97-004356CON Healthsouth Of Treasure Coast, Inc., D/B/A Healthsouth Treasure Coast Rehabilitation Hospital vs. Agency For Health Care Administration Status: Closed Recommended Order on Wednesday, April 22, 1998.

Summary: Special or "not normal" circumstances at comprehensive medical rehab (CMR) hospital with over 90% occupancy & unique Commission on Accreditation of Rehab Facilities (CARF) programs in District, but mathematically impossible to calculate CARF prg occupanc

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

HEALTHSOUTH OF TREASURE COAST, )

INC., d/b/a HEALTHSOUTH TREASURE )

COAST REHABILITATION HOSPITAL, )

)

Petitioner, )

)

vs. ) Case No. 97-4356

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

__________________________________)

PINECREST REHABILITATION HOSPITAL )

INC., d/b/a PINECREST )

REHABILITATION HOSPITAL, )

)

Petitioner, )

)

vs. ) Case No. 97-4357

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, )

)

Respondent. )

__________________________________)

RECOMMENDED ORDER

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

on December 15-17, 1998, in Tallahassee, Florida, before Eleanor

M. Hunter, a duly designated Administrative Law Judge of the

Division of Administrative Hearings.

APPEARANCES

For Petitioner

Healthsouth of

Treasure Coast, Inc.: Jennifer Kujawa Graner, Esquire

Craig Smith, Esquire

Panza, Maurer, Maynard

& Neel

NationsBank Building, 3rd Floor

3600 North Federal Highway

Fort Lauderdale, Florida 33308

For Petitioner

Pinecrest Rehabilitation

Hospital: Michael J. Glazer, Esquire

C. Gary Williams, Esquire

Ausley & McMullen, P.A.

Post Office Box 391

Tallahassee, Florida 32302

For Respondent

Agency for Health Care

Administration: Mark Thomas, Esquire

Agency for Health Care

Administration

Fort Knox Building 3

2727 Mahan Drive, Suite 3431

Tallahassee, Florida 32308-5403

STATEMENT OF THE ISSUES

Whether or not there is a need for additional CMR beds at

Pinecrest Rehabilitation Hospital based on the special

circumstances provision of Rule 59C-1.039 and whether or not, on

balance, the application for CON No. 8770 meets the other

applicable criteria of the rules and statutes.

PRELIMINARY STATEMENT

Pinecrest Rehabilitation Hospital is the applicant for a

certificate of need to expand from 90 to 115 comprehensive

medical rehabilitation beds in Delray Beach, Florida, Agency for

Health Care Administration ("AHCA") District 9. The application

was preliminarily denied by AHCA, a position which is supported

by Healthsouth of Treasure Coast Rehabilitation Hospital in Vero

Beach, Florida. The formal hearing was held on December 15-17,

1997, in Tallahassee, Florida.

Pinecrest presented the testimony of Paul Echelard, expert

in rehabilitation hospital administration; Marc Levinson, M.D.,

expert in physical medicine and rehabilitation; and Daniel J.

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

Pinecrest's Exhibits 1-11 and 14, were received in evidence.

Relevant portions of Exhibits 11 and 12 were read into the record

or summarized in testimony. Exhibit 15 was not received in

evidence, but considered more appropriate for legal argument.

Pinecrest's Exhibits 16-21 were received in evidence over

objection to any discussion related to travel times.

Healthsouth presented the testimony of Mark Richardson,

expert in health care planning; Denise McGrath, the Healthsouth

Treasure Coast hospital administrator; and Rick Knapp, expert in

health care finance. Healthsouth's Exhibits 1-13 were received

in evidence.

AHCA presented the testimony of Elfie Stamm, expert in

health planning. AHCA's Exhibits 1 and 2 were received in

evidence.

The transcript of the hearing was received on January 13,

1998. After Healthsouth's Motion for Extension of Time to File

Proposed Recommended Orders ("PROs") was granted, the PROs were

received on January 30, 1998.

FINDINGS OF FACT

1. Pinecrest Rehabilitative Hospital ("Pinecrest") is a

90-bed comprehensive medical rehabilitation ("CMR") hospital

which is physically connected to the Delray Medical Center

("Delray") in Delray Beach, Palm Beach County, Florida.

Pinecrest, Delray, a 120-bed nursing home, and a 102-bed

psychiatric hospital are located on the Delray medical campus and

are subsidiaries of Tenet Healthcare Corporation ("Tenet").

Tenet owns 131 acute care hospitals and 25 specialty hospitals in

the United States.

2. Delray, a 235-bed acute care hospital, is the designated

trauma center for southern Palm Beach County. Unlike most acute

care hospitals which average occupancy rates of 50 percent,

Delray reports 85 to 90 percent occupancy. Catering to an older

population within its service area, Delray's services include

cardiac and orthopedic surgery, but not obstetrics.

3. The Agency for Health Care Administration ("AHCA") is

the state agency responsible for the administration of the

certificate of need ("CON") program. After determining that no

need exists for additional CMR beds in District 9, AHCA

preliminarily denied Pinecrest's application for CON 8770. Palm

Beach County is located in AHCA District 9, which also includes

to the north, Martin, Indian River, St. Lucie and Okeechobee

Counties. Approximately 80 percent of the population in District

9 is concentrated in Palm Beach County.

4. The existing District 9, CMR service providers are St.

Mary's Hospital ("St. Mary's"), Lawnwood Regional Medical Center

("Lawnwood"), and Healthsouth of Treasure Coast ("Healthsouth").

At the time Pinecrest filed the application for CON 8770, there

were 183 licensed and 73 approved CMR beds at the existing

District 9 facilities.

5. Like Delray, St. Mary's is an acute care hospital which

is a county-designated trauma center. St. Mary's is located in

the City of West Palm Beach, approximately 25 miles north of

Delray Beach. St. Mary's has recently expanded from 23 CMR beds

to 50 beds, and is accredited by the Commission on Accreditation

of Rehabilitation Facilities (CARF) as a comprehensive inpatient

category one hospital.

6. Lawnwood is a 365-bed acute care hospital in Fort

Pierce, in St. Lucie County. Lawnwood recently opened a 26-bed

CMR unit.

7. Healthsouth is a specialty rehabilitation hospital

which, like Pinecrest, was previously owned by National Medical

Enterprises ("NME"). NNE operated the facility as Treasure Coast

Hospital before selling it to the Healthsouth Corporation. It is

located in Vero Beach, in Indian River County, approximately a

two-hour drive north of Delray Beach. Healthsouth has recently

increased its capacity from 70 to 90 beds. Healthsouth treats

some brain and spinal cord patients and is accredited by CARF as

a comprehensive inpatient category one hospital. Primarily,

Healthsouth treats stroke and orthopedic patients, along with

some cardiac, neurological and ventilator patients. Healthsouth,

as described by its expert, is primarily an Indian River provider

with a market presence in the remaining three northern counties.

8. Pinecrest opened in April 1986, with 60 beds, and

expanded to 90 beds in August 1993. Within ten days of opening

the additional 30 beds, Pinecrest exceeded and has continued to

exceed 90 percent occupancy. The existing 90 beds are organized

into a 30-bed stroke unit, a 30-bed orthopedic and pain unit, and

a 30-bed medically complex patient unit. Separate therapy and

treatment pods serve the different kinds of patients. The

facility includes an outpatient unit, one of seven operated by

Pinecrest. Each of the remaining outpatient centers is located

in approximately 15-minute driving increments from the hospital

with the most distant from Pinecrest located on the same street

as St. Mary's, in West Palm Beach. Pinecrest is a state-

designated vocational rehabilitation facility, with CARF

accreditation in categories one (medical rehabilitation programs)

and three (skilled nursing), and for specialized rehabilitation

programs for spinal cord injuries, pain management, and brain

injuries.

9. The staff at Pinecrest includes speech, respiratory,

occupational and physical therapists. The medical staff at

Pinecrest has approximately 250 physicians, sixteen specializing

in physical medicine and rehabilitation, or physiatry.

10. Pinecrest's inpatients have an average length of stay

(ALOS) of 14 to 15 days. Occupancy levels ranged from 93.7

percent in 1994 to 94.6 percent in 1996. At the reported

occupancy levels in the mid-90 percent, Pinecrest is effectively

full, taking into consideration the logistics of discharge

planning and admissions, and the need to place patients of the

same gender together. In addition, Health Care Finance

Administration ("HCFA") rules dictate the appropriate diagnoses

for 75 percent of the patients in CMR hospitals. Approximately,

80 percent of the Pinecrest patients reside in southern Palm

Beach County, in general in the areas of Delray Beach, Boynton

Beach, and Boca Raton. In 1996, a total of 4,790 patients were

referred to Pinecrest, of which 2,078 were admitted. In the same

year, 119 patients were refused admissions to Pinecrest due to a

lack of an available bed, in addition to those whose admissions

were delayed and those who were rejected to maintain compliance

with HCFA guidelines.

11. Healthsouth and AHCA contend that no need exists for

Pinecrest's proposed expansion based on zero numeric need using

the CMR rule methodology, a failure to meet special circumstances

listed in the CMR rule, recent openings of new beds in the

District, and projected future constraints on CMR utilization.

Numeric Need

12. For the 1997 batching cycle in which the application

for CON 8770 was filed, AHCA published a fixed need for zero

additional CMR beds in AHCA District 9. The need formula

indicated a need for 234 CMR beds for the July 2002 planning

horizon, as compared to 183 licensed and 73 approved, or a total

of 256 CMR beds in February 1997. In the 183 existing CMR beds,

historically occupancy rates have averaged 94 percent.

Special Circumstances

13. Rule 59C-1.039(5)(e), Florida Administrative Code,

lists special circumstances for the issuance of a CON to expand

an existing facility in the absence of numeric need, as follows:

. . . if the occupancy rate of the hospital's

licensed comprehensive medical rehabilitation

inpatient beds was at least 90 percent for at

least two consecutive calendar quarters

during the 12-month period ending 6 months

prior to the beginning date of the quarter of

the publication of the fixed bed need pool;

and at least one of the following conditions

is also met:

a. The applicant submits evidence that it

has a specialty inpatient rehabilitation

service, accredited as a specialty by the

Commission on Accreditation of Rehabilitation

Facilities (CARF), that is not available

elsewhere in the district, and the

applicant's high occupancy occurred in the

specialty rehabilitation service beds ; or

b. The applicant is a disproportionate share

hospital as determined consistent with the

provisions of section 409.911, Florida

Statutes, and the applicant submits evidence

that it has been providing both Medicaid and

charity care days in its comprehensive

medical rehabilitation inpatient beds.

(Emphasis added).

14. The three requirements related to occupancy rate, CARF

accreditation, and high occupancy in specialty rehabilitation

service beds are at issue in this proceeding. The alternative

provision related to disproportionate share providers, does not

apply to Pinecrest, since CMR hospitals cannot participate in the

disproportionate share program.

15. Pinecrest meets the requirement of having an occupancy

rate of at least 90 percent for at least two consecutive quarters

in the year ending 6 months before the fixed need publication.

In fact, Pinecrest has exceeded 90 percent occupancy for the last

20 consecutive quarters.

16. The parties agree that Pinecrest also meets the

accreditation requirement by having CARF-accredited programs to

treat traumatic brain injuries and spinal cord injuries, the only

ones in the District.

17. The parties disagree over the appropriate

interpretation of the phrase in the rule which requires that

". . . the applicant's high occupancy occurred in the specialty

rehabilitation service beds." Healthsouth and AHCA interpret the

provision as requiring high occupancy in the CARF-accredited

services beds, consistent with the requirement that the applicant

provide CARF-accredited services not otherwise available in the

district. AHCA's expert testified that the provision is

meaningless unless the occupancy occurs in CARF-specialty beds

and the additional beds will be allocated to the specialty

services. AHCA determined that relatively few patients, an

average daily census (ADC) of approximately 5 to 10 patients at

the time of hearing, are brain and spinal cord injury patients.

In fact, the experts agreed that fortunately, largely due to the

use of seat belts, such injuries are declining. At most,

approximately 4 percent of total Pinecrest patients have brain

injuries and 8 to 10 percent have spinal cord injuries.

18. The uncertainty in the interpretation of the rule

arises because CARF accredits programs but does not designate

beds. Pinecrest typically treats brain and spinal cord injury

patients within its 30-bed medically complex patient unit. It is

mathematically impossible to calculate an occupancy rate without

a defined universe of brain and spinal cord beds. However, like

CARF's accreditation of programs, Florida also issues CONS or

licenses for general CMR beds and services but not for any CARF-

accredited CMR subspecialties. Pinecrest's administrator was

asked if he could designate certain beds for brain or spinal cord

patients and conceded that he could. However, by doing so he

could also manipulate the occupancy rate which would not assist

in a rational application of the provision.

19. Healthsouth's expert planner relied on the declining

incidence of serious brain and spinal cord injuries, decreasing

lengths of stay, and the proliferation of CMR and other

categories of subacute beds in the District as evidence of the

absence of need for Pinecrest's proposal. The trend towards a

younger and younger population mix in Palm Beach County, although

the number of people over 65 years old is growing, was also

suggested as an indication of no need. Pinecrest's financial

forecast also confirms an expected decline in ALOS from 14 to 15

days to 12 to 13 days in the second year of operating the

additional CMR beds.

20. The special circumstances rule does not require

applicants to show need for the CARF sub-specialty services.

Nothing in the rule establishes a means to determine the need for

CARF program beds. Similarly, Subsection (b) of the special

circumstances provisions does not require disproportionate share

hospitals to show need based solely on Medicaid and charity care.

In addition, the CMR rule defines "specialty bed" as "a category

of hospital inpatient beds for which the agency has promulgated a

separate rule specifying need determination criteria, including

. . . comprehensive medical rehabilitation inpatient beds

regulated under the rule."

21. The special circumstances rule, by title and content,

applies to the demand for additional beds in both general and CMR

hospitals. One reasonable, although redundant interpretation is

that the bed occupancy provision applies to general acute care

hospitals. That is, general acute care hospitals must show a

high occupancy in CMR beds in order to demonstrate a demand for

additional CMR beds. Alternatively, as suggested by the expert

for Pinecrest the requirement is satisfied by the uniformly high

utilization of the facility as a whole, including the unit in

which the subspecialty services are provided. Brain and spinal

cord injury patients are contributing to the high occupancy in

the medically complex unit to the potential detriment of other

patients of the same type who seek admission to Pinecrest.

22. Pinecrest meets the requirements of the special

circumstances rule because of its occupancy rate in excess of 90

percent and its CARF-accredited specialty services which are not

otherwise available in the district. The fact that Pinecrest is

full is, in and of itself, a limitation on its ability to provide

additional brain and spinal cord rehabilitation services.

23. Pinecrest also showed a maldistribution of CMR beds in

District 9. For example, Palm Beach County, with approximately 1

million people has 143 of the total, while the four northern

counties, with approximately 400,000 people have 116 CMR beds.

Constraints on available capacity are reflected by the fact that

the lowest use rates in the District are in Palm Beach County.

Number of Additional Beds

24. The past increases in District 9 use rates whenever CMR

beds are added to the District 9 inventory is further evidence of

unmet demand due to capacity constraints. In adjacent District

10 for Broward County, the bed-to-population ratio is 102 as

compared to 73.5 in District 9, and 74.5 state-wide. The

population 65 and over has a use rate which is approximately 33

percent higher in District 10 than in District 9, and 50 percent

higher than state-wide. The population of District 9 is

approximately 1.45 million as compared that of District 10 which

is approximately 1.42 million. In 1997, the 65 and over

population of District 9 was 348,122, and 269,331 in District 10.

25. Once the special circumstances threshold is met, the

maximum number of additional beds is determined by a formula in

the CMR rule. The formula calculates the facility's historical

percentage of the total district CMR patient days applied to the

total projected future CMR patient days. Since Pinecrest

provided approximately 40 percent of total District 9 CMR patient

days in 1995 to 1996 (for the time periods specified in the

rule), the rule assumes that it will also do approximately the

same proportion of the projected 72,600 CMR days in the planning

horizon year of 2002. The result is a need for an additional

25 beds at Pinecrest.

26. The approach used in the formula is also consistent

with the use of total CMR bed occupancy rather than CARF-

specialty program occupancy to determine special circumstances.

Adverse Impact

27. District 9 CMR providers have the following primary

service areas (from North to South) as determined by the origin

of 85 percent of their patients:

Healthsouth - southern Brevard, Indian River,

Okeechobee, St. Lucie, and Martin Counties;

Lawnwood (using the acute care service area

to estimate the CMR service area) - St. Lucie

and Okeechobee Counties;

St. Mary's - northern Palm Beach County; and

Pinecrest - southern Palm Beach County

28. The service area overlap between St. Mary's and

Pinecrest is attributable to fewer than 10 percent of total

patients. Pinecrest averages an admission of one patient a month

from the trauma center at St. Mary's. Over 60 percent of the

referrals to Pinecrest originate at Delray and Boca Raton

Community Hospital (BRCH), which is approximately five to eight

miles from the Delray campus. BRCH has 394 licensed beds, with

approximately 70 percent of its patients age 65 and over. For

patients referred for rehabilitation, stays at BRCH are

lengthened as a result of beds being unavailable at Pinecrest.

The BRCH Director of Social Services concludes that, despite an

approved CON to add 10 skilled nursing beds at BRCH, a need

exists to treat patients requiring more intense therapy at

Pinecrest. An annualized number of approximately 4 to 5 Palm

Beach County residents are treated at Healthsouth. The primary

service area for Pinecrest is southern Palm Beach County, an area

generally bound on the north by Okeechobee Boulevard and on the

south by the Palm Beach/Broward County line. No overlap exists

between service areas of Pinecrest and Lawnwood or Healthsouth.

Pinecrest does not have any residents of either Indian River or

St. Lucie Counties on staff and does not specifically recruit in

those Counties.

29. Although conceding that it does not currently have an

overlapping service area with Pinecrest, Healthsouth assumes that

Pinecrest will expand into its service area, particularly into

Martin County, in order to fill new beds. Healthsouth projected

a loss of 64 to 136 patients per year due to the addition of 25

beds at Pinecrest. The volume loss is equivalent, according to

Healthsouth's expert, to approximately $285,000, or the loss of a

contribution margin of $163.00 per patient day in the second year

of operation. The impact analysis is based on the assumption

that Pinecrest can achieve a major expansion in service area

crossing northern Palm Beach County and reaching into Martin or

St. Lucie Counties. It is not reasonable to expect Pinecrest to

achieve such expansion into Martin County with St. Mary's and

Lawnwood having geographically intervening service areas.

30. Healthsouth also raises questions whether the demand

for new beds exists in Pinecrest services area and whether the

pool of CMR patients will stay constant or decline. The demand

in the Pinecrest service area is established based on its

referrals from Delray and BRCH, the suppressed demand due to

capacity constraints, and the maldistribution of beds in the

District. Based on projected growth in the population 65 and

over, it is reasonable to conclude that the demand for CMR

services will also increase over time.

31. In March 1997, Indian River Memorial opened a 20-bed

skilled nursing unit within a city block of Healthsouth. At the

same time, Healthsouth maintained an ADC of 69.81 patients in 70

beds. In September 1997, Healthsouth increased from 70 to 90

beds and projected 93.2 percent overall occupancy for 1997. The

ADC at Healthsouth for November 1997 was over 75 patients. At

the time of the final hearing, Healthsouth had a census of 84

patients in the 90 beds.

32. A total of 256 CMR beds were licensed and operational,

at the time of the hearing, with no effect on the occupancy at

Pinecrest.

33. Based on the historical experience with the addition of

new skilled nursing units and CMR beds in District 9 and the

demand for services at Pinecrest, the projections of any adverse

impact on Healthsouth are rejected as remote and highly

speculative.

Local and State Health Plans

34. The local health plan factors favor applicants with

support from other health care providers and who show a

commitment to Medicaid/Indigent and handicapped population

groups. Pinecrest's proposal has the support of unrelated and

potentially competitive providers as well as the large network of

other Tenet subsidiaries. Pinecrest's existing Medicaid and

charity commitment of 2.67 percent has been met and is proposed

to be extended to the additional 25 beds if CON 8770 is approved.

Approximately 75 percent of Pinecrest's patients are participants

in the Medicare program, but Pinecrest also treats patients

funded by the health care district and the county division of

vocational rehabilitation.

35. The state health plan preference for the conversion of

excess acute care beds and for disproportionate share hospitals

are inapplicable. Pinecrest does not meet the preference for

teaching hospitals, although it has numerous teaching

affiliations, or for proposing to offer services not currently

offered in the District, although it is the only CARF-accredited

provider. Pinecrest meets the preference for operating existing

outpatient facilities.

Other Statutory Criteria

36. Judging by the demand as demonstrated by the suppressed

use rate and the historical failure of SNU's to affect the demand

for CMR beds in the district, Pinecrest's proposal will increase

the availability and accessibility to CMR services in the

district. Additional beds at Pinecrest will increase its

efficiency and utilization. ACHA and Healthsouth argue that

since CMR is a tertiary service with a two-hour travel standard,

which is met in District 9, existing CMR programs are accessible.

In fact, they are not accessible because of high utilization and

distinct medical services area patterns in the district.

37. Healthsouth maintains that additional CMR beds and

hospital-based SNUs offer alternatives to the Pinecrest proposal.

The separate and distinct service areas of the existing CMR

providers and their occupancy rates demonstrate that they are not

viable alternatives. For example, discharge planners at Tenet-

owned Palm Beach Gardens, an acute care hospital in northern Palm

Beach County, typically refer rehabilitation patients to St.

Mary's, not to Pinecrest despite common ownership. Pinecrest

also presented evidence of the differing intensities of therapies

provided at Pinecrest and at Tenet-owned Largo Vista, a 120-bed

skilled nursing facility on the Delray campus. Pinecrest admits

approximately half of the 4,000 patients referred to it each

year.

38. The parties stipulated that Pinecrest satisfies the

criteria related to quality of care. As one indication of the

quality of its programs, Pinecrest discharges 92 percent of its

patients to their homes while nationwide 70 percent of

rehabilitation patients are discharged home.

39. Considering its position as a referral hospital in the

Tenet organization and its location on a medical campus,

Pinecrest plays a central role in offering a continuum of care

within the multilevel system. That position will be enhanced by

the addition of beds to assure its continued availability and the

efficiency of its operation.

40. The services proposed by Pinecrest are needed in Palm

Beach County and are not intended to serve residents of adjoining

areas or outside the district.

41. The expected cost of the Pinecrest addition, a third

floor to its existing two-story building, is $3,253,710.

Pinecrest will add more private rooms to accommodate more

medically complex patients and the equipment needed in their care

and treatment. The parties stipulated that Pinecrest has the

funds necessary to accomplish the project and that the project

will be financially feasible.

42. Although Pinecrest included in its application a

substantial list of affiliations with health maintenance

organizations ("HMOs"), Pinecrest is not itself a HMO.

43. The parties stipulated that the construction plans and

costs for CON Number 8770 are reasonable. No less costly or more

appropriate alternative to the expansion of Pinecrest is

available. Without the expansion of Pinecrest, problems in the

availability of CMR services for all types of patients treated at

Pinecrest, including those with brain or spinal cord injuries,

are reasonably anticipated due to high rates of utilization.

Other Rule Criteria

44. Requirements in the rules related to quality of care,

including organization, staffing, and services are met based on

the stipulation that Pinecrest meets the statutory quality of

care criterion. In addition, with the correction of transposed

staffing numbers in the application, proposed staffing is

reasonable.

45. Pinecrest also included in its application the data

required by rule and necessary for the agency to determine its

compliance with existing agency rules. The rule giving a

preference for a trauma center is not met by Pinecrest, although

adjacent Delray is a trauma center.

Factual Conclusion

46. Pinecrest has demonstrated that 25 additional CMR beds

are needed at Pinecrest to serve District residents, that its

proposal complies with most of the applicable review criteria,

and that no adverse effects will result from the approval of CON

8770.

CONCLUSIONS OF LAW

47. The Division of Administrative Hearings has

jurisdiction over the parties and subject matter of this case,

pursuant to Subsections 120.57(1) and 408.039(5), Florida

Statutes.

48. Pinecrest, as the applicant, has the burden of proving

its entitlement to a certificate of need (CON), based on a

balanced consideration of the criteria. Boca Raton Artificial

Kidney Center, Inc. v. Department of Health 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).

49. One of the significant disputed issues in this case is

the interpretation and application of Rule 59C-1.039(5)(e),

Florida Administrative Code, and, in particular, that portion of

the rule dealing with the occupancy of "specialty rehabilitation

service beds." Pinecrest contends that this provision is

satisfied by the utilization of its spinal cord and head injury

patients, along with other patients in the medically complex unit

and the overall extremely high utilization throughout every unit

in the hospital. AHCA contends that high utilization must occur

in beds specifically designated for CARF accredited specialty

services, although neither the State of Florida nor CARF

designates or licenses beds for specialized services within a CMR

hospital. AHCA's contention that this portion of the CMR rule is

only intended to result in the approval of beds for specialized

CMR services is contrary to the plain language of the rule that

imposes no such limitation. AHCA's interpretation is also

inconsistent with the subsection of the rule which applies to

disproportionate share hospitals. Despite any deference that may

be given to an agency's interpretation of its own rule, the CMR

rule cannot be read in the manner contended by the Agency in this

case. Boca Raton Artificial Kidney Center, Inc. v. Department of

Health and Rehabilitative Services , 493 So. 2d 1055 (Fla. 1st DCA

1986).

50. The Agency's interpretation is mathematically

impossible to determine and no applicant can ever satisfy the

provision in a rational manner. More rational interpretations

are either (1) the provision applies to general acute care

hospitals which have some CMR beds, or (2) an applicant

successfully demonstrates consistency, by meeting the overall

occupancy and unique CARF-specialties requirements, and by

demonstrating the need, as prescribed by the methodology in the

rule, for a specific number of additional CMR beds.

51. Even if this "subspecialty bed" provision is not

satisfied and despite the absence of any numeric need under the

CMR rule methodology, Pinecrest has clearly and convincingly

demonstrated the need for the 25 additional CMR beds based on the

distinct markets for CMR services in District 9, the

maldistribution of CMR beds within the district, the extremely

high historical utilization at Pinecrest, delays in admissions,

and the lack of appropriate available or accessible alternatives.

These "not normal" factors establish a need for the additional 25

beds proposed by Pinecrest. The Petitioner in this case has a

very similar situation as that of the Petitioner based on the

reported facts, in Healthsouth Rehabilitation of Florida, Inc. v.

Agency for Health Care Administration , DOAH Case No. 92-5099

(R.O. 5/20/93), although no final agency action on the

Recommended Order is available due to a settlement agreement.

51. Despite the two-hour travel time standard contained in

the CMR rule, which is a maximum objective, not a minimum, it is

appropriate to consider the actual market areas for CMR services

given the particular factual circumstances of each case. See

Subsection 408.035(1)(b), Florida Statutes; and South Broward

Hospital District d/b/a Memorial Hospital v. Agency for Health

Care Administration et al. , DOAH Case No. 93-4881 (R.O. January

20, 1992).

52. It is also appropriate to consider, as a "not normal"

circumstance, high utilization at an existing provider despite

the existence of other either recently opened or approved beds at

other providers. Bethesda Memorial Hospital, Inc. v. Agency for

Health Care Administration, et al. , 18 FALR 2330, DOAH Case No.

95-0730, (AHCA December 13, 1995).

53. Pinecrest's application satisfies the need-related

criteria found in Subsections 408.035(1)(a), (b), (d), and (f),

Florida Statutes.

54. Pinecrest is not a teaching hospital nor an HMO,

therefore, not favored as a provider pursuant to Subsections

408.035(1)(g), and (j), Florida Statutes.

55. Pinecrest has the resources, including a reasonable

staffing plan and the ability to recruit staff, to meet the

requirements of Subsection 408.035(1)(h), Florida Statutes.

56. Pinecrest has provided evidence of the adequacy of its

past and proposed commitment to Medicaid and indigent patients,

satisfying the criteria in Subsection 408.035(1)(n), Florida

Statutes.

57. Based on the scope of services and facilities provided

by Pinecrest and its sister facilities, approval of this

application satisfies the criteria related to a continuum of care

and the economies of joint operations in Subsection

408.035(1)(e),and (o), Florida Statutes.

58. The criteria in Subsection 408.035(2), Florida

Statutes, for new inpatient services are arguably not applicable,

but are satisfied by the Pinecrest application.

59. The application satisfies the remaining criteria in

Rules 59C-1.030 and 59C-1.039, Florida Administrative Code,

except that Pinecrest is not a trauma center.

60. On balance, the addition of 25 CMR beds at Pinecrest is

justified by the "special circumstances" portion of the CMR rule

and by other "not normal" circumstances that exist in the

district.

61. Subsection 408.039(5)(b), Florida Statutes, restricts

standing to applicants in the same batching cycle, or existing

health care facilities with an established program that will be

substantially affected by the issuance of the CON. To be

substantially affected, Healthsouth had to demonstrate that it

will suffer injury in fact of sufficient immediacy, and that the

injury is within the zone of interest to be protected by this

proceeding. Agrico Chemical Company v. Department of

Environmental Regulation , 406 So. 2d 478 (Fla. 2nd DCA 1981),

pet. for rev. den., 415 So. 2d 1361 (Fla. 1982). Based on the

evidence produced at the final hearing, Healthsouth has failed to

demonstrate that it will be substantially affected by the

addition of 25 beds to Pinecrest, based on speculative evidence

of an adverse impact. Consequently, Healthsouth has failed to

demonstrate its standing in this proceeding.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that a Final Order be entered approving

the issuance of Certificate of Need Number 8770 for the addition

of 25 comprehensive medical rehabilitation beds at Pinecrest

Rehabilitation Hospital, and dismissing Healthsouth of Treasure

Coast, Inc.'s Petition for Formal Administrative Hearing for

failure to establish its standing in this proceeding.

DONE AND ENTERED this 22nd day of April, 1998, in

Tallahassee, Leon County, Florida.

___________________________________

ELEANOR M. HUNTER

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

[phone] SUNCOM 278-9675

Fax Filing [phone]

Filed with the Clerk of the

Division of Administrative Hearings

this 22nd day of April, 1998.

COPIES FURNISHED:

Sam Power, Agency Clerk

Agency for Health Care Administration

Fort Knox Building 3

2727 Mahan Drive, Suite 3431

Tallahassee, Florida 32308

Paul J. Martin, General Counsel

Agency for Health Care Administration

Fort Knox Building 3

2727 Mahan Drive, Suite 3431

Tallahassee, Florida 32308-5403

Mark Thomas, Esquire

Agency for Health Care Administration

Fort Knox Building 3

2727 Mahan Drive, Suite 3431

Tallahassee, Florida 32308-5403

Jennifer Kujawa Graner, Esquire

Thomas Panza, Esquire

Panza, Maurer, Maynard & Neel

NationsBank Building, 3rd Floor

3600 North Federal Highway

Fort Lauderdale, Florida 33308

Michael J. Glazer, Esquire

C. Gary Williams, Esquire

Ausley & McMullen, P.A.

Post Office Box 391

Tallahassee, Florida 32302

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within 15

days from the date of this Recommended Order. Any exceptions to

this Recommended Order should be filed with the agency that will

issue the Final Order in this case.