99-000713CON St. Mary&Apos;S Hospital, Inc. vs. Columbia/Jfk Medical Center, L.P., D/B/A Jfk Medical Center; And Agency For Health Care Adminisration Status: Closed Recommended Order on Friday, April 7, 2000.

Summary: Recommend approval of Certificate of Need for 20 additional acute care beds due to large percentage (65% of total) of admissions from emergency room and backlog in intensive care and monitored beds; special circumstances occupancy in acute care beds.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

GOOD SAMARITAN HOSPITAL, INC., )

)

Petitioner, )

)

vs. ) Case No. 99-0712

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION and COLUMBIA/JFK )

MEDICAL CENTER LIMITED PARTNERSHIP, )

d/b/a JFK MEDICAL CENTER, )

)

Respondents. )

____________________________________)

ST. MARY'S HOSPITAL, INC., )

)

Petitioner, )

)

vs. ) Case No. 99-0713

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION and COLUMBIA/JFK )

MEDICAL CENTER LIMITED PARTNERSHIP, )

d/b/a JFK MEDICAL CENTER, )

)

Respondents. )

____________________________________)

WELLINGTON REGIONAL MEDICAL CENTER, )

INC., d/b/a WELLINGTON REGIONAL )

MEDICAL CENTER, )

)

Petitioner, )

)

vs. ) Case No. 99-0714

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION and COLUMBIA/JFK )

MEDICAL CENTER LIMITED PARTNERSHIP, )

d/b/a JFK MEDICAL CENTER, )

)

Respondents. )

____________________________________)

RECOMMENDED ORDER

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

on June 30, 1999 through July 2, 1999, and July 7 and 8, 1999, at

the Division of Administrative Hearings, the DeSoto Building,

1230 Apalachee Parkway, Tallahassee, Florida, before Eleanor M.

Hunter, a duly-designated Administrative Law Judge of the

Division of Administrative Hearings.

APPEARANCES

For Petitioners: Good Samaritan Hospital, Inc. and

St. Mary's Hospital, Inc.:

Thomas A. Sheehan, III, Esquire

Moyle, Flanigan, Katz, Kolins, Raymond

& Sheehan, P.A.

Post Office Box 3888

West Palm Beach, Florida 33402-3888

For Respondent: Agency for Health Care Administration:

Richard A. Patterson, Esquire

Agency for Health Care Administration

Fort Knox Building 3, Suite 3431

2727 Mahan Drive

Tallahassee, Florida 32308-5403

For Respondent: Columbia/JFK Medical Center, L.P.,

d/b/a JFK Medical Center:

Stephen A. Ecenia, Esquire

R. David Prescott, Esquire

Rutledge, Ecenia, Purnell & Hoffman, P.A.

215 South Monroe Street, Suite 420

Tallahassee, Florida 32301-0551

STATEMENT OF THE ISSUE

Whether Certificate of Need Application Number 9099, filed

by Columbia/JFK Medical Center, L.P., d/b/a JFK Medical Center,

to convert 20 skilled nursing beds to 20 acute care beds, meets

the criteria for approval.

PRELIMINARY STATEMENT

Columbia/JFK Medical Center, L.P., d/b/a JFK Medical Center

(JFK) is the applicant for Certificate of Need (CON) Number 9099.

If approved, JFK will convert 20 skilled nursing beds to 20 acute

care beds. JFK is located in Agency for Health Care

Administration (AHCA) District 9, Subdistrict 5, in Palm Beach

County, Florida.

AHCA preliminarily approved JFK's application, which Good

Samaritan Hospital, Inc. (Good Samaritan); St. Mary's Hospital,

Inc. (St. Mary's); and Wellington Regional Medical Center, Inc.

(Wellington) opposed by filing petitions in this proceeding.

During the final hearing, Wellington submitted a notice

voluntarily dismissing its petition in DOAH Case No. 99-0714.

JFK presented the testimony of Randall Wolff, M.D., an

expert in emergency medicine and internal medicine; Gary M.

Mervak, an expert in health care financial administration;

Gretchen Szafaryn, R.N., an expert in emergency department

administration and emergency nursing; Mary Bishop, R.N., an

expert in nursing and administration of clinical programs;

Kathleen Dassler, R.N., an expert in nursing administration;

Madelyn Passarella, an expert in physician services and

recruitment; Darryl Weiner, an expert in health care finance and

health care project financial feasibility; and Michael L.

Schwartz, an expert in health care planning and hospital

administration. By depositions, JFK also presented the testimony

of Linda Anderson; Phillip Robinson; Jose Arrascue, M.D.;

Michael Ray, M.D.; Robert Collins, M.D.; Jack Zeltzer, M.D.;

Daniel Spurlock, M.D.; and Larry Bush, M.D. Including the

depositions, JFK's Exhibits numbered 1 through 6, 8 through 12,

14, and 16 through 26 were received in evidence.

The Petitioners, Good Samaritan and St. Mary's, presented

the testimony of Jay Cushman, an expert in health planning, and

Frank Nask, an expert in hospital financial operations.

Petitioner's Exhibits numbered 1 through 12 were received in

evidence.

AHCA presented the deposition testimony of Elfie Stamm, an

expert in health planning. The deposition was marked and

received into evidence as AHCA's Exhibit numbered 1.

The nine-volume T ranscript of the final hearing was filed on

August 29, 1999. Following a Joint Motion for Extension of Time,

proposed recommended orders were filed on September 14, 1999.

FINDINGS OF FACT

1. Columbia/JFK Medical Center, L.P., d/b/a JFK Medical

Center (JFK) is the applicant for Certificate of Need (CON)

Number 9099 to convert a 20-bed hospital-based skilled nursing

unit (SNU) to 20 general acute care or medical/surgical beds.

The construction cost is approximately $117,000, of the total

project cost of $151,668. JFK is an affiliate of Columbia

Hospital System (Columbia), the largest for-profit hospital chain

in the United States.

2. The Agency for Health Care Administration (AHCA) is the

state agency which administers the CON program for health care

services and facilities in Florida.

3. JFK is a 343-bed hospital located in Atlantis, Florida,

in Palm Beach County, AHCA District 9, Subdistrict 5. Pursuant

to a previously approved CON, an additional 24 acute care beds

are under construction at JFK, along with 12 CON-exempt

observation beds, at a cost of approximately $4 million. In

August 1998, JFK was allowed to convert 10 substance abuse beds

to 10 acute care beds.

4. Other acute care hospitals in District 9 include the

Petitioners: St. Mary's Hospital, Inc. (St. Mary's), and Good

Samaritan Hospital, Inc. (Good Samaritan), which are located in

northern Palm Beach County, AHCA District 9, Subdistrict 4,

approximately 11 and 9 miles, respectively, from JFK.

5. The remaining hospitals in District 9, Subdistrict 5, in

southern Palm Beach County, and their approximate distances from

JFK are as follows: Wellington (8 miles), Bethesda (7 miles),

West Boca (18 miles), Delray (12 miles), and Boca Raton Community

(17 miles). JFK and Delray are both "cardiac" hospitals offering

open heart surgery services, with active emergency rooms, and

more elderly patients in their respective service areas.

6. The parties stipulated to the following facts:

1. JFK's CON application was submitted in

the Agency for Health Care Administration

("AHCA") second hospital batching cycle in

1998, and was the only acute care bed

application submitted from acute care bed

District 9, Subdistrict 5. AHCA noticed its

decision to approve JFK's CON 9099 by

publication in Volume 25, Number 1, Florida

Administrative Weekly , dated January 8, 1999.

2. Good Samaritan and St. Mary's each timely

filed a Petition for Formal Administrative

Proceeding challenging approval of JFK's CON

application. By Order dated March 17, 1999,

the cases arising from those petitions were

consolidated for the purposes of all future

proceedings.

3. JFK has the ability to provide quality

care and has a record of providing quality of

care. §408.035(1)((c), Fla. Stat.

4. JFK's CON application, at Schedule 6 and

otherwise, projects all necessary staff

positions and adequate numbers of staff, and

projects sufficient salary and related

compensation. See, §408.035(1)(h).

5. JFK has available the resources,

including health personnel, management

personnel, and funds for capital and

operating expenditures, for project

accomplishment and operation. See,

§408.035(1)(h), Fla. Stat.

6. JFK's CON application proposal is

financially feasible in the immediate term.

§408.035(1)(i), Fla. Stat.

7. JFK's CON application proposal is

financially feasible in the long term,

except, Good Samaritan and St. Mary's contend

as it relates to projected utilization.

§408.035(1)(i), Fla. Stat.

8. Schedules 9 and 10 and the architectural

schematics in JFK's application are complete

and satisfy all applicable CON application

requirements. Schedule 1 in the application

is complete, reasonable, and not at issue.

JFK's proposed construction/renovation

design, costs, and methods of

construction/renovation are reasonable and

satisfy all applicable requirements. See,

§408.035(1)(m), Fla. Stat.

9. JFK's CON application satisfies all

minimum application content requirements in

Section 408.037(1), Florida Statutes; except

that Good Samaritan and St. Mary's contend

that subsection (1)(a), is not satisfied.

10. JFK certified that it will license and

operate the facility if its CON proposal is

approved. See, §408.037(2), Fla. Stat.

11. JFK's Letter of Intent was timely filed

and legally sufficient. See, §408.039(2)(a)

and (c), Fla. Stat.

12. Good Samaritan does not provide cardiac

catheterization services, angioplasty, or

open heart surgery.

13. St. Mary's does not provide elective

angioplasty or open heart surgery services.

14. JFK is one of the hospitals to which

Good Samaritan and St. Mary's transfer

patients in need of inpatient cardiac

catheterization services, angioplasty, and

open heart surgery.

15. Neither Good Samaritan nor St. Mary's

have any present plans to apply for CON

approval to add skilled nursing beds or acute

care beds.

7. The parties also stipulated that Subsections

408.035(1)(e), (f), (g), (h) - as related to training health

professionals, (j), (k), and (2), Florida Statutes, are not at

issue or not applicable to this proposal.

8. For the batching cycle in which JFK applied for CON

Number 9099, AHCA published a fixed need of zero for District 9,

acute care subdistrict 5.

9. In the absence of a numeric need for additional acute

care beds in the subdistrict, JFK relied on not normal

circumstances to support the need for its proposal, including the

following: delays in admitting patients arriving through the

emergency room to inpatient beds, delays in moving patients from

surgery to recovery to acute care beds, and seasonal variations

in occupancy exceeding optimal levels and, at times,

exceeding 100%.

10. Good Samaritan and St. Mary's oppose JFK's CON

application. In general, these Petitioners claimed that other

problems cause overcrowding in the emergency room at JFK, that

the type of beds proposed will not be appropriate for the needs

of most patients, that "seasonality" is not unique to or as

extreme at JFK, and that a hospital-specific occupancy level

below that set by rule cannot constitute a special or not normal

circumstance. If JFK achieves the projected utilization, experts

for Good Samaritan and St. Mary's also projected adverse

financial consequences for those hospitals.

Rule 59C-1.038(5) - special circumstances

11. During the hearing, the parties stipulated that the

numeric need for new acute care beds in the subdistrict is zero.

The rule for determining numeric need also includes the following

provision:

(5) 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 the hospital's average

occupancy rate based on inpatient utilization

of all licensed acute care beds is at or

exceeds 80 percent. The determination of the

average occupancy rate shall be made based on

the average 12 months occupancy rate for the

reporting period specified in section (4).

Proposals for additional beds submitted by

facilities qualifying under this subsection

shall be reviewed in context with the

applicable review criteria in section

408.035, F.S.

12. The applicable time period for the special

circumstances provision is calendar year 1997. JFK's reported

acute care occupancy was 76.29% in 1997, and 79.7% in 1998, not

80%, as required by the rule.

13. JFK and AHCA take the position that other special

circumstances may, nevertheless, be and have been the basis for

the approval of additional acute care beds. JFK also maintained

that the reported average occupancy levels understated the demand

for and actual use of its inpatient beds.

14. Due to seasonal fluctuations caused by the influx of

winter residents, JFK reached or exceeded 100% occupancy on 5 or

6 days, exceeded 80% occupancy on 20 days, and averaged 90.9%

occupancy, in January 1999. In February 1999, the average was

96.5%, but was over 100% on 8 days, and over 90% on 25 days. In

March 1999, the average occupancy was 90.1%, but exceeded 100% on

one day, and 90% on 17 days. In recent years, the "season" also

has extended into more months, from approximately Thanksgiving to

Easter or Passover. It also includes flu season which

disproportionately affects the health of the elderly. JFK also

demonstrated that occupancy varies based on the day of the week,

generally highest on Mondays, Tuesdays, and Wednesdays and lowest

on weekends.

15. JFK's acute care beds were also occupied by patients

who were not classified as 24-hour medical/surgical inpatients.

Others included observation and 23-hour patients, covered by

Medicare or health maintenance organizations (HMOs). Some of

those patients were classified initially as outpatients to lower

reimbursement rates, but routinely subsequently reclassified and

admitted as inpatients. In fact, during the applicable time

period for determining occupancy, Medicare allowed patients to be

classified as outpatients for up to 72-hour hospital stays.

Subsequently, Medicare reduced the allowable hospital stay to 48

hours for all "outpatients," according to AHCA's expert witness.

When not classified as inpatients, patients are not counted in

average occupancy rates which are based solely on the admitted

inpatient census, counted each midnight. For example, in

February 1999, the average daily census for 23-hour patients was

10.8 patients, which, when combined with 24-hour patients,

results in an average occupancy of 99.7% for the month. Due to

the Medicare classification system, some but not all of the so-

called 23-hour patients affect the accuracy of the inpatient

utilization data. According to AHCA's expert witness, however,

numeric need cannot be determined because of JFK's failure to

quantify the number of Medicare patients who actually affected

the acute care bed utilization.

16. The 23-hour or observation patients may use, but do not

require CON-approved and licensed acute care beds. Instead,

those patients may be held in either non-CON, non-licensed

"observation" beds or in licensed acute care beds. As AHCA

determined, to the extent that 23-hour patients in reality stayed

longer, and adversely affected JFK's ability to accommodate acute

care patients, their presence can be considered to determine if

special circumstances exist. Combining 24-hour and 23-hour

patients, JFK experienced an occupancy rate of 80% in 1996, and

85.7% in 1997. While some of the 23-hour patients were, in fact,

outpatients who should not be considered and others stayed from

24 hours up to 3 days and should be considered, JFK's proportion

of Medicare services is important to determining whether special

circumstances based on acute care utilization exist. With 74% of

all JFK patients in the Medicare category, but without having

exact numbers, it is more reasonable than not to conclude that

the occupancy level is between the range of 76.29% for acute care

only and 85.7% for acute care and 23-hour patients. A reasonable

inference is that JFK achieved at least 80% occupancy of patients

who were in reality inpatients in its acute care beds in 1997.

The expert health planner for the Petitioners conceded that bed

availability declines, capacity is a constraint, and high

occupancy becomes a barrier to service at some level between 80

and 83% occupancy. In a prior CON filed on behalf of Good

Samaritan for a 4-bed addition to an 11-bed neonatal intensive

care unit (NICU), the same expert asserted that 76% occupancy was

a reasonable utilization standard. That occupancy level was

based on the desire to maintain 95% bed availability. An exact

comparison of the occupancy levels in this and the NICU case,

however, is impossible due to the small size of the NICU unit and

the fact that the applicant met the occupancy level in that rule

for special circumstances.

17. The statistical data on the number patients actually

using acute care beds at JFK in excess of 24-hours despite their

classification, supports its claim of overcrowding.

Emergency Room Conditions

18. JFK described overcrowding in its emergency department

as another special circumstance creating a need for additional

acute care beds.

19. The emergency room at JFK has 37 bays each with a bed

and another 15 to 17 spaces used for stretchers. Eighteen

parking spaces are reserved for ambulances in front of the

emergency department.

20. It is not uncommon for a patient to wait in the JFK

emergency room up to 24 hours after being admitted to the

hospital, before being moved to an acute care bed. In

February 1999, after having converted 10 substance abuse beds to

acute care beds in October 1998, JFK still provided 234 patient

days of acute care in the emergency department. The waiting time

for patients to receive a bed after being admitted through the

emergency department ranged from 10 hours to 5 days in the

winter, and from an average of 6 hours up to 24 hours in the

summer. While JFK claims that the quality of care is not

adversely affected, it does note that patient privacy and comfort

are compromised due to the noise, lights, activity, and lack of

space for visitors in the emergency room.

21. JFK's patients tend to be older and sicker than the

average. As a result, more patients arriving at its emergency

room are admitted to the hospital. In the winter of 1998, JFK

was holding up to 35 acute care inpatients at a time in the

emergency room. Nationally, from 15% to 20% of emergency room

patients are admitted to hospitals. By contrast, almost twice

that number, or one-third of JFK's emergency room patients become

admitted inpatients.

22. Emergency room admissions are also a substantial number

of total admissions at JFK. In calendar year 1998, slightly more

than 65% of all inpatient admissions to JFK arrived through the

emergency room, most by ambulance. Ambulance arrivals at any

particular hospital are often dictated by the patient's

condition, with unstable patients directed to the nearest

hospital. Once patients are stabilized in the emergency room at

JFK, those requiring obstetric, pediatric, or psychiatric

admissions are transferred from JFK which does not provide those

inpatient services. Emergency room patients in need of acute

care services provided at JFK, like the neonates at issue in the

prior Good Samaritan application, are unlikely candidates for

transfer

23. The emergency room at JFK receives up to 50,000 patient

visits a year, up from approximately 32,000 annual visits five

years ago. JFK operates one of the largest and busiest emergency

departments in Palm Beach County. Due to overcrowding in the

emergency department at Delray Hospital, in southern Palm Beach

County, patients have been diverted to other facilities,

including JFK.

24. In terms of square footage, JFK's emergency room does

not meet the standards to accommodate the 52 to 54 bays and

stretchers and related activities. JFK lacks adequate space for

support services which should also be available in the emergency

department. The Petitioners asserted that enlarging the

emergency room will alleviate its problems. JFK demonstrated,

however, that regardless of the physical size of the emergency

room, optimal patient care requires more capacity to transfer

patients faster to acute care beds outside the emergency

department.

Conditions in Other Departments

25. Of 343 operational beds at JFK at the time of the final

hearing, 290 were monitored or telemetry acute care beds, 30 were

critical care beds, and 23 were non-monitored, non-critical care

beds. Most of the monitored beds are in rooms equipped with

antennae to transmit data from electrodes and monitors when

attached to patients. When monitoring is not necessary, the same

beds are used by regular acute care patients.

26. The large number of monitored beds located throughout

the hospital in various units reflects JFK's largely elderly

population and specialization in cardiology. In 1998, 820

inpatient cardiac catheterizations (caths) were performed at JFK.

Petitioners Good Samaritan and St. Mary's transferred 90 and 28

of those cath patients, respectively to JFK. In the first five

months of 1999, 449 caths were performed, including procedures on

35 patients transferred from Good Samaritan and 16 from St.

Mary's. Cath lab patients are held in the lab longer after their

procedures when beds are not available in cardiac or the post-

anesthesia care units. The Petitioners suggested that cath lab

patients could be placed in a 12-bed holding area added to the

lab in July 1999; however, that space was expected to be filled

by patients being prepared for caths. Open heart surgery is

available in Palm Beach County at three hospitals, Delray, JFK

and Palm Beach Gardens. Patients admitted to JFK for other

primary diagnoses often require cardiac monitoring even though

they are not in a cardiac unit.

27. The additional 24 beds which were under construction at

the time of the final hearing will also be monitored beds. The

20 beds at issue in this proceeding will not be monitored. The

Petitioners questioned whether non-monitored beds will alleviate

overcrowding at JFK where so many patients require monitoring.

28. JFK physicians in various specialties testified

concerning conditions in other areas of the hospital. A

nephrologist, who consults primarily in intensive care units,

described the backlog and delay in moving patients from intensive

care into acute care beds. A cardiologist noted that patients

are taking telemetry beds they do not need because there is no

other place to put them. A general and vascular surgeon

described the overcrowding as a problem with the ability to move

patients from more to less intensive care when appropriate.

Elective surgeries have been delayed to be sure that patients

will have beds following surgery. The evidence presented by JFK

supports the conclusion that the additional acute care beds will

assist in alleviating overcrowding in other hospital units,

including backlogs in the existing monitored beds.

29. JFK has established as factual bases for special

circumstances that its high occupancy exceeds the optimal much of

the year, aggravated by seasonal fluctuations; that it has

relatively large emergency room admissions over which it has no

control; and that its intensive care and monitored beds are not

available when needed.

Number of Beds Needed

30. With the conversion, in 1998, of 10 substance abuse

beds to acute care beds and the 1999 construction of 24 of 40

additional beds requested by JFK, the number of licensed and

approved beds at JFK increased to 367. In addition, with CON-

exemption, JFK has added observation beds. As a result of AHCA's

partial approval of the previous JFK request for new construction

and due to unfavorable changes in Medicare reimbursement policies

for hospital-based SNUs, JFK now seeks this 20-bed conversion.

JFK ceased operating the SNU in October 1998, after Medicare

reimbursement changed to a system based on resource utilization

groups (RUGs). JFK was unable to operate the SNU without

financial losses, that is, unable to cover its patient care costs

under the RUGs system. The proposal to convert the beds back to

acute care, as they were previously licensed will allow JFK to

reconnect existing oxygen lines in the walls and to use the beds

for acute care patients. Although Good Samaritan and St. Mary's

suggested that JFK can profitably operate a SNU, there was no

evidence presented other than its previous occupancy levels which

were very high, and the fact that Columbia is not closing all of

its SNUs. The Petitioners also question JFK's ability to use its

SNU beds for acute care and/or observation patients. AHCA,

however, took the position that acute care licensure is required

for beds in which acute care patients are routinely treated.

Otherwise, the agency would not have accurate data on

utilization, bed inventory, and the projected need.

31. In order to demonstrate the number of beds needed,

JFK's expert used historical increases in admissions. Some

admissions data was skewed because the parent corporation,

Columbia, closed Palm Beach Regional in 1996, and consolidated

its activities at JFK. Excluding from consideration the increase

of 3,707 admissions from 1995 to 1996, JFK's expert considered

approximately 800 as reasonable to assume as an average annual

increase. That represents roughly the mid-point between the 1996

to 1997 increase of 605, and the 1997 to 1998 increase of 1,076

admissions. A projected increase of 800 admissions for an

average 5-day length of stay would result in an increase of 4,000

patient days a year which, at 80% occupancy, justifies an

increase of 14 beds a year. Considering the closing of Palm

Beach Regional, the number of beds in the subdistrict will have

been reduced by 170.

32. At the hearing, JFK's expert also relied on 3.3% annual

patient day increase to project the number of beds needed, having

experienced an increase of 5.8% from 1997 to 1998. Using this

methodology, JFK projected a need for 20 additional acute care

beds by 2002, and over 40 more by 2004. That methodology assumed

patient growth in the excess of population growth and,

necessarily, an increase in market share. JFK's market share

increased in its primary service area from approximately 19% in

1993 to 27% in 1997. But the market share also slightly declined

from 1997 to 1998.

33. AHCA' s methodology for determining the number of beds

needed was based on the entire population of Palm Beach County,

not just the more elderly southern area. It also assumed that

JFK's market share would remain constant. Using this more

conservative approach than JFK, AHCA projected a need for 383

acute care beds, or 16 beds added to the current total of 367

licensed and approved beds, at an optimal 75% occupancy by the

year 2004. AHCA relied on a projection of 104,959 total patient

days in 2004. Using the same methodology, JFK's expert

determined that total projected patient days for 1998 would have

been 94,225, but the actual total was 98,126 patient days.

34. AHCA's methodology underestimates the number of beds

needed, but does confirm that more than 16 additional beds will

be needed by 2004. AHCA's reliance on 75% as an optimal future

occupancy level as compared to the hospital-specific historical

level of 80% was criticized, as was the use of the year 2004 as a

planning horizon. The rule requires 80% occupancy for a prior

reporting period and does not establish any planning horizon.

35. Good Samaritan and St. Mary's used 80% occupancy in

their analysis of bed need. At 80% occupancy, Petitioners

projected an average daily census of 265 patients in 331 beds in

2001, or 268 patients in 334 beds in 2002, and 270 patients in

358 beds in 2003, as compared to 367 existing and approved beds.

The Petitioners' projection is an underestimate of bed-need based

on the actual average daily census of 269 patients in 1998. The

Petitioners' methodology erroneously projects a need for fewer

licensed beds than JFK has currently, despite the special

circumstances evincing overcrowding. At 80% occupancy, based on

the special circumstances rule, a hospital exceeds the optimal

level and needs more beds. But, according to the Petitioners,

80% is a future occupancy target for the appropriate planning

horizon of 2002. As AHCA's expert noted, it is illogical to use

80% as both optimal and as an indication of the need for

additional beds. Similarly, it is not reasonable to use a

planning horizon which coincides with the time when more beds

will be needed. Therefore, the use of 75% for the five-year

planning horizon of 2004 is a reasonable optimal target, as

contrasted to the need for additional beds when 80% occupancy is

reached at some future time beyond the planning horizon.

36. AHCA's underestimate of need at 16 more beds by 2004,

and JFK's overestimate of need at 40 more beds by 2004, support

the conclusion that the requested addition of 20 beds in this

application is in a reasonably conservative range.

Rule 59C-1.038(6)(a) and Subsection 408.035(l)(n) -

service and commitment to medically indigent;

and Rule 59C-1.038(6)(b) - conversion of beds

37. Rule 59C-1.038(6), Florida Administrative Code, also

includes the following criteria:

(a) Priority consideration for initiation of

new acute care services of capital

expenditures shall be given to applicants

with documented history of providing services

to medically indigent patients or a

commitment to do so.

(b) When there are competing applications

within a subdistrict, priority consideration

shall be given to the applications which meet

the need for additional acute care beds in a

particular service through the conversion of

existing underutilized beds.

38. Subsection (a) of the Rule, overlaps with District 9

health plan allocation factor one, which must be considered

pursuant to Subsection 408.035(1)(a), and with the explicit

criterion of Subsection 408.035(1)(n), Florida Statutes. All

three require a commitment to and record of service to Medicaid,

indigent and/or handicapped patients.

39. JFK agreed to have its CON conditioned on 5% of the

care given in the 20 new beds to Medicaid and charity patients.

The commitment for the 24 beds under construction is 3% for

Medicaid and charity patients.

40. If charity patients are defined as those with family

incomes equal to or below 150% of federal poverty guidelines, JFK

provided $2.9 million in charity care in calendar year 1998, and

$720,000 as of April for 1999. JFK provided an additional 3% to

5% in Medicaid care. The Medicaid total includes Palm Beach

County Health Care District patients, who are also called welfare

patients. The charity care provided by JFK is equivalent to

approximately 1% of its gross revenue. JFK explained its

relatively low Medicaid care as a function of its relatively

limited services for people covered by Medicaid, particularly,

the young who utilize obstetrics and pediatrics. JFK pointed to

the differing demographics in Palm Beach County with more

elderly, who have Medicare coverage, located in its primary

service area. Excluding pediatric and obstetric care, Medicaid

covered 6.7% of patients in southern Palm Beach County as

compared to 16.3% in northern Palm Beach County. Of the Medicaid

patients, 2.9% in the southern area as compared to 6% in the

northern area are adults. On this basis, JFK established the

adequacy of its historical Medicaid and indigent care, and of its

proposed commitment.

41. Subsection (6)(b) of Rule 59C-1.038 is inapplicable

when, as in this case, there are not competing applications to

compare.

Subsection 408.035(1)(a) - other local health plan factors

and Subsection 408.035(1)(o) - continuum of care

42. District 9 allocation factor 2, favoring cost

containment practices, is enhanced by the proposed conversion

rather than the new construction of beds. Within the Columbia

group of hospitals, there is an effort to avoid unnecessary

duplications of services. JFK caters to an elderly population

and to providing cardiology, neurology, and oncology services.

Columbia's Palms West provides pediatric and obstetric care.

Another Columbia facility in Palm Beach County, Columbia

Hospital, specializes in inpatient psychiatric services. The

elimination of the hospital-based SNU at JFK does eliminate one

level of care in the system, contrary to the criteria.

43. District 9 health plan allocation factor 3 requires

favorable consideration of plans, like JFK's, to convert unused

or underutilized beds. In this case, the JFK SNU was highly

utilized but unprofitable. There is no evidence that alternative

placements in free-standing nursing homes are inappropriate or

unavailable. Minor inefficiencies result from the time lag for

transfers during which skilled nursing patients remain in acute

care beds. To some extent, the inefficiencies were already

occurring while JFK operated the SNU due to its high average

census of 18 or 19 patients in a total of 20 SNU beds. Those

inefficiencies are outweighed by the low cost conversion of 20

beds for $117,000, particularly as compared to its prior 24-bed

construction for $4 million.

44. In general, the applicable local health plan allocation

factors support the approval of the JFK application.

Rule 59C-1.030 - needs access for low income, minorities,

handicapped, elderly, Medicaid, Medicare, indigent or other

medically underserved

45. In general, the proposal is intended to increase access

to JFK's services by decreasing waiting times for admissions.

The services are used by a large number of elderly patients, who

are primarily covered by Medicare. JFK demonstrated that the

population in its service area also tends to be wealthier than

the population in northern Palm Beach County. Medicaid and

indigent access to care at JFK is consistent and reasonable given

the demographic data presented. Access for elderly Medicare

patients will be enhanced by the proposal.

Subsection 408.035(1)(b) - accessibility, availability,

appropriateness, and adequacy of like and existing services

46. Good Samaritan and St. Mary's argue that hospitals

below 75% occupancy are available alternatives to JFK's patients.

Yet, those facilities are not viable alternatives for unstable

patients admitted through the emergency room. Neither is it

appropriate to transfer patients who need services provided at

JFK. JFK does not allege that any problems exist at other

facilities, but only that it is affected by special

circumstances. From January to June 1998, the closest hospitals

to JFK experienced wide-ranging occupancy levels from 92% at

Delray, the hospital with services most comparable to those at

JFK, to 57% at Bethesda, and 47% at Wellington. The wide range

in occupancy rate is further indication of uniqueness of the need

for patients to access services available only at Delray and JFK.

Subsection 408.035(1)(d) - outpatient care

or other alternatives

47. Admitted inpatients have no alternatives to their need

for acute care beds.

Subsection 408.035(1)(h) - alternative use of

resources and accessibility for residents

48. The continued use of the 20 beds as a SNU was suggested

as an alternative. As noted, however, that proved to be

financially unprofitable at JFK, in comparison to the low cost

conversion to acute care beds.

49. AHCA reasonably rejected the idea that of the beds

being designated "observation" beds when used for acute care

patients. In addition, in 1996, JFK estimated the cost of moving

patients from bed to bed in the hospital due to the shortage of

appropriate beds, when needed, at up to $1 million.

50. This project is intended to meet a facility-specific

need based on the demand for services at JFK from patients who

cannot reasonably initially be sent or subsequently transferred

to other hospitals. As such, JFK's additional beds do not meet

the criterion for accessibility for all residents of the

district.

Subsection 408.035(1)(i) - utilization and long-term

financial feasibility

51. Good Samaritan and St. Mary's contend that JFK's

proposal includes unrealistically high utilization projections

for the additional 20 beds. Using 98,000 patient days in 1998,

which excludes any days attributable to skilled nursing beds,

total utilization projected in the second year is 78.4%. For the

additional 20 beds, projected utilization is 77.4%.

52. The expert for Good Samaritan and St. Mary's disagreed

with the allocation of patient days between the existing and

additional beds. If 80% utilization is assigned to existing 367

beds, as he suggested, then the average annual occupancy of the

20 new beds would be only 50%. The financial break-even point

for the project, however, is 50 to 75 patient days, or 10 to 15

patients with average lengths of stay of 5 days. Therefore, even

with the lower projected occupancy of 50%, or an average of 10

beds at any time, the project is financially feasible in the

long-term.

53. In reality, a separate allocation of patient days to

the 20 new beds is somewhat arbitrary. It is also less important

than total projected utilization, since the 20 beds do not

represent a separate unit in which specialized services will be

provided. The additional beds will become a part of the total

medical/surgical inventory. By demonstrating that there will be

sufficient total occupancy to exceed the financial break-even

point in the newly converted beds regardless of the allocation of

patient days to any particular bed, JFK demonstrated the long-

term financial feasibility of the proposal for CON 9099.

Subsection 408.035(1)(l) - impact on costs;

effects of competition

54. If the JFK proposal is approved, Good Samaritan

anticipates a loss of 255 patients, or 1,392 patient days, which

is equivalent to a financial loss of over $1.5 million. St.

Mary's anticipates losses of 158 patients or 973 patient days,

and in excess of $1 million. Both hospitals were experiencing

overall operating losses in 1999. But, the estimates of

financial losses for both hospitals did not take into

consideration all of the expense reductions associated with

serving fewer patients.

55. Excluding pediatrics and obstetrics, which are not

available at JFK, JFK's overlapping service areas with Good

Samaritan and St. Mary's are minimal. Good Samaritan's market

share in JFK's primary service area is 4.8%, and St. Mary's is

9.3%. Pediatrics and obstetrics contribute 30.7% of total

patients at Good Samaritan, and 49.5% at St. Mary's.

56. Physician overlap among the hospitals is also limited.

Although 357 doctors admitted patients to JFK and 464 to

St. Mary's in the first two quarters of 1998, the number of

overlapping doctors was 28. With a total of 379 admitting

doctors at Good Samaritan for the same period of time, only 21

were included in JFK's 357 admitting physicians. In general,

doctors in the northern Palm Beach County acute care subdistrict

seldom admit patients to hospitals in the southern subdistrict,

and vice versa.

57. The absence of overlapping medical staff also reflected

the differences in the services. Most of the top twenty doctors

who admitted patients to Good Samaritan and St. Mary's were

obstetricians and pediatricians. When obstetricians and

pediatricians are excluded, the number of overlapping doctors for

JFK and Good Samaritan is reduced to 15, and for JFK and

St. Mary's to 22 .

58. In addition to providing different services, to

different areas of the County, doctors who practice primarily in

one or the other subdistrict served patients in different payor

classification mixes. In 1997, JFK's patients were 74% Medicare,

consistent with the fact that a larger percentage of elderly

patients live in JFK's service area. By contrast, Medicare

patients were approximately 48% of the total at Good Samaritan,

and 32% of the total at St. Mary's.

59. Historically, the addition of acute care beds at JFK

has not affected other hospitals in the district or even the same

acute care subdistrict. After the conversion of 10 substance

abuse beds in the fall of 1998, the acute care patient days at

every hospital in the same subdistrict increased in early 1999

over comparable periods of time in 1998.

60. The assumption that additional beds at JFK will take

patients from other hospitals includes the assumption that JFK

will draw a larger share of an incremental increase of patients.

The assumption is, in other words, that all patients will be new

to JFK. The expert health planner for Good Samaritan and

St. Mary's conceded that facility-specific overcrowding can

justify projections that the additional beds will accommodate the

existing census plus growth attributable to increasing

population, and will not generate new patients. The expert

assumed, nevertheless that from 1478 to 1486 new patients

(depending on whether the length of stay is rounded off) would be

associated with JFK's project. From that total, the proportional

losses allocated were 255 patients from Good Samaritan and 158

patients from St. Mary's.

61. Another underlying assumption increase is that all of

the new patients would go to other hospitals if JFK does not add

20 acute care beds. That assumption suggests that all of the

patients could receive the services they need at the other

facilities, which is not supported by the facts or current

utilization data.

62. More likely, with the addition of beds due to

overcrowding, some patients will come from the existing hospital

census at JFK. It is not reasonable to assume that JFK will have

all new patients, nor that all patients could be treated at other

hospitals in the absence of JFK's expansion. The proportion of

emergency room admissions at JFK is reasonably expected to

continue. Patients who arrive at JFK requiring open heart

surgery, angioplasties or invasive cardiac caths are reasonably

expected to continue to receive those services at JFK, including

patients who are transferred to JFK from Good Samaritan and

St. Mary's.

63. Based on the failure to support the assumptions, and

the differences in service areas, medical staff, specialties, and

patient demographics, Good Samaritan and St. Mary's have not

shown any adverse impact from the JFK proposal.

64. On balance, considering the statutory and rule criteria

for reviewing CON applications, JFK established, as a matter of

fact, that it meets the special circumstance criteria related to

emergency room admissions, pre- and post-surgical and intensive

care backlogs, and average annual occupancy projections in excess

of optimal levels.

CONCLUSIONS OF LAW

65. The Division of Administrative Hearings has

jurisdiction in this proceeding pursuant to Sections 120.569 and

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

Statutes.

66. As the applicant, JFK has the burden of demonstrating

its entitlement to a CON, based on a balanced consideration of

the criteria. Boca Raton Artificial Kidney Center v. Department

of Health and Rehabilitative Services , 475 So. 2d 260 (Fla. 1st

DCA 1985); Florida Department of Transportation v. J. W. C., Co. ,

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

67. The special circumstances provision of the acute care

rule applies, in the absence of numeric need, as follows:

(5) 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 the hospital's average

occupancy rate based on inpatient utilization

of all licensed acute care beds is at or

exceeds 80 percent. The determination of the

average occupancy rate shall be made based on

the average 12 months occupancy rate for the

reporting period specified in section (4).

Proposals for additional beds submitted by

facilities qualifying under this subsection

shall be reviewed in context with the

applicable review criteria in section

408.035, F.S.

Rule 59C-1.038(5), Florida Administrative Code

68. Special circumstances, recognized by AHCA, have

included seasonal high occupancy levels and unusually large

emergency room admissions. Humana of Florida, Inc. v. AHCA and

Adventist Health System/Sunbelt, Inc., d/b/a East Pasco Medical

Center , 17 FALR 2538, DOAH Case No. 92-1497 (F.O. 6/3/93).

69. The experience in the emergency room and other

specialized units at JFK distinguishes the facts from those cases

in which seasonal occupancy alone was rejected as a special

circumstance for approval of a CON. Some of those decisions

include the explanation that seasonal occupancy fluctuations are

common at Florida hospitals and is included in a calculation of

average annual occupancy. Naples Community Hospital v. AHCA and

Southwest Florida Regional Medical Center , 15 FALR 2615, DOAH

Case No. 92-1510 (F.O. 6/6/93); Leesburg Regional Medical Center

v. Department of Health Rehabilitative Services and Lake

Community Hospital , DOAH Case No. 83-156 (R.O. 12/15/83).

70. As Good Samaritan and St. Mary's correctly indicated,

however, the applicant in the East Pasco case met the facility-

specific occupancy level of the acute care rule, which was 75%,

at that time. In fact, while acknowledging seasonal occupancy

exceeding 100%, and 55% (twice the national average) of inpatient

admissions from the emergency department, AHCA's conclusions of

law include the following statement:

"A threshold requirement under (7)(e) is that

the applicant-hospital must have an average

annual occupancy exceeding seventy-five

percent (75%)."

17 FALR at 2547.

71. AHCA goes on to note that "East Pasco's occupancy of

78.7% allowed it to seek approval under (7)(e)." That language

in East Pasco , supports a conclusion that the failure to achieve

the facility-specific occupancy level in the rule bars further

consideration of special circumstances.

72. Similarly, in Bethesda Memorial Hospital, Inc. v. NME

Hospital, Inc., d/b/a Delray Community Hospital and AHCA , 18 FALR

2330 (1996), DOAH Case No. 95-0730 (F.O. 12/18/95), Delray

received a CON to add 24 acute care beds. Among the special

circumstances at Delray were occupancy rates ranging from 80 to

128% in its intensive care units, while 75 to 80% was considered

reasonable. Delray was also a trauma center with an active

emergency room, and a "cardiac" hospital in a service area of

more elderly people. Unlike JFK in the present case, Delray,

like East Pasco, exceeded the special circumstances hospital-

specific occupancy. Delray reported 75.63% to average annual

occupancy at the same time the rule set the requirement at 75%.

73. JFK and AHCA rely on the decision in Sarasota County

Public Hospital Board v. Department of Health Rehabilitative

Services , 11 FALR 6248, DOAH Case Nos. 89-1412 and 89-1413 (F.O.

11/17/89) to argue for a consideration of "reality in the CON

process," meaning, in this case, whether the proposal meets the

requirements based on a consideration of the actual acute care

occupancy rate. In South Broward Hospital District v. AHCA and

Plantation General Hospital, L.P. , FALR 1995 WL 1052639, DOAH

Case No. 93-4881 (F.O. 6/15/95), AHCA rejected the conclusion

that unused licensed beds (which could easily be put back into

service) should be omitted from the inventory but, in so doing,

allowed evidence related to the accuracy of the reported

utilization. In considering what is reality in this case, AHCA's

expert took the position, consistent with the rules that

observation and 23-hour patients are not acute care inpatients

because they are not admitted for 24-hour stays; but, the expert

also testified in support of the approval of the application for

20 beds. That position was advanced without her apparently

subsequent concession that some portion of the combined 23- and

24-hour data, based on Medicare policy, would most likely be

inpatients. Deposition of Elfie Stamm at pps. 77 and 89

(6/21/99).

74. The rules give some direction for determining the

meaning of "inpatient" and "acute care bed" as used in the rule

which provides that "occupancy rate [is] based on inpatient

utilization of all licensed acute care beds." Rule 59C-1.038(5),

Florida Administrative Code. For example, an acute care bed is

defined in the CON Section of the Florida Administrative Code, as

follows:

"Acute care bed" means a patient

accommodation or space licensed by the agency

pursuant to Chapter 395, Part I, F.S., and

regulated under Rule 59C-1.038, F.A.C. Acute

care beds exclude neonatal intensive care

beds, comprehensive medical rehabilitation

beds, hospital inpatient psychiatric beds,

hospital inpatient substance abuse beds, beds

in distinct part skilled nursing units, and

beds in long term care hospitals licensed

pursuant to Chapter 395, Part I, F.S.

Rules 59C-1.002(2) and 59C-1.038(2)(a), Florida Administrative

Code. In rules establishing a hospital uniform reporting system

and data collection requirement, AHCA has adopted the following

definitions:

(1) "Acute care" means inpatient general

routine care provided to patients who are in

an acute phase of illness, which includes the

concentrated and continuous observation and

care provided in the intensive care units of

an institution.

Rule 59E-7.011(1), Florida Administrative Code.

(4) 'Inpatient' means a patient who has an

admission order given by a licensed physician

or other individual who has been granted

admitting privileges by the hospital. This

shall include obstetric patients who

experience a length of stay of twenty-four

hours or less. Short stay and observation

patients are excluded.

Rule 59E-7.011(4), Florida Administrative Code.

(16) "Inpatient admission" means a person

who has been admitted to a hospital for bed

occupancy for purposes of receiving inpatient

hospital services. A person is considered an

inpatient if formally admitted by the

hospital as an inpatient by physician order

with the expectation that the individual

would remain at least overnight and occupy a

bed.

Rule 59E-5.101(16), Florida Administrative Code. The rules

support the inclusion of all patients who were expected to remain

overnight in beds not in the categories excluded in the

definition of an acute care bed. Therefore, Medicare patients

who are classified as outpatients or 23-hour patients but who

otherwise meet the definition of inpatients are properly

considered in the utilization data.

75. The health planning experts testified that just over

80% occupancy in acute care indicates the need for additional

beds. That position supports AHCA's expert's position, as

articulated for the agency, that:

If your beds are at 80 percent or more then

our interpretation, and I think the Court's

interpretation has been that then you're

automatically entitled to additional beds.

Deposition of Elfie Stamm, at p. 52 (6/21/99).

76. There are no cases cited in this record which support

AHCA's expert's conclusion regarding court interpretations. The

expert's opinion that valid health care principles support AHCA's

position that 80% is a standard which more likely than not tends

to indicate additional need is accepted principles and the 1997

rule change increasing hospital-specific occupancy from 75% to

80% distinguish this case from those in which AHCA held that 75%

was a threshold requirement. AHCA is not required to interpret

the rule in a manner which results in illogical or unintended

consequences. See Sarasota County Public Hospital , supra .

77. Having proved that it more likely than not exceeded 80%

occupancy in 1997, based on the range of acute care only and

actual acute care bed utilization, JFK met the requirement of the

rule related to facility-specific occupancy.

78. Independently of meeting the rule occupancy

requirement, JFK demonstrated (1) the large number of patients

admissions through its emergency room and, (2) the backlog of

patients in more intense care, monitored beds are special

circumstances.

79. Other statutory and rule criteria include those

stipulated, in Subsections 408.035(1)(e), (f), (g), (h) - as

related to training health professionals, (j), (k), and (2),

Florida Statutes, as not at issue or not applicable to this

proposal.

80. JFK's historical and proposed commitment to Medicaid

and indigent patients, and its level of Medicare service meet the

requirements of the local health plan, Rule 59C-1.030, Rule 59C-

1.038(6)(a), and Subsection 408.035(1)(a) criteria.

81. In general, JFK meets the local health plan goals for

Medicaid/indigent care, conversion of beds, and non-duplication

of services, as required by Subsection 408.035(1)(a). The

proposal reduces the continuum of care at JFK, and is

inconsistent with Subsection 408.035(1)(o).

82. JFK established that Good Samaritan and St. Mary's, and

other hospitals in the district are not accessible, appropriate,

or adequate for the types of patients at JFK, due to distinct

markets, service areas, and medical staff. As a result of the

large proportion of patients arriving by ambulance at JFK, there

are no visible alternatives to JFK's proposal, which is

consistent with the need criteria of Subsections 408.035(1)(b)

and (d).

83. JFK demonstrated its resources should be used for the

conversion of skilled nursing to acute beds. JFK did not

demonstrate that its services in new beds will be accessible to

all residents, and therefore, only partially satisfies the

criteria at issue in Subsection 408.035(1)(h).

84. JFK demonstrated that it can achieve sufficient

utilization, and that the proposal is financially feasible in the

long term, as required in Subsection 408.035(1)(i).

85. JFK's proposal will not adversely impact costs or

competition for acute care beds, in compliance with Subsection

408.035(1)(l). Having failed to demonstrate any adverse impact

from the JFK proposal, Good Samaritan and St. Mary's have failed

to demonstrate standing, as required by Subsection 408.039(5),

Florida Statutes.

86. On balance, JFK's proposal satisfies the applicable CON

criteria, and the addition of 20 beds is also justified by "not

normal" or special circumstances.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED

1. That a final order be entered issuing CON 9099 to

convert 20 skilled nursing beds to 20 acute care beds at

Columbia/JFK Medical Center, L.P., d/b/a JFK Medical Center, on

condition that a minimum of 5% of new acute care patient days

will be provided to Medicaid and charity patients.

2. The file of the Division of Administrative Hearings,

DOAH Case No. 99-0714 is hereby closed.

DONE AND ENTERED this 7th day of April, 2000, 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]

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 7th day of April, 2000.

COPIES FURNISHED:

Sam Power, Agency Clerk

Agency for Health Care Administration

Fort Knox Building 3, Suite 3431

2727 Mahan Drive

Tallahassee, Florida 32308-5403

Julie Gallagher, General Counsel

Agency for Health Care Administration

Fort Knox Building 3, Suite 3431

2727 Mahan Drive

Tallahassee, Florida 32308-5403

Richard A. Patterson, Esquire

Agency for Health Care Administration

Fort Knox Building 3, Suite 3431

2727 Mahan Drive

Tallahassee, Florida 32308-5403

Thomas A. Sheehan, III, Esquire

Moyle, Flanigan, Katz, Kolins,

Raymond & Sheehan, P.A.

Post Office Box 3888

West Palm Beach, Florida 33402

Stephen A. Ecenia, Esquire

Thomas W. Konrad, Esquire

Rutledge, Ecenia, Purnell & Hoffman, P.A.

Post Office Box 551

Tallahassee, Florida 32302-0551

Robert D. Newell, Jr., Esquire

Newell & Terry, P.A.

817 North Gadsden Street

Tallahassee, Florida 32303-6313

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.