92-001508CON Sacred Heart Hospital Of Pensacola vs. Agency For Health Care Administration Status: Closed Recommended Order on Thursday, August 20, 1992.

Summary: Threshold amount for requiring review in establishing inpatient radiation therapy not met. Certificate Of Need not required. Alternatively if required met proof for it.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

SACRED HEART HOSPITAL OF PENSACOLA, )

)

Petitioner, )

)

vs. ) CASE NO. 92-1508

)

STATE OF FLORIDA, DEPARTMENT OF )

HEALTH AND REHABILITATIVE SERVICES, )

)

Respondent, )

)

and )

)

BAPTIST HOSPITAL, )

)

INTERVENOR. )

______________________________________)

RECOMMENDED ORDER

Notice was provided and on May 20-22, 1992, in Tallahassee, Florida, at the

offices of the Division of Administrative Hearings, The DeSoto Building, 1230

Apalachee Parkway, Tallahassee, Florida, a hearing was held in this case. The

hearing was a formal hearing conducted in accordance with Section 120.57(1),

Florida Statutes. Charles C. Adams was the Hearing Officer.

APPEARANCES

For Petitioner: Karen O. Emmanuel, Esquire

Emmanuel, Sheppard & Condon

Post Office Drawer 1271

Pensacola, Florida 32596

For Respondent: Richard Patterson, Esquire

Department of Health and

Rehabilitative Services

103 Fort Knox Executive Center

2727 Mahan Drive

Tallahassee, Florida 32301

For Intervenor: Stephen A. Ecenia, Esquire

Katz, Kutter, Haigler, Alderman,

Davis, Marks & Rutledge, P.A.

106 East College Avenue, Suite 1200

Post Office Box 1877

Tallahassee, Florida 32302-1877

STATEMENT OF ISSUES

Two issues are raised in this case. The first issue concerns the question

of whether the Petitioner must seek review and permission by and from the

Respondent before engaging in this project to provide inpatient radiation

therapy. See Section 381.706(1)(h), Florida Statutes. If that question is

answered in the affirmative, then the next question to be answered is whether

Petitioner is entitled to a certificate of need to provide inpatient radiation

therapy services at its hospital in Pensacola, Florida. In answering the

initial question reference is made to the case of Scared Heart Hospital of

Pensacola v. Department of Health and Rehabilitative Services, and Baptist

Hospital, DOAH Case No. 90-3576. That reference is made because Intervenor in

the present case has made a motion in limine which asserts that the Petitioner

here is estopped from raising the issue of whether jurisdiction resides with the

Respondent to require a certificate of need based upon the belief that DOAH Case

No. 90-3576 has answered that question in the affirmative. Thus, as argued in

the motion in limine, Petitioner in the present action should be barred by

doctrines of collateral estoppel and res judicata from further examining that

issue. Both issues are addressed in the fact finding and conclusions of law

which follow, to include a ruling on the motion in limine.

At the commencement of the hearing in discussing the motion in limine an

examination was made of the significance, if any, of the Petitioner having

failed to clearly state its opposition to the Respondent's assertion of

jurisdiction over the subject matter and that party in the Petition contesting

the decision on the merits to deny the application for certificate of need.

Consequently, the issue of whether Petitioner has waived its right to contest

the jurisdiction is also addressed in the Recommended Order.

PRELIMINARY STATEMENT

Petitioner applied for a certificate of need to provide inpatient radiation

therapy services at its hospital in Pensacola, Florida. That application was

denied. In turn Petitioner requested a formal hearing to contest the decision

to deny. The case was forwarded to the Division of Administrative Hearings to

conduct the hearing. The case was initially scheduled for hearing to be held on

May 6-9, 1992. Petitioner moved to continue. The case was reset for May 20-22,

1992, the dates upon which the hearing was held. Prior to the hearing,

Intervenor had been granted leave to intervene as a full party.

The witnesses and exhibits presented by the parties together with hearing

officer exhibits placed with the record to preserve the integrity of the record

are indexed in the transcript volumes forwarded with the Recommended Order.

The parties have offered a prehearing stipulation which is included with

this record.

The parties upon an extended schedule for submitting proposed recommended

order have filed their proposals. The proposed recommended order submitted by

the Respondent and Intervenor is a joint submission. By extending the schedule

for submitting proposed recommended orders, the parties have waived the

requirement to have the hearing officer enter a Recommended Order within thirty

days of receipt of the transcript. See Rule 22I-6.031, Florida Administrative

Code.

Fact finding suggested by the parties is addressed in the Appendix to this

Recommended Order.

FINDINGS OF FACT

MOTION IN LIMINE

(DOAH Case No. 92-3576)

1. On the prior occasion described in DOAH Case No. 90-3576, Petitioner

had applied to Respondent for a certificate of need to institute radiation

therapy services and to construct a radiation therapy facility at the campus of

its hospital in Pensacola, Florida. That center was to serve inpatients and

outpatients. The projected capital expenditure for that project approximated

3.7 million dollars.

2. Petitioner contended that the radiation therapy center that would be

constructed would be an extension to an existing oncology program as contrasted

with the establishment of a "new service." Consistent with that position

Respondent asserted that the basis for requiring a certificate of need was found

in the language at Section 381.706(1)(c), Florida Statutes, which states:

A capital expenditure of $1 million or more

by or on behalf of a health care facility or

hospice for a purpose directly related to the

furnishing of health services at such

facility; provided that a certificate of need

shall not be required for an expenditure to

provide an outpatient health service, or to

acquire equipment or refinance debt, for

which a certificate of need is not otherwise

required pursuant to this subsection. The

department shall, by rule, adjust the capital

expenditure threshold annually using an

appropriate inflation index.

3. By resort to Section 381.706(1)(c), Florida Statutes, as the basis for

declaring jurisdiction, the Respondent in its preliminary position did not

perceive that the proposed project constituted establishment of new

institutional health services or a substantial change to the existing health

services, rather, it was believed to be constituted of construction costs as a

capital expenditure related to the existing oncology program which expenditure

met the $1 million threshold.

4. If the basis for jurisdiction was found within Section 381.706(1)(c),

Florida Statutes, then the would-be intervenor in that case, the same intervenor

here, would be denied intervention. The basis for denial is found within the

limitations placed upon those persons who may participate in a decision

involving certificate of need for a capital expenditure as identified in Section

381.706(1)(c), Florida Statutes. That contest is between the Respondent and an

applicant for the certificate. Third parties have no right to participate.

5. On the other hand, if the basis for jurisdiction is as argued by the

petition for intervention in the prior case, that basis being the jurisdiction

established by Section 381.706(1)(h), Florida Statutes, then a third party

health care provider in competition with the applicant seeking a certificate of

need could participate in that decision. The language in Section 381.706(1)(h),

states:

The establishment of inpatient institutional

health services by a health care facility, or

a substantial change in such services, or the

obligation of capital expenditures for the

offering of, or a substantial change in, any

such services which entails a capital

expenditure in any amount, or an annual

operating cost of $500,000 or more. The

department shall, by rule, adjust the annual

operating cost threshold annually using an

appropriate inflation index.

6. The Hearing Officer in DOAH Case No. 90-3576, heard the matter and

entered his Recommended Order to resolve the right of the present intervenor to

intervene in that cause. In doing so the Hearing Officer generally addressed

the jurisdictional basis upon which the agency could review the application.

Nothing in that process attempted to distinguish between inpatient and

outpatient costs by way of a discrete analysis and allocation of those costs.

Observations were made in passing concerning the aggregate amount of inpatient

and outpatient costs. In particular reference was made to the capital

expenditure of approximating 3.7 million dollars.

7. No attention was given the issue of the threshold amount associated

with annual operating costs identified in Section 381.706(1)(h), Florida

Statutes. Factual reference to that jurisdictional amount associated with

annual operating costs was left for some other occasion. The thrust in DOAH

Case No. 90-3576 was to determine whether the appropriate basis for the

jurisdictional claim would be found in Section 381.706(1)(c), Florida Statutes,

as initially contended by the Respondent or upon resort to Section

381.706(1)(h), Florida Statutes, as contended by the petition for intervention,

without a more complete analysis concerning the jurisdictional amount set out in

Section 381.706(1)(h), Florida Statutes, should the hearing officer be persuaded

that the latter provision constituted the grounds for review generally stated.

8. In the factual and legal conclusions by the hearing officer in DOAH

Case No. 90-3576, he determined that the project in question for inpatient and

outpatient radiation therapy services constituted the establishment of new

inpatient institutional health services or at least constituted a substantial

change in the services that were being provided by the applicant. Thus the

petition for intervention was deemed appropriate and the motion to dismiss that

petition was recommended for denial.

9. Through the Final Order which followed, with some minor modifications

which have no influence on the present case, the Respondent adopted the findings

of fact of the hearing officer in DOAH Case No. 90-3576, and granted the

petition to intervene.

10. The Recommended Order was entered on April 3, 1991, and the Final

Order on May 21, 1991. The parties in DOAH Case No. 90-3576 did not proceed to

hearing before the present case was heard. The decision by the hearing officer

in DOAH Case No. 90-3576 was to defer consideration of the matter pending

hearing in the present case. That choice was upon a request by all parties in

DOAH Case No. 90-3576.

PARTIES STIPULATIONS

CONCERNING REVIEW CRITERIA

11. The parties agree that Petitioner's Certificate of Need Application

No. 6772, the present application, meets the following statutory criteria:

Section 381.705(1)(c), (h), except for the third clause which is not applicable

and the fourth clause which is at issue, (i), (m), except that Intervenor

contends that the project costs were not properly allocated to Petitioner's

Certificate of Need Application No. 6772, and (n) to Section 381.705(1). The

parties also agree that the following statutory criteria are not applicable to

Petitioner's application: Section 381.705(1)(e), (f), (g) and (j), Florida

Statutes.

12. Within the context of the stipulation as to criteria, the parties

agree that the following issues are to be litigated:

a. The need for the proposed project in

relation to the applicable district plan

and state health plan.

b. The availability, quality of care,

efficiency, appropriateness, accessibility,

extent of utilization, and adequacy of like

and existing health care services in the

service district.

c. The availability of and adequacy of other

health care facilities and services in the

service district, which may serve as

alternatives for the services proposed to be

provided by Scared Heart Hospital.

d. The impact of the proposed project on the

cost of providing health services proposed by

Scared Heart Hospital.

e. Whether less costly, more efficient, or

more appropriate alternatives to the proposed

services are available.

f. Whether existing inpatient facilities,

providing inpatient services similar to those

proposed are being used in an appropriate and

efficient manner.

g. Whether patients will experience serious

problems in obtaining inpatient care of the

type proposed, in the absence of the proposed

new service.

h. The need that the population served or to

be served has for the health services proposed

to be offered, and the extent to which

residents in the district are likely to have

access to those services.

i. The contribution of the proposed service

in meeting the health needs of members of

such medically underserved groups.

BACKGROUND FACTS

13. On August 22, 1991, Petitioner gave notice that it intended to apply

for the September 19, 1991, batch review cycle to initiate inpatient radiation

therapy services at its Pensacola, Florida facility. That notification referred

to the fact that the Petitioner was presently constructing an outpatient cancer

center to provide radiation therapy services and that the anticipated opening

date for that outpatient facility was December, 1991.

14. Petitioner did apply for the September 19, 1991 batch review for

initiation of inpatient radiation therapy services. At that time the

construction of the outpatient radiation therapy services was proceeding.

Petitioner had received a letter of non-reviewability for the construction of

the outpatient cancer treatment facility on a prior date.

15. The completion of the outpatient radiation therapy services center at

the Petitioner's facility was completed and Petitioner began to provide

outpatient radiation treatment in April, 1992.

16. The cancer treatment program at Petitioner's facility is a

comprehensive cancer center providing radiation therapy, chemotherapy, IV.

hydration, blood transfusion, nutrition counseling, social work counseling and a

library. The outpatient facility for radiation therapy is fully staffed and

supplied. It was placed on the books of the Petitioner as an active asset in

the year 1991.

17. Before submitting the application for review in September, 1991 review

cycle, Petitioner conferred with Respondent and was instructed to submit an

application for the initiation of inpatient services and to allocate costs to

the project based upon a percentage of the total facility which would be devoted

to inpatient services. Through the application Petitioner noted that the total

cost of the establishment of the radiation therapy services projected to open in

December, 1991, was $4,124,475. Pursuant to the instruction by the Respondent

$618,671 was allocated as an estimate of capital expenditures for inpatient

radiation therapy services. This approximates 15 percent of patients being

treated as inpatients of the total number of patients treated by radiation

therapy. Generally stated, the experience of most providers is that 10 to 15

percent of radiation therapy is delivered on an inpatient basis with the balance

of the radiation therapy being delivered on an outpatient basis. The allocation

of capital expenditures to inpatient therapy was an artificial device mandated

by the Respondent. It does not reflect the actual experience.

18. In actuality the incremental project costs related to capital

expenditures for the inpatients receiving radiation therapy are zero. The

reason for this finding is based upon the fact that the equipment for providing

the inpatient radiation therapy is already in place, the facility for providing

that care had been constructed, there is no associated incremental depreciation

for inpatient care, the project has been fully paid for from funded depreciation

cash and has been placed upon the books of the facility at 100 percent of that

total. In essence, the capital costs have been incurred before the advent of

the inpatient radiation therapy services.

19. Additional costs promoted by the provision of care for inpatients who

receive radiation therapy at the facility would be supply expenses attributable

to those inpatients and the possibility of additional salaries attributable to

overtime work done by staff to serve the inpatients. These are minimal costs.

20. Operating costs were also artificially allocated to inpatients in the

application. For the first year of operation, salaries allocated to inpatient

care were estimated at $64,950.00, with associated benefits at $9,898.00, other

patient care expenses at $17,925.00 and depreciation in the amount of

$51,135.00. Even when resort is made to this certificate the proposal to

institute inpatient radiation therapy does not reach the $500,000.00 threshold

in annual operating costs, in addition to having no fiscal impact by way of

capital expenditures.

21. Petitioner is a 391 bed acute general hospital located in Pensacola,

Florida. The services that it provides are available to inpatients and

outpatients. Among those services are an open heart facility, neonatal

intensive care Level II and Level III units, and freestanding 50 bed children's

hospital.

22. The patients receiving care for cancer are provided screening

programs, risk assessments, preventative education programs, diagnostic

services, surgery, chemotherapy and radiation therapy on an outpatient basis.

23. The application for inpatient radiation therapy was not favorably

reviewed in the State Agency Action Report issued on or about January 8, 1992.

This led to the present hearing when Petitioner contested the decision to deny

the application.

24. Intervenor and West Florida Hospital, both of Pensacola, Florida, and

the same planning district where Petitioner is located, have certificates of

need to provide inpatient radiation therapy. They also provide outpatient

radiation therapy. The other two hospitals treat patients referred by

Petitioner for radiation therapy needs.

25. The inpatients of the Petitioner requiring radiation therapy must be

transported to the other two hospitals to receive that care. The majority of

those patients who are being transported are referred to the Intervenor.

Pediatric cancer patients from Petitioner's facility are transported to West

Florida.

26. The patients who are transported from Petitioner's facility to the

Intervenor's facility are received by the Intervenor as outpatients. When they

return to the Petitioner's facility they are perceived as inpatients.

27. Each of the other two facilities who offer radiation therapy pursuant

to certificates of need have two linear accelerators to provide inpatient and

outpatient radiation therapy. Petitioner seeks to have its single linear

accelerator which now provides outpatient radiation therapy made available to

provide inpatient radiation therapy.

28. There are also two non-hospital based radiation therapy centers which

have single linear accelerators to provide outpatient radiation therapy

services. Those non-hospital based providers are located in Ft. Walton Beach

and Crestview, Florida, within the same planning district that is associated

with this application.

REVIEW CRITERIA 1/

29. Section 381.705(1)(a), Florida Statutes, requires that an application

be reviewed for its consistency with the state and district health plans.

Neither of those plans addresses the provision of radiation therapy services.

As a consequence, neither plan sets forth need allocation factors that would

address this type application. In view of the silence of the state and local

health plans concerning inpatient radiation therapy, the application cannot be

seen as inconsistent with those plans.

30. Section 381.705(1)(b), Florida Statutes, speaks in terms of the

availability, quality of care, efficiency, appropriateness, accessibility, and

extent of utilization and adequacy of like and existing health care services in

the service district to be served by the applicant. As stated before inpatient

radiation therapy is being delivered by two other providers. Those providers

make available and could continue to make availability the quality of care,

which is efficient, appropriate, accessible and adequate in delivering inpatient

radiation therapy to those patients which Petitioner would serve if granted the

certificate of need to do so. The inpatient radiation therapy services offered

by those two providers are not over-utilized at present nor would they be in the

foreseeable future. The exception to these findings would be related to a

quality of care issue not pertaining to the actual delivery of radiation therapy

to patients referred from the Petitioner to the other two providers but related

to the inconvenience in preparing those patients for transport for delivery of

therapy and the transport itself. For some patients who are required to undergo

the preparation for transport and transport, that process can be quite painful.

Patients have refused to be transported to receive radiation therapy and this

has complicated their treatment. It would be a less uncomfortable process if

the patients were undergoing the radiation therapy at the Petitioner's facility.

Physician's practice patterns in this community where some physicians choose to

practice in a single hospital notwithstanding their admission privileges in

multiple hospitals complicates the issue in that a patient may be admitted to

Petitioner's facility because the admitting physician chooses to practice there

alone. Once a diagnosis is made and a decision reached that the patient in that

hospital needs to undergo radiation therapy, the need to transport for those

treatment ensues. Moreover, as suggested, the decision to utilize radiation

therapy in the treatment is not ordinarily made at the initial moment of

admission when health care professionals are trying to make the initial

diagnosis concerning the patients complaints in deciding whether they are

associated with cancer or not and if radiation therapy would benefit the patient

or even in the instance where the patient is known to have a history of that

illness whether radiation therapy is indicated. Therefore, there might not be a

reason to try and place the patient in a facility that has inpatient radiation

therapy available if that treatment regime upon evaluation does not seem

indicated.

31. The issue concerning the ability to transfer a patient from one

facility to another for the overall hospitalization to include provision of

inpatient radiation therapy such that a patient who has been determined to need

radiation therapy could be transferred from Petitioner's facility to

Intervenor's facility for overall care, while theoretically possible does not

seem practicable. Additionally, the patients who receive outpatient radiation

therapy through Petitioner's facility who would need at some future point in

treating the condition to be transferred to another facility to receive

radiation therapy once admitted as an inpatient in Petitioner's facility breaks

the continuity of the management of the care by requiring the patient to undergo

an evaluation by two different radiation therapists, disrupting the patient-

physician relationship in a setting which is complicated by the patient's

condition. Nonetheless, the quality of care is not so compromised by the need

to transport for the inpatients at the Petitioner's facility to receive

radiation therapy to conclude that it constitutes a reason standing alone to

grant the certificate of need.

32. In a similar vein, as contemplated by Section 381.705(1)(d), Florida

Statutes, the availability and adequacy of other health care facilities and

services and hospices in the service district of the applicant, such as

outpatient care and home care services, which might serve as alternatives for

the applicant's proposal have been considered. Out of that list, only the

possibility of the use of outpatient care provided by the existing facilities

who offer outpatient radiation therapy would arguably have pertinence to this

inquiry. They would not constitute an available and adequate substitute for

inpatient radiation therapy for reason that patients who are admitted to a

hospital are distinguished from those who come to the facility from other places

for purposes of receiving outpatient radiation therapy. That distinction has to

do with the gravity of the condition of the patient which caused the patient to

be admitted to the hospital in the first instance, and to receive, together with

medical attention and other therapies, the provision of radiation therapy.

33. Concerning that portion of Section 381.705(1)(h), Florida Statutes,

which describes the applicant's need to address the availability of alternative

uses of resources for the provision of other health services, that clause was

referred to as an issue in the prehearing stipulation but was not advanced at

the hearing.

34. Through the prehearing stipulation the parties did not include

reference to Section 381.705(1)(k), Florida Statutes, as a provision about which

there was an agreement concerning compliance or the need to comply with its

terms. The record reveals that the applicant and the existing providers address

the need for radiation therapy of individuals who are not residing in the

service district. This project does not appear to have a pronounced influence

in improving or diminishing health care for persons not residing in the service

district.

35. Section 381.705(1)(l), Florida Statutes, addresses the probable impact

of the project on the cost of providing health services proposed by the

applicant and it takes into consideration the effects of competition on the

supply of health services being proposed and any improvements or innovations in

the financing and delivery of health services which foster competition and serve

as a promotion of quality assurance and cost effectiveness. Whether the

applicant delivers services to the inpatients that it would gain with

recognition of its application or some other entity serves the needs of those

patients, the basic costs of providing health services would be relatively the

same. The exception is the improvement in the circumstance of health care costs

related to the transport of the patients from the Petitioner's facility to the

two other facilities for provision of the radiation therapy of inpatients in the

Petitioner's facility and the attendant costs of duplication of patient charges

and professional fees charged by the physician therapist potentially associated

with having a patient move from the status of an outpatient at the Petitioner's

facility to an admitted patient at that facility who receives radiation therapy

at one of the other two facilities while undergoing inpatient care in the

Petitioner's facility. These additional costs in transport and potential for

patient charges associated with procedures in the other two hospitals and

physicians fees in those other two hospitals which are duplicative of efforts

made by the Petitioner's outpatient radiation program in its procedures and the

physician's fees associated with those outpatient radiation therapy procedures

could be done away with if the project were approved. There is no indication of

any significant improvements or innovations in the financing and delivery of

health services associated with this application which might foster competition

and serve to promote quality assurance and cost effectiveness. The cost

improvements that are discussed here standing alone do not justify the applicant

being granted a certificate of need.

36. The advent of an inpatient radiation therapy service will not be so

adverse in its impact that it will cause the Intervenor or any other existing

facility to lose financial viability concerning the ability to maintain an

appropriate level of utilization of existing facilities.

37. There are no costs of construction and the method of proposed

construction need not be considered in that the construction has been concluded

as previously discussed. Consequently, the necessity to address the costs and

methods of the proposed constructions as described in Section 381.705(1)(m),

Florida Statutes, is not relevant to the inquiry. Nor are the references within

Section 381.705(2), Florida Statutes, having to do with capital expenditures

pertinent to the outcome in examining the review criteria.

LACK OF A VIABLE

NEEDS FORMULA

38. Respondent does not have a rule which calculates the need for

inpatient radiation therapy by resort to a formula which derives need.

39. Neither does the Respondent have an emergent policy which it is

developing to formulate the amount of inpatient radiation therapy services

needed in a given review cycle. Respondent and the private litigants have

attempted to examine the need for inpatient radiation therapy contemplated by

this application by devising various mathematical formulas to determine need.

Each explanation is fundamentally flawed in that they fail to address the

discrete issue contemplated for examination by the review process, that is the

need for inpatient radiation therapy. Instead, these methods look at all

radiation therapy both inpatient and outpatient. The statute does not

contemplate that form of evaluation. It is the 10 to 15 percent of all

radiation therapy patients that constitute the inpatients. It is the provision

of care to those persons that is subject to examination. If need is to be

derived by use of a formula, a knowledge of the circumstances existing for

outpatients, a category of patient for whom no certificate of need must be

obtained to serve them, should not enter in to the analysis.

40. The formulas exercised by the parties in measuring the overall need

for inpatient and outpatient radiation therapy services derive the answers by

identifying the number of linear accelerators needed in the district or in one

instance for the applicant's facility alone. In that exercise a count is made

of the four linear accelerators in the district belonging to the two hospitals

which have been granted certificates of need which would allow inpatient

radiation therapy to be delivered as well as outpatient therapy and the three

programs that serve outpatients on three additional linear accelerators. The

total number of linear accelerators is seven counting the linear accelerator the

Petitioner has to serve outpatients. No attempt by formula has been made to

ascertain whether more than four linear accelerators found within the two

hospitals who have certificates of need to provide inpatient radiation therapy

service are warranted.

41. Thought provoking questions have been raised by the several parties in

critiquing the needs calculation made by an opponent or opponents. However, it

is not necessary to choose among these competing theories because in selecting

any theory one cannot derive the amount of inpatient radiation therapy services

needed in the district. Furthermore, case law does not allow the trier of fact

to utilize the basic information provided by the parties to construct a formula

for determining need for inpatient radiation services independent of the efforts

of the parties in the person of their experts whom they have consulted with on

this subject. This means that the decision here must be made by a review of

applicable criteria without resort to a preliminary determination of numeric

needs. This has been done.

42. On balance, when taking into account the combination of improvements

to quality of care for a patient being transported from the Petitioner's

facility to receive radiation therapy and the improvement concerning the removal

of the cost of that transport and duplication of charges and fees for certain

patients who move from an outpatient posture under treatment by the Petitioner

and into an inpatient status with Petitioner receiving radiation therapy at one

of the two other hospitals which has been discussed in preceding paragraphs, the

project is justified and the application should be granted.

CONCLUSIONS OF LAW

43. The Division of Administrative Hearings has jurisdiction to consider

the matters in dispute. See Section 120.57(1), Florida Statutes.

44. On the subject of the motion in limine, DOAH Case 90-3576 is not

dispositive of the jurisdictional issue. The hearing officer in the prior case

was called upon to decide the matter of the attempted intervention by the

present Intervenor in this cause. In arriving at his recommendation he did so

by deciding that the basis for claiming jurisdiction would be premised upon

Section 381.706(1)(h), Florida Statutes having to do with the establishment of

inpatient institutional health services or a substantial change in the oncology

service that was being performed as contrasted with the Respondent's preliminary

impression that the basis for jurisdiction to require a certificate of need was

associated with a capital expenditure of one million dollars or more as referred

in Section 381.706(1)(c), Florida Statutes. That section as a basis for

jurisdiction that does not allow the participation by third parties in the

decision to grant a certificate of need, whereas Section 381.706(1)(h), Florida

Statutes would allow a third party to participate. Thus the recommendation was

to allow the intervention and that recommendation was followed by the entry of a

Final Order by the Respondent. In this decision the hearing officer in DOAH

Case No. 90-3576 was not called upon to critically examine the threshold amount

necessary to declare the jurisdiction under Section 381.705(1)(h), Florida

Statutes. The task to be performed was to decide between Sections

381.706(1)(c), Florida Statutes, and Section 381.706(1)(h), Florida Statutes in

generally identifying the basis for jurisdiction. It was left to another

occasion to address the specific proof necessary to sustain the jurisdictional

basis set out in Section 381.706(1)(h), Florida Statutes. It is also noted that

the application under consideration at that time was one in which both inpatient

and outpatient services were being established simultaneously. The present case

looks at inpatient radiation therapy services following the establishment of

outpatient radiation therapies in which all capital expenditures had been made

when the outpatient radiation therapy services were brought on line.

45. In denying the motion in limine, any claim that the Petitioner had

waived its right to raise the issue of jurisdiction of the subject matter and

parties by failing to advise the other parties that this opposition to

jurisdiction was being advanced through its petition in challenge to the

preliminary decision by the Respondent to deny the application for the

certificate of need for inpatient radiation therapy services is not accepted.

Jurisdictional issues may be raised at any point in the proceeding absent

prejudice which transpires with delay in raising the jurisdictional issue.

46. In denying the motion in limine it is concluded that the Petitioner is

not precluded from raising the jurisdictional issue based upon grounds of

estoppel or the doctrine of res judicata. As described, the issues litigated in

DOAH Case 90-3576 were different from the issues raised in the present case.

See Hollingsworth v. Department of Environmental Regulation, 466 So.2d 383 (Fla.

1st DCA 1985) and Thomoson v. Department of Environmental Regulation, 511 So.2d

989 (Fla. 1987).

47. The argument in opposition to Respondent's claim of jurisdiction is

well taken. The policy explanation made by Respondent at hearing through

remarks of its policy maker is not compelling. Ordinarily, deference is

afforded an agency in interpreting its own statutes; however, that would not be

appropriate here. The Respondent's attempt to refer to annual operating costs

of the radiation therapy service attributable to outpatients as well as

inpatients to declare jurisdiction under Section 381.706(1)(h), Florida Statutes

is contrary to the statute. The correct approach is to limit a consideration of

the possible jurisdiction to the annual operating costs associated with

inpatients. This interpretation coincides with the statute. See Cataract

Surgery Center v. Healthcare Cost Containment Board, 581 So.2d 1359 (Fla. 1st

DCA 1991).

48. At Section 381.702(13), Florida Statutes the definition of

institutional health services is that of

"Institutional health service" means a health

service which is provided by or through a

health care facility and which entails an

annual operating cost of $500,000 or more.

The department shall, by rule, adjust the

annual operating cost threshold annually

using an appropriate inflation index.

The form of institutional health service which is subject to Respondent's

jurisdiction in this instance is an inpatient institutional health service by a

health care facility which is being established, not an outpatient institutional

health service by a health care facility already established which is being

supplemented by the establishment of an inpatient institutional health service

by the same health care facility.

49. For ease of reference Section 381.706(1)(h), Florida Statutes is

restated as follows:

(h) The establishment of inpatient

institutional health services by a health

care facility, or a substantial change in

such services, or the obligation of capital

expenditures for the offering of, or a

substantial change in, any such services

which entails a capital expenditure in any

amount, or an annual operating cost of

$500,000 or more. The department shall, by

rule, adjust the annual operating cost

threshold annually using an appropriate

inflation index.

50. In analyzing the language set forth in Section 381.706(1)(h), Florida

Statutes which Respondent uses in declaring its jurisdiction, the definition of

institutional health service at Section 381.702(13), Florida Statutes is carried

forward to respond to an inpatient setting. Consequently the inpatient

radiation therapy service must entail an annual operating cost of $500,000 or

more associated with this new inpatient radiation therapy service that is being

established to confer jurisdiction to require a certificate of need. It does

not, given that the outpatient radiation therapy service has already been

established and the operating costs associated with the inpatient radiation

therapy service are minimal. Even when a percentage allocation is made

concerning the annual operating costs, an artificial exercise required by the

Respondent which does not comport with reality, the threshold for annual

operating costs of $500,000 more is not reached.

51. The decision to bring about inpatient radiation services is not a

substantial change to an existing service over which the Respondent has

jurisdiction. Radiation therapy services are distinct services separate and

apart from other oncology services. The addition of inpatient radiation therapy

services, although similar to outpatient radiation therapy services is not the

substantial change in services referred to in Section 381.706(1)(h), Florida

Statutes in that outpatient radiation therapy services are not subject to

requirements to obtain a certificate of need.

52. Likewise, there is no obligation of capital expenditures or any

substantial change in existing services which would entail a further capital

expenditure related to the project to provide inpatient radiation therapy.

53. The phrase within Section 381.706(1)(h), Florida Statutes which

describes an annual operating cost of $500,000 or more restates or is redundant

to the definitional statement at Section 381.702(13), Florida Statutes

describing the same annual operating costs. As used in Section 381.706(1)(h),

Florida Statutes the legislature is referring to establishment of inpatient

institutional health services by the health care facility or substantial changes

to existing inpatient institutional health services by health care facilities

which amount to $500,000 or more in annual operating cost as a means to declare

the jurisdiction. Again, this project does not involve a substantial change to

an existing radiation therapy service over which the Respondent had jurisdiction

to require a certificate of need for that existing radiation therapy service and

the amount of annual operating costs associated with the inpatient radiation

therapy services which are being instituted is not $500,000 or more.

54. Should the decision be reached that the Respondent does have

jurisdiction to require a certificate of need then the Petitioner must prove its

entitlement to the certificate of need. See Florida Department of

Transportation v. J.W.C., Co., 396 So.2d 778 (Fla. 1DCA 1981) and Boca Raton

Artificial Kidney Center, Inc. v. Department of Health and Rehabilitative

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

55. In deciding whether Petitioner has sustained the burden the applicable

criteria in Section 381.705, Florida Statutes, and Rule 5.011, Florida

Administrative Code, must be examined. See Balsam v. Department of Health and

Rehabilitative Services, 486 So.2d 1341 (Fla. 1st DCA 1986). The criteria that

are applicable are weighed and balanced and the weight to be afforded individual

criteria will vary depending on the facts of the particular case and the

circumstances that exist in that case. See Collier Medical Center, Inc., v.

Department of Health and Rehabilitative Services, 462 So.2d 83 (Fla. 1st DCA

1985); Department of Health and Rehabilitative Services v. Johnson and Johnson,

447 So.2d 361, (Fla. 1st DCA 1984).

56. Associated with the consideration of the review criteria is the

possible use of a numeric need formula to assist in that analysis. The

Respondent does not have a rule in place. Nor is it developing incipient policy

to describe by a numeric formula the identification of the need for inpatient

radiation therapy services. For reasons discussed in the fact finding the

attempt by the parties to offer a case specific numeric need determination is

rejected. The hearing officer may not derive a numeric need formula independent

of those attempts. See Upjohn Healthcare Services v. Department of Health and

Rehabilitative Services, 496 So.2d 147 (Fla. 1st DCA 1986). Consequently, the

decision here is reached upon the weighing and balancing of applicable statutory

and rule criteria unassociated with a numeric need calculation.

57. Based upon the improvements to quality of care as envisioned by

Section 381.705(1)(b), Florida Statutes, and the cost of providing health

services referred to in Section 381.705(1)(l), Florida Statutes, discussed in

the fact finding and in view of other applicable criteria, Petitioner has

sustained the burden to establish entitlement to the grant of a certificate of

need for provision of radiation therapy services.

RECOMMENDATION

Based upon the consideration of the facts, and in view of the conclusions

of law, it is,

RECOMMENDED:

That a Final Order be entered which declines jurisdiction to require a

certificate of need for inpatient radiation therapy services or in the

alternative grants a certificate of need for inpatient radiation therapy

services.

DONE and ENTERED this 20th day of August, 1992, in Tallahassee, Florida.

___________________________________

CHARLES C. ADAMS, Hearing Officer

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

[phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 20th day of August, 1992.

ENDNOTES

1/ The discussion of the review criteria is being made to facilitate entry of a

final order in a setting in which the agency might not agree with the opinion

that the agency is without jurisdiction to require review.

APPENDIX

Case No. 92-1508

The following discussion is given concerning the proposed facts of the

parties.

Petitioner's Fact

Facts Associated with the Motion in Limine

1. - 12. Are subordinate to facts found.

13. Constitutes a conclusion of law.

14. Is subordinate to facts found.

15. - 16. Constitute an analysis of the policy position by the

Respondent associated with conclusions of law.

17. Is subordinate to facts found.

Findings of Facts Unassociated with Motion in Limine

1. - 3. Are subordinate to facts found.

4. Is not necessary to the resolution of dispute.

5. - 10. Are subordinate to facts found.

11. Is not necessary to the resolution of dispute.

Paragraphs 12 and 13 and the first sentence to paragraph 14 are

subordinate to facts found. The balance of paragraph 14 through paragraph 25 as

a calculation of need by use of a formula are rejected.

26. Rejected in that although the staff at West Florida may

be closed the facility still serves patient needs.

27. - 36. Are subordinate to facts found.

37. While accepted does not form the basis for

establishing need.

38. See discussion of paragraph 37.

39. - 40. Are subordinate to facts found.

41. See discussion of paragraph 37.

42. See discussion of paragraph 37.

43. - 44. Are subordinate to facts found.

45. Rejected.

46. - 47. Subordinate to facts found.

48. - 49. Rejected.

50. Subordinate to facts found.

51. - 53. Rejected.

54. Not necessary to the resolution of dispute.

55. - 57. Are subordinate to facts found.

Respondent and Intervenor Facts

1. - 2. Are subordinate to facts found.

3. - 12. Constitute discussion of Respondent's policy position

related to a conclusion of law.

13. - 15. Subordinate to facts found.

16. - 24. Are not necessary to the resolution of dispute.

25. Is subordinate to facts found.

26. - 34. Are not necessary to the resolution of dispute.

35. Is subordinate to facts found.

36. Is not necessary to the resolution of dispute.

37. Is subordinate to facts founds.

38. Is not necessary to the resolution of dispute.

39. Rejected.

40. Is subordinate to facts found.

41. - 43. Are not necessary to the resolution of dispute.

44. - 48. Are subordinate to facts found.

49. - 51. Are not necessary to the resolution of dispute.

52. Is subordinate to facts found.

53. The alternative suggested in paragraph 53 was not

shown to be a viable alternative even if such

permission could be received to adequately equip that

vehicle.

54. - 58. Are subordinate to facts found.

59 - 63. Are not necessary to the resolution of dispute.

64. Rejected.

65. Is subordinate to facts found.

66. Rejected.

67 - 94. Discussion of need by use of a formula is rejected.

95. Is not necessary to the resolution of dispute.

96 -98. Rejected as a means to determine need.

99.-115. Are subordinate to facts found.

116.-121. Are accepted with the exception that the impact of the

project on the Intervenor is more likely to be

associated with the lower amount quoted in paragraph

121.

122. Is not necessary to the resolution of dispute.

123. Is subordinate to facts found.

124. Does not lead to the conclusion that the radiation

therapy program at the Intervenor's facility will no

longer be viable with the advent of inpatient

radiation therapy services at Petitioner's facility.

COPIES FURNISHED:

Sam Power, Department Clerk

Department of Health and

Rehabilitative Services

1323 Winewood Boulevard

Tallahassee, Florida 32399-0700

Karen O. Emmanuel, Esquire

Emmanuel, Sheppard & Condon

Post Office Drawer 1271

Pensacola, Florida 32596

Richard Patterson, Esquire

Department of Health and

Rehabilitative Services

103 Fort Knox Executive Center

2727 Mahan Drive

Tallahassee, Florida 32301

Stephen A. Ecenia, Esquire

Katz, Kutter, Haigler, Alderman,

Davis, Marks & Rutledge, P.A.

106 East College Avenue, Suite 1200

Post Office Box 1877

Tallahassee, Florida 32302-1877

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

AGENCY FOR HEALTH CARE ADMINISTRATION

SACRED HEART HOSPITAL OF

PENSACOLA,

Petitioner,

CASE NO.: 92-1508

vs. CON NO.: 6772

RENDITION NO.: HRS-92-37-FOF-CON

AGENCY FOR HEALTH CARE

ADMINISTRATION,

Respondent,

and

BAPTIST HOSPITAL,

Intervenor

__________________________/

FINAL ORDER

This cause came on before me for the purpose of issuing a final agency

order. The Hearing Officer assigned by the Division of Administrative Hearings

(DOAH) in the above-styled case submitted a Recommended Order to the Agency for

Health Care Administration (AHCA).

The Recommended Order entered August 20, 1992, by Hearing Officer Charles

C. Adams is incorporated by reference.

RULING ON EXCEPTIONS FILED BY AHCA

AHCA excepts to the Conclusions of Law at pages 24 and 25 wherein the

Hearing Officer concluded that the agency is without jurisdiction to require a

Certificate of Need for Petitioner's proposed inpatient radiation therapy

program. Section 381.706(1)(h), Florida Statutes (1991), requires a Certificate

of Need for the "establishment of inpatient institutional health services." See

St. Mary's Hospital Inc. vs. Department of Health and Rehabilitative Services,

12 FALR 2727, 2750 (DOAH 1990), affirmed Baptist Hospital vs. Department of

Health and Rehabilitative Services, 578 So2d 1104 (Fla. 1st DCA 1991); State vs.

City of Boca Raton, 172 So2d 230, 233 (Fla. 1965). [The last expression of

legislative will is the law in cases of conflicting provisions in the same

statute; the last in order of arrangement in such statute prevails.] A

"radiation therapy program" is an institutional health service. See Sacred

Heart Hospital vs. Department of Health and Rehabilitative Services, DOAH Case

No. 90-3576, Order Granting Intervention filed May 17, 1991.

Respondent also excepts to Findings of Fact Numbers 19 and 20 and the

Conclusions of Law at page 26 wherein the Hearing Officer concluded that only

the incremental operating cost associated with the establishment of an inpatient

component of a radiation therapy program may be considered in determining the

agency's jurisdiction to require a Certificate of Need for the establishment of

an inpatient institutional health service. The allocation of inpatient costs is

irrelevant to the issue of jurisdiction. Section 381.706(1)(h), Florida

Statutes (1991), requires a Certificate of Need for the establishment of

inpatient institutional health services, regardless of annual operating cost.

Therefore, the agency has jurisdiction over Petitioner's proposal. The

exceptions are granted.

RULINGS ON EXCEPTIONS

FILED BY BAPTIST HOSPITAL

Baptist excepts to Finding of Fact 20. See the ruling on exceptions filed

by AHCA. The exception to Finding of Fact 41 is denied as the finding is

supported by competent, substantial evidence. Baptist maintains that because it

can be inferred from the Hearing Officer's findings that existing providers have

adequate capacity to serve inpatient need, Sacred Heart's proposal must be

rejected. A Certificate of Need decision must be based on a consideration of

all review criteria; therefore the capacity of existing providers is not

dispositive.

Baptist's exceptions to the Conclusions of Law are addressed in the ruling

on the AHCA exceptions.

FINDINGS OF FACT

The department hereby adopts and incorporates by reference the findings of

fact set forth in the Recommended Order except for the characterization as an

artificial device, the department's requirement that capital costs be allocated

to Petitioner's proposal to initiate inpatient radiation therapy services.

Petitioner has previously established its outpatient radiation therapy program

at a cost of $4,124,475.000. It would be illogical from an accounting and

health planning perspective to assume that Petitioner's proposal is without cost

simply because additional equipment and space would not be required to initiate

inpatient service. Likewise, the characterization as artificial, the allocation

of operating costs is rejected. The last sentence in paragraph 37 of the

Findings of Fact is rejected.

CONCLUSIONS OF LAW

The department hereby adopts and incorporates by reference the conclusions

of law set forth in the Recommended Order except as modified in this Final

Order.

Based upon the foregoing, it is

ADJUDGED, that the application of Sacred Heart Hospital of Pensacola for

Certificate of Need 6772 to initiate inpatient radiation therapy services be

APPROVED.

DONE and ORDERED this 22nd day of October 1992, in Tallahassee, Florida.

_______________________________

Douglas M. Cook, Director

Agency for Health Care

Administration

COPIES FURNISHED:

Charles C. Adams

Hearing Officer

DOAH, The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

Karen O. Emmanuel, Esquire

EMMANUEL, SHEPPARD & CONDON

Post Office Box 1271

Pensacola, Florida 32596

Richard Patterson, Esquire

Department of Health and

Rehabilitative Services

2727 Mahan Drive, Suite 103

Fort Knox Executive Center

Tallahassee, Florida 32308

Stephen A. Ecenia, Esquire

KATZ, KUTTER, HAIGLER, ALDERMAN

DAVIS, MARKS & RUTLEDGE

First Florida Bank Building

215 South Monroe Street, Suite 400

Tallahassee, Florida 32302-1877

Wayne McDaniel (AHCA)

Wendy Thomas (AHCA)

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a copy a the foregoing was sent to the above named

people by U.S. Mail this 28th of October, 1992.

_______________________________

R. S. Power, Agency Clerk

Assistant General Counsel

Department of Health and

Rehabilitative Services

1323 Winewood Boulevard

Building One, Room 407

Tallahassee, FL 32399-0700

[phone]

A PARTY WHO IS ADVERSELY AFFECTED BY THIS FINAL ORDER IS ENTITLED TO A 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 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 APPELLATE RULES. THE NOTICE

OF APPEAL MUST BE FILED WITHIN 30 DAYS OF RENDITION OF THE ORDER TO BE REVIEWED.