STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

LEE MEMORIAL HEALTH SYSTEM,

Petitioner,

vs.

AGENCY FOR HEALTH CARE

ADMINISTRATION,

Respondent.

_______________________________/

NAPLES COMMUNITY HOSPITAL, INC.,

d/b/a NCH NORTH NAPLES HOSPITAL

CAMPUS,

Petitioner,

vs.

AGENCY FOR HEALTH CARE

ADMINISTRATION,

Respondent.

_______________________________/

Case No. 13-2508CON

Case No. 13-2558CON

RECOMMENDED ORDER

Pursuant to notice, an evidentiary hearing was conducted in

these consolidated cases on November 4 through 8 and 12 through

15, 2013, in Tallahassee, Florida, before Administrative Law

Judge Elizabeth W. McArthur of the Division of Administrative

Hearings.

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APPEARANCES

For Petitioner, Lee Memorial Health System:

Seann M. Frazier, Esquire

Jonathan L. Rue, Esquire

Parker, Hudson, Rainer & Dobbs, LLP

215 South Monroe Street, Suite 750

Tallahassee, Florida 32301

Karl David Acuff, Esquire

Law Offices of Karl David Acuff, P.A.

1615 Village Square Boulevard, Suite 2

Tallahassee, Florida 32309-2770

For Petitioner, Naples Community Hospital, Inc., d/b/a NCH

North Naples Hospital Campus:

R. Terry Rigsby, Esquire

Brian Newman, Esquire

Pennington, Moore, Wilkinson,

Bell and Dunbar, P.A.

Post Office Box 10095

Tallahassee, Florida 32302-2095

For Respondent, Agency for Health Care Administration:

Richard Saliba, Esquire

Michael Hardy, Esquire

Agency for Health Care Administration

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

STATEMENT OF THE ISSUE

The issue in this case is whether the certificate of need

(CON) application filed by Lee Memorial Health System (LMHS) to

establish a new 80-bed hospital in Lee County, Florida, should be

approved or denied.

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PRELIMINARY STATEMENT

On March 6, 2013, LMHS filed a CON application to establish a

new 80-bed general acute care hospital in Lee County, Florida.

The Agency for Health Care Administration (AHCA) assigned the LMHS

CON application number 10185.

On June 7, 2013, AHCA issued its State Agency Action Report

(SAAR), which set forth its preliminary decision to deny the LMHS

CON application. LMHS timely filed a petition for an

administrative hearing to contest AHCA’s preliminary decision.

Naples Community Hospital, Inc. (NCH), doing business as NCH North

Naples Hospital Campus (North Naples), an existing hospital

located within the service area targeted by the proposed new

hospital, timely filed a petition for an administrative hearing to

support AHCA’s preliminary decision. AHCA referred the two

petitions to the Division of Administrative Hearings, where they

were consolidated and set for hearing.

Prior to the hearing, the parties filed a Joint Pre-Hearing

Stipulation in which they set forth several admitted facts and

agreed statements of law. The parties’ stipulations are

incorporated into this Recommended Order to the extent relevant.

At the final hearing, LMHS presented the testimony of the

following witnesses: Donald F. Eslick; Leonard “Scotty” Wood;

Dave Kistel, accepted as an expert in hospital facility management

and compliance with building code requirements of AHCA’s Office of

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Plans and Construction; Warren Panem, accepted as an expert in

emergency medical service (EMS) operations and quality

improvement; Larry Hobbs, M.D., accepted as an expert in emergency

medicine and emergency room operations; Rick Knapp, accepted as an

expert in health care finance; James Nathan, accepted as an expert

in hospital and health care systems administration; Tom Davidson,

accepted as an expert in health care planning; and Lisa Sgarlata,

accepted as an expert in hospital administration, nursing

administration, and emergency department operation.

LMHS Exhibits 3, 5, 7, 8, 10, 11, 13 through 20, 23, 27

through 29, 31 through 39, 43 through 52, part of 53 (pages 14-17

only), 65, and 70 were admitted in evidence. In addition,

official recognition was taken of Lee County Ordinance No. 08-16.

NCH presented the testimony of the following witnesses:

Allen Weiss, M.D., accepted as an expert in hospital

administration, geriatric rheumatology, and internal medicine;

Michelle Thoman, accepted as an expert in hospital administration

and clinical care; Jeffrey Panozzo, M.D., accepted as an expert in

emergency medicine and area EMS protocol; Elizabeth Novakovich;

Kevin Cooper, accepted as an expert in hospital administration;

Darryl Weiner, accepted as an expert in health care financial

analysis; and Sharon Gordon-Girvin, accepted as an expert in

health care planning.

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NCH Exhibits 1, 3, 5, 6, 15 through 17, 19 through 21, part

of 22 (page 1 only), 23, 26, 27, 31, 34, 36 through 38, 40, part

of 43 (petition and pages 93-111 only), 45, 46, 48 through 50, 52,

part of 53 (pages 1-19 and 52-53 only), 59, and 65 through 70 were

admitted in evidence.

In addition, post-hearing, the undersigned is admitting NCH

Exhibit 64, the four-page Harvard Jolly architectural plans

submitted with LMHS’s CON application. When offered in evidence

by NCH, counsel for LMHS stated that the exhibit duplicated

appendix O to the CON application, in evidence as LMHS Exhibit 3.

(Tr. 1387). However, upon closer inspection, LMHS Exhibit 3, as

offered by LMHS and admitted, did not include appendix N

(community support letters) or appendix O. Therefore, NCH Exhibit

64 is admitted in lieu of the missing CON application appendix O.

AHCA presented the testimony of Jeffrey N. Gregg, accepted as

an expert in health planning and certificate of need. AHCA’s

Exhibits 1 through 3 were admitted in evidence.

At the conclusion of the hearing, the parties requested 60

days after the hearing transcript filing date to file their

proposed recommended orders, and also requested an enlarged page

limit of 50 pages; the undersigned agreed to both requests. The

11-volume Transcript of the final hearing was filed on December 2,

2013. LMHS and NCH timely filed proposed recommended orders, and

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AHCA timely filed a joinder in NCH’s filing. The parties’ filings

were given due consideration in preparing this Recommended Order.

FINDINGS OF FACT

I. The Parties

A. The Applicant, LMHS

1. The applicant, LMHS, is a public, not-for-profit health

care system, created in 1968 by special act of the Legislature. A

ten-member publicly elected board of directors is responsible for

overseeing LMHS on behalf of the citizens of Lee County. LMHS does

not have taxing power.

2. LMHS is the dominant provider of hospital services in Lee

County. LMHS operates four hospital facilities under three

separate hospital licenses. The four hospital campuses are

dispersed throughout Lee County: borrowing the sub-county area

descriptors adopted by LMHS’s health planning expert, LMHS

operates one hospital in northwest Lee County, one hospital in

central Lee County, and two hospitals in south Lee County.1/ At

present, the four hospital campuses are licensed to operate a

total of 1,423 hospital beds. The only non-LMHS hospital in Lee

County is 88-bed Lehigh Regional Medical Center (Lehigh Regional)

in northeast Lee County, owned and operated by a for-profit

hospital corporation, Health Management Associates, Inc. (HMA).

3. LMHS has a best-practice strategy of increasing and

concentrating clinical specialties at each of its existing

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hospitals. The LMHS board has already approved which specialty

service lines will be the focus at each of its four hospitals.

Although there is still some duplication of specialty areas, LMHS

has tried to move more to clinical specialization concentrated at

a specific hospital to lower costs, better utilize resources, and

also to concentrate talent and repetitions, leading to improved

clinical outcomes.

4. Currently licensed to operate 415 hospital beds, Lee

Memorial Hospital (Lee Memorial) is located in downtown Fort Myers

in central Lee County. The hospital was initially founded in 1916

and established at its current location in the 1930s. In the

1960s, a five-story clinical tower was constructed on the campus,

to which three more stories were added in the 1970s. The original

1930s building was demolished and its site became surface parking.

Today, Lee Memorial provides a full array of acute care services,

plus clinical specialties in such areas as orthopedics, neurology,

oncology, and infectious diseases. Lee Memorial’s licensed bed

complement includes 15 adult inpatient psychiatric beds (not in

operation), and 60 beds for comprehensive medical rehabilitation

(CMR), a tertiary health service.2/ Lee Memorial is a designated

stroke center, meaning it is a destination to which EMS providers

generally seek to transport stroke patients, bypassing any closer

hospital that lacks stroke center designation. Lee Memorial

operates the only verified level II adult trauma center in the

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seven-county region designated AHCA district 8. Lee Memorial also

is home to a new residency program for medical school graduates.

5. At its peak, Lee Memorial operated as many as 600

licensed beds at the single downtown Fort Myers location. In

1990, when hospital beds were still regulated under the CON

program, Lee Memorial transferred its right to operate 220 beds to

establish a new hospital facility to the south, HealthPark Medical

Center (HealthPark). One reason to shift some of its regulated

hospital beds to the south was because of the growing population

in the southern half of Lee County. Another reason was to ensure

a paying patient population by moving beds away from Lee Memorial

to a more affluent area. That way, LMHS would have better system

balance, and be better able to bear the financial burden of caring

for disproportionately high numbers of Medicaid and charity care

patients at the downtown safety-net hospital. That was a

reasonable and appropriate objective.

6. HealthPark, located in south Lee County ZIP code 33908,

to the south and a little to the west of Lee Memorial, now

operates 368 licensed beds--320 general acute care and 48 neonatal

intensive care beds. HealthPark’s specialty programs and services

include cardiac care, open heart surgery, and urology. HealthPark

is a designated STEMI3/ (heart attack) center, a destination to

which EMS providers generally seek to transport heart attack

patients, bypassing any closer hospital lacking STEMI center

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designation. HealthPark also concentrates in specialty women’s

and children’s services, offering obstetrics, neonatal intensive

care, perinatal intensive care, and pediatrics. HealthPark is a

state-designated children’s cancer center. HealthPark’s open

heart surgery, neonatal and perinatal intensive care, and

pediatric oncology services are all tertiary health services.

7. In 1996, LMHS acquired its third hospital, Cape Coral

Medical Center (Cape Coral), from another entity.4/ The

acquisition of Cape Coral was another step in furtherance of the

strategy to improve LMHS’s overall payer mix by establishing

hospitals in affluent areas. Cape Coral is located in northwest

Lee County, and is licensed to operate 291 general acute care

beds. Cape Coral’s specialty concentrations include obstetrics,

orthopedics, gastroenterology, urology, and stroke treatment.

Cape Coral recently achieved primary stroke center designation,

making it an appropriate destination for EMS transport of stroke

patients, according to Lee County EMS transport guidelines.

8. The newest LMHS hospital, built in 2007-2008 and opened

in 2009, is Gulf Coast Medical Center (Gulf Coast) in south Lee

County ZIP code 33912.5/ With 349 licensed beds, Gulf Coast

offers tertiary services including kidney transplantation and open

heart surgery, and specialty services including obstetrics, stroke

treatment, surgical oncology, and neurology. Gulf Coast is both a

designated primary stroke center and a STEMI center.

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B. NCH

9. NCH is a not-for-profit system operating two hospital

facilities with a combined 715 licensed beds in Collier County,

directly to the south of Lee County. Naples Community Hospital

(Naples Community) is in downtown Naples. NCH North Naples

Hospital Campus (North Naples) is located in the northernmost part

of Collier County, near the Collier-Lee County line.6/ The

Petitioner in this case is NCH doing business as North Naples.

10. North Naples is licensed to operate 262 acute care beds.

It provides an array of acute care hospital services, specialty

services including obstetrics and pediatrics, and tertiary health

services including neonatal intensive care and CMR.

C. AHCA

11. AHCA is the state health planning agency charged with

administering the CON program pursuant to the Health Facility and

Services Development Act, sections 408.031-408.0455, Florida

Statutes (2013).7/ AHCA is responsible for the coordinated

planning of health care services in the state. To carry out its

responsibilities for health planning and CON determinations, AHCA

maintains a comprehensive health care database, with information

that health care facilities are required to submit, such as

utilization data. See § 408.033(3), Fla. Stat.

12. AHCA conducts its health planning and CON review based

on “health planning service district[s]” defined by statute.

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See § 408.032(5), Fla. Stat. Relevant in this case is district 8,

which includes Sarasota, DeSoto, Charlotte, Lee, Glades, Hendry,

and Collier Counties. Additionally, by rule, AHCA has adopted

acute care sub-districts, originally utilized in conjunction with

an acute care bed need methodology codified as Florida

Administrative Code Rule 59C-1.038. The acute care bed need rule

was repealed in 2005, following the deregulation of acute care

beds from CON review. However, AHCA has maintained its acute care

sub-district rule, in which Lee County is designated sub-district

8-5. Fla. Admin. Code R. 59C-2.100(3)(h)5.

II. The Proposed Project

13. LMHS proposes to establish a new 80-bed general hospital

on the southeast corner of U.S. Highway 41 and Coconut Road in

Bonita Springs (ZIP code 34135),8/ in south Lee County. The CON

application described the hospital services to be offered at the

proposed new hospital in only the most general fashion--medical-

surgical services, emergency services, intensive care, and

telemetry services. Also planned for the proposed hospital are

outpatient care, community education, and chronic care management

--all non-hospital, non-CON-regulated services.

14. At hearing, LMHS did not elaborate on the planned

hospital services for the proposed new facility. Instead, no firm

decisions have been made by the health system regarding what types

of services will be offered at the new hospital.

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15. The proposed site consists of three contiguous parcels,

totaling approximately 31 acres. LMHS purchased a 21-acre parcel

in 2004, with a view to building a hospital there someday. LMHS

later added to its holdings when additional parcels became

available. At present, the site’s development of regional impact

(DRI) development order does not permit a hospital, but would

allow the establishment of a freestanding emergency department.

16. The proposed hospital site is adjacent to the Bonita

Community Health Center (BCHC). Jointly owned by LMHS and NCH,

BCHC is a substantial health care complex described by LMHS

President James Nathan as a “hospital without walls.” This

100,000 square-foot complex includes an urgent care center,

ambulatory surgery center, and physicians’ offices. A wide

variety of outpatient health care services are provided within the

BCHC complex, including radiology/diagnostic imaging, endoscopy,

rehabilitation, pain management, and lab services.

17. Although LMHS purchased the adjacent parcels with the

intent of establishing a hospital there someday, representatives

of LMHS expressed their doubt that “someday” has arrived; they

have candidly admitted that this application may be premature.

III. CON Application Filing

18. LMHS did not intend to file a CON application when it

did, in the first hospital-project review cycle of 2013. LMHS did

not file a letter of intent (LOI) by the initial LOI deadline to

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signify its intent to file a CON application. However, LMHS’s

only Lee County hospital competitor, HMA, filed an LOI on the

deadline day. LMHS learned that the project planned by HMA was to

replace Lehigh Regional with a new hospital, which would be

relocated to south Lee County, a little to the north of the

Estero/Bonita Springs area.

19. LMHS was concerned that if the HMA application went

forward and was approved, that project would block LMHS’s ability

to pursue a hospital in Bonita Springs for many years to come.

Therefore, in reaction to HMA’s LOI, LMHS filed a “grace period”

LOI, authorized under AHCA’s rules, to submit a competing proposal

for a new hospital in south Lee County. But for the HMA LOI,

there would have been no grace period for a competing proposal,

and LMHS would not have been able to apply when it did.

20. Two weeks later, on the initial application filing

deadline, LMHS submitted a “shell” application. LMHS proceeded to

quickly prepare the bulk of its application to file five weeks

later by the omissions response deadline of April 10, 2013.

21. Shortly before the omissions response deadline,

Mr. Nathan met with Jeffrey Gregg, who is in charge of the CON

program as director of AHCA’s Florida Center for Health

Information and Policy Analysis, and Elizabeth Dudek, AHCA

Secretary, to discuss the LMHS application. Mr. Nathan told the

AHCA representatives that LMHS was not really ready to file a CON

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application, but felt cornered and forced into it to respond to

the HMA proposal. Mr. Nathan also discussed with AHCA

representatives the plan to transfer 80 beds from Lee Memorial,

but AHCA told Mr. Nathan not to make such a proposal. Since beds

are no longer subject to CON regulation, hospitals are free to add

or delicense beds as they deem appropriate, and therefore, an

offer to delicense beds adds nothing to a CON proposal.

22. LMHS’s CON application was timely filed on the omissions

deadline. A major focus of the application was on why LMHS’s

proposal was better than the expected competing HMA proposal.

However, HMA did not follow through on its LOI by filing a

competing CON application.

23. The LMHS CON application met the technical content

requirements for a general hospital CON application, including an

assessment of need for the proposed project. LMHS highlighted the

following themes to show need for its proposed new hospital:

South Lee County “should have its own acute care hospital”

because it is a fast-growing area with an older population;

by 2018, the southern ZIP codes of Lee County will contain

nearly a third of the county’s total population.

The Estero/Bonita Springs community strongly supports the

proposed new hospital.

Approval of the proposed new hospital “will significantly

reduce travel times for the service area’s residents and

will thereby significantly improve access to acute care

services,” as shown by estimated travel times to local

hospitals for residents in the proposed primary service

area and by Lee County EMS transport logs.

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LMHS will agree to a CON condition to delicense 80 beds at

Lee Memorial, which are underutilized, so that there will

be no net addition of acute care beds to the sub-district’s

licensed bed complement.

IV. AHCA’s Preliminary Review and Denial

24. AHCA conducted its preliminary review of the CON

application in accordance with its standard procedures.

25. As part of the preliminary review process for general

hospital applications, the CON law now permits existing health

care facilities whose established programs may be substantially

affected by a proposed project to submit a detailed statement in

opposition. Indeed, such a detailed statement is a condition

precedent to the existing provider being allowed to participate as

a party in any subsequent administrative proceedings conducted

with respect to the CON application. See § 408.037(2), Fla. Stat.

North Naples timely filed a detailed statement in opposition to

LMHS’s proposed new hospital. LMHS timely filed a response to

North Naples’ opposition submittal, pursuant to the same law.

26. After considering the CON application, the North Naples

opposition submittal, and the LMHS response, AHCA prepared its

SAAR in accordance with its standard procedures. A first draft of

the SAAR was prepared by the CON reviewer; the primary editor of

the SAAR was AHCA CON unit manager James McLemore; and then a

second edit was done by Mr. Gregg. Before the SAAR was finalized,

Mr. Gregg met with the AHCA Secretary to discuss the proposed

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decision. The SAAR sets forth AHCA’s preliminary findings and

preliminary decision to deny the LMHS application.

27. Mr. Gregg testified at hearing as AHCA’s representative,

as well as in his capacity as an expert in health planning and CON

review. Through Mr. Gregg’s testimony, AHCA reaffirmed its

position in opposition to the LMHS application, and Mr. Gregg

offered his opinions to support that position.

V. Statutory and Rule Review Criteria

28. The framework for consideration of LMHS’s proposed

project is dictated by the statutory and rule criteria that apply

to general hospital CON applications. The applicable statutory

review criteria, as amended in 2008 for general hospital CON

applications, are as follows:

(a) The need for the health care facilities

and health services being proposed.

(b) The availability, accessibility, and

extent of utilization of existing health care

facilities and health services in the service

district of the applicant.

* * *

(e) The extent to which the proposed services

will enhance access to health care for

residents of the service district.

* * *

(g) The extent to which the proposal will

foster competition that promotes quality and

cost-effectiveness.

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* * *

(i) The applicant’s past and proposed

provision of health care services to Medicaid

patients and the medically indigent.

§ 408.035(1), Fla. Stat.; § 408.035(2), Fla. Stat. (identifying

review criteria that apply to general hospital applications).

29. AHCA has not promulgated a numeric need methodology to

calculate need for new hospital facilities. In the absence of a

numeric need methodology promulgated by AHCA for the project at

issue, Florida Administrative Code Rule 59C-1.008(2)(e) applies.

This rule provides that

the applicant is responsible for demonstrating

need through a needs assessment methodology

which must include, at a minimum,

consideration of the following topics, except

where they are inconsistent with the

applicable statutory and rule criteria:

a. Population demographics and dynamics;

b. Availability, utilization and quality of

like services in the district, subdistrict or

both;

c. Medical treatment trends; and

d. Market conditions.

30. Florida Administrative Code Rule 59C-1.030 also applies.

This rule elaborates on “health care access criteria” to be

considered in reviewing CON applications, with a focus on the

needs of medically underserved groups such as low income persons.

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VI. LMHS’s Needs Assessment

31. LMHS set forth its assessment of need for the proposed

new hospital, highlighting the population demographics of the area

proposed to be served.

A. Theme: South Lee County’s substantial population

32. The main theme of LMHS’s need argument is that south Lee

County “should have its own acute care hospital” because it is a

fast-growing area with a substantial and older population. (LMHS

Exh. 3, p. 37). LMHS asserts that south Lee County’s population

is sufficient to demonstrate the need for a new hospital because

“by 2018, the southern ZIP codes of Lee County will contain nearly

a third of the county’s total population.” Id.

33. LMHS identified eight ZIP codes--33908, 33912, 33913,

33928, 33931, 33967, 34134, and 34135--that constitute “south Lee

County.” (LMHS Exh. 3, Table 4). Claritas population projections,

reasonably relied on by the applicant, project that by 2018 these

eight ZIP codes will have a total population of 200,492 persons,

approximately 29 percent of the projected population of 687,795

for all of Lee County. The age 65-and-older population in south

Lee County is projected to be 75,150, approximately 40 percent of

the projected 65+ population of 185,655 for all of Lee County.

34. A glaring flaw in LMHS’s primary need theme is that the

eight-ZIP-code “south Lee County” identified by LMHS is not

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without its own hospital. That area already has two of the

county’s five existing hospitals: Gulf Coast and HealthPark.

35. In advancing its need argument, LMHS selectively uses

different meanings of “south Lee County.” When describing the

“south Lee County” that deserves a hospital of its own, LMHS means

the local Estero/Bonita Springs community in and immediately

surrounding the proposed hospital site in the southernmost part of

south Lee County. However, when offering up a sufficient

population to demonstrate need for a new hospital, “south Lee

County” expands to encompass an area that appears to be half, if

not more, of the entire county.

36. The total population of the Estero/Bonita Springs

community is 76,753, projected to grow to 83,517 by 2018--much

more modest population numbers compared to those highlighted by

the applicant for the expanded version of south Lee County. While

the rate of growth for Estero/Bonita Springs is indeed fast

compared to the state and county growth rates, this observation is

misleading because the actual numbers are not large.

37. LMHS also emphasizes the larger proportion of elderly in

the Estero/Bonita Springs community, which is also expected to

continue to grow at a fast clip. Although no specifics were

offered, it is accepted as a generic proposition that elderly

persons are more frequent consumers of acute care hospital

services. By the same token, elderly persons who require

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hospitalization tend to be sicker, and to present greater risks of

potential complications from comorbidities, than non-elderly

patients. As a result, for example, as discussed below, Lee

County EMS’s emergency transport guidelines steer certain elderly

patients to hospitals with greater breadth of services than the

very basic hospital planned by LMHS, “as a reasonable precaution.”

B. Projections of a Well-Utilized Proposed Hospital

38. Mr. Davidson, LMHS’s health planning consultant, was

provided with the proposed hospital’s location and number of beds,

and was asked to develop the need assessment and projections. No

evidence was offered regarding who determined that the proposed

hospital should have 80 beds, or how that determination was made.

39. Mr. Davidson set about to define the proposed primary

and secondary service areas, keeping in mind that section

408.037(2) now requires a general hospital CON application to

specifically identify, by ZIP codes, the primary service area from

which the proposed hospital is expected to receive 75 percent of

its patients, and the secondary service area from which 25 percent

of the hospital’s patients are expected.

40. Mr. Davidson selected six ZIP codes for the primary

service area. He included the three ZIP codes comprising the

Estero/Bonita Springs community. He also included two ZIP codes

that are closer to existing hospitals than to the proposed site,

according to the drive-time information he compiled. In addition,

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he included one ZIP code in which there is already a hospital

(Gulf Coast, in 33912). Mr. Davidson’s opinion that this was a

reasonable, and not overly aggressive, primary service area was

not persuasive;9/ the criticisms by the other expert health

planning witnesses were more persuasive and are credited.

41. Mr. Davidson selected six more ZIP codes for the

secondary service area. These include: two south Lee County ZIP

codes that are HealthPark’s home ZIP code (33908) and a ZIP code

to the west of HealthPark (33931); three central Lee County ZIP

codes to the north of HealthPark and Gulf Coast; and one Collier

County ZIP code that is North Naples’ home ZIP code.

Mr. Davidson’s opinion that this was a reasonable, and not overly

aggressive, secondary service area was not persuasive; the

criticisms by the other expert health planning witnesses were more

persuasive and are credited.

42. As noted above, the existing LMHS hospitals provide

tertiary-level care and a number of specialty service lines and

designations that have not been planned for the proposed new

hospital. Conversely, there are no services proposed for the new

hospital that are not already provided by the existing LMHS

hospitals. In the absence of evidence that the proposed new

hospital will offer services not available at closer hospitals, it

is not reasonable to project that any appreciable numbers of

patients will travel farther, and in some instances, bypass one or

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more larger existing hospitals with greater breadth of services,

to obtain the same services at the substantially smaller proposed

new hospital. As aptly observed by AHCA’s representative,

Mr. Gregg, the evidence to justify such an ambitious service area

for a small hospital providing basic services was lacking:

So if we were to have been given more

detail[:] here’s the way we’re going to fit

this into our system, here’s -- you know,

here’s why we can design this service area as

big as we did, even though it would require a

lot of people to drive right by HealthPark or

right by Gulf Coast to go to this tiny basic

hospital for some reason. I mean, there are

fundamental basics about this that just make

us scratch our head. (Tr. 1457).

43. The next step after defining the service area was to

develop utilization projections, based on historic utilization

data for service area residents who obtained the types of services

to be offered by the proposed hospital.

44. In this case, the utilization projections suffer from a

planning void. Mr. Nathan testified that no decisions have been

made regarding what types of services, other than general medical-

surgical services, will be provided at the proposed new hospital.

45. In lieu of information regarding the service lines

actually planned for the proposed hospital, Mr. Davidson used a

subtractive process, eliminating “15 or so” service lines that the

proposed hospital either “absolutely wasn’t going to provide,” or

that, in his judgment, a small hospital of this type would not

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provide. The service lines he excluded were: open heart surgery;

trauma; neonatal intensive care; inpatient psychiatric,

rehabilitation, and substance abuse; and unnamed “others.” His

objective was to “narrow the scope of available admissions down to

those that a smaller hospital could reasonably aspire to care

for.” (Tr. 671-672). That objective is different from

identifying the types of services expected because they have been

planned for this particular proposed hospital.

46. The testimony of NCH’s health planner, as well as

Mr. Gregg, was persuasive on the point that Mr. Davidson’s

approach was over-inclusive. The historic data he used included a

number of service lines that are not planned for the proposed

hospital and, thus, should have been subtracted from the historic

utilization base. These include clinical specialties that are the

focus of other LMHS hospitals, such as infectious diseases,

neurology, neurosurgery, orthopedics, and urology; cardiac care,

such as cardiac catheterization and angioplasty that are not

planned for the proposed hospital; emergency stroke cases that

will be directed to designated stroke centers; pediatric cases

that will be referred to HealthPark; and obstetrics, which is not

contemplated for the proposed hospital according to the more

credible evidence.10/

47. Mr. Davidson’s market share projections suffer from

some of the same flaws as the service area projections: there is

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no credible evidence to support the assumption that the small

proposed new hospital, which has planned to offer only the most

basic hospital services, will garner substantial market shares in

ZIP codes that are closer to larger existing hospitals providing a

greater breadth of services. In addition, variations in market

share projections by ZIP code raise questions that were not

adequately explained.11/

48. Overall, the “high-level” theme offered by LMHS’s health

planner--that it is unnecessary to know what types of services

will be provided at the new hospital in order to reasonably

project utilization and market share--was not persuasive. While

it is possible that utilization of the proposed new hospital would

be sufficient to suggest it is filling a need, LMHS did not offer

credible evidence that that is so.

C. Bed Need Methodology for Proposed Service Area

49. Mr. Davidson projected bed need for the proposed service

area based on the historic utilization by residents of the 12 ZIP

codes in the service lines remaining after his subtractive

process, described above. Other than using an over-inclusive base

(as described above), Mr. Davidson followed a reasonable approach

to determine the average daily census generated by the proposed

service area residents, and then applying a 75 percent occupancy

standard to convert the average daily census into the number of

beds supported by that population. The results of this

25

methodology show that utilization generated by residents of the

six-ZIP code primary service area would support 163 hospital beds;

and utilization generated by residents of the six-ZIP code

secondary service area would support 225 beds in the secondary

service area. The total gross bed need for the proposed service

area adds up to 388 beds.

50. However, the critical next step was missing: subtract

from the gross number of needed beds the number of existing beds,

to arrive at the net bed need (or surplus). In the primary

service area, 163 beds are needed, but there are already 349 beds

at Gulf Coast. Thus, in the primary service area, there is a

surplus of 186 beds, according to the applicant’s methodology. In

the secondary service area, 225 beds are needed, but there are

already 320 acute care beds at HealthPark and 262 acute care beds

at North Naples. Thus, in the secondary service area, there is a

surplus of 357 beds, according to the applicant’s methodology.

51. While it is true that Gulf Coast and HealthPark use some

of their beds to provide some tertiary and specialty services that

were subtracted out of this methodology, and all three hospitals

presumably provide services to residents outside the proposed

service area, Mr. Davidson made no attempt to measure these

components. Instead, the LMHS bed need methodology ignores

completely the fact that there is substantial existing bed

capacity--931 acute care beds--within the proposed service area.

26

D. Availability and Utilization of Existing Hospitals

52. LMHS offered utilization data for the 12-month period

ending June 30, 2012, for Lee County hospitals. Cape Coral’s

average annual occupancy rate was 57.6 percent; HealthPark’s was

77.5 percent; Lee Memorial’s was 55.9 percent; Lehigh Regional’s

was 44 percent; and Gulf Coast’s was 79.8 percent.

53. Mr. Davidson acknowledged that a reasonable occupancy

standard to plan for a small hospital the size of the proposed

hospital is 75 percent. For a larger operational hospital, 80

percent is a good standard to use, indicating it is well-utilized.

Judged by these standards, only HealthPark and Gulf Coast come

near the standard for a well-utilized hospital.

54. As noted in the CON application, these annual averages

do not reflect the higher utilization during peak season.

According to the application, HealthPark’s occupancy was 88.2

percent and Gulf Coast’s was 86.8 percent for the peak quarter of

January-March 2012.

55. LMHS did not present utilization information for North

Naples, even though that hospital is closest to the proposed

hospital site and is within the proposed service area targeted by

the applicant. For the same 12-month period used for the LMHS

hospitals, North Naples’ average annual occupancy rate was 50.97

percent and for the January-March 2012 “peak season” quarter,

North Naples’ occupancy was 60.68 percent.

27

56. At the final hearing, LMHS did not present more recent

utilization data, choosing instead to rely on the older

information in the application. Based on the record evidence,

need is not demonstrated by reference to the availability and

utilization of existing hospitals in the proposed service area or

in the sub-district.

E. Community Support

57. LMHS argued that the strong support by the Estero/Bonita

Springs community should be viewed as evidence of need for the

proposed new hospital. As summarized in the SAAR, approximately

2,200 letters of support were submitted by local government

entities and elected officials, community groups, and area

residents, voicing their support for the proposed hospital. LMHS

chose not to submit these voluminous support letters in the

record. The AHCA reviewer noted in the SAAR that none of the

support letters documented instances in which residents of the

proposed service area needed acute care hospital services but were

unable to obtain them, or suffered poor or undesirable health

outcomes due to the current availability of hospital services.

58. Two community members testified at the final hearing to

repeat the theme of support by Estero/Bonita Springs community

residents and groups. These witnesses offered anecdotal testimony

about traffic congestion during season, population growth, and

development activity they have seen or heard about. They

28

acknowledged the role their community organization has played in

advocating for a neighborhood hospital, including developing and

disseminating form letters for persons to express their support.

Consistent with the AHCA reviewer’s characterization of the

support letters, neither witness attested to any experiences

needing acute care hospital services that they were unable to

obtain, or any experiences in which they had poor or undesirable

outcomes due to the currently available hospital services. There

was no such evidence offered by any witness at the final hearing.

59. Mr. Gregg characterized the expression of community

support by the Estero/Bonita Springs community as typical “for an

upper income, kind of retiree-oriented community where, number

one, people anticipate needing to use hospitals, and number two,

people have more time on their hands to get involved with things

like this.” (Tr. 1433).

60. Mr. Gregg described an extreme example of community

support for a prior new hospital CON application, in which AHCA

received 21,000 letters of support delivered in two chartered

buses that were filled with community residents who wanted to meet

with AHCA representatives. Mr. Gregg identified the project as

the proposed hospital for North Port, which was ultimately denied

following an administrative hearing.

61. In the North Port case, the Administrative Law Judge

made this apt observation with regard to the probative value of

29

the overwhelming community support offered there: “A community’s

desire for a new hospital does not mean there is a ‘need’ for a

new hospital. Under the CON program, the determination of need

for a new hospital must be based upon sound health planning

principles, not the desires of a particular local government or

its citizens.” Manatee Memorial Hospital, L.P. v. Ag. for Health

Care Admin., et al., Case Nos. 04-2723CON, 04-3027CON, and 04-

3147CON (Fla. DOAH Dec. 15, 2005; Fla. AHCA April 11, 2006), RO at

26, ¶ 104, adopted in FO. That finding, which was adopted by AHCA

in its final order, remains true today, and is adopted herein.

VII. Access

62. The statutory review criteria consider access issues

from two opposing perspectives: from the perspective of the

proposed project, consideration is given to the extent to which

the proposal will enhance access to health care services for the

applicant’s service district; without the proposed project,

consideration is given to the accessibility of existing providers

of the health care services proposed by the applicant. Addressing

this two-part access inquiry, LMHS contends that the proposed

hospital would significantly reduce travel times and significantly

enhance access to acute care services.

63. Three kinds of access are routinely considered in CON

cases: geographic access, in this case the drive times by

individuals to hospitals; emergency access, i.e., the time it

30

takes for emergency ground transport (ambulances) to deliver

patients to hospitals; and economic access, i.e., the extent to

which hospital services are provided to Medicaid and charity care

patients.

A. Geographic Access (drive times to hospitals)

64. For nearly all residents of the applicable service

district, district 8, the proposed new hospital was not shown to

enhance access to health care at all. The same is true for nearly

all residents of sub-district 8-5, Lee County.

65. LMHS was substantially less ambitious in its effort to

show access enhancement, limiting its focus on attempting to prove

that access to acute care services would be enhanced for residents

of the primary service area. LMHS did not attempt to prove that

there would be any access enhancement to acute care services for

residents of the six-ZIP code secondary service area.

66. As set forth in the CON application, Mr. Davidson used

online mapping software to estimate the drive time from each ZIP

code in the primary service area to the four existing LMHS

hospitals, the two NCH hospitals, and another hospital in north

Collier County, Physicians Regional-Pine Ridge.

67. The drive-time information offered by the applicant

showed the following: the drive time from ZIP code 33912 was less

to three different existing LMHS hospitals than to the proposed

new hospital; the drive time from ZIP code 33913 was less to two

31

different existing LMHS hospitals than to the proposed new

hospital; and the drive time from ZIP code 33967 was less to one

existing LMHS hospital than to the proposed hospital site. Thus,

according to LMHS’s own information, drive times would not be

reduced at all for three of the six ZIP codes in the primary

service area.

68. Not surprisingly, according to LMHS’s information, the

three Estero/Bonita Springs ZIP codes are shown to have slightly

shorter drive times to the proposed neighborhood hospital than to

any existing hospital. However, the same information also

suggests that those residents already enjoy very reasonable access

of 20-minutes’ drive time or less to one or more existing

hospitals: the drive time from ZIP code 33928 is between 14 and

20 minutes to three different existing hospitals; the drive time

from ZIP code 34134 is between 18 and 20 minutes to two different

existing hospitals; and the drive time from ZIP code 34135 is 19

minutes to one existing hospital. In terms of the extent of drive

time enhancement, the LMHS information shows that drive time would

be shortened from 14 minutes to seven minutes for ZIP code 33928;

from 18 minutes to 12 minutes for ZIP code 34134; and from 19

minutes to 17 minutes for ZIP code 34135.

69. There used to be an access standard codified in the

(now-repealed) acute care bed need rule, providing that acute care

services should be accessible within a 30-minute drive time under

32

normal conditions to 90 percent of the service area’s population.

Mr. Davidson’s opinion is that the former rule’s 30-minute drive

time standard remains a reasonable access standard for acute care

services. Here, LMHS’s drive time information shows very

reasonable access now, meeting an even more rigorous drive-time

standard of 20 minutes.

70. The establishment of a new hospital facility will always

enhance geographic access by shortening drive times for some

residents. For example, if LMHS’s proposed hospital were

established, another proposed hospital could demonstrate enhanced

access by reducing drive times from seven minutes to four minutes

for residents of Estero’s ZIP code 33928. But the question is not

whether there is any enhanced access, no matter how insignificant.

Instead, the appropriate consideration is the “extent” of enhanced

access for residents of the service district or sub-district.

Here, the only travel time information offered by LMHS shows

nothing more than insignificant reductions of already reasonable

travel times for residents of only three of six ZIP codes in the

primary service area.

71. The drive-time information offered in the application

and at hearing was far from precise, but it was the only evidence

offered by the applicant in an attempt to prove its claim that

there would be a significant reduction in drive times for

residents of the primary service area ZIP codes. No travel time

33

expert or traffic engineer offered his or her expertise to the

subject of geographic accessibility in this case. No evidence was

presented regarding measured traffic conditions or planned roadway

improvements. Anecdotal testimony regarding “congested” roads

during “season” was general in nature and insufficient to prove

that there is not reasonable access now to basic acute care

hospital services for all residents of the proposed service area.

72. The proposed new hospital is not needed to address a

geographic access problem. Consideration of the extent of access

enhancement does not weigh in favor of the proposed new hospital.

B. Emergency Access

73. LMHS also sought to establish that emergency access via

EMS ambulance transport was becoming problematic during the season

because of traffic congestion. In its CON application, LMHS

offered Lee County EMS transport logs as evidence that ambulance

transport times from the Estero/Bonita Springs community to an

existing hospital were higher during season than in the off-season

months. LMHS represented in its CON application that the

voluminous Lee County EMS transport logs show average transport

times of over 22 minutes from Bonita Springs to a hospital in

March 2012 compared to 15 minutes for June 2012, and average

transport times of just under 22 minutes from Estero to a hospital

in March 2012 compared to over 17 minutes for June 2012.

34

74. LMHS suggested that these times were not reasonable

because these were all emergency transports at high speeds with

flashing lights and sirens. LMHS did not prove the accuracy of

this statement. The Lee County EMS ordinance limits the use of

sirens and flashing lights to emergency transports, defined to

mean transports of patients with life- or limb-threatening

conditions. According to Lee County EMS Deputy Chief Panem, 90 to

95 percent of ambulance transports do not involve such conditions.

75. Contrary to the conclusion that LMHS urges should be

drawn from the EMS transport logs, the ambulance transport times

summarized by LMHS in its application do not demonstrate

unreasonable emergency access for residents of Estero/Bonita

Springs. The logs do not demonstrate an emergency access problem

for the local residents during the season, as contended by LMHS;

nor did LMHS offer sufficient evidence to prove that the proposed

new hospital would materially improve ambulance transport times.

76. LMHS’s opinion that the ambulance logs show a seasonal

emergency access problem for Estero/Bonita Springs residents

cannot be credited unless the travel times on the logs reflect

patient transports to the nearest hospital, such that establishing

a new hospital in Bonita Springs would result in faster ambulance

transports for Estero/Bonita Springs residents.

77. Deputy Chief Panem testified that ambulance transport

destination is dictated in the first instance by patient choice.

35

In addition, for the “most serious calls,” the destination is

dictated by emergency transport guidelines with a matrix

identifying the most “appropriate” hospitals to direct patients.

For example, as Deputy Chief Panem explained:

In the case of a stroke or heart attack, we

want them to go to a stroke facility or a

heart attack facility[;] or trauma, we have a

trauma center in Lee County as well . . . Lee

Memorial Hospital downtown is a level II

trauma center. (Tr. 378).

78. The emergency transport matrix identifies the hospitals

qualified to handle emergency heart attack, stroke, or trauma

patients. In addition, the matrix identifies the “most

appropriate facility” for emergency pediatrics, obstetrics,

pediatric orthopedic emergencies, and other categories involving

the “most serious calls.” Of comparable size to the proposed new

hospital, 88-bed Lehigh Regional is not identified as an

“appropriate facility” to transport patients with any of the

serious conditions shown in the matrix. Similar to Lehigh

Regional, the slightly smaller proposed new hospital is not

expected to be identified as an appropriate facility destination

for patients with any of the conditions designated in the Lee

County EMS emergency transport matrix.

79. The Lee County EMS transport guidelines clarify that all

trauma alert patients “will be” transported to Lee Memorial as the

Level II Trauma Center. In addition, the guidelines provide as

36

follows: “Non-trauma alert patients with a high index of

suspicion (elderly, etc.) should preferentially be transported to

the Trauma Center as a reasonable precaution.” (emphasis added).

For the elderly, then, a condition that would not normally be

considered one of the most serious cases to be steered to the most

appropriate hospital may be reclassified as such, as a reasonable

precaution because the patient is elderly.

80. The Lee County EMS transport logs do not reflect the

reason for the chosen destination. The patients may have

requested transport to distant facilities instead of to the

nearest facilities. Patients with the most serious conditions may

have accepted the advice of ambulance crews that they should be

transported to the “most appropriate facility” with special

resources to treat their serious conditions; or those patients may

have been unable to express their choice due to the seriousness of

their condition, in which case the patients would be taken to the

most appropriate facility, bypassing closer facilities. Elderly

patients may have been convinced to take the reasonable precaution

to go to an appropriate facility even if their condition did not

fall into the most serious categories.

81. Since the transport times on the EMS logs do not

necessarily reflect transport times to the closest hospital, it is

not reasonable to conclude that the transport times would be

shorter if there were an even closer hospital, particularly where

37

the closer hospital is not likely to be designated as an

appropriate destination in the transport guidelines matrix.

82. The most serious cases, categorized in the EMS transport

matrix, are the ones for which minutes matter. For those cases, a

new hospital in Estero/Bonita Springs, which has not planned to be

a STEMI receiving center, a stroke center, or a trauma center, is

not going to enhance access to emergency care, even for the

neighborhood residents.

83. The evidence at hearing did not establish that ambulance

transport times are excessive or cause an emergency access problem

now.12/

In fact, Deputy Chief Panem did not offer the opinion, or

offer any evidence to prove, that the drive time for ambulances

transporting patients to area hospitals is unreasonable or

contrary to any standard for reasonable emergency access.

Instead, Lee County EMS recently opposed an application for a

certificate of public convenience and necessity by the Bonita

Springs Fire District to provide emergency ground transportation

to hospitals, because Lee County EMS believed then, and believes

now, that it is providing efficient and effective emergency

transport services to the Bonita Springs area residents.

84. At hearing, LMHS tried a different approach by

attempting to prove an emergency access problem during season, not

because of the ambulance drive times, but because of delays at the

emergency departments themselves after patients are transported

38

there. The new focus at hearing was on EMS “offload” times,

described as the time between ambulance arrival at the hospital

and the time the ambulance crews hand over responsibility for a

patient to the emergency department staff.

85. According to Deputy Chief Panem, Lee County hospitals

rarely go on “bypass,” a status that informs EMS providers not to

transport patients to a hospital because additional emergency

patients cannot be accommodated. No “bypass” evidence was

offered, suggesting that “bypass” status is not a problem in Lee

County and that Lee County emergency departments are available to

EMS providers. Deputy Chief Panem also confirmed that North

Naples does not go on bypass. The North Naples emergency

department consistently has been available to receive patients

transported by Lee County EMS ambulances, during seasonal and off-

season months.

86. Offload times are a function of a variety of factors.

Reasons for delays in offloading patients can include inadequate

capacity or functionality of the emergency department, or

inadequate staffing in the emergency department such that there

may be empty treatment bays, but the bays cannot be filled with

patients because there is no staff to tend to the patients.

Individual instances of offload delays can occur when emergency

department personnel prioritize incoming cases, and less-emergent

39

cases might have to wait while more-emergent cases are taken

first, even if they arrived later.

87. Offload times are also a function of “throughput”

issues. Approximately 20 to 25 percent of emergency department

patients require admission to the hospital, but there can be

delays in the admission process, causing the patient to be held in

a treatment bay that could otherwise be filled by the next

emergency patient. There can be many reasons for throughput

delays, including the lack of an available acute care bed, or

inadequate staffing that prevents available acute care beds from

being filled.

88. No evidence was offered to prove the actual causes of

any offload delays. Moreover, the evidence failed to establish

that offload times were unreasonable or excessive. Deputy Chief

Panem offered offload time data summaries that reflect very good

performance by LMHS hospitals and by North Naples.

89. Deputy Chief Panem understandably advocates the shortest

possible offload time, so that Lee County EMS ambulances are back

in service more quickly. Lee County EMS persuaded the LMHS

emergency departments to agree to a goal for offload times of 30

minutes or less 90 percent of the time, and that is the goal he

tracks. Both Lee Memorial and North Naples have consistently met

or exceeded that goal in almost every month over the last five

years, including during peak seasonal months. Cape Coral and Gulf

40

Coast sometimes fall below the goal in peak seasonal months, but

the evidence did not establish offload times that are excessive or

unreasonable during peak months.

90. HealthPark is the one LMHS hospital that appears to

consistently fall below Lee County EMS’s offload time goal; in

peak seasonal months, HealthPark’s offload times were less than 30

minutes in approximately 70 percent of the cases. No evidence was

offered to prove the extent of offload delays at HealthPark for

the other 30 percent of emergency cases, nor was evidence offered

to prove the extent of offload delays at any other hospital.

Deputy Chief Panem referred anecdotally to offload times that can

sometimes reach as high as two to three hours during season, but

he did not provide specifics. Without documentation of the extent

and magnitude of offload delays, it is impossible to conclude that

they are unreasonable or excessive.

91. There is no persuasive evidence suggesting that this

facet of emergency care would be helped by approval of the

proposed new hospital, especially given the complicated array of

possible reasons for each case in which there was a delayed

offload.13/

Staffing/professional coverage issues likely would be

exacerbated by approving another hospital venue for LMHS. Pure

physical plant issues, such as emergency department capacity and

acute care bed availability, might be helped to some degree, at

41

least in theory, by a new hospital, but to a lesser degree than

directly addressing any capacity issues at the existing hospitals.

92. For example, HealthPark’s emergency department has

served as a combined destination for a wide array of adult and

pediatric emergencies. However, HealthPark is about to break

ground on a new on-campus children’s hospital with its own

dedicated emergency department. There will be substantially

expanded capacity both within the new dedicated pediatric

emergency department, and in the existing emergency department,

where vacated space used for pediatric patients will be freed up

for adults. Beyond the emergency departments themselves, there

will be substantial additional acute care bed capacity, with space

built to accommodate 160 dedicated pediatric beds in the new

children’s hospital. The existing hospital will have the ability

to add more than the 80 acute care beds proposed for the new

hospital. This additional bed capacity could be in place within

roughly the same timeframe projected for opening the proposed new

hospital.

93. To the extent additional capacity would improve

emergency department performance, Cape Coral is completing an

expansion project that increases its treatment bays from 24 to 42,

and Lee Memorial is adding nine observation beds to its emergency

department. No current expansion projects were identified for

Gulf Coast, which just began operations in 2009, but LMHS has

42

already invested in design and construction features to enable

that facility to expand by an additional 252 beds. In

Mr. Kistel’s words, Gulf Coast has a “tremendous platform for

growth[.]” (Tr. 259).

94. Mr. Gregg summarized AHCA’s perspective in considering

the applicant’s arguments of geographic and emergency access

enhancement, as follows:

[I]n our view, this community is already well

served by existing hospitals, either within

the applicant’s system or from the competing

Naples system, and we don’t think that the

situation would be improved by adding another

very small, extremely basic hospital. And to

the extent that that would mislead people

into thinking that it’s a full-service

hospital that handles time-sensitive

emergencies in the way that the larger

hospitals do, that’s another concern. (Tr.

1425).

* * *

The fact that this hospital does not plan to

offer those most time-sensitive services means

that any – on the surface, as I said earlier,

the possible improvement in emergency access

offered by any new hospital is at least

partially negated in this case because it has

been proposed as such a basic hospital, when

the more sophisticated services are located

not far away. (Tr. 1431).

Mr. Gregg’s opinion is reasonable and is credited.

C. Economic Access

95. The Estero/Bonita Springs community is a very affluent

area, known for its golf courses and gated communities.

43

96. As a result of the demographics of the proposed

hospital’s projected service area, LMHS’s application offers to

accept as a CON condition a commitment to provide 10 percent of

the total annual patient days to a combination of Medicaid,

charity, and self-pay patients. This commitment is less than the

2011-2012 experience for the primary service area, where patient

days attributable to residents in these three payer classes was a

combined 16.3 percent; and the commitment is less than the 2011-

2012 experience for the total proposed service area, where patient

days in these three categories was a combined 14.4 percent.

Nonetheless, LMHS’s experts reasonably explained that the

commitment was established on the low side, taking into account

the uncertainties of changes in the health care environment, to

ensure that the commitment could be achieved.

97. In contrast with the 10 percent commitment and the

historic level of Medicaid/charity/self-pay patient days in the

proposed service area, Lee Memorial historically has provided the

highest combined level of Medicaid and charity patient days in

district 8. According to LMHS’s financial expert, in 2012, Lee

Memorial downtown and HealthPark, combined for reporting purposes

under the same license, provided 31.5 percent of their patient

days to Medicaid and charity patients--a percentage that would be

even higher, it is safe to assume, if patient days in the “self-

pay/other” payer category were added.

44

98. At hearing, Mr. Gregg reasonably expressed concern with

LMHS shifting its resources from the low-income downtown area

where there is great need for economic access to a very affluent

area where comparable levels of service to the medically needy

would be impossible to achieve.

99. Mr. Gregg acknowledged that AHCA has approved proposals

in the past that help systems with safety-net hospitals achieve

balance by moving some of the safety net’s resources to an

affluent area. As previously noted, that sort of rationale was at

play in the LMHS project to establish HealthPark, and again in the

acquisitions of Cape Coral and Gulf Coast. However, LMHS now has

three of its four hospitals thriving in relatively affluent areas.

To move more LMHS resources from the downtown safety-net hospital

to another affluent area would not be a move towards system

balance, but rather, system imbalance, and would be contrary to

the economic access CON review criteria in statute and rule.

VIII. Missing Needs Assessment Factor: Medical Treatment Trends

100. The consistent testimony of all witnesses with

expertise to address this subject was that the trend in medical

treatment continues to be in the direction of outpatient care in

lieu of inpatient hospital care. The expected result will be that

inpatient hospital usage will narrow to the most highly

specialized services provided to patients with more serious

conditions requiring more complex, specialized treatments.

45

Mr. Gregg described this trend as follows: “[O]nly those services

that are very expensive, operated by very extensive personnel”

will be offered to inpatients in the future. (Tr. 1412). A basic

acute care hospital without planned specialty or tertiary services

is inconsistent with the type of hospital dictated by this medical

treatment trend. Mr. Gregg reasonably opined that “the ability of

a hospital system to sprinkle about small little satellite

facilities is drawing to a close.” (Tr. 1413). Small hospitals

will no longer be able to add specialized and tertiary services,

because these will be concentrated in fewer hospitals. LMHS’s

move to clinical specialization at its hospitals bears this out.

101. Another trend expected to impact services within the

timeframe at issue is the development of telemedicine as an

alternative to inpatient hospital care. For patients who cannot

be treated in an outpatient setting and released, an option will

be for patients to recover at home in their own beds, with close

monitoring options such as visual monitoring by video linking the

patient with medical professionals, and use of devices to

constantly measure and report vital signs monitored by a

practitioner at a remote location. Telemedicine offers advantages

over inpatient hospitalization with regard to infection control

and patient comfort, as well as overall health care cost control

by reducing the need for capital-intensive traditional bricks-and-

mortar hospitals.

46

102. A medical treatment trend being actively pursued by

both LMHS and NCH is for better, more efficient management of

inpatient care so as to reduce the average length of patient

stays. A ten-year master planning process recently undertaken by

LMHS included a goal to further reduce average lengths of stay by

0.65 days by 2021, and thereby reduce the number of hospital beds

needed system-wide by 128 beds.

103. LMHS did not address the subject of medical treatment

trends as part of its needs assessment. The persuasive evidence

demonstrated that medical treatment trends do not support the need

for the proposed new facility; consideration of these trends

weighs against approval.

IX. Competition; Market Conditions

104. The proposed new hospital will not foster competition;

it will diminish competition by expanding LMHS’s market dominance

of acute care services in Lee County. AHCA voiced its reasonable

concerns about Lee Memorial’s “unprecedented” market dominance of

acute care services in a county as large as Lee, which recently

ranked as the eighth most populous county in Florida.

105. LMHS already provides a majority of hospital care being

obtained by residents of the primary service area. LMHS will

increase its market share if the proposed new hospital is

approved. This increase will come both directly, via basic

medical-surgical services provided to patients at the new

47

hospital, and indirectly, via LMHS’s plan for the proposed new

hospital to serve as a feeder system to direct patients to other

LMHS hospitals for more specialized care.14/

106. The evidence did not establish that LMHS historically

has used its market power as leverage to demand higher charges

from private insurers. However, as LMHS’s financial expert

acknowledged, the health care environment is undergoing changes,

making the past less predictive of the future. The changing

environment was cited as the reason for LMHS’s low commitment to

Medicaid and charity care for the proposed project.

107. There is evidence of LMHS’s market power in its high

operating margin, more than six percent higher than NCH’s

operating margin between 2009 and 2012. LMHS’s financial expert’s

opinion that total margin should be considered instead of

operating margin when looking at market power was not persuasive.

Of concern is the market power in the field of hospital

operations, making operating margin the appropriate measure.

108. Overall, Mr. Gregg reasonably explained the lack of

competitive benefit from the proposed project:

I think that this proposal does less for

competition than virtually any acute care

hospital proposal that we’ve seen. As I

said, it led the Agency to somewhat scratch

[its] head in disbelief. There is no other

situation like it. . . . This is the most

basic of satellites. This hospital will be

referring patients to the rest of the Lee

Memorial system in diverse abundance because

48

they are not going to be able to offer

specialized services. And economies of scale

are not going to allow it in the future.

People will not be able to duplicate the

expensive services that hospitals offer. So

we do not see this as enhancing competition

in any way at all. (Tr. 1416-1417).

109. The proposed hospital’s inclusion of outpatient

services, community education, and chronic care management

presents an awkward dimension of direct competition with adjacent

BCHC, the joint venture between LMHS and NCH. BCHC has been a

money-losing proposition in a direct sense, but both systems

remain committed to the venture, in part because of the indirect

benefit they now share in the form of referrals of patients to

both systems’ hospitals. Duplication of BCHC’s services, which

are already struggling financially, would not appear to be

beneficial competition. While this is not a significant factor,

to the extent LMHS makes a point of the non-hospital outpatient

services that will be available at the proposed new hospital, it

must be noted that that dimension of the project does nothing to

enhance beneficial competition.

X. Adverse Impact

110. NCH would suffer a substantial adverse financial impact

caused by the establishment of the proposed hospital, if approved.

A large part of the adverse financial impact would be attributable

to lost patient volume at North Naples, an established hospital

which is not well-utilized now, without a new hospital targeting

49

residents of North Naples’ home zip code. The expected adverse

financial impact of the proposed new hospital was reasonably

estimated to be $6.4 million annually.

111. Just as LMHS cited concerns about the unpredictability

of the health care environment as a reason to lower its

Medicaid/charity commitment for the proposed project, NCH has

concerns with whether the substantial adverse impact from the

proposed hospital will do serious harm to NCH’s viability, when

added to the uncertain impacts of the Affordable Care Act,

sequestration, Medicaid reimbursement, and other changes.

112. LMHS counters with the view that if the proposed

hospital is approved, in time population growth will offset the

proposed hospital’s adverse impact.

113. While consideration of medical treatment trends may

dictate that an increasing amount of future population growth will

be treated in settings other than a traditional hospital,

Mr. Gregg opined that over time, the area’s population growth will

still tend to drive hospital usage up. However, future hospital

usage will be by a narrower class of more complex patients.

114. Considering all of the competing factors established in

this record, the likely adverse impact that NCH would experience

if the proposed hospital is established, though substantial enough

to support the standing of Petitioner North Naples, is not viewed

as extreme enough to pose a threat to NCH’s viability.

50

XI. Institution/System-Specific Interests

115. LMHS’s proposed condition to transfer 80 beds from Lee

Memorial downtown is not a factor weighing in favor of approval of

its proposed hospital.

116. At hearing, LMHS defended the proposed CON condition as

a helpful way to allow LMHS to address facility challenges at Lee

Memorial. The evidence showed that to some extent, this issue is

overstated in that, by all accounts, Lee Memorial provides

excellent, award-winning care that meets all credentialing

requirements for full accreditation.

117. The evidence also suggested that to some extent, there

are serious system issues facing LMHS that will need to be

confronted at some point to answer the unanswered question posed

by Mr. Gregg: What will become of Lee Memorial? Recognizing

this, LMHS began a ten-year master planning process in 2011, to

take a look at LMHS’s four hospitals in the context of the needs

of Lee County over a ten-year horizon, and determine how LMHS

could meet those needs.

118. A team of outside and in-house experts were involved in

the ten-year master planning process. LMHS’s strategic planning

team looked at projected volumes and population information for

all of Lee County over the next ten years and determined the

number of beds needed to address projected needs. Recommendations

were then developed regarding how LMHS would meet the needs

51

identified for Lee County through 2021 by rearranging, adding, and

subtracting beds among the four existing hospital campuses.

119. A cornerstone of the master plan assessment by numerous

outside experts and LMHS experts was that Lee Memorial’s existing

physical plant was approaching the end of its useful life.

Options considered were: replace the hospital building on the

existing campus; downsize the hospital and relocate some of the

beds and services to Gulf Coast; and the favored option,

discontinue operations of Lee Memorial as an acute care hospital,

removing all acute care beds and reestablishing those beds and

services primarily at the Gulf Coast campus, with some beds

possibly placed at Cape Coral. All of these options addressed the

projected needs for Lee County through 2021 within the existing

expansion capabilities of Gulf Coast and Cape Coral, and the

expansion capabilities that HealthPark will have with the addition

of its new on-campus children’s hospital.

120. Somewhat confusingly, the CON application referred

several times to LMHS’s “ten-year master plan for our long-term

facility needs, which considers the changing geographic population

trends of our region, the need for additional capacity during the

seasonal months, and facility challenges at Lee Memorial[.]” (LMHS

Exh. 3, pp. 12, 57). The implication given by these references

was that the new hospital project was being proposed in

furtherance of the ten-year master plan, as the product of

52

careful, studied consideration in a long-range planning process to

address the future needs of Lee County. To the contrary, although

the referenced ten-year master plan process was, indeed, a long-

range deliberative planning process to assess and plan for the

future needs of Lee County, the ten-year master plan did not

contemplate the proposed new hospital as a way to meet the needs

in Lee County identified through 2021.15/

121. The ten-year master planning process was halted because

of concerns about the options identified for Lee Memorial.

Further investigation was to be undertaken for Lee Memorial and

what services needed to be maintained there. No evidence was

presented to suggest that this investigation had taken place as of

the final hearing.

122. The proposed CON condition to transfer 80 beds from Lee

Memorial does nothing to address the big picture issues that LMHS

faces regarding the Lee Memorial campus. According to different

LMHS witnesses, either some or nearly all of those licensed beds

are not operational or available to be put in service, so the

license is meaningless and delicensing them would accomplish

nothing. To the extent any of those beds are operational,

delicensing them might cause Lee Memorial to suddenly have

throughput problems and drop below the EMS offload time goal, when

it has been one of the system’s best performers.

53

123. The proposed piecemeal dismantling of Lee Memorial,

without a plan to address the bigger picture, reasonably causes

AHCA great concern. As Mr. Gregg explained, “[I]t raises a

fundamental concern for us, in that the area around Lee Memorial,

the area of downtown Fort Myers is the lower income area of Lee

County. The area around the proposed facility, Estero, Bonita, is

one of the upper income areas of Lee County.” (Tr. 1410). The

plan to shift resources away from downtown caused Mr. Gregg to

pose the unanswered question: “[W]hat is to become of Lee

Memorial?” Id. Recognizing the physical plant challenges faced

there, nonetheless AHCA was left to ask, “[W]hat about that

population and how does [the proposed new hospital] relate? How

does this proposed facility fit into the multihospital system that

might exist in the future?” (Tr. 1410-1411).

124. These are not only reasonable, unanswered questions,

they are the same questions left hanging when LMHS interrupted the

ten-year master planning process to react to HMA’s LOI with the

CON application at issue here.

XII. Balanced Review of Pertinent Criteria

125. In AHCA’s initial review, when it came time to weigh

and balance the pertinent criteria, “It was difficult for us to

come up with the positive about this proposal.” (Tr. 1432).

126. In this case, AHCA’s initial review assessment was

borne out by the evidence at hearing. The undersigned must agree

54

with AHCA that the balance of factors weighs heavily, if not

entirely, against approval of the application.

CONCLUSIONS OF LAW

127. The Division of Administrative Hearings has

jurisdiction over the parties to and subject matter of this

proceeding. §§ 120.569, 120.57(1), and 408.039(5), Fla. Stat.

128. Petitioner LMHS has standing, as the applicant for a

CON to establish an additional health care facility. LMHS is the

party whose substantial interests are subject to determination in

this proceeding. §§ 120.52(13)(a), 408.039(5)(c), Fla. Stat.

129. Petitioner North Naples has standing, as an existing

acute care hospital in district 8 with established programs that

will be substantially affected by the proposed new hospital, if

approved. North Naples also met the condition precedent to

participating as a party in this administrative proceeding by

stating the grounds for its opposition in a detailed and timely

submittal to AHCA. §§ 120.52(13)(b), 408.039(5)(c), Fla. Stat.

130. As the applicant, LMHS has the burden of proving its

entitlement to a CON by a preponderance of the evidence. Boca

Raton Art. Kidney Ctr., Inc. v. Dep’t of Health & Rehab. Servs.,

475 So. 2d 260 (Fla. 1st DCA 1985); § 120.57(1)(j), Fla. Stat.

131. When evaluating a CON application, a balanced review of

all relevant statutory and rule criteria must be made. Dep’t of

Health & Rehab. Servs. v. Johnson & Johnson Home Health Care,

55

Inc., 447 So. 2d 361, 363 (Fla. 1st DCA 1984). The appropriate

weight to be given to each criterion is not fixed, but varies from

case to case depending upon the facts and circumstances. Collier

Med. Ctr., Inc. v. Dep’t of Health & Rehab. Servs., 462 So. 2d 83,

84 (Fla. 1st DCA 1985).

132. Proposals such as LMHS’s to establish a new general

hospital used to be evaluated, in part, by reference to a rule

methodology that calculated the need for additional acute care

hospital beds. In 2004, however, the Legislature deregulated

acute care beds from CON review, while retaining CON regulation

for the addition of new hospital facilities. See ch. 2004-383,

§ 6, Laws of Fla. Since that time, existing hospitals are free to

add or subtract licensed acute care beds without first undergoing

CON review and obtaining a CON. However, to establish a new

hospital in which to operate acute care beds, a CON is required.

133. AHCA’s acute care bed need rule was repealed following

the deregulation of beds from CON review. Under the old bed need

rule, a net numeric need for acute care beds created a rebuttable

presumption of need. If the calculated net bed need was zero,

there was a rebuttable presumption that no beds were needed.

134. AHCA has not developed a numeric need methodology for

additional hospital facilities. Thus, there is no presumption one

way or the other regarding need or the absence of need for an

additional hospital in district 8, or in Lee County, sub-district

56

8-5. Instead, the issue of overall need is considered pursuant to

the applicable statutory review criteria, as well as the

applicable rule criteria in rules 59C-1.008(2)(e) and 59C-1.030.

135. The 2008 changes to the CON laws for general hospital

applications were recently reviewed in two CON final orders

decided under the amended laws. See Memorial Healthcare Grp. v.

Ag. For Health Care Admin., et al., Case No. 12-0429CON (Fla. DOAH

Dec. 7, 2012; Fla. AHCA Apr. 10, 2013) (Memorial Healthcare Final

Order); Columbia Hosp. Palm Beaches L.P. etc., et al. v. Fla.

Regional Med. Ctr. and Ag. for Health Care Admin., Case Nos. 12-

0428CON and 12-0496CON (Fla. DOAH Apr. 30, 2013; Fla. AHCA June 6,

2013) (Florida Regional Final Order). As observed in the Memorial

Healthcare and Florida Regional Final Orders, the 2008 changes to

the CON laws streamlined the application and review process for

new general hospitals. As part of the changes, several previously

applicable CON review criteria were eliminated, including quality

of care, availability of resources, financial feasibility, and the

costs and methods of proposed construction. Significantly,

however, “need” was not eliminated as a review criterion.

Conclusions of law regarding the pertinent criteria follow.

Section 408.035(1)(a): The need for the health care facilities

and health services being proposed; and rule 59C-1.008(2)(e):

applicant’s needs assessment methodology.

136. Based on the findings of fact above, LMHS did not meet

its burden of proving that there is a need for the proposed new

57

hospital, pursuant to section 408.035(1)(a) and rule 59C-

1.008(2)(e). Instead, consideration of the appropriate need

assessment factors, including medical treatment trends and market

conditions, weighs against approving the proposed hospital.

Section 408.035(1)(b): The availability, accessibility, and

extent of utilization of existing health care facilities and

health services in the service district of the applicant.

137. Based on the findings of fact above, LMHS did not meet

its burden of proving that consideration of the availability,

accessibility, and utilization of existing hospitals weigh in

favor of the proposed new hospital, pursuant to section

408.035(1)(b). Instead, a preponderance of the evidence

establishes that North Naples, Gulf Coast, and HealthPark are

available to residents of the proposed service area, are

accessible within very reasonable travel times, and are not highly

utilized to a level that would make them practically unavailable.

North Naples, in particular, is underutilized. At times during

peak season, Gulf Coast is well-utilized, but still does not lack

for available beds. If that condition changes in time, then Gulf

Coast is well situated to add capacity, with LMHS having already

invested in the design and construction that provide Gulf Coast

with a “tremendous platform for growth.” (Tr. 259). And at the

time of hearing, HealthPark was about to break ground on a new on-

campus children’s hospital, which will greatly expand its

emergency department capacity for adults and children, and

58

significantly increase its acute care bed capacity. This

substantial expansion project will be operational by about the

same time as the proposed hospital would come on line.

Section 408.035(1)(e): The extent to which the proposed services

will enhance access to health care for residents of the service

district.

138. LMHS did not prove that access to acute care services

would be enhanced for anyone other than residents of the three-ZIP

code Estero/Bonita Springs community. Even for these residents,

LMHS did not prove that drive times would be shortened by more

than an insignificant extent, when there is already very

reasonable access to one or more existing hospitals in 20 minutes

or less. This insignificant enhancement of access to residents

who already have very reasonable access does not weigh in favor of

approving the LMHS application, pursuant to section 408.035(1)(e).

139. With regard to LMHS’s emergency access argument, as

found above, the more persuasive evidence did not establish that

there is an emergency access problem for residents of the proposed

service area, or that approving the proposed project would

increase emergency access to any appreciable degree.

Section 408.035(1)(g): The extent to which the proposal will

foster competition that promotes quality and cost-effectiveness.

140. Based on the findings of fact above, LMHS did not meet

its burden of proving that its proposed new hospital would foster

competition for acute care services, or that the proposed new

59

hospital would foster competition that would promote quality and

cost-effectiveness for the non-hospital services that are part of

its proposal. Under the CON laws (unlike the antitrust laws at

issue when LMHS was attempting to acquire Cape Coral), LMHS is not

exempt from the competition criterion in section 408.035(1)(g),

and its market position is relevant. This criterion does not

favor the LMHS proposed project.

Section 408.035(i): The applicant’s past and proposed provision

of health care services to Medicaid patients and the medically

indigent; and rule 59C-1.030(2): health care access for the

medically underserved.

141. Consideration of the first part of section

408.035(1)(i), which addresses the applicant’s past provision of

services to Medicaid and indigent patients, is a factor weighing

in LMHS’s favor. However, the proposal falters under the second

part of this criterion, along with the criteria in rule 59C-

1.030(2), which together consider the applicant’s proposed

provision of services to Medicaid and indigent patients. This

factor raises the specter of AHCA’s legitimate concerns about the

piecemeal shifting of LMHS resources away from the low-income

downtown area to the affluent Estero/Bonita Springs area, without

addressing the bigger-picture unanswered questions about what is

to become of Lee Memorial. These economic access criteria weigh

against approving the proposed new hospital.

60

142. “Not every city, town or hamlet can or should have its

own hospital.” Columbia Hosp. Corp. of South Broward v. Ag. For

Health Care Admin., Case Nos. 01-2891CON and 01-2892CON (Fla. DOAH

July 3, 2002; Fla. AHCA Sept. 30, 2002), RO at ¶ 62 (application

to establish a new 100-bed hospital in Broward County), aff’d, 883

So. 2d 283 (Fla. 1st DCA 2004). Similarly, “[a] community’s

desire for a new hospital does not mean there is a ‘need’ for a

new hospital. Under the CON program, the determination of need

for a new hospital must be based upon sound health planning

principles, not the desires of a particular local government or

its citizens.” Manatee Memorial Hospital, L.P. v. Ag. for Health

Care Admin., et al., Case Nos. 04-2723CON, 04-3027CON, and 04-

3147CON (Fla. DOAH Dec. 15, 2005; Fla. AHCA Apr. 11, 2006), RO at

¶ 104; accord Osceolasc, LLC, d/b/a St. Cloud Reg’l Med. Ctr. v.

Ag. For Health Care Admin. and Osceola Reg’l Hosp., Inc., d/b/a

Osceola Reg’l Med. Ctr., Case No. 08-0612CON (Fla. DOAH Dec. 31,

2008; Fla. AHCA Mar. 3, 2009), RO at ¶ 275.

143. In addition, as recently observed in the Memorial

Healthcare and Florida Regional Final Orders: “Just as the desires

of local government or citizens may not dictate the approval of a

new hospital, neither should the motivations of a particular

health system, no matter how noble, trump the statutory

requirement that ‘need’ for the proposal be demonstrated.”

61

Memorial Healthcare Final Order, RO at ¶ 137; Florida Regional

Final Order, RO at ¶ 104. These comments apply here.

144. The pertinent statutory and rule criteria weigh heavily

against approving LMHS’s application. A balanced consideration of

all applicable criteria compels the conclusion that LMHS’s CON

application should be denied.

RECOMMENDATION

Based on the foregoing Findings of Fact and Conclusions of

Law, it is RECOMMENDED that the Agency for Health Care

Administration issue a Final Order denying CON application no.

10185.

DONE AND ENTERED this 28th day of March, 2014, in

Tallahassee, Leon County, Florida.

S

ELIZABETH W. MCARTHUR

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-3060

(850) 488-9675

Fax Filing (850) 921-6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 28th day of March, 2014.

62

ENDNOTES

1/ Table 4 of the CON application (LMHS Exh. 3, p. 19) shows the

sub-county descriptors adopted by the applicant’s health planning

consultant. All ZIP codes in Lee County are set forth and

grouped into the following sub-county areas: central county;

northeast county, islands; northwest county; and south county.

These descriptors were used by the applicant to advance its

arguments for approval of the proposed new hospital. Thus, for

consistency, the same descriptors will be used here.

2/ A “tertiary health service” is defined in section 408.032(17)

and Florida Administrative Code Rule 59C-1.002(41) as a health

service which, due to its high level of intensity, complexity,

specialized or limited applicability, and cost, should be limited

to, and concentrated in, a limited number of hospitals to ensure

the quality, availability, and cost-effectiveness of the service.

3/ “STEMI” is an acronym for ST elevation myocardial infarction.

4/ The acquisition of Cape Coral was delayed by the Federal Trade

Commission because of antitrust concerns; in particular, the

concern was that LMHS would have too much market share in the

community if it acquired Cape Coral. The inquiry was resolved,

not because the market-share concern was alleviated, but because

LMHS, as a public hospital system, was entitled to state action

immunity from antitrust laws. Accordingly, for purposes of the

antitrust laws, LMHS was “allowed to have that kind of market

position.” (Tr. 562).

5/ Before Gulf Coast Medical Center was built in 2007-2008, there

were two hospitals owned and operated by for-profit hospital

corporation HCA: Southwest Florida Regional Medical Center, with

400 licensed beds, and a hospital referred to as Gulf Coast

Hospital-Estero (Tr. 287), with 120 licensed beds. HCA had plans

to merge the two hospitals and construct a new replacement

hospital with 349 licensed beds at the Gulf Coast-Estero

location. LMHS acquired the two HCA hospitals and completed the

plan to combine the hospitals and build a new replacement

hospital with 349 licensed beds at the Gulf Coast location.

6/ The CON application includes a map identifying the proposed

new hospital’s service area. (LMHS Exh. 3, p. 13) The map shows

ZIP code boundaries in the vicinity and portrays locations of

existing hospitals and the proposed new hospital. However,

despite the fact that the map includes a portion of Collier

County, and identifies north Collier County ZIP code 34110 as

63

part of the proposed hospital’s service area, the map fails to

identify the presence of North Naples in ZIP code 34110.

7/ All references herein to statutes are to the Florida Statutes

(2013), the law in effect as of the final hearing, unless

otherwise specified. The undersigned notes that there were no

changes in 2013 to the CON statutory provisions that are

pertinent to this proceeding.

8/ The record is somewhat unclear as to the actual home ZIP code

of the proposed hospital. For example, according to some

questions by LMHS counsel and answers by Mr. Davidson, the

hospital will be located in Estero ZIP code 33928. However, in

the CON application, LMHS committed to the specific site for the

proposed hospital, identified as the southeast corner of Highway

41 and Coconut Road in Bonita Springs. According to LMHS Exhibit

8, a color-coded Lee County ZIP code map that also shows the

pertinent roadways, the southeast corner of Highway 41 and

Coconut Road is in Bonita Springs ZIP code 34135.

9/ In defense of his large proposed primary service area,

Mr. Davidson noted that three other small hospitals in district 8,

Lehigh Regional in Lee County, and two Physicians Regional Medical

Centers in Collier County, have more than six ZIP codes in their

primary service areas. However, a comparison of the number of ZIP

codes, without more, is superficial and not meaningful. There is

insufficient evidence to support service area comparisons with the

two Physicians hospitals, but the record evidence confirms the

unreasonableness of comparing service areas with Lehigh Regional.

Mr. Davidson described Lehigh Regional’s northeast part of the

county as “bounded by . . . wetlands and by the river, . . . a

pretty evident separate area.” Significantly, there are no other

existing hospitals in Lehigh’s primary service area, nor are there

any existing hospitals in the ZIP codes adjacent to Lehigh’s

primary service area. In contrast, there is one existing hospital

(Gulf Coast) in the proposed new hospital’s primary service area,

and two more existing hospitals, HealthPark and North Naples, are

in ZIP codes adjacent to the primary service area ZIP codes.

10/

Mr. Davidson acknowledged that obstetric cases were included

in the base historic data used to project use of the new proposed

hospital. For the year 2018, 867 patient days were included that

should not have been. When asked about obstetrics, Mr. Davidson’s

testimony was vague, seeming to suggest that perhaps he was told

by one of the CON attorneys that obstetrics would be provided at

the proposed hospital. Mr. Davidson never spoke with anyone from

LMHS regarding whether obstetrics (or any other service line) was

64

or was not a planned service. Mr. Kistel, LMHS’s Vice President

for Facilities Management and Support Services, testified that

obstetrics was not a planned program for the proposed hospital as

far as he knows. Since Mr. Kistel was the one who gave the

architect information about the hospital programs to develop

architectural plans for the CON application, there is no

obstetrics unit shown on the plans. Perhaps of equal importance,

NCH’s health planner credibly demonstrated that obstetrics would

not be a reasonable program for the proposed hospital as a matter

of sound health planning: the projected utilization would result

in slightly less than one delivery per day, and an average daily

census of just over 2 patients--not enough to sustain an

obstetrics unit. LMHS did not effectively refute NCH’s analysis

in this regard. To the contrary, any suggestion that obstetrics

would be a reasonable service for the proposed new hospital was

impeached by LMHS’s ten-year master planning process, discussed

below, in which LMHS’s strategic planning team provided their

projections that declining need for obstetrics beds in Lee County

would mean that by 2021, LMHS would need 51 fewer obstetrics beds

than are in service now at HealthPark and Gulf Coast (78 needed,

compared to 129 currently licensed obstetrics beds).

11/

For example, it seems unreasonable to project that in Gulf

Coast’s home zip code, the proposed new hospital would achieve a

10 percent market share of non-tertiary, non-specialty admissions

in its first year of operations, increasing to 20 percent by the

third year of the proposed hospital’s operations. The travel time

information developed by Mr. Davidson indicates that ZIP code

33912 is closer to three existing LMHS hospitals than to the

proposed new hospital.

Likewise, it seems unreasonable to project that in its first

year, the proposed new hospital would achieve a 15 percent market

share of admissions by residents of ZIP code 33913, to the east of

Gulf Coast’s home ZIP code, or a 32.5 percent market share by the

third year of the proposed hospital’s operations. According to

the LMHS application, the drive time from ZIP code 33913 to Gulf

Coast is only 11 minutes, and only 20 minutes to HealthPark,

compared to a drive time of 21 minutes to the proposed hospital.

As another example, it seems unreasonable to project that in

year one, the proposed new hospital would achieve a 25 percent

market share of admissions by residents of ZIP code 33967, or that

the market share will grow to 40 percent by year three. ZIP code

33967 is just south of Gulf Coast’s home ZIP code, 33912.

According to the LMHS application, ZIP code 33967 is closer to

65

Gulf Coast (12 minutes) than to the proposed new hospital (13

minutes), and almost as close to HealthPark (17 minutes).

One might expect the highest market shares projected for the

proposed hospital’s home ZIP code, 34135, yet that is not the

case. The applicant projects a 10 percent market share from each

of the two Bonita Springs ZIP codes (34134 and 34135)--the same

market share the proposed hospital projects from Gulf Coast’s home

ZIP code of 33912. While one might call the projections for

Bonita Springs “conservative,” there is no patterned conservatism

in the projections. Instead, the market share assignments appear

random. No credible explanation was offered to support the

differences in market share assumptions by ZIP code.

12/

Even if there had been proof of an emergency access problem,

that would not establish need for the proposed new hospital. Any

such emergency access issue could be addressed by establishing a

freestanding emergency department, as LMHS and NCH have considered

and were willing to do with financial contributions by the

Estero/Bonita Springs community.

13/

At hearing, Mr. Davidson took yet another approach in an

attempt to establish an emergency access problem for the local

residents of Estero/Bonita Springs. He melded together the time

segments on the Lee County EMS transport logs, from ambulance

dispatch through patient offload, and prepared bar charts

depicting in graphic form this total time (which he mislabeled as

“Dispatch to Destination”). His bar charts compared the total

time when ambulances are dispatched to Estero and Bonita Springs

to the total time when ambulances are dispatched to the remainder

of Lee County. This comparison was provided for a full year, as

well as for a strange combination of March 2012 plus January and

February 2013, purportedly representing a seasonal quarter.

Mr. Davidson’s opinion that this data comparison evidences a

pattern of longer total time for Estero/Bonita Springs residents,

which in turn is evidence of an emergency access problem, is not

persuasive. Instead, the comparison compounds the flaws with

drawing conclusions from the ambulance transport times, discussed

above, and from the offload times, discussed above, while adding a

host of new variables unrelated to an emergency access problem

that would be helped by the proposed new hospital. For example,

the total time includes time the ambulance crew spends on scene,

diagnosing and perhaps treating or stabilizing patients. It may

be that this time component is higher in Estero/Bonita Springs

because of the requirement that 911 calls be responded to both by

the Estero or Bonita Springs Fire District first responders and by

Lee County EMS. This admittedly inefficient duplication of on-

66

scene responders may be a factor, as may be the dynamics between

these particular competing emergency service providers.

14/

“The Lee Memorial project will offer non-tertiary acute care

services to the residents of its service area, and will

coordinate with the other hospitals and programs in the Lee

Memorial Health System to provide more advanced and specialized

services to its patients on a referral basis.” LMHS Exh. 3, p.

10.

15/

LMHS’s attempt to portray the ten-year master planning

process as narrowly confined to a facility review of the four

LMHS hospitals was not credible, in light of the described

purpose of the ten-year planning process as being to identify the

needs county-wide, upon consideration of population projections,

expected patient volumes, and hospital bed need, and to plan for

how LMHS could meet those needs.

COPIES FURNISHED:

Seann M. Frazier, Esquire

Parker, Hudson, Rainer and Dobbs, LLP

215 South Monroe Street, Suite 750

Tallahassee, Florida 32301

Karl David Acuff, Esquire

Law Office of Karl David Acuff, P.A.

1615 Village Square Boulevard, Suite 2

Tallahassee, Florida 32309-2770

Jonathan L. Rue, Esquire

Parker, Hudson, Rainer and Dobbs, LLP

285 Peachtree Center Avenue, Suite 1500

Atlanta, Georgia 30303

R. Terry Rigsby, Esquire

Pennington, Moore, Wilkinson,

Bell and Dunbar, P.A.

Post Office Box 10095

Tallahassee, Florida 32302-2095

Michael J. Hardy, Esquire

Agency for Health Care Administration

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

67

Richard J. Shoop, Agency Clerk

Agency for Health Care Administration

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

Elizabeth Dudek, Secretary

Agency for Health Care Administration

2727 Mahan Drive, Mail Stop 1

Tallahassee, Florida 32308

Stuart Williams, General Counsel

Agency for Health Care Administration

2727 Mahan Drive, Mail Stop 3

Tallahassee, Florida 32308

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.