select utilizes the InterQual criteria as part of its

admission process at its e xisting LTCHs, and it intends to

utilize those criteria at its proposed Escambia County LTCH.

Specifically, Select ’s nurses screen patients prior to admission

and, again, shortly after admission to ensure they are LTCH -

appropriate patients . Additionally, Select’s n urses and care

teams periodically evaluate each patient to ensure that the LTCH

is still the most appropriate care setting for the patient and

to determine whether the patient is ready for discharge, either

to a traditional post - acute care setti ng or to home.

28. Select also utilizes a third - party organization to

review and assess the patient - outcomes achieved at each of its

LTCHs. T his is a quality assurance/improvement tool because it

allows Select to compare and “benchmark” the performance o f its

L TCHs against each other and against other LTCHs nationwide and

it helps to identify functions or services that need

improvement.

29. LTCH services are most highly utilized by persons in

the 65 and older (65) age cohort because those persons are m ore

likely to have complex and/or co - morbid medical conditions that

require long - term acute care. In calendar year 2003, for

example, approximately 77 percent of LTCH patients in Florida

were in the 65 age cohort and approximately 51 percent were in

the 75 and older (75) age cohort.

30. The typical LTCH patient is still in need of

considerable acute care, but a traditional acute care hospital

may no longer be the most appropriate or lowest cost setting for

that care.

31. The vast majority of LTCH admis sions are patients

transferred directly from a traditional acute care hospital. It

is not uncommon for an LTCH patient to be transferred on life

support from a critical care unit or ICU after the patient has

been diagnosed and stabilized.

32. Nursing hom es, SNFs, SNUs, CMR facilities, and home

health care are not appropriate for the typical LTCH patient

because the patient's acuity level and medical/therapeutic needs

are higher than those generally treated in those settings.

Indeed, unlike traditional po st - acute care settings, which

typically do not admit patients who still require acute care,

the core patient - group served by LTCHs are patients who require

considerable acute care through daily physician visits and

intensive nursing care in excess of eight hours of direct

patient care per day.

33. LTCH patients are often discharged to a traditional

post - acute care facility such as a nursing home, SNF, CMR

facility, or home health care. Thus, those facilities cannot be

considered as "substitutes" for LTCHs , even though there is some

overlap between the services provided to lower acuity LTCH

patients and higher acuity patients in those traditional post -

acute care facilities.

34. The family of a patient in an LTCH is generally

encouraged to be more involved in the patient’s care than it

would be if the patient was in the ICU of a traditional acute

care hospital. For example, the visiting hours at LTCHs are

typically more liberal than the visiting hours of the ICU at a

traditional acute care hospital .

35. Medicare reimbursements are the primary source of

revenue for LTCHs because , on average , 75 to 85 percent of LTCH

patients are covered by Medicare. In this case, Select - Escambia

projected that approximately 77 percent of the patient days at

its proposed E scambia County LTCH would be generated by Medicare

patients.

36. In 2002, the federal government adopted a Medicare

prospective payment system (PPS) specifically for LTCHs. That

system recognizes the LTCH patient population as being distinct

from the pat ient populations treated by traditional acute care

hospitals and post - acute care facilities such as nursing homes,

SNFs, SNUs, and CMR facilities, even though there may be some

overlap between the patient populations served by LTCHs and

those other types o f facilities.

37. Under the LTCH PPS, services are reimbursed by

Medicare at a predetermined rate that is weighted based upon the

patient's diagnosis and acuity, regardless of the cost of care.

This reimbursement system is similar to, but uses Diagnosis

Related Groups (DRGs) that are different than the DRGs used in

the PPS for traditional acute care hospitals.

38. The Medicare reimbursement rates for services to long -

stay patients in an LTCH are generally higher than the

reimbursement rates for the same services to long - stay patients

at a traditional acute care hospital. As a result, there is a

financial incentive for hospitals to transfer their long - stay

patients to an LTCH.

39. In August 2004, the federal regulations governing

Medicare reimbursements for LTCHs were substantially amended.

One significant change in the regulations is that the number of

admissions that a n HIH LTCH can receive from its host hospital

and still qualify for reimbursement under the LTCH PPS is

generally capped at 25 percent. The effect of that change is

that new HIH LTCHs will not be viable in most instances.

(2) LTCHs in Florida

40. At the time CON 9800 was filed, there were 12 LTCHs

operating in Florida with a total of 799 licensed beds . T here

were an additional four app roved but not yet licensed LTCHs,

including the three Select facilities referenced above.

41. There are no licensed or approved LTCHs in District 1,

which consists of Escambia, Santa Rosa, Okaloosa, and Walton

Counties.

42. There is at least one licens ed or approved LTCH in

each health planning district, except for District s 1 and 9. 2

43. The closest Florida LTCH to Escambia County is the

former SemperCare (now Select) facility in Panama City, which is

in District 2. That facility, which opened in ea rly 2003, is a

30 - bed HIH LTCH, and is approximately 100 miles and a two - hour

drive from Pensacola.

44. There is or soon will be an LTCH in Mobile, Alabama,

which is approximately 60 miles from Pensacola. There was no

evidence presented regarding the ty pe, size, utilization, or

quality of care at that facility.

45. The existing F lorida LTCHs are well - utilized.

According to the SAAR , the overall occupancy rate for the

Florida LTCH beds was approximately 68 percent in 2003 , and

several of the facilities had occupancy rates in excess of 80

percent.

46. The newer facilities - – Select’s Miami LTCH, which

opened in December 2002, and the former SemperCare (now Select)

LTCH in Orlando, which opened in June 2003 -- had considerably

lower occupancy rates , whic h as discussed in the Select - Marion

Recommended Order (page 23) , is to be expected . If the beds and

patient days for those facilities are excluded from the

calculation in the SAAR , the overall occupancy rate for the

Florida LTCH beds in 2003 would have be en slightly above 71

percent.

47. The existing Florida LTCHs receive a majority of their

admissions from the county in which they are located, which is

consistent with the comment in the MedPAC Report that proximity

to an LTCH “quadruples the likelihood that a [patient] will use

a long - term care hospital.”

48. Florida LTCHs served patients in 174 of the 527 DRGs

in calendar year 2003 , but 50 of the DRGs accounted for 91

percent of the cases and 93 percent of the patient days . B y

far, the most commonly treated DRG is No. 475, which is

“respiratory system diagnosis with ventilator support.”

(3) Select - Escambia’s Proposed LTCH

49. Select - Escambia’s proposed LTCH will be a 54 - bed

freestanding facility in 54,090 square feet of new construction.

50. The precise location of the proposed LTCH is not yet

known. However, Select - Escambia conditioned approval of its CON

application on the facility being located in Escambia County ,

and the application states that the facility will be located

"proximate to the area acute care hospitals."

51. The service area for the proposed LTCH is Escambia

County and a 40 - mile radius around Pensacola. Th e service area

extends into Alabama on the west and into Santa Rosa and

Okaloosa Counties on the east . It excludes Walto n County .

52. The service area is reasonable based upon the facts

discussed in Part D(2)(a) below, particularly the concentration

of the population and the acute care beds in Escambia County,

the large elderly population in Escambia County, and the larg e

in - migration to (and small out - migration from) Escambia County

for acute care services.

53. The bed complement at the proposed LTCH will be 35

private rooms (five of which are ICU - level), 8 semi - private

rooms, and three isolation rooms (one of which is ICU - level).

The facility will also include a surgical suite, a gym for

physical and occupational therapy, a pharmacy, and laboratory

and x - ray facilities.

54. The total project cost is approximately $17.1 million.

That cost will be funded by Select from its net cash flow from

operations and through borrowings from Select’s bank.

55. The services at the proposed LTCH will include the

same “core” services found at other Select LTCH s . Those

services are the treatment of pulmonary and ventilator patients,

neuro - trauma and stroke patients, medically complex patients,

and wou n d care.

56. Select - Escambia has not negotiated patient transfer

agreements with any of the area hospitals, but the CON

application does include letters of support from Sacred Heart

Hosp ital - Pensacola in Escambia County and North Okaloosa Medical

Center in Okaloosa County. It is not unusual for patient

transfer agreements not to have been negotiated at the CON - stage

of the development of a new LTCH.

57. The proposed LTCH was projected t o open approximately

two years after approval of the CON, or in November 2006. That

date has been delayed as a result of this proceeding , but the

two - year construction period is reasonable .

58. The need projections in the application focus on the

first t wo years of the facility’s operation, 2007 and 2008, as

do the utilization and financial projections.

59. Select - Escambia projects that its proposed LTCH will

have 8,819 patient days in its first year of operation, and

14,054 patient days in its second ye ar of operation. Those

patient days equate to utilization rates of 45 percent in the

first year and 71 percent in the second year. Those projections

are reasonable and attainable.

60. Select - Escambia projects that its proposed LTCH will

generate a net l oss of approximately $2.18 million in the first

year of operation, and a net profit of approximately $1.19

million. Those projections are reasonable and attainable based

upon the utilization projected.

61. In addition to the letter of support from the tw o

hospitals referenced above, the CON application includes letters

of support from physicians, local politicians and businesses,

the operator of rehabilitation clinics in Pensacola, and the

medical director of several nursing homes in Pensacola.

62. The l etters of support attest to the general

unavailability of LTCH services in Escambia County and, as

discussed below, several of the letters specifically state that

the traditional post - acute care settings in the area are

inadequate for patients in need of l ong - term acute care.

D. Statutory and Rule Criteria

63. The statutory criteria applicable to the review of

Select - Escambia’s application are in the 2004 version of Section

408.035, Florida Statutes. 3

64. The Agency’s rules do not contain any specific

c riteria relating to LTCHs.

65. The general criteria in Florida Administrative Code

Rule 59C - 1.008(2)(e)2. are applicable because the Agency does

not publish a fixed need pool or a need methodology for LTCHs.

That rule requires the applicant to demonstrat e that there is a

need for its proposed facility or service.

(1) Stipulated Criteria

66. The parties’ Joint Pre - hearing Stipulation includes

the following stipulations relating to the statutory criteria 4 :

With respect to compliance with Section

408.035 (3), Florida Statutes, it is agreed

that Select - Escambia has the ability to

provide quality programs based on the

description of their programs in their CON

application and based on the operational

facilities of the applicant and/or of the

applicant's pare nt facilities which are

JCAHO certified.

With respect to compliance with Section

408.035(4), Florida Statutes, it is agreed

that Select - Escambia has the ability to

provide the necessary resources including

health personnel, management personnel and

funds for capital operating expenditures,

for project accomplishment and operation.

With respect to compliance with Section

408.035(6), Florida Statutes, it is agreed

that the immediate financial feasibility of

the Select - Escambia project is not in

dispute. It is further agreed by all

parties that the long term financial

feasibility of Select - Escambia is not in

dispute.

The parties agree that, if the projected

levels are realized ( i.e. , need) with

respect to compliance there is no disputed

issue with respect t o compliance with

Section 408.035(7), Florida Statutes, in

that the project will foster competition

that promotes quality and cost

effectiveness.

The parties agree there are no disputed

issues with respect to compliance with

Section 408.035(8), Florida St atutes, which

relates to an applicant's proposed costs and

methods of proposed construction for the

type of project proposed.

The parties agree there is no disputed

issues with respect to compliance with

408.035(9), Florida Statutes, as it relates

to Medi caid patients in that Select's

Medicaid provision (conditions - Schedule C)

exceeds the state average.

Section 408.035(10), Florida Statutes, is

not at issue with respect to a review of the

CON application filed by Select - Escambia.

67. In light of thos e stipulations, the only statutory

criteria still at issue are those relating to “need” – - Section

408.035(1), 5 (2), and (5), Florida Statutes -- and the charity

care component of Section 408.035(9), Florida Statutes.

68. The issue of “need” was identif ied as the dispositive

issue in this case . Mr. Gregg acknowledged in his testimony at

the hearing and in his deposition that other than the issue of

“need” there is no basis to deny Select - Escambia’s application.

(2) Criteria Related to “Need”

69. The statutory criteria in Section 408.035(1), (2), and

(5), Florida Statutes – - i.e. , need for the proposed service;

availability, quality of care, accessibility, and extent of

utilization of the service in the district; and the extent to

which the proposed se rvice will enhance access in the district -

- encompass essentially the same factors that are enumerated in

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

70. Mr. Gregg testified at the hearing that where there is

no LTCH in a district (as is the case in District 1), the Agency

presumes that there is some amount of need fo r LTCH services in

the district . However, Select - Escambia has the burden to

demonstrate the extent of that need .

(a) Demographic, Market, etc. Factors Showing Need

71. Each of the four counties in District 1 is relatively

long and narrow . The counties extend from the Gulf of Mexico to

the south and the Florida - Alabama line to the north.

72. Escambia County is the westernmost county in District

1, and Walton County is the easternm ost county in the district.

Santa Rosa County is immediately to the east of Escambia County,

and Okaloosa County is between Santa Rosa and Walton Counties.

73. A 40 - mile radius around Pensacola, which is the

largest city in Escambia County, encompasses a ll of Santa Rosa

County and almost all of Okaloosa County. Although much of

Walton County is outside of that radius, it (and all of District

1) is within an hour and a half drive of Pensacola.

74. Walton County is bordered on the east by Washington

and B ay Counties, which are in District 2. Panama City, which

currently has an LTCH, is in southern Bay County.

75. District 1 had a population of 670,283 in July 2004,

with approximately 45.6 percent of that population located in

Escambia County.

76. Appr oximately 13.4 percent of the July 2004 population

in District 1 was in the 65 age cohort, and 5.98 percent of

that population was in the 75 age cohort. Those percentages

were lower than the statewide averages of 17.8 percent in the

65 age cohort and n ine percent in the 75 age cohort.

77. The population of District 1 and the percentages of

the population in the 65 and 75 age cohorts are almost the

same as the population and percentages in District 2, which has

one operational (Panama City) and one approved (Tallahassee)

LTCH.

78. The population of District 1 is projected to grow

approximately 6.91 percent to 716,585 by July 2009, which is

five - year planning horizon applicable to this case.

79. The five - year growth rate in District 1 is lower th an

the 7.93 percent rate that the state as a whole is projected to

grow over the same period . H owever, the projected five - year

growth rate in the 65 and 75 age cohorts, which most heavily

utilize LTCH services, are higher than the statewide growth

rates in those age cohorts.

80. Specifically, the 75 age cohort in District 1 is

projected to grow 13.85 percent by July 2009, which is a higher

percentage than any other health planning district in the state

and nearly twice the statewide rate of 6.33 perce nt . T he 65

age cohort in District 1 is projected to grow 11.36 percent by

July 2009, which is higher than the 9.94 percent statewide rate

and higher than all but three of the other health planning

districts.

81. Walton County is projected to grow at a higher rate,

both as a whole and in the 65 and 75 age cohorts, over the

applicable five - year planning horizon than any of the other

counties in District 1 . T he higher growth rate is due in large

part to the fact that Walton County is considerably smalle r than

the other District 1 counties.

82. From a raw population perspective, there will be

considerably more growth in Escambia and Santa Rosa Counties

than in Walton County over the applicable five - year planning

horizon. The population of Walton Count y is expected to

increase by only 7,400 persons over that period, while the

population of Escambia and Santa Rosa Counties are expected to

increase by almost 27,000 persons.

83. As of December 2003, there were approximately 1,800

acute care beds in Distr ict 1 at 11 hospitals. For calendar year

2003, the district - wide average occupancy of those beds was 52.4

percent.

84. The three largest hospitals in District 1 are located

in Escambia County. Those hospitals -- Baptist Hospital, Sacred

Heart Hospital - P ensacola , and West Florida Regional Medical

Center -- are all similar in size and account for approximately

1,135 (or 62.6 percent) of the acute care beds in District 1.

85. Sacred Heart Hospital - Pensacola provided a letter of

support for Select - Escambia 's proposed LTCH, as did two

hospitals in Okaloosa County ( i.e. , Sacred Heart Hospital of the

Emerald Coast and North Okaloosa Medical Center).

8 6 . The data presented in the CON application (at pages

000118 to 000121) shows that between 62.4 and 68.4 pe rcent of

the “long - stay patients” in District 1 were in the three

Escambia County hospitals; that those hospitals had a relatively

high (28.8 to 31.6 percent) in - migration rate of long - stay

patients from outside of Escambia County; and that there is very

l ittle (1.3 to 3.6 percent) out - migration of Escambia County

long - stay patients to other District 1 hospitals.

87. Only one District 1 resident was admitted to a Florida

LTCH in calendar year 2003, which is a strong indication that

LTCH services are not r easonably accessible to District 1

residents even with the establishment of the Panama City LTCH in

early 2003.

88. The Panama City LTCH, which is approximately 100 miles

from Pensacola, is too far away from Escambia County to be a

reasonable alternative for residents of that county. The same

is true for the other counties in District 1, except for Walton

County which is geographically closer to Panama City than it is

to Pensacola.

89. T he Panama City LTCH was not expected to serve

District 1. Accordin g to the SAAR that recommended approval of

that LTCH, t h e facility was projected to get 60 percent of its

admissions from its host hospital, Bay Medical Center , and only

two of the potential LTCH referrals were projected to come from

a District 1 hospital . Those referrals were projected to come

from Santa Rosa Medical Center in Santa Rose County, and n one of

the referrals to the Panama City LTCH were projected to come

from Escambia County.

90. Those projections are consistent with the experience

of the Panama City LTCH since it opened in early 2003. Only

f ive or six patients from Escambia County have been referred to

the Panama City LTCH, and none have chosen to be admitted to the

facility .

91. There are no LTCHs or “like services” in District 1

bec ause, as more fully discussed in Part C(1) above, the

traditional post - acute care settings such as SNFs, CMRs, and

hospital - based SNUs are not substitutes for LTCHs.

92. T he data presented in the CON application shows that

in calendar year 2003 there were 500 patients treated in

District 1 hospitals with LTCH - appropriate DRGs who were in the

hospital for a collective 13,942 days beyond the geometric mean

length of stay (GMLOS), 6 which corresponds to an average of 27.9

days beyond the GMLOS. It is reasonab le to expect that that

those patients would have been discharged to a post - acute care

setting if they no longer needed acute care, and because there

were available CMR, SNU, and SNF beds in the d istrict, 7 it is

reasonable to infer that the patients were st ill in need of

long - term acute care and/or that the available post - acute care

facilities did not offer the requisite level of intensive care.

93. This inference is corroborated by the letters of

support from local physicians that were included in the CO N

application. For example, the October 7, 2003, letter to Mr.

Gregg from Dr. Donna Jacobi states that:

Our skilled nursing facilities and subacute

units have had difficulty in managing

complex, more unstable patients . . . . One

facility was equipped an d staffed for

ventilator patients when it opened; now that

ward is for routine SNF care. Our

rehabilitation institute is not the place

for these patients either – they may be too

ill for three hours of therapy daily.

Currently some of these patients rema in in

acute care much longer than necessary and

are subjected to iatrogenic [sic] risks,

depression, and possible further decline in

functional status while becoming more

medically stable. Others bounce back and

forth between nursing home and hospital, an d

a few leave our area of the state to find

care elsewhere – far from their family and

friends who are very important to their

recovery. A LTA C H [sic] would provide the

opportunity for them to remain here in a

supportive environment. [ 8 ]

94. Letters of s upport such as Dr. Jacobi’s and those

quoted in Endnote 8 , with detailed information about the

inability to place patients in existing facilities , are the type

that the Mr. Gregg identified in Select - Marion (page 60, endnote

5) as being the most useful to the Agency in “validating” the

applicant’s numeric need projections.

95. In sum, the demographic and market conditions

described above, coupled with the letters of support from local

physicians and two of the acute care hospitals in District 1 ,

support th e establishment of an LTCH in the district , and more

specifically, in Escambia County.

(b) Quantification of the Need / Numeric Need

96. Select - Escambia presented two different methodologies

in its application to quantify the need for LTCH beds in

Distri ct 1. The methodologies are similar, but not identical to

the methodology recently accepted by the Agency in Select -

Marion . 9

97. The methodologies presented in the application each

define the potential patients for Select - Escambia’s proposed

LTCH as the “long - stay patients” in the existing District 1

acute care hospitals with “LTCH - appropriate DRGs.” That

approach is reasonable from a health planning perspective

because, as discussed in Part C(1) above, an LTCH is likely the

most appropriate setting for such patients from a financial and

patient - care standpoint.

98. The methodologies differ in their definition of what

constitutes a “long - stay patient,” but they both use the GMLOS

as the starting point, which is reasonable from a health

planning perspecti ve.

99. Both methodologies define the “LTCH - appropriate DRGs”

as the 50 DRGs that are most commonly treated in the existing

Florida LTCHs. The focus on the “top 50” DRGs was reasonable

from a health planning perspective because those DRGs account

for more than 91 percent of the cases and 93 percent of the

patient days at the existing Florida LTCHs.

(i) GMLOS Methodology

100. The first methodology presented in the application – -

“the GMLOS methodology” – - identified all of the patients

treated in the District 1 hospitals with LTCH - appropriate DRGs

whose length of stay was at least 15 days longer than the GMLOS

for the DRG. A similar definition of long - stay patients was

accepted by the Agency in Select - Marion .

101. There were a total of 500 po tential LTCH patients

identified through Select - Escambia’s GMLOS methodology.

According to the dat a included in the CON application (at page

000120), 30 of those patients were Walton County residents and

55 resided outside of District 1.

102. Selec t - Escambia calculated a total of 19,409

potential LTCH patient days that would be generated by the 500

identified long - stay patients, which equates to an average daily

census ( ADC ) of 53.

103. According to Select - Escambia's health planner

(Transcript, at 131), t he 19,409 patient - days included all of

the days in the patient’s hospital stay as potential LTCH

patient days, and not just that portion of the stay that

exceeded the GMLOS. T he inclusion of all of the days in the

patient’s hospital stay as potenti al LTCH patient days is not

reasonable because the vast majority of LTCH patients are

transferred from an acute care hospital at some point during the

patient’s hospital stay, typically at or after the GMLOS.

104. The effect of including all of the days in the

patient’s hospital stay as potential LTCH patient days rather

than just the days after the GMLOS is an overstatement of the

potential LTCH patient days and the ADC calculated under the

GMLOS methodology in Select - Escambia’s application.

105. If only the days beyond the GMLOS were included (as

was done in Select - Marion ), the result would be 13,941 potential

LTCH patient days . I f the 875 days attributable to Walton

County residents and the 1,596 days attributable to non - District

1 residents were excluded ( see Exhibit P2, at 000121), then the

total would be 11,471 potential LTCH patient days .

106. The ADC of 53 calculated by Select - Marion under the

GMLOS methodology is not reliable because it was based upon

the 19,409 patient days. Using the 13,941 or 11,471 patient

days referenced above would result in an ADC of 38.2 or 31.4,

respectively.

107. Based upon an 80 occupancy standard, those ADCs would

translate into a projected need for 40 to 48 LTCH beds in

District 1. If a 75 percent occupan cy standard was used, the

projected LTCH bed need would be 42 to 51 beds. The lower

numbers in each of those ranges reflect the exclusion of the

patient days attributable to Walton County residents and non -

District 1 residents; the higher numbers in those ranges reflect

the inclusion of those residents.

108. An 80 percent occupancy standard was accepted by the

Agency in Select - Marion and was also used by Select in Select -

Sarasota . As stated in the Recommended Order in Select - Marion

(at page 37), the 80 percent occupancy standard “better reflects

the lower bed turn - over by LTCH patients than does the 75

percent occupancy standard typically applied to traditional,

‘short - term’ acute care hospitals.”

(ii) GMLOS Methodology

109. The second methodology presented in the application -

– “the GMLOS methodology” – - uses a broader definition to

identify the potential LTCH patients in District 1 . I t includes

all of the patients with LTCH - appropriate DRGs who were treated

in the District 1 hospitals and whos e lengths of stay were at

least seven days longer than the GMLOS.

110. The broader definition of long - stay patients in the

GMLOS methodology resulted in 1,498 potential LTCH patients

( see Exhibit P2, at 000117 (Table 1 - 16(b)), 000120), as compared

to th e 500 potential LTCH patients identified through the

GMLOS methodology.

111. The Agency did not expressly take issue with the

broader definition used in the GMLOS methodology to identify

the potential LTCH patients, and it cannot be said based upon

the record evidence in this case that the definition is

inherently unreasonable.

112. In calculating the potential LTCH patient days under

the GMLOS methodology, Select - Escambia only included the days

that the patient stayed in the hospital beyond the GMLOS, which

are referred to in the application as “excess days.” See

Tr anscript, at 132. A similar approach was used in the

methodology accepted by the Agency in Select - Marion .

113. The following table, which is derived from the data

in Table 1 - 16(a) in the CON application , summarizes the number

of excess days generated by patients in the District 1 hospitals

based upon the patient’s county of residence:

Escambia County 11,434

Okaloosa County 5,634

Santa Rosa County 3,194

Subtotal: Dis trict 1

Residents except for

Walton County 20,262

Walton County 1,410

Subtotal: All

District 1

residents 21,672

Outside of District 1 2,340

Total 24,012

114. Select - Escambia then converted the excess days int o

“forecasted LTCH cases” by dividing the most conservative figure

– - the 20,262 days, which excluded Walton County residents and

non - District 1 residents -- by the 33.6 ALOS at Select’s

existing freestanding LTCHs. The result – - 603 cases – - was

then inf lated based upon the projected growth rate in District 1

to determine the number of forecasted LTCH cases in 2007 and

2008, which were projected to be the first two years of

operation for Select - Escambia’s proposed LTCH. The forecasted

cases were then con verted into “forecasted LTCH days” by

multiplying the number of cases by the same 33.6 ALOS.

115. The conversion of the excess days into forecasted

LTCH cases and then back into forecasted LTCH days based upon a

33.6 ALOS is not reasonable because, accor ding to the CON

application, 10 the initial calculation of the excess days is

intended to reflect the number of days that patients would

likely spend in the LTCH rather than the short - term acute care

hospitals in District 1 if an LTCH was available in the a rea.

The ALOS experienced by Select at its other facilities is

irrelevant to that issue.

116. The effect of the conversion step in Select -

Escambia’s GMLOS methodology is an overstatment of the

forecasted LTCH patient days, as can be seen through a

comp arison of the data in Tables 1 - 16(a) and 1 - 16(b) in the CON

application.

117. Table 1 - 16(b) shows the number of cases associated

with the excess days calculated in Table 1 - 16(a). The 1,498

total cases identified on Table 1 - 16(b) correlate to the 24,012

total excess days identified on Table 1 - 16(a). As a result,

there is an average of only 16.03 excess days per case.

118. Stated another way, the long - stay patients identified

through the GMLOS methodology are staying in the hospital an

average of 16.0 3 days longer than the GMLOS. It is those 16.03

days/case that make up the potential LTCH patient days , but the

conversion described above appears to assume that those same

patients would stay in Select - Escambia’s proposed LTCH for 33.6

days. There is no logic or reason to t hat assumption, and as a

result, the patient days, ADC, and bed need reflected in Table

1 - 17 of the application are not reliable.

119. The most reliable projection of bed need that can be

calculated based upon the data presented in co nnection with the

GMLOS methodology is derived from the Table 1 - 16(a), to wit:

Excess Bed Need

Days ADC (at 80%)

Escambia only 11,434 31.3 40

District 1

excluding Walton

and non - District 1 20,262 55.5 70

District 1

including Walton;

excluding non -

District 1 21,672 59.4 75

120. Accordingly, the GMLOS methodology projects a need

for 70 to 75 LTCH beds , depending upon whether Walton County

residents are included in the calculation, with 40 of th e beds

attributable to the excess days generated by Escambia County

residents alone.

(iii) Ultimate Findings Regarding Numeric Need

121. Using the most conservative figures produced by the

respective need methodologies presented in the application,

ther e is a need for between 40 ( see Finding of Fact 107 ) and 70

( see Finding s of Fact 119 and 120 ) LTCH beds in District 1.

122. It is reasonable to expect that the “actual” bed need

is towards the mid - point of that range -- 55 beds -- because

Select - Escambia ’s proposed LTCH will likely get some of the

potential LTCH admissions from Walton County , as well as some of

the potential LTCH admissions from outside of District 1 ;

because as many as seven percent of the facility's patient days

will be attributable to patients whose diagnoses are not within

the “top 50” DRGs used in the methodologies to identify the

potential LTCH patients ; and because the methodologies and the

fiqures reflected in the preceeding paragraphs do not take into

account the growth in admissi ons and patient days between 2003

(the period used in the methodologies) and 2007 (when Select -

Escambia's proposed LTCH is projected to open) that is expected

as the population of District 1 grows, particularly in the 65

and 75 age cohorts.

123. Acco rdingly, the preponderance of the evidence

establishes that there is a numeric need for the 54 LTCH beds

proposed by Select - Escambia.

(3) Other Disputed Criteria

124. Section 408.035(9), Florida Statutes, requires

consideration of the “ applicant's past and proposed provision of

health care services to Medicaid patients and the medically

indigent.”

125. The statutory reference to “the medically indigent”

encompasses what are typically referred to as charity patients.

126. Select - Escambia conditioned t he approval of its CON

application on the provision of two percent of the patient days

at its proposed LTCH to Medicaid patients and 0.8 percent of the

patient days to charity patients.

127. It was stipulated that Select - Escambia’s commitment

to Medicaid patients exceeds the statewide average for LTCHs,

which according to the SAAR is 1.24 percent of patient days.

128. Select - Escambia’s commitment to charity patients is

slightly lower than the statewide average for LTCHs, which is

0.94 percent of patient d ays. 1 1

129. When viewed collectively, Select - Escambia’s

commitment to Medicaid and charity patients -- 2.8 percent of

patient days -- exceeds the statewide average for LTCHs of 2.18

percent of patient days.

130. The commitments to Medicaid and charity pa tients in

Select - Escambia’s CON application were based upon Select’s

experience at its other LTCHs, and they are reasonable and

attainable in District 1.

131. The fact that Select - Escambia’s commitment to charity

patients is slightly lower than the statew ide average for LTCHs

is not significant under the circumstances of this case.

Indeed, Mr. Gregg conceded at the hearing that it is not an

independent basis to deny Select - Escambia’s application, and

that the Agency will accept Select - Escambia’s proposed charity

commitment of 0.8 percent of patient days if the CON is

ultimately approved.

CONCLUSIONS OF LAW

132. The Division has jurisdiction over the parties to and

subject matter of this proceeding pursuant to Sections 120.569,

120.57(1), and 408.039(5), Florida Statutes.

133. Select - Escambia has the burden to prove by a

preponderance of the evidence that its CON application should be

approved. See , e.g. , Boca Raton Artificial Kidney Center, Inc.

v. Dept. of Health & Rehabilitative Servs. , 475 So. 2d 26 0, 263

(Fla. 1st DCA 1985); Select - Marion , supra , at 56; Select -

Sarasota , supra , at 21.

134. Generally, the review of a CON application requires a

balanced consideration of the applicable statutory and rule

criteria in which the appropriate weight to be g iven to each

criterion is not fixed, but rather varies based upon the facts

of the case. See , e.g. , Morton F. Plant Hospital Ass’n, Inc. v.

Dept. of Health & Rehabilitative Servs. , 491 So. 2d 586, 589

(Fla. 1st DCA 1986) (quoting North Ridge General Hospi tal, Inc.

v. NME Hospitals, Inc. , 478 So. 2d 1138, 1139 (Fla. 1st DCA

1985)); Select - Marion , supra .

135. In this case, however, the parties’ stipulations have

made the issue of “need” the dispositive criterion. If Select -

Escambia establishes need for its proposed LTCH – - numerically

and based upon the criteria in Florida Administrative Code Rule

59C - 1.008(2)(e)2. -- then the balancing of the remaining

statutory and rule criteria tilt in favor of granting the

application, but if it does not establish need then the balanc e

tilts in favor of denying the application. Accord Select -

Sarasota , supra , at 21 - 22.

136. Because the Agency does not publish a fixed need pool

for LTCHs or a formula or methodology for projecting need for

LTCH beds, the determination of need for new LTCH beds is

governed by Florida Administrative Code Rule 59C - 1.008(2)(e)2.

That rule provides:

(e) . . . . If an agency need

methodology does not exist for the proposed

project:

* * *

2. . . . the applicant will be

responsible f or demonstrating need through a

needs assessment methodology which must

include, at a minimum, consideration of the

following topics, except when they are

inconsistent with the applicable statutory

and rule criteria:

a. Population demographics and dyn amics;

b. Availability, utilization and quality

of like services in the district,

subdistrict or both;

c. Medical treatment trends; and

d. Market conditions.

137. The criteria in that rule encompass essentially the

same issues as are containe d in the statutory criteria that have

not been stipulated to by the parties . See § 408.035(1), (2),

(5), Fla. Stat. Thus, to the extent that Select - Escambia

establishes “need” based upon the rule criteria, it has also

done so under the statutory criteria .

138. Select - Escambia met its burden to establish “need”

for its proposed LTCH in accordance with the statutory and rule

criteria. Specifically, as more fully discussed in Part D(2) of

the Findings of Fact, the preponderance of the evidence

establishes that the population of District 1 and Escambia

County are growing, particularly in the 65 and 75 age cohorts

that most heavily utilize LTCH services; that the existing LTCH

in Panama City does not serve Escambia County and, because of

its distance, it is not a reasonable alternative for District 1

residents in need of LTCH services except for those residents in

Walton County; that there is support for Select - Escambia’s

proposed LTCH from physicians and hospitals in District 1; that

the traditional post - ac ute care settings in District 1 do not

provide reasonable alternatives to the proposed LTCH because

they are not currently being utilized by long - stay patients with

LTCH - appropriate DRGs and, according to the letters of support,

the post - acute care facilit ies cannot accommodate ventilator

patients, which make up a large percentage of the LTCH patient

population ; that Select - Escambia’s proposed LTCH will utilize

admission criteria designed to ensure that its facility is only

used by patients for whom other c are settings are not medically

appropriate; and that, even excluding Walton County residents, a

numeric need has been shown for the 54 LTCH beds that Select -

Escambia has proposed.

139. Therefore, in light of the parties’ stipulations

regarding the other r eview criteria, Select - Escambia’s CON

application sh ould be approved.

RECOMMENDATION

Based upon the foregoing findings of fact and conclusions

of law, it is

RECOMMENDED that the Agency issue a final order approving

Select - Escambia’s application, CON 9800.

DONE AND ENTERED this 17th day of June , 2005, in

Tallahassee, Leon County, Florida.

S

T. KENT WETHERELL, II

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Talla hassee, 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 17th day of June, 2005.

ENDNOTES

1/ Official recognition of the Federal Regi ster pages was taken

through an Order issued in DOAH Case No. 04 - 0455CON on August

19, 2004, which was prior to the consolidation of that case with

this case. The parties agreed at the hearing that those

materials should be part of the record of this case , even though

the file in DOAH Case No. 04 - 0455CON was subsequently closed.

See Transcript, at 6 - 7.

2/ A Recommended Order was recently issued recommending

approval of two LTCHs with a total of 130 beds in District 9.

See Select Specialty - Hospital - Palm Beach, Inc. v. Agency for

Health Care Admin. , Case Nos. 03 - 2486CON and 03 - 2854CON (DOAH

Apr. 18, 2005).

3/ Unless otherwise indicated, all statutory references in this

Recommended Order are to the 2004 version of the Florida

Statutes.

4/ The Joint Pre - hearing Stipulation cited the 2003 version of

Section 408.035, Florida Statutes, but the parties agreed at the

hearing that the 2004 version of the statute applies to CON

9800. See Transcript, at 9 - 10. Accordingly, the citations to

the 2003 version of t he statute in the stipulations quoted from

the Joint Pre - hearing Stipulation have been replaced with the

corresponding citations to the 2004 version of the statute.

Brackets are omitted for ease of reading.

5/ The Joint Pre - hearing Stipulation indicated that the

criteria in Section 408.035(1), Florida Statutes (2003), were

not applicable because there are no local health plan

preferences related to LTCHs. The reference to the local health

plan preferences in that subsection was deleted by Chapter 2004 -

3 83, Laws of Florida, and the subsection now more generally

requires consideration of “[t]he need for the health care

facilities and health services being proposed.” See §

408.035(1), Fla. Stat.

6 / The GMLOS is a statistically - adjusted value calculated b y

the federal government for each DRG that takes into account

certain types of cases that could skew an arithmetic ALOS. In

essence, the GMLOS is the length of time that the “typical”

patient would be expected to spend in the hospital for a

particular ill ness/injury.

7 / Table 1 - 10 of the CON application indicates that the 2003 -

2003 occupancy rates in District 1 were 61.76 percent for CMR

beds, 58.49 percent for hospital - based SNU beds, and 91.84

percent for SNF beds. See Exhibit P2 at 000078. Similarly , the

SAAR identifies occupancy rates of 63.63 percent for CMR beds,

47.65 percent for hospital - based SNU beds, and 83.64 percent for

SNF beds for calendar year 2003. See Exhibit A - 2, at 7.

8 / See Exhibit P2, at 000020. Other letters are in accord.

See , e.g. , October 1, 2003, letter to Mr. Gregg from Dr. F.

James Fleischhauer (Exhibit P2, at 000009 and 000021), which was

“reaffirmed” through his letter dated March 23, 2004 ( id. at

000008), and which identifies 24 patients treated by his group

“who wo uld likely be candidates for admission into an LTACH

[sic] if one were conveniently located in Pensacola” and who

were otherwise required to remain in the short - term acute care

setting since they were too ill to be discharged to a SNF or

other traditional post - acute care setting; September 18, 2003,

letter to Mr. Gregg from Pensacola Lung Group ( id. at 000007 and

000022), which was “reaffirmed” through a letter dated March 23,

2004 ( id. at 000006), and which states that “ventilator

supported patient[s] must be sent out of the area for current

long - term care”; October 7, 2003, letter to Mr. Gregg from Dr.

Barbara H. Wade ( id. at 000025 and 000027), which identifies six

patients treated by her group “who would likely be candidates

for admission into LTACH [sic ] if one were conveniently located

in Pensacola”; October 8, 2003, letter to Mr. Gregg from Tina

Craft and Sue Kearney, the managers of case management and

social services, respectively, at Sacred Heart Hospital ( id. at

000026), which states that “[s]kille d nursing facilities in our

community are not able to meet the needs of our patients who

require ventilator support.”

9 / The methodology used by Kindred Hospitals East, LLC

(Kindred) and accepted by the Agency in Select - Marion was more

conservative than either of the methodologies presented in

Select - Escambia’s application. Kindred’s methodology defined

long - stay patients as those with lengths of stay at least 17

days longer than the GMLOS, and in calculating the potential

LTCH days generated by those pa tients, Kindred excluded the days

before the GMLOS as well as the first seven days after the

GMLOS. See Select - Marion , supra , at 34. The purpose of

excluding the first seven days after the GMLOS was to “take[]

into account the fact that hospitals typical ly do not consider

the transfer of patients to an LTCH until after the GMLOS and

that it typically takes several days for the transfer to be

coordinated once the patient has been identified as a potential

LTCH patient.” Id. Neither of the methodologies p resented in

Select - Escambia’s application take into account the delay - in -

transfer issue discussed in Select - Marion , but the Agency did

not argue in the SAAR, at the final hearing, or in its PRO that

the methodologies are deficient for that reason.

1 0 / Se e Exhibit P2, at 000097 (stating that the calculation of

the excess days “identifies the days acute care hospitals

incurred [] for treating long - stay patients” and the calculation

“provide[es] an estimate of the potential long - term care

hospital patient da ys”).

1 1 / In making this finding, the undersigned did not overlook

the data in the CON application that purports to show that

charity patients represented only 0.02 percent of patient days

in the Florida LTCHs in calendar year 2003 . S ee Exhibit P2, at

0 00288 . H owever, Select - Escambia’s health planner testified at

the hearing that the statewide average for charity patients was

“under one percent, it might be .9 or .94 or something like

that” (Transcript, at 125), which is consistent with the

percentage i dentified in the SAAR. See Exhibit A - 2, at 20 - 21.

COPIES FURNISHED :

Richard Shoop, Agency Clerk

Agency for Health Care Administration

2727 Mahan Drive, Mail Station 3

Tallahassee, Florida 32308

William Roberts, Acting General Counsel

Agency for Hea lth Care Administration

Fort Knox Building, Suite 3431

2727 Mahan Drive

Tallahassee, Florida 32308

Alan Levine, Secretary

Agency for Health Care Administration

Fort Knox Building, Suite 3116

2727 Mahan Drive

Tallahassee, Florida 32308

Mark A. Emanuele, Esquire

Panza, Maurer, & Maynard, P.A.

Bank of America Building, Third Floor

3600 North Federal Highway

Fort Lauderdale, Florida 33308

Kenneth W. Gieseking, Esquire

Agency for Health Care Administration

2727 Mahan Drive, Mail Station 3

Tallahassee, Flor ida 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.