91-005720 University Community Hospital vs. Department Of Health And Rehabilitative Services Status: Closed Recommended Order on Thursday, January 16, 1992.

Summary: Held petitioner did not meet rule requirements for Certificate Of Need (CON) and no special circumstances shown to authorize CON.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

UNIVERSITY COMMUNITY HOSPITAL, )

)

Petitioner, )

)

vs. ) CASE NO. 91-5720

)

DEPARTMENT OF HEALTH AND )

REHABILITATIVE SERVICES, )

)

Respondent, )

)

and )

)

HUMANA OF FLORIDA, INC., d/b/a )

HUMANA WOMEN'S HOSPITAL TAMPA, )

and HILLSBOROUGH COUNTY HOSPITAL )

AUTHORITY, d/b/a TAMPA GENERAL )

HOSPITAL, )

)

Intervenors. )

__________________________________)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly

designated Hearing Officer, K. N. Ayers, held a formal hearing in the above-

styled case on December 3-6, 1991, at Tallahassee, Florida.

APPEARANCES

For Petitioner: Cynthia S. Tunnicliff, Esquire

W. Douglas Hall, Esquire

Post Office Drawer 190

Tallahassee, Florida 32302

For Respondent: Richard Patterson, Esquire

2727 Mahan Drive

Tallahassee, Florida 32308

For Intervenor James C. Hauser, Esquire

Humana: Post Office Box 508

Tallahassee, Florida 32302

For Intervenor John Radey, Esquire

Tampa General: Post Office Drawer 11307

Tallahassee, Florida 32302

STATEMENT OF THE ISSUES

Whether Petitioner should be granted CON No. 6606 to convert 10

medical/surgical beds to 10 neonatal intensive care beds to create a Level II

neonatal intensive care unit ( NICU).

PRELIMINARY STATEMENT

By Application for CON dated March 21, 1991, University Community Hospital

( UCH) seeks authority to install a Level II NICU through the conversion of 10

existing medical/surgical beds. By letter dated May 7, 1991 (Exhibit 5), UCH

was advised by the Department of Health and Rehabilitative Services ( DHRS) that

its Application was deemed complete and that a State Agency Action Report ( SAAR)

ruling on the application will follow. By letter dated July 8, 1991 (Exhibit

6), UCH was advised that its Application was denied for reasons contained in the

attached SAAR and of UCH's right to challenge the decision by filing a petition

for an administrative hearing.

Grounds for denying the Application included:

1. Need methodology for Level II NICU did not

show a need for additional beds in District

VI;

2. Need not supported by local health council

plan or state health plan, primarily for

failure to meet the preferences established

in these plans;

3. Project does not increase availability or

access (geographical and financial) and

improve quality of care in District VI;

4. Project projected admissions to the proposed

NICU were deemed unrealistically high;

5. UCH obstetrics hospital was not opened at

the time of the application and could not

meet the rule requirement of 1000 live

births in the prior calendar year;

6. The occupancy rate of existing providers in

District VI did not reach 80 percent;

7. Due to the unrealistically high patient pro-

jections and the effect the proposed unit,

if granted, would have on existing providers,

the project was deemed to be not financially

feasible immediately or for the long term; and,

8. The application failed to address the needs of

a health maintenance organization, will unfairly

impact on existing providers, will not foster

competition to promote quality assurance and

cost effectiveness, failed to show no less

costly, more efficient alternatives to the

proposed project, and failed to show patients

needing Level II NICU care are unable to obtain

same.

By Petition for Formal Administrative Hearing dated August 6, 1991, UCH

requested a hearing to challenge the denial of CON No. 6606, Humana and Tampa

General petitioned to intervene, and these proceedings followed. At the

commencement of the hearing, it was noted by the Hearing Officer that the

prehearing stipulation required by Order entered September 11, 1991 had not been

submitted, and the parties then stipulated that subsections 381.705(1)(a), (b),

(d), (h), ( i), (j), (l), and (n), Florida Statutes, were the only review

criteria challenged in these proceedings.

Thereafter, Petitioner called Bridget Shaw, who prepared the application;

Sandra Williams, accepted as an expert in health care finance; Scott Hopes,

accepted as an expert in health care planning; Keith Kanarek, accepted as an

expert in neonatology; and Henry Hyatt, accepted as an expert in obstetrics.

Respondent called Alfie Stamm, accepted as an expert in health care planning;

and Alberta Granger, accepted as an expert in health care planning. Tampa

General Hospital called Paul Powers, accepted as an expert in health care

finance; Howard E. Fagan, accepted as an expert in health care planning and

health care finance; and Patrick J. McCarthy, accepted as an expert in

obstetrics and gynecology. Humana called John Manieri, accepted as an expert in

hospital finance; and Daniel J. Sullivan, accepted as an expert in health care

planning and health care finance. Thirty-two exhibits were offered into

evidence, and all were admitted with the exception of Exhibit 12 to which

objection, on grounds it was not on the list of exhibits to be offered into

evidence as required by the prehearing order, was sustained. Exhibit 32 was the

deposition of Donna Koslowski taken November 25, 1991. The Hearing Officer took

official notice of all statutes and applicable rules published in the Florida

Administrative Code and the final orders and recommended order in DOAH Case Nos.

90-7682 and 90-6496.

Proposed findings have been submitted by the partieseatment accorded

those proposed findings is contained in the Appendix attached hereto and made a

part hereof.

FINDINGS OF FACT

1. UCH is a licensed acute care hospital with 404 authorized beds. A

number of these beds were transferred to the Women's Center, which was exempted

from CON review by DHRS. (Exhibit 8) The Women's Center involved the

expenditure by UCH of some $11,000,000 to construct and equip a separate

building adjacent to the existing hospital. The Women's Center was completed

and became operational in September 1991. Accordingly, at the time the

Application for NICU beds was submitted through the processing of the

Application by DHRS, no births were experienced at this facility.

2. For the first two months the Women's Center was operational, the

Women's Center experienced 107 births of which 1 required transfer to a hospital

providing Level II neonatal intensive care services.

3. At the time the batching cycle for the September 27, 1990 deadline and

January 1993 planning horizon was published (Exhibit 18), the NICU inventory was

in litigation, and DHRS did not publish a fixed bed need pool for that batching

cycle. Instead, in Florida Administrative Weekly, Vol. 16, No. 34, dated August

24, 1990 (Exhibit 18), an estimated inventory of existing beds was used in the

bed need formula calculation. This showed for District VI zero need for

additional NICU Level II beds. Subsequent to the issuance of the State Agency

Action Report ( SAAR), in this case litigation was complete, and DHRS entered a

Final Order on September 15, 1991 establishing the bed inventory for neonatal

intensive care beds Level II and Level III in District 6. That Order increased

the NICU Level II bed inventory by 15 beds by adding four beds to Lakeland

Regional Medical Center ( LMRC) NICU and 11 beds to Winter Haven's NICU. These

additions increased the NICU Level II inventory in District VI from the 61 shown

on Exhibit 18 to 76. The SAAR (Exhibit 6) used an inventory of 77 Level II NICU

beds in District VI to determine no need after application of the bed need

formula showed a need for 70 Level II NICU beds in District VI. Changing the

inventory from 77 to 76 NICU beds does not affect this conclusion.

4. Occupancy rates used in the bed need calculation were taken from the

reports hospitals are required to submit to local health councils. In some

instances in the batching cycle here involved, the hospitals had failed to

report to the local health councils their occupancy rate for the period required

by the bed need formula, and DHRS contacted these hospitals in District VI for

the data needed.

5. Petitioner contends that the occupancy rate data relied upon by DHRS in

calculating the need for NICU beds for the 1993 planning horizon is inaccurate

and that more reliable data is obtained from using different reports that the

hospitals are required to submit to the Hospital Cost Containment Board ( HCCB).

Petitioner's expert witness opined that the information hospitals are required

to submit to the HCCB provides a more accurate method of determining the

occupancy rate of the Level II NICU beds at each hospital. Petitioner also

contends that at the time the Level II occupancy rates were provided to DHRS

there was no finite definition, by rule, of the differences between Levels I, II

and III NICUs, and the hospitals did not submit accurate data. However,

credible evidence was presented that a proposed definition of Levels I, II and

III NICUs had been promulgated to all of the hospitals and, when enacted as a

rule, this proposed definition was adopted verbatim or nearly so.

6. Intervenors' witnesses pointed out that the hospital reports to HCCB

are based on DRG's (diagnostic related groups), and the same DRG is frequently

used on a Level I, II or III NICU admission. Accordingly, from those reports to

the HCCB an accurate determination of the Level II occupancy rate cannot be

made. Furthermore, the patient, during the hospital stay, is frequently moved

from Level III to Level II to Level I care, and this data cannot be obtained

from the reports submitted to the HCCB. Accordingly, it is found that the

reports submitted by hospitals to the local health councils provide more

accurate occupancy rates than can be gleaned from the reports submitted to the

HCCB, and the occupancy rate utilized by DHRS to calculate NICU bed need is

correct.

7. The average occupancy rate for District VI hospitals providing NICU

Level II beds was approximately 70 percent during the most recent 12 months

prescribed for this batching cycle. Although discrepancies were noted in the

patient days at Humana and Tampa General during this period, when these

discrepancies were corrected, the district occupancy rate remained in the

vicinity of 70 percent.

8. Rule 10-5.042(3)(d), Florida Administrative Code, provides that

regardless of bed need shown (by using the bed need formula) the establishment

of new Level II NICU beds within a district shall not normally be approved,

unless the average occupancy rate for Level II beds in the district equals or

exceeds 80 percent for the most recent 12 month period ending 6 months prior to

the beginning date of the quarter of the publication of the fixed bed need pool.

Petitioner submitted no evidence to demonstrate a not normal situation existed

to waive the 80 percent average District VI occupancy rate required before

additional Level II NICU beds will be approved. Petitioner principally relied

upon the admissions in Hillsborough County to demonstrate an 80 percent

occupancy rate. However, the rule specifically refers to a district rate rather

than to a subdistrict or one-county rate.

9. In several areas, Petitioner's estimates used to determine the

anticipated number of patients to be served in the proposed NICU are not

realistic. To determine the ratio of Level II patients to the number of births,

Petitioner relied on data from Lakeland Regional Medical Center ( LMRC) as a

comparable hospital. However, LMRC is not comparable to UCH in patient payor

mix. In excess of 40 percent of LMRC obstetrical cases are Medicaid patients,

while UCH projects only 6 percent Medicaid births. A lower income payor such as

Medicaid patients have a much higher ratio of ill babies at birth than do more

affluent mothers who generally receive better prenatal care. Consequently, the

percentage of births needing Level II care in the payor mix expected at UCH is

more comparable to the percentage experienced by Humana Women's Hospital, an

Intervenor herein. At Humana the percentage of births requiring Level II care

is on the order of 6 percent as compared to 15.6 percent at LMRC. This lower

ratio is more consistent with UCH experience in its first two months of

operations where out of 107 births only 1 required transfer to a Level II NICU.

10. Some question was raised regarding the accuracy of Petitioner's

estimate of 1500-1700 births during the first full year of operation. While it

would be expected that admissions to a new facility would be lower the start-up

year than in subsequent years, hard evidence to support the proposed number of

births or a lessor number was not presented. In either case, Petitioner has

failed to meet the birth requirement of a minimum of 1000 live births for the

most recent 12 month period ending 6 months prior to the beginning date of the

quarter of the publication of the fixed need pool needed to qualify for this

CON. Petitioner presented no evidence to support the not normal conditions that

would provide an exemption to this requirement in Rule 10-5.042(6), Florida

Administrative Code, other than the fact that it is patently obvious that a

hospital that commenced operations 6 months after submitting its CON application

could not demonstrate 1000 live births in the 12 months preceding its

application.

11. The protesting providers of Level II neonatal care are both located

within one hour driving time of the site of UCH as is All Children's Hospital in

St. Petersburg. The other hospitals in District VI providing Level II neonatal

care, to wit Manatee Memorial Hospital, Winter Haven Hospital and LMRC, are also

within two hours driving time of UCH which is the geographical access guideline

established by rules for NICUs.

12. Although UCH contends that its application meets all eight preference

items prescribed by the state health plan, the evidence presented established

its application conclusively meets only one of these preferences, number 6.

Absent a showing of need for the proposed facility as found in finding 6 above,

granting this CON will increase the excess NICU beds in District VI and

adversely impact existing providers. This includes Tampa General which is a

disproportionate share provider (of Medicaid and indigent care).

13. It appears from the evidence presented, that in constructing the

Women's Hospital, space for an NICU was provided in the plans and, while

awaiting a CON to provide a 10 bed Level II ICU, the space is used for storage.

No structural changes will be required to operate a NICU at this location, and

costs are related primarily to the equipment that will be needed. Whether the

installation of a NICU in this space will improve the physical plant of the

Women's Center depends on from which advantage point one looks. From

Petitioner's point of view, the NICU would improve the physical plant and comply

with Preference 3 of the state health plan.

14. Based upon the premise that the proposed NICU beds will be used at an

occupancy rate of 70 percent or greater, the conversion of 10 acute care beds

currently operating at less than 50 percent occupancy to NICU beds, the overall

occupancy rate will increase and Preference 4 would be met. However, no

credible evidence was presented that the proposed 10 bed Level II NICU will

operate at 70 percent capacity. If initial utilization of Level II care

continues and less than 1 percent of UCH live births require Level II care, this

Preference will not be met.

15. Although Petitioner did not address Preference 5 in its application,

the SAAR notes that HCB reports show of the three hospitals with a grouping of

"05" UCH has lower gross revenues per adjusted admission.

16. Petitioner meets Preference 6.

17. Preference 7 of the State Health Plan pertains to applicants who

propose to provide neonatal intensive care services to Children's Medical

Services (CMS) and non-CMS patients who are defined as charity care patients.

Although UCH proposes to provide 6 percent Medicaid and 5 percent indigent care,

past history does not support this level of indigence or low pay care.

18. Under Preference 8 of the State Health Plan, preference is given to

applicants who propose to serve substance abuse, pregnant and postpartum women,

and coordinate their services with other appropriate social agencies. Although

UCH stated in its application that it has developed a referral relationship with

the Teen Mom's Program, it did not specifically address coordination of its

services with substance abuse, pregnant and postpartum women.

19. The local health plan for District VI provides preference shall be

given to an applicant who provides the department with documentation that they

provide, or propose to provide, a disproportionate share of Medicaid and charity

care patient days in relation to other hospitals in the subdistrict. UCH is not

a disproportionate share provider and does not propose to become one.

Accordingly, it does not comply with this preference item in the district health

plan.

CONCLUSIONS OF LAW

20. The Division of Administrative Hearings has jurisdiction over the

parties to, and the subject matter of, these proceedings.

21. In these proceedings, Petitioner has the burden of proving entitlement

to the CON it seeks by a preponderance of the evidence and must show the

criteria in Section 381.705, Florida Statutes, have been met. Balino v.

Department of Health and Rehabilitative Services, 348 So.2d 349 (Fla. 1st DCA

1977).

22. Pursuant to Section 381.701, et seq., Florida Statutes, health care

providers are required to obtain a certificate of need prior to offering

neonatal intensive care services which are defined as tertiary services.

Section 381.702(2) defines "tertiary health service" to mean a health service

which, due to its high level of intensity, complexity, specialized or limited

applicability, and costs, should be limited to, and concentrated in, a limited

number of hospitals.

23. Rule 10-5.042, Florida Administrative Code, defines neonatal intensive

care unit bed Levels I, II and III, and subparagraph (3) thereof establishes

criteria for determining bed need for these NICUs. The bed need rule for Level

II beds provides a formula for computing district need. Other provisions of

this rule establish an average occupancy rate district wide of 80 percent before

new Level II beds will normally be approved, and provides that hospitals

applying for Level II neonatal intensive care services shall not normally be

approved unless the hospital had a minimum service volume of 1000 live births

for the most recent 12 month period ending 6 months prior to the beginning date

of the quarter of the publication of the fixed need pool.

24. The viability of UCH's application rests upon its contention that the

district wide occupancy rate grossly exceeded the rate utilized by DHRS in

computing the bed need. Therefore, a greater numerical need exists than was

developed from the data used by DHRS to compute the bed need for this batching

cycle. The facts surrounding the determination of the occupancy rate during the

appropriate period has been determined adversely to the applicant in the above

findings. No evidence was presented that an access problem, either geographical

or financial, exists to result in a not normal situation which would permit the

granting of this CON despite the no need calculation.

25. Similarly, the data used by DHRS to calculate the occupancy rate in

District VI has been found to be reliable at an occupancy rate of approximately

70 percent which existed during the designated period is deemed accurate. Since

this is below the 80 percent required for authorizing additional Level II beds

and no not normal circumstances exist to authorize a deviation from this

requirement, the application must also fail on this ground. Finally, the 1000

birth requirement was not met. This too requires denial of the application.

26. With respect to the preference items in the state and local health

plans, these preference items are useful primarily in selecting an applicant

from competing applicants in the same batching cycle. If an applicant meets all

statutory review criteria listed in Section 381.705 and no other applicant is

seeking the same beds there would appear to be no need to refer to these

preference items. Here, there was but one applicant for Level II NICU beds.

27. Absent a need for the proposed Level II beds in District VI, the

availability and accessibility of Level II care at other hospitals in District

VI, the less than 80 percent occupancy rate of existing providers, the adverse

financial impact the granting of this CON would have to existing providers, and

the failure of the applicant to meet the minimum birth requirements, the

application should be denied.

28. From the foregoing, it is concluded that UCH has failed to show that

it satisfies the review criteria contained in Section 381.705, Florida Statutes.

RECOMMENDATION

It is, therefore, recommended that a Final Order be entered denying the

application of University Community Hospital for Certificate of Need No. 6606 to

establish and operate a 10 bed Level II neonatal intensive care unit.

RECOMMENDED this 16th day of January, 1992, in Tallahassee, Florida.

__________________________________

K. N. AYERS

Hearing Officer

Division of Administrative Hearings

The Desoto Building

1230 Apalachee Parkway

Tallahassee, FL 32399-1550

[phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 16th day of January, 1992.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 91-5720

Proposed findings submitted by Petitioner are accepted, except as noted

below. Those not noted below and not contained in Hearing Officer findings were

deemed not necessary to the conclusions reached.

22. Accepted as the testimony of Hopes, but not as a fact.

24. Accepted only insofar as not in conflict with HO #5.

25. Rejected.

32. Rejected.

34-35. Accepted insofar as not inconsistent with HO #7.

36. Same as 34.

39. Accepted as testimony of witnesses. However, ultimate

finding in HO #7 is that when these numbers were

corrected, no change in bed need resulted.

40. Rejected.

42. Rejected that Hopes utilization statistic more accurately

reflects true utilization of NICU beds.

53-55. Rejected.

56. Rejected as outside the time period here involved.

58-59. Rejected.

62. Rejected insofar as inconsistent with HO #10.

64. Rejected.

65. Second sentence rejected as in conflict with HO #9.

75. Ultimate sentence rejected.

85. Rejected.

92. Accepted, except for the connotation that these patients

have geographical access problems to existing facilities.

95. Accepted merely as the testimony of this witness who is

currently an employee of UCH.

97-118. Although these preference items were discussed in HO

findings #12-19, absent a comparative review these

preferences were not considered in determining that a

need for 10 more Level II NICU beds did not exist in

District VI.

Proposed findings submitted by Respondent and the Intervenors are

accepted. Those not included in HO findings were deemed unnecessary to the

conclusions reached.

COPIES FURNISHED:

Cynthia S. Tunnicliff, Esquire

W. Douglas Hall, Esquire

Post Office Drawer 190

Tallahassee, FL 32302

Richard Patterson, Esquire

Department of Health and

Rehabilitative Services

2727 Mahan Drive

Tallahassee, FL 32308

James C. Hauser, Esquire

Post Office Box 508

Tallahassee, FL 32302

John Radey, Esquire

Post Office Drawer 11307

Tallahassee, FL 32302

Sam Power

Clerk

Department of Health and

Rehabilitative Services

1323 Winewood Boulevard

Tallahassee, FL 32399-0700

John Slye

General Counsel

Department of Health and

Rehabilitative Services

1323 Winewood Boulevard

Tallahassee, FL 32399-0700

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS:

All parties have the right to submit written exceptions to this Recommended

Order. All agencies allow each party at least 10 days in which to submit

written exceptions. Some agencies allow a larger period within which to submit

written exceptions. You should contact the agency that will issue the final

order in this case concerning agency rules on the deadline for filing exceptions

to this Recommended Order. Any exceptions to this Recommended Order should be

filed with the agency that will issue the final order in this case.

=================================================================

AGENCY FINAL ORDER

=================================================================

STATE OF FLORIDA

DEPARTMENT TO HEALTH AND REHABILITATIVE SERVICES

UNIVERSITY COMMUNITY HOSPITAL,

Petitioner,

vs. CASE NO. 91-5720

CON NO. 6606

DEPARTMENT OF HEALTH AND

REHABILITATIVE SERVICES,

Respondent,

and

HUMANA OF FLORIDA, INC., d/b/a

HUMANA WOMEN'S HOSPITAL TAMPA,

and HILLSBOROUGH COUNTY HOSPITAL

AUTHORITY, d/b/a TAMPA GENERAL

HOSPITAL,

Intervenors.

____________________________/

FINAL ORDER

The Department of Health and Rehabilitative Services, having received a

Recommended Order from the Division of Administrative Hearings and a Notice of

Withdrawal of Application and Voluntary Dismissal from Petitioner, and being

otherwise well advised in the premises, decides as follows:

On January 16, 1992, Hearing Officer Ayers entered a Recommended Order in

the above-styled case. A copy of the Recommended Order is attached hereto.

Then on January 21, 1992, Petitioner filed the Notice of withdrawal of

Application and Voluntary Dismissal. A copy of the Notice is also attached

hereto. Since Petitioner abandoned its challenge by the voluntary dismissal,

HRS' preliminary action becomes effective as final agency action. John A. McCoy

Florida SNF Trust v. HRS, ___ So.2d.___ (Fla. 1st DCA Case No. 91-273, Opinion

filed November 6, 1991, Reh. den. December 17, 1991) [16 FLW D2830].

WHEREFORE, Petitioner's certificate of need application number 6606 is

hereby DENIED and the above- styled case is DISMISSED.

DONE and ORDERED this __8th__ day of 1992, in Tallahassee, Florida.

Robert B. Williams

Secretary

Department of Health and

Rehabilitative Services

By_________________________

Deputy Secretary for

Human Services

A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO JUDICIAL

REVIEW WHICH SHALL BE INSTITUTED BY FILING ONE COPY OF A NOTICE OF APPEAL WITH

THE AGENCY CLERK OF HRS, AND A SECOND COPY, ALONG WITH THE FILING FEE AS

PRESCRIBED BY LAW, WITH THE DISTRICT COURT OF APPEAL IN THE APPELLATE DISTRICT

WHERE THE AGENCY MAINTAINS ITS HEADQUARTERS OR WHERE A PARTY RESIDES. REVIEW

PROCEEDINGS SHALL BE CONDUCTED IN ACCORDANCE WITH THE FLORIDA RULES OF APPELLATE

PROCEDURE.

Copies furnished to:

Cynthia S. Tunnicliff, Esq.

W. Douglas Hall, Esq.

Post Office Drawer 190

Tallahassee, FL 32302

James C. Hauser, Esq.

Post Office Box 508

Tallahassee, FL 32308

John Radey, Esq.

P. O. Drawer 11307

Tallahassee, FL 32302

Richard A. Patterson, Esq.

Department of Health and

Rehabilitative Services

Regulation & Health Facilities

2727 Mahan Drive

Tallahassee, FL 32308

K. N. Ayers, Hearing Officer

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, FL 32399-1550

Wayne McDaniel ( PDDR)

Legal Office ( PDDR)

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a true and correct copy of the foregoing has been

furnished by U. S. Mail, this __13__ of __ February__, 1992, to the above-named

people.

_________________________

R. S. POWER, Agency Clerk

Assistant General Counsel

Department of Health and

Rehabilitative Services

1323 Winewood Boulevard

Building One, Suite 407

Tallahassee, FL 32399

[phone]