95-000730CON Bethesda Memorial Hospital, Inc. vs. Nme Hospital, Inc., D/B/A Delray Community Hospital And Agency For Health Care Administration Status: Closed Recommended Order on Tuesday, November 7, 1995.

Summary: Over 75% medical/surgery and over 100% occupancy in some intensive care unit beds in trauma center with open heart surgery with above average elderly in area result in need for more acute beds.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

BETHESDA MEMORIAL HOSPITAL, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 95-0730

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, and NME HOSPITAL, )

INC., d/b/a DELRAY COMMUNITY )

HOSPITAL, )

)

Respondents. )

___________________________________)

RECOMMENDED ORDER

This case was consolidated with Division of Administrative Hearings Case

No. 95-2649RX and heard by Hearing Officer Eleanor M. Hunter, on June 12-16,

1995, in Tallahassee, Florida.

APPEARANCES

For Petitioner, Kenneth G. Hoffman, Attorney

Bethesda Memorial W. David Watkins, Attorney

Hospital, Inc.: Oertel, Hoffman, Fernandez & Cole, P.A.

Post Office Box 6507

2700 Blair Stone Road

Tallahassee, Florida 32314-6507

For Respondent, John Gilroy, Attorney

Agency For Agency For Health Care Administration

Health Care 2727 Mahan Drive

Administration: Fort Knox Building 3, Suite 3431

Tallahassee, Florida 32308-5403

For Respondent, C. Gary Williams, Attorney

NME Hospitals, Michael J. Glazer, Attorney

Inc., d/b/a MacFarlane, Ausley, Ferguson & McMullen

Delray Community Post Office Box 391

Hospital: 227 South Calhoun Street

Tallahassee, Florida 32302

STATEMENT OF THE ISSUES

Whether the application of Delray Community Hospital for a certificate of

need to add 24 acute care beds meets, on balance, the applicable criteria for

approval.

PRELIMINARY STATEMENT

The Agency For Health Care Administration ("AHCA") preliminarily approved

Certificate of Need ("CON") Application Number 7872 to authorize NME Hospitals,

Inc. d/b/a Delray Community Hospital ("Delray") to add 24 acute care beds.

Delray is located in AHCA District 9, Subdistrict 5, for southern Palm Beach

County, as is the Petitioner, Bethesda Memorial Hospital, Inc. ("Bethesda").

Bethesda challenged AHCA's preliminary approval of Delray's CON and, in Division

of Administrative Hearings ("DOAH") Case No. 95-2649RX, also challenged the

validity of the need methodology in Rule 59C-1.038, the acute care bed need

rule. The cases were consolidated for hearing. By Final Order of August 17,

1995, paragraphs (5), (6) and (7)(a)-(c) of the acute care bed need rule were

held invalid. Although the cases were consolidated for hearing, the parties

stipulated that the witnesses and exhibits listed in this Recommended Order

constitute the record in this case.

AHCA presented the testimony of Elizabeth Dudek, expert in health care

planning and certificate of need policy and procedure. There were no AHCA

exhibits.

Delray presented the testimony of Laura Cillo, expert in hospital

administration; Jean Iapichino, R.N., expert in nursing and nursing

administration; Julie Hilsenbeck, R.N., expert in nursing and nursing

administration; Ivan Puente, M.D., expert in trauma care and surgery; Roy

Katzin, M.D., expert in neurology; Santosh K. Mathen, M.D., expert in emergency

medicine; Keith A. Kasper, expert in health care finance; and Daniel J.

Sullivan, expert in health care planning, health care finance, and financial

feasibility of health care projects. Delray's exhibits 1-19 and 21 were

received in evidence. Delray's exhibit 20 was not received in evidence.

Bethesda presented the testimony of Armand Balsano, expert in health care

planning and financial feasibility; Virgil C. Norris, M.D., expert in surgery;

Jeri-Ann Saltamacchia, R.N., expert in nursing and emergency department nurse

management; Harold J. Lynch, Jr., M.D., expert in internal medicine and

pulmonology; and Gale Marsh, R.N., expert in critical care nursing and critical

care unit management. Bethesda's exhibits 1-6 were received in evidence.

The transcript of the final hearing was received on July 10, 1995. After a

motion to extend post-hearing deadlines was granted, proposed findings of fact

and conclusions of law were filed on August 21, 1995.

FINDINGS OF FACT

1. The Agency For Health Care Administration ("AHCA") administers the

state certificate of need ("CON") program for health care services and

facilities. In August 1994, AHCA published a numeric need of zero for

additional acute care beds in District 9, Subdistrict 5, for southern Palm Beach

County.

2. In September 1994, NME Hospitals, Inc. d/b/a Delay Community Hospital,

Inc. ("Delray") applied for a certificate of need ("CON") to add 24 acute care

beds in District 9, Subdistrict 5, for a total construction cost of $4,608,260.

AHCA published its intent to approve the application and to issue CON No. 7872

to Delray, on January 20, 1995, in Volume 21, No. 3 of the Florida

Administrative Weekly.

3. By timely filing a petition, Bethesda Memorial Hospital, Inc.

("Bethesda"), which is located in the same acute care subdistrict, challenged

AHCA's preliminary decision. Bethesda also filed a petition challenging Rule

59C-1.038, Florida Administrative Code, the acute care bed need rule, which

resulted in a determination that the need methodology in the rule is invalid.

Bethesda Memorial Hospital, Inc. v. AHCA and NME Hospital, Inc., DOAH Case No.

95-2649RX (F.O. 8/16/95).

4. Delray and Bethesda are in a subdistrict which includes five other

hospitals, Wellington Regional Medical Center ("Wellingon"), West Boca Medical

Center ("West Boca"), Palm Beach Regional Medical Center ("Palm Beach

Regional"), J. F. Kennedy Medical Center ("JFK"), and Boca Raton Community

Hospital ("BRCH"). The hospitals range in size from 104 to approximately 400

beds. Wellington, West Boca, and Palm Beach Regional have fewer, and Bethesda,

JFK and BRCH have more than Delray's 211 beds.

5. Bethesda, located in Boynton Beach, is accredited by the Joint

Commission for the Accreditation of Hospital Organizations ("JCAHO") for the

maximum time available, 3 years. Bethesda has 330 beds, and offers obstetrics,

pediatrics, and emergency room services. An average of 10 patients a month are

transferred, after their condition is stabilized, from the emergency room at

Bethesda to other hospitals, and most are participants in the Humana health

maintenance organization ("HMO"), which requires their transfer to an Humana-

affiliated hospital. Approximately one patient a month is transferred for open

heart surgery or angioplasty after stabilization with thrombolitic therapy at

Bethesda. Bethesda has a 12-bed critical care unit, a 12-bed surgical intensive

care unit, and a telemetry or progressive care unit. From October to April,

Bethesda also opens a 10-bed medical intensive care unit. Even during this

"season," when south Florida experiences an influx of temporary winter

residents, Bethesda's critical care beds are very rarely full. Only one time

during the 1994-1995 season was a patient held overnight in the emergency room

waiting for a bed at Bethesda. Only diagnostic cardiac caths are performed at

Bethesda due to the absence of back-up open heart surgery.

6. Delray is located on a medical campus with Fair Oaks Hospital, a 102

bed psychiatric facility, and Hillhaven Convalescent Center, which has 108 beds.

Delray is physically connected to Pinecrest Rehabilitation Hospital, which has

90 beds. The campus also includes a medical mall, with outpatient services, a

home health agency, and medical office buildings. Delray has a medical staff of

430 physicians.

7. Delray is a for-profit hospital owned and operated by NME Hospitals,

Inc., a wholly owned subsidiary of National Medical Enterprises, which after

merging with American Medical International, does business as Tenet Health Care

Corporation ("Tenet"). Tenet owns, operates, or manages 103 facilities,

including Fair Oaks and Pinecrest Rehabilitation Hospital. Delray owns

Hillhaven Convalescent Center, but it is managed by the Hillhaven nursing home

management company. NME Hospitals, Inc., also owns West Boca Medical Center,

which is approximately 10 to 12 miles from Delray. South Florida Tenet Health

System is an alliance of the Tenet facilities, which has successfully negotiated

managed care contracts offering the continuum of care of various levels of

providers within one company.

8. AHCA published a numeric need of zero for additional acute care beds in

the southern Palm Beach County subdistrict, for July 1999, the applicable

planning horizon. Delray's application asserts that special circumstances exist

for the approval of its application despite the absence of numeric need. AHCA

accepted and reviewed Delray's application pursuant to the following section of

the acute care bed need rule:

(e) Approval Under Special Circumstances.

Regardless of the subdistrict's average

annual occupancy rate, need for additional

acute care beds at an existing hospital is

demonstrated if a net need for beds is shown

based on the formula described in paragraphs

(5)(b), (7)(a), (b), (c), and (8)(a), (b),

(c), and provided that the hospital's average

occupancy rate for all licensed acute care

beds is at or exceeds 75 percent. The deter-

mination of the average occupancy rate shall

be made based on the average 12 months occupancy

rate made available by the local health council

two months prior to the begining of the

respective acute care hospital batching cycle.

9. The need methodology referred to in the special circumstances rule

indicated a net need for 1442 additional beds in District 9. All parties to the

proceeding agree that the net need number is unrealistic, irrational, and/or

wrong. That methodology was invalidated in the previously consolidated rule

challenge case. Delray also met the requirement of exceeding 75 percent

occupancy, with 75.63 percent from January through December 1993. In 1994,

Delray's occupancy rate increased to 83 percent.

10. In 1993, occupancy rates were 55.6 percent in District 9 and 52.5

percent in subdistrict 5. At individual hospitals, other than Delray, occupancy

rates ranged from lows of 25.5 percent at Wellington and 35 percent at Palm

Beach Regional to highs of 58 percent at BRCH and JFK. A study of four year

trends shows declining acute care occupancy at every subdistrict hospital except

Delray.

11. Delray points to occupancy levels in intensive care units as another

special circumstance for adding new beds. Currently, Delray has 8 beds in a

trauma intensive care unit ("TICU"), 8 in a surgical intensive care unit

("SICU"), 7 in a critical or coronary care unit ("CCU"), 7 in a medical

intensive care unit ("MICU"), and 67 beds in a telemetry or progressive care

unit ("PCU"). For the fiscal year ending May 31, 1994, occupancy rates were 80

percent in the PCU, 91 percent in CCU, and 128 percent in SICU. If the CON is

approved, Delray plans to allocate the 24 additional beds to increase the PCU by

10, CCU by 7, and the SICU by 7 beds. Expert testimony established 75 percent

to 80 percent as a range of reasonable occupancy levels for intensive care

units.

12. A PCU, telemetry, or step down unit serves as a transition for

patients leaving ICUs who require continued heart rate monitoring. PCU staffing

ratios are typically 1 nurse to every 4 patients. CCU is used for patients who

have had heart attacks or other serious cardiac problems and continue to need

closer personal monitoring. SICU is used primarily for post-surgery open heart

patients. The TICU is used for patients with neurological injuries and those in

need of neurosurgery. When the ICUs are full, overflow patients are placed in

holding areas of the ICU, the emergency room ("ER"), telemetry unit, or in a

medical holding unit behind the emergency room. During the season, from

November to April, from 20 to 55 patients are in holding areas, most of whom

would otherwise be in an ICU or PCU bed. Critical care nurses are moved to the

holding areas to care for critical patients. Additional staffing requirements

are met, in part, by using contract nurses from an agency owned by Tenet, called

Ready Staff. Other temporary or traveling nurses go through a three day

orientation and are paired with regular staff mentorsaveling nurses have

three to six month contracts to work at various hospitals throughout the county,

as needed. Intensive care nurses are cross-trained to work in any of the ICUs,

but the same nurses usually are assigned to open heart and trauma patients.

13. Since May 1991, Delray has been the state-designated level II trauma

center for southern Palm Beach County, as is St. Mary's Hospital for the

northern areas of the Countyauma patients are transported by ambulance or

helicopter, and treated in two designated trauma rooms in the emergency

department. The state designation requires Delray to have one of its eight

trauma surgeons, trauma nurses, anesthesiologists, and certain other ancillary

services available in the hospital at all times. Delray also must have a bed

available in its TICU.

CON Review Criteria

14. By supplemental prehearing stipulation, the parties agreed that

Delray's CON application includes the information and documents required in

Section 408.037, Florida Statutes. The parties also stipulated that the project

is financially feasible in the short term, and that proposed construction costs

and methods, and equipment costs are reasonable. Based on prehearing

stipulations, the statutory review criteria in dispute are as follows:

408.035(1)(a) - need in relation to district

and state health plans;

408.035(1)(b) and (1)(d) - availability,

accessibility, efficiency, and adequacy of

other hospitals;

408.035(1)(b) and (1)(c) - quality of care

at other hospitals and the applicant's ability

to provide and record of providing quality of care;

408.035(1)(h) - availability of critical care

nurses; and

408.035(1)(i) - long term financial feasibility.

State and District Health Plans

15. The 1993 Florida State Health Plan has a preference for approving

additional acute care beds in subdistricts with at least 75 percent occupancy,

and at facilities equal to or in excess of 85 percent occupancy. Subdistrict 5

and Delray do not meet the preference. See, Finding of Facts 9 and 10.

16. The state health plan also includes a preference for hospitals which

are disproportionate share Medicaid providers. Delray does not meet the

preference, and notes that 70 percent of its patients are over 65 years old and

entitled to Medicare reimbursement. In fact, there are no disproportionate

share providers in the subdistrict.

17. Delray meets the state plan preference for proposing a project which

will not adversely affect the financial viability of an existing,

disproportionate share provider.

18. The state health plan also has four preferences related to emergency

services, for accepting indigent patients in ER, for a trauma center, for a full

range of ER services, and for not having been fined for ER services violations.

Delray meets all four preferences related to emergency services.

19. The 1990 District 9 Health Plan, with a 1993 CON Allocation Factors

Report, favors applicants who serve Medicaid/Indigent, handicapped, and

underserved population groups. In 1992 and 1993, approximately 2.5 percent of

the patients at Delray were in the Medicaid program. Delray also provided 3

percent indigent and charity care for 1993. The hospital's 1992 financial

reports do not indicate that it provided any indigent or charity care. In 1993-

1994, Delray had the lowest percentage of Medicaid and charity patients at a

state designated level II trauma center. AHCA proposes to condition approval of

CON 7872 on Delray's providing 2.4 percent of total annual patient days to

Medicaid and 1 percent of total annual patient days to charity care, as

projected by Delray in Table 7 of the application.

20. Under the district health plan, priority is given for applicants who

document cost containment. One example of cost containment, according to the

plan, is sharing services with other area hospitals to enhance efficient

resource utilization and avoid duplication. Delray describes its patient-

focused care model as an example of cost containment. In response to rising

labor cost, the underutilization of certain required categories of employees,

and the large number of staff interacting with each patient, Delray created the

model which emphasizes cross-training of staff to work in teams led by a

registered nurse. Delray has not proposed sharing services with other

hospitals, and has not documented cost containment as that is described in the

district health plan.

Availability, Accessibility, Efficiency and Adequacy

of Other Hospitals

21. Additional acute care beds at Delray will not meet any demonstrated

numeric, geographic, or financial need. Acute care beds are available in

adequate numbers in the subdistrict. Roughly half, or 800, of the subdistrict's

1700 beds were empty most days in 1993 and 1994.

22. Bethesda's expert in health care planning and financial feasibility

testified that some available, more appropriate alternatives to the approval of

additional beds at Delray are the transfer of patients to other subdistrict

hospitals, including Tenet's West Boca, the transfer of unused bed capacity from

one area of the hospital to another, or the transfer of unused bed capacity from

West Boca to Delray. Bethesda also contends that Delray could find alternatives

to placing outpatient surgery and outpatient cardiac cath patients in inpatient

beds from four to twenty-three hours for observation and care. In support of

Delray, AHCA's expert testified that institution-specific demand, in Delray's

case, has reached the level of community need, because other subdistrict

hospitals are not adequate or available to treat the type of patients treated at

Delray.

23. All of Delray's patients come from areas of the county which overlap

the service areas of other hospitals, which shows the absence of any geographic

access barriers. A diagnostic related group, or DRG, analysis shows that most

of the categories of diagnosed illnesses or injuries treated at Delray are also

treated at other subdistrict hospitals. The DRGs exclusively treated at Delray

are related to trauma. Others treated in the subdistrict only at Delray and JFK

are related to angioplasty and open heart surgery.

24. Of the state level II trauma centers, Delray reported the highest

percentage, 96.5 percent, of discharges of all patients were urgent or emergent

cases. By comparison, the lowest were 65.6 percent at St. Joseph's Hospital in

Tampa and 66 percent at West Florida Regional Medical Center, and the next

highest was 94.2 percent at Bayfront Medical Center. Bethesda's expert

suggested that the number was too high and could result from miscoding.

Approximately 70 to 90 trauma patients are treated each month at Delray and

approximately 50 percent of those are admitted to the hospital. One Bethesda

witness, a doctor on the staff at both Bethesda and Delray, testified that he

was called in once when Delray refused to go on "by-pass status," to send an

incoming trauma patient to St. Mary's, knowing the patient was likely to need a

CT scan. At the time, Delray's main scanner inside the hospital was inoperable

or undergoing repairs. The patient who arrived by helicopter was taken by

ambulance to another scanner on the campus, approximately 1000 yards away from

the hospital. The same doctor also complained that ER patients who are upgraded

to trauma status cannot be downgraded by trauma surgeons. There was no evidence

how often the inside CT scan is unavailable and, consequently, no showing that

altering this practice would result in an appreciable decline in the demand for

trauma services at Delray. Similarly, there was no evidence of any impact on

hospital admissions resulting from upgrading emergency patients to trauma

patients.

auma victims seldom require open heart surgery. Therefore, a

different category of patients served only in the subdistrict at JFK and Delray

is open heart surgery patients. Because of its location in an area with a large

population over age 65 and due to the services it provides, one Delray witness

described Delay, as a "cardiac" hospital. Delray has no pediatric or obstetric

services. The percentage of residents over 65 in Delray's service area is about

35 percent, in contrast to a statewide level approaching 20 percent.

26. Delray began an open heart surgery program in August, 1986. There are

now approximately 50 cardiologists on staff, 19 performing cardiac

catheterizations ("caths") and angioplasties, and three performing open heart

surgeries. In fiscal year 1993, approximately 1900 cardiac caths, and 450 open

heart surgeries were performed at Delray. In fiscal year 1994, that increased

to approximately 2100 patients cathed and 540 open heart surgeries. Through

April 1995, or 11 months into the fiscal year, there were approximately 2300

caths and 526 open heart surgeries. The cath labs are available twenty-four

hours a day, seven days a week, within forty-five minutes notice. By

comparison, the cath lab at Bethesda operates on weekdays until 3:30 p.m. Ten

to twelve physicians use Delray's two cardiac cath labs and a third overflow

lab, if needed. The cath labs at Delray and Bethesda are considered "open"

because any qualified staff physician is eligible to receive privileges to use

the lab. A backlog occurs in the Delray cath lab when critical care beds are

not available for patients following caths. Delray has three open heart surgery

operating rooms and three open heart surgeons, with the capacity to perform 1000

open heart surgeries a year.

27. Within the subdistrict, approximately 11 miles from Delray, JFK also

provides cardiac cath, angioplasty, and open heart surgery services. JFK has

369 beds and is equipped with two cardiac cath labs, each with the capacity to

accommodate 2000 procedures a year. In fiscal year 1994, approximately 3200

caths were performed at JFK. The cath lab is "closed," meaning JFK has entered

into an exclusive contract for services with one group of invasive

cardiologists. JFK's medical staff has relatively little overlap, approximately

10 to 15 percent, with the medical staff at Delray. Across all patients and all

diagnoses, there is also relatively little geographic overlap. JFK, by and

large, serves the central area and Delray serves the southern area of Palm Beach

County. The average census in thirty critical care beds at JFK was 16.5

patients in 1994, and 18.4 in the first six months of 1995. A high range of 70

percent to 80 percent occupancy in JFK's critical care beds is reached during

the peak season. Although JFK's thirty critical care beds are not officially

divided into different types of intensive care services, a de facto designation

has developed. Depending on the patient mix, the same 16 beds are generally

used for cardiac critical care. The average daily census for cardiac critical

care was 13.4 in March 1994 and 23.4 in February 1995. Overall, there is no

excess capacity in the district in critical care beds during the height of the

season. The average occupancy of all critical care beds in southern Palm Beach

County was 104 percent in February 1992, 98 percent in February 1993, and 93.5

percent in February 1994.

28. Open heart surgery and angioplasty are more frequently than not

scheduled up to a week ahead of time. Most cardiac patients can be admitted to

any emergency room and stabilized with thrombolytic therapy before transfer to

another hospital for an angioplasty or open heart surgery, without compromising

their conditions. However, at Delray, cardiac patients are more likely to be

emergent or urgent cases, remaining in the hospital for stabilization, scheduled

for surgery within 24 hours, and remaining in SICU an average of forty-eight

hours following surgery. The older patients are more difficult to transfer

because they tend to have more consulting specialists on the staff of the

hospital in the service area where they resideansferring open heart surgery

patients from Delray to JFK is not beneficial as a health planning objective

during the season, when JFK operates at reasonable levels of 70 percent to 80

percent occupancy in critical care beds and exceeds the capacity of its de facto

cardiac critical care beds.

29. Delray's emergency department can accommodate 23 patients at one time.

Over the past three years, ER visits have increased by approximately 1,000 each

year. Approximately 20 percent to 25 percent of patients treated in its

emergency room, excluding trauma patients, are admitted to Delray. During the

winter season, there are also more emergency room patients who do not have local

physicians, most complaining of cardiac and respiratory problems. By federal

law, certain priority categories of emergency patients must be taken to the

nearest hospital. Federal law also prohibits patient transfers to a different

hospital unless a patient's medical condition is stable, the patient consents,

and the other hospital has an available bed and a staff doctor willing to take

the patient. Patient condition and consent are major factors preventing

transfers of elderly residents of the Delray service area to other hospitals.

30. Delray also reasonably expects an increase in patients due to an

increase in its market share, managed care contracts, and population in its

service area. Managed care contracts, usually for 3 year terms, are not alone a

reliable basis for making long term community health planning decisions.

Combining trends in growth, population aging, declining lengths of stays in

hospitals, market share and the greater consumption of inpatient services by

people over 65, however, Delray reasonably expects an incremental increase of

1667 discharges by 1999. At 80 percent occupancy, the incremental patients

attributable to population growth alone, according to Delray's expert, justifies

an additional 34 beds.

31. For a substantial part of 1994, ICU, CCU and medical/surgical beds at

Delray exceeded reasonable occupancy standards. In the first four months of

1995, medical/surgical occupancy levels ranged from 96.7 percent to 119.4

percent. Given those levels and the projected growth, transfer of beds from

medical/surgical units is not a reasonable option for increasing the supply of

critical care beds. Delray is small when compared to all other high volume open

heart surgery and level II trauma hospitals in Florida.

32. Another option suggested by Bethesda's expert was the transfer of beds

from West Boca to Delray. Because the beds have already been built, a transfer

would not reduce capital or fixed costs at West Boca. The only effect that was

apparent from the evidence in this case would be a statistical increase in

subdistrict utilization. In addition, with 171 beds, West Boca is relatively

small and in a growing area of Palm Beach County.

33. Bethesda's contention that Delray could stop using inpatient beds for

the four to twenty-three hour outpatients was not supported by the evidence.

There was no showing that the physical plant or space exists for the

construction of observation beds near an ambulatory surgery center. Given the

testimony that all hospitals use inpatient beds for certain outpatients, and

that Delray averages five to seven outpatients in inpatient medical/surgical

beds at any time, there is no evidence of a practical alternative with any

significant impact on the overcrowding at Delray. Bethesda also challenged the

need for critical care for fractures, cellulitis, and fever of unknown origin,

which were among the diagnoses listed for patients in the ER hold. However,

Bethesda's expert also acknowledged that some patients in ER hold at Delray were

waiting for medical/surgical beds not only ICU beds. Patients are placed in

holding areas whenever assignment to an appropriate bed is not possible within

thirty minutes of the issuance of orders to admit the patient.

34. Delray proved that it is unique in the subdistrict in treating trauma

patients and cardiac patients in a service area with minimal geographic and

medical staff overlap with that of JFK. The transfer of such patients to other

hospitals in the subdistrict is often not practical or possible. Delray also

demonstrated that other subdistrict hospitals are not available alternative

intensive care providers when their ICUs are also full or over optimal levels of

occupancy, during the season. In addition, the demographic characteristics of

Delay's service area support projected increases in inpatient days due to

increased market share, population aging and growth. All of these factors

indicate that Delray cannot, as Bethesda suggests, control its own growth,

transfer, or redirect patients.

Quality of Care and Availability of Critical Case Nurses

35. Delray is JCAHO accredited. There is no evidence that quality of care

affects hospital utilization in southern Palm Beach County. Open heart surgery

mortality rates from 1990 to 1994 were 1.9 percent at JFK and 3 percent at

Delray, but the data is not adjusted to take into consideration "case-mix,"

meaning the severity of illnesses, and is, therefore, meaningless as a

comparison. A 1994 Medicare case mix index report shows Delray treating the

sickest patients followed by JFK, then Bethesda. The sicker, older patients,

exert more pressure on ICUs.

36. Because ICU nursing ratios are one-nurse-to-one-patient or, more

typically, one-to-two and PCU ratios are one-to-four, PCUs provide a step down

from ICUs. PCU beds are used for patients who no longer need ICU care, but

require more intense monitoring than that provided on the medical/surgical

floors with nurse/patient ratios of one-to-twelve or one-to-twenty. In PCU or

telemetry beds, radio signals transmit data to heart monitors. However, if PCU

beds are not available, patients are left in the ICUs longer than necessary,

aggravating the backlog cause by crowded ICUs.

37. Critical care is a resource-intensive service, and Bethesda argues

that Delray cannot increase the service because of the shortage of critical care

nurses in Palm Beach County. However, the testimony presented by Bethesda is

not consistent. Bethesda's expert in critical care nursing and critical care

unit management testified that vacancies are difficult to fill, that there is a

shortage of critical care nurses, but that Bethesda does not experience a

shortage of critical care staff. There is no explanation why Bethesda has no

shortage, but Delray would if its CON is approved. Delray's director of

neuroscience and critical care testified that she maintains a file of available

critical care nurses and can recruit the additional staff needed due to Delray's

competitive salaries and benefits.

Long Term Financial Feasibility

38. There are no revenues or expenses during construction of the 24 beds,

just construction costs. After the beds are in service, Delray projects net

income of $1,951,164 in 1997 and $2,003,769 in 1998.

39. In projecting revenues and expenses for the beds, Delray used its

historical percentages of patients in each unit receiving a particular type of

care and the historical cost of that care, and assumed that the same breakdown

in the 24 new beds. Using the historical financial experience, Delray

constructed a pro forma for the 24 beds, with an expected average daily census

of 21.6 patients.

40. If the 24 new beds are used only for existing holding area patients

then, as Bethesda contends, Delray's pro forma should show a shift of revenues

and expenses to the new beds, and the same amounts deducted from the remainder

of the hospital. Delray already charges holding area patients based on the

intensity of nursing care provided, even though the patients are not physically

located in an ICU. The ER hold patients accounted for 2,210 patient days in

1994, which are reallocated to ICU beds in the pro forma.

41. However, Delray also projected an incremental increase of 7,865

patient days which, contrary to Bethesda's claim, does not include or double-

count the ER hold patient days. Of these, 54 percent of incremental patient

days are projected to be in the ICUs or PCU. The additional patients will,

therefore, spend 46 percent of total patient days in medical/surgical beds.

Routine revenue estimates of $492 a day in year one were criticized as too low

for the projected 54 percent ICU/46 percent medical/surgical mix. However, $492

a day is a reasonable estimate of incremental routine revenues for the hospital

as a whole. In 1994, patients at Delray spent 44 percent of total days in

medical/surgical beds as compared to the projection of 46 percent for new

patients. There is no material variation from 44 percent to 46 percent,

therefore $492 a day is a reasonable projected incremental routine revenue.

Delray has demonstrated, in an incremental analysis, the financial feasibility

of adding 24 critical care beds for existing and additional patients.

42. Delray has also considered the financial impact of additional patients

in all categories of beds. Although criticized by Bethesda for this approach,

Delray explained that a critical care bed generates revenues from a

medical/surgical bed when patient's condition is downgraded. The financial

analysis is reasonable, particularly since Medicare pays a flat rate by DRG

regardless of how a patient's total days are divided between ICUs and

medical/surgical beds.

43. Bethesda questioned whether the use of new beds for new patients will

eliminate the use of holding areas. The movement of patients in and out of ICUs

will be enhanced by having more ICU and PCU beds, even if the additional beds do

not eliminate entirely the use of holding areas during the peak season.

Projected average occupancies are expected to reach 98 percent in March 1997 and

1998.

44. Delray also demonstrated that the share of its projected increased

admissions which would have otherwise gone to Bethesda is approximately 150

patients, representing a net decline in revenue to Bethesda of approximately

$257,000, in comparison to Bethesda's net income of $9 million in 1994.

Bethesda also will no longer receive a county tax subsidy of $1 million in

income and $3.5 million in restricted funds, after 1994.

CONCLUSIONS OF LAW

45. The Division of Administrative Hearings has jurisdiction over the

parties and subject matter of this case, pursuant to Subsection 120.57(1) and

408.039(5), Florida Statutes.

46. NME Hospitals, Inc., d/b/a Delray Community Hospital, as the

applicant, has the burden of proving, its entitlement to certificate of need,

based on a balanced consideration of the criteria. Boca Raton Artificial Kidney

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

(Fla. 1st DCA 1985); Florida Department of Transportation v. J.W.C. Company,

Inc., 396 So.2d 778 (Fla. 1st DCA 1981).

47. Although its financial solvency is not threatened, Bethesda has

standing to challenge the issuance of a CON to Delray, as did Palm Beach Gardens

in St. Mary's Hospital, Inc., et. al v. AHCA et. al., DOAH 93-0956 and 93-0957

(F.O. 1/13/95).

48. Bethesda argues that the approval of Delray's CON will impermissibly

respond to an institution-specific need, not a community need, as required by

Section 408.302(2), Florida Statutes. Bethesda relies on St. Mary's hospital,

Inc., et al. v. Agency For Health Care, supra. In St. Mary's, the applicant

constructed, equipped and operated an outpatient cardiac catherization

laboratory and applied for CON authorizing it to perform inpatient cardiac

catheterizations. The Recommended Order in St. Mary's was based on the

applicant's failure to demonstrate need and to support projected utilization

volumes, not solely on institution-created demand.

49. Bethesda also cites Naples Community Hospital v. AHCA, DOAH Case No.

92-1510 (F.O. 6/6/93) for the proposition that peak seasonal demand for acute

care beds is not a "not normal" circumstance unless "a credible threat of a

negative impact to patient outcomes exists." However, the average occupancy

level of Naples Community Hospital was less than the 75 percent threshold of

Rule 59C-1.038(7)(e), and AHCA clarified its adoption of the Recommended Order

to "not suggest that such circumstances are the only way "not normal"

circumstances can be established." (F.O. at page 4).

50. Consideration of the Delray application in relation to the state and

local health plans is required by Subsection 408.035(1)(a), Florida Statutes.

51. Delray, on balance, meets the preferences in the state health plan.

Although not meeting occupancy level and Medicaid requirements, Delray meets the

preferences for emergency and trauma services, and for proposing a project which

will not adversely affect another hospital which is a disproportionate share

provider of the Medicaid reimbursed services.

52. The Delray application is not in compliance with the local health

plan, having not documented cost containment as envisioned by the plan, and due

to the low levels of Medicaid and charity care, the lowest of any level II

trauma center in the state.

53. Delray established the need for the additional 24 beds, based on its

high average annual occupancy in medical/surgical, ICU, and PCU beds. Likewise,

during the season, beds at other hospitals are either not accessible,

appropriate, or adequate for the types of patients at Delray, in compliance with

the need criteria of Subsection 408.035(1)(b) and (d).

54. Delray demonstrated that the need for the additional beds at Delray is

a community need based on the DRG analysis of the patients who are not served at

other subdistrict hospitals, trauma patients, and those who require angioplasty

and open heart surgery services, but are not in JFK's primary service area.

Delray also demonstrated community need by showing that it is illegal,

impractical and/or impossible to transfer many patients who are admitted from

its emergency room.

55. In Humana of Florida, Inc. d/b/a Humana Hospital Pasco v. AHCA, DOAH

Case No. 92-1497, 17 FALR 2300 (F.O. 6/3/93), AHCA approved the addition of 24

acute care beds at East Pasco Hospital, which exceeded 100 percent occupancy in

the peak winter season. East Pasco's case was less compelling than is Delray's.

The projected average daily census was 5 patients in 24 beds in year 2 at East

Pasco, in contrast to 21.6 patients in 24 beds at Delray. In addition, East

Pasco was not a trauma center, and offered the same medical services as the only

other hospital in the subdistrict, with which it shared "virtually identical"

medical staffs and primary service areas. (R.O. at page 3; F.O. at page 1).

56. Delray meets the quality of care criteria of Subsection 408.035(1)(c),

and can recruit and hire the necessary staff, as required by Subsection

408.035(1)(h).

57. Delray does not seek approval of the project as a joint or shared

program, to meet needs in adjoining areas, or as a research or training program,

under Subsections 408035(1)(e), (f) and (g).

58. The parties stipulated to short-term financial feasibility and Delray

demonstrated the long-term financial feasibility of its project, as required by

Subsection 408.035(1)(i).

59. The addition of 24 acute care beds, as proposed by Delray, does not

respond to any special needs or circumstances of large numbers of people outside

the service district, for of any health maintenance organizations, as AHCA

interprets Subsections 408.035(1)(j) and (k).

60. There was no evidence that the project will impact costs or

competition for acute care beds, as described in Subsection 408.035(1)(l). The

parties stipulated that costs and methods of construction were reasonable,

pursuant to Subsection 408.035(1)(m).

61. Considering, under Subsection 408.035(1)(n), past and proposed service

to Medicaid and indigent patients, Delray's past levels and proposed commitment

for the new beds are consistent with the subdistrict.

62. Delray meets the criterion of Subsection 408.035(1)(o), for promoting

a continuum of care in a multi-level health care system.

63. On balance, the addition of 24 acute care beds at Delray is justified

by "not normal" circumstances, particularly the absence of another level II

trauma center and the lack of medical staff and geographic service area overlap

with JFK, which severely limits the ability to redirect Delray's cardiac

patients to JFK.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of Law, it is

RECOMMENDED that a Final Order be entered issuing Certificate of Need 7872,

approving the addition of 24 acute care beds, to NME Hospital, Inc., d/b/a

Delray Community Hospital, conditioned on the provision 2.4 percent of total

annual patient days to Medicaid and 1 percent of total annual patient days to

charity care.

DONE AND ENTERED this 7th day of November, 1995, in Tallahassee, Leon

County, Florida.

___________________________________

ELEANOR M. HUNTER

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 7th day of November, 1995.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 95-0730

To comply with the requirements of Section 120.59(2), Florida Statutes

(1993), the following rulings are made on the parties' proposed findings of

fact:

Petitioner, Bethesda Memorial, Proposed Findings of Fact.

1. Accepted in Findings of Fact 14.

2. Accepted in or subordinate to Findings of Fact 2, 7, and 10.

3. Accepted in or subordinate to Findings of Fact 23 and 27.

4. Accepted in or subordinate to Findings of Fact 21 and 23.

5. Accepted in Findings of Fact 22.

6. Accepted in or subordinate to Findings of Fact 21.

7. Accepted in Findings of Fact 23.

8,9. Accepted in Findings of Fact 19 and 20.

10. Accepted except first sentence in Findings of Fact 15.

11-12. Accepted in Findings of Fact 16.

13. Accepted in Findings of Fact 18.

14. Rejected in Findings of Fact 15-18.

15-17. Accepted in or subordinate to Findings of Fact 21 and 22.

18. Accepted in Findings of Fact 35.

19. Rejected first sentence in Findings of Fact 30.

20. Accepted in part and rejected in part in Findings of Fact 23-29.

21. Accepted in or subordinate to Findings of Fact 14.

22. Subordinate to Findings of Fact 14 and accepted in Findings of Fact

21.

23-25. Accepted in or subordinate to Findings of Fact 4.

26. Rejected in Findings of Fact 27.

27-28. Accepted in Findings of Fact 30.

29. Accepted in Findings of Fact 21.

30. Rejected first sentence in Findings of Fact 38-43.

31-32. Rejected in or subordinate to Finding of Fact 43.

33. Accepted in Findings of Fact 40.

34-35. Accepted in or subordinate to Findings of Fact 39-41.

36. Accepted in Findings of Fact 37.

37(1). Accepted in Findings of Fact 40 and 41.

37(2). Accepted in Findings of Fact 11.

37(3). Accepted in Findings of Fact 39 and 43.

38-39. Accepted in part and rejected in part in Findings of Fact 40 and

43.

40-48. Rejected in part in Findings of Fact 40 and 41.

49-51. Rejected in Findings of Fact 41.

52. Subordinate to Findings of Fact 41.

53. Rejected in Findings of Fact 38-42.

54(A). Rejected in Findings of Fact 33.

54(B). Accepted in or subordinate to Findings of Fact 33.

54(C). Rejected

54(D-E). Subordinate to Findings of Fact 34.

54(F). Accepted in Findings of Fact 19.

54(G). Subordinate to Findings of Fact 38.

54(H). Accepted in Findings of Fact 22.

54(I). Subordinate to Findings of Fact 34.

54(J). Subordinate to Findings of Fact 30.

54(K). Subordinate to Findings of Fact 28.

54(L). Rejected as speculative in Findings of Fact 35.

54(M). Subordinate to Findings of Fact 7 and 34.

54(N). Conclusions rejected. See Findings of Fact 16.

54(O-P). Conclusions rejected. See Findings of Fact 24.

54(Q). Accepted in Findings of Fact 21.

54(R). Conclusions rejected. See Findings of Fact 24.

55. Accepted in Findings of Fact 12.

56. Accepted in Findings of Fact 21 and 23.

57. Accepted in preliminary statement.

58. Accepted in Findings of Fact 12.

59. Accepted in relevant part in Findings of Fact 29.

60. Accepted in Findings of Fact 35.

61. Accepted in or subordinate to Findings of Fact 26.

62-63. Accepted in part in Findings of Fact 27-29.

64. Accepted in Findings of Fact 23, 27 and 28.

65. Subordinate to Findings of Fact 26.

66. Subordinate to Findings of Fact 30

67. Subordinate to Findings of Fact 26.

68. Subordinate to Findings of Fact 30.

69. Subordinate to Findings of Fact 26.

70. Subordinate to Findings of Fact 27.

71. Subordinate to Findings of Fact 27.

72. Subordinate to Findings of Fact 26 and 27.

73. Accepted in part in Findings of Fact 28.

74. Accepted in Findings of Fact 23.

75. Accepted in or subordinate to Findings of Fact 6.

76. Accepted in Findings of Fact 26.

77. Accepted in Findings of Fact 35-37.

78. Accepted in Findings of Fact 27.

79-81. Accepted in or subordinate to Findings of Fact 27 and 28.

82-85. Accepted in or subordinate to Findings of Fact 28.

86. Accepted in Findings of Fact 10.

87. Accepted in or subordinate to Findings of Fact 27.

88. Subordinate to Findings of Fact 28 and rejected in Findings of Fact

35.

89. Rejected in general in Findings of Fact 27 and 28.

90. Subordinate to Findings of Fact 27.

91. Subordinate to Findings of Fact 28.

92. Rejected in Findings of Fact 35.

93. Accepted in Findings of Fact 30.

94-98. Accepted in part or subordinate to Findings of Fact 28 and 29.

99-100. Rejected in or subordinate to Finding of Fact 28 and 29.

101. Subordinate to Findings of Fact 35.

102-104. Subordinate to Findings of Fact 27, 28 and 35.

105. Accepted in Findings of Fact 28.

106-107. Subordinate to Findings of Fact 35.

108-111. Accepted in or subordinate to Findings of Fact 27.

112. Subordinate to Findings of Fact 26.

113. Subordinate to Findings of Fact 27.

114. Accepted in Findings of Fact 35.

115. Accepted in Findings of Fact 27.

116. Subordinate to Findings of Fact 16.

117-122. Accepted in Findings of Fact 5 and 35.

123. Rejected in Findings of Fact 37.

124. Accepted in part and rejected in part in Findings of Fact 44.

Respondent, AHCA, Proposed Findings of Fact.

1. Accepted in or subordinate to preliminary statement.

2. Accepted in or subordinate to Findings of Fact 1.

3. Accepted in Findings of Fact 4.

4. Accepted in Findings of Fact 13 and 25.

5-6. Accepted in or subordinate to Findings of Fact 1 and 8-10.

7. Accepted in Findings of Fact 4 and 26.

8. Accepted in or subordinate to Findings of Fact 24 and 31.

9. Accepted in or subordinate to Findings of Fact 35.

10. Subordinate to Findings of Fact 22.

11. Accepted in Findings of Fact 21.

12. Accepted in Findings of Fact 22.

13. Accepted in part and rejected in part in Findings of Fact 8, 9 and 34.

Respondent, NME, Proposed Findings of Fact.

1. Accepted in Findings of Fact 2.

2. Accepted in Findings of Fact 11.

3. Accepted in Findings of Fact 4 and 6.

4. Accepted in or subordinate to Findings of Fact 26.

5. Accepted in Findings of Fact 6.

6-10. Accepted in or subordinate to Findings of Fact 24-26.

11. Accepted in Findings of Fact 35.

12. Subordinate to Findings of Fact 16.

13-14. Accepted in or subordinate to Findings of Fact 8-13 and 23-34.

15. Accepted in Findings of Fact 9 and 10.

16. Accepted in Findings of Fact 10.

17. Accepted in Findings of Fact 5, 12 and 34.

18. Accepted in Findings of Fact 9 and 10.

19. Accepted in Findings of Fact 30.

20. Subordinate to Findings of Fact 9.

21. Accepted in or subordinate to Findings of Fact 13, 23 and 35.

22. Accepted in or subordinate to Findings of Fact 11-12 and 28.

23. Accepted in Findings of Fact 11.

24. Accepted in or subordinate to Findings of Fact 11.

25. Accepted in Findings of Fact 14 and 34.

26. Accepted in or subordinate to Findings of Fact 25.

27. Rejected.

28. Accepted in Findings of Fact 35.

29. Accepted in Findings of Fact 13 and 31.

30. Accepted in Findings of Fact 24.

31. Accepted in Findings of Fact 13.

32. Accepted in Findings of Fact 36.

33. Subordinate to Findings of Fact 12 and 13.

34. Accepted in Findings of Fact 23 and 29.

35. Accepted in Findings of Fact 29.

36-43. Accepted in or subordinate to Findings of Fact 11 and 12.

44-50. Accepted in or subordinate to Findings of Fact 22 and 23-29.

51. Subordinate to Findings of Fact 6.

52. Accepted in or subordinate to Findings of Fact 34.

53. Accepted in or subordinate to Findings of Fact 28.

54. Accepted except last sentence in Findings of Fact 24.

55-56. Accepted in or subordinate to Findings of Fact 22 and 33.

57. Accepted in or subordinate to Findings of Fact 27 and 28.

58. Accepted in Findings of Fact 22.

59. Accepted in Findings of Fact 24.

60. Accepted in Findings of Fact 26.

61. Accepted in or subordinate to Findings of Fact 35.

62. Accepted in Findings of Fact 23.

63-65. Accepted in or subordinate to Findings of Fact 30.

66-67. Accepted in or subordinate to Findings of Fact 31.

68-72. Accepted in or subordinate to Findings of Fact 7 and 30.

73-76. Accepted in or subordinate to Findings of Fact 8 and 9.

77. Accepted in Findings of Fact 34.

78. Accepted, except last phrase in Findings of Fact 15-20.

79. Accepted in or subordinate to Findings of Fact 21-22.

80. Accepted in or subordinate to Findings of Fact 22.

81. Accepted in or subordinate to Findings of Fact 22-34.

82. Subordinate to Findings of Fact 22.

83-86. Accepted in Findings of Fact 12 and 35-37.

87-89. Accepted in Findings of Fact 35-37.

90. Accepted in Findings of Fact 30.

91. Accepted in Findings of Fact 38 and 39.

92. Accepted in Findings of Fact 38.

93. Accepted in Findings of Fact 41.

94. Subordinate to Findings of Fact 38.

95-99. Accepted in or subordinate to Findings of Fact 38-42.

100. Accepted, except first sentence, in or subordinate to Findings of

Fact 44.

101. Subordinate to Findings of Fact 22.

102-104. Accepted in or subordinate to Findings of Fact 16 and 19.

105-106. Accepted in or subordinate to Findings of Fact 7.

107-108. Issue not reached. See Findings of Fact 14.

109-114. Accepted in or subordinate to Findings of Fact 44.

COPIES FURNISHED:

John Gilroy, Esquire

Agency for Health Care Administration

2727 Mahan Drive

Fort Knox Building 3, Suite 3431

Tallahassee, Florida 32308-5403

Kenneth Hoffman, Esquire

W. David Watkins, Esquire

OERTEL, HOFFMAN, FERNANDEZ & COLE

2700 Blair Stone Road

Tallahassee, Florida 32301

Michael J. Glazer, Esquire

C. Gary Williams, Esquire

MACFARLANE, AUSLEY, FERGUSON

& MCMULLEN

Post Office Box 391

Tallahassee, Florida 32302

R. S. Power, Agency Clerk

Agency for Health Care Administration

2727 Mahan Drive

Fort Knox Building 3, Suite 3431

Tallahassee, Florida 32308-5403

Tom Wallace

Assistant Director

Agency For Health Care Administration

2727 Mahan Drive

Fort Knox Building 3, Suite 3431

Tallahassee, Florida 32308-5403

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 ten 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.