STATE AGENCY ACTION REPORTahca.myflorida.com/MCHQ/CON_FA/Batching/pdf/10111.pdf · 2011-06-09 · STATE AGENCY ACTION REPORT ON APPLICATION FOR CERTIFICATE OF NEED A. PROJECT IDENTIFICATION

STATE AGENCY ACTION REPORT

ON APPLICATION FOR CERTIFICATE OF NEED

A. PROJECT IDENTIFICATION

1. Applicant/CON Action Number

Bay Hospital, Inc. d/b/a Gulf Coast Medical Center/CON #10111 One Park Plaza

Nashville, Tennessee 37203

Authorized Representative: Brian P. Baumgardner

President & CEO (850) 769-8341

2. Service District/Subdistrict/County

District 2 - Bay, Calhoun, Franklin, Gadsden, Gulf, Holmes, Jackson, Jefferson, Leon, Liberty, Madison, Taylor, Wakulla, Washington Counties

B. PUBLIC HEARING

A public hearing was not held or requested regarding the establishment

of a six-bed Level III neonatal intensive care unit (NICU) at Gulf Coast Medical Center located in Panama City, Bay County, Florida.

Bay Hospital, Inc. included 14 unduplicated letters of support in the application’s Tab 3. Twelve were dated during February 23, through

March 2, 2011. Two letters were not dated. All but one of the applicant’s support letters from medical professionals

were a form letter. Nine were signed by local physicians. This letter expressed continued support for Gulf Coast’s NICU growth and

expansion and that ―this endeavor will fulfill a gap in service availability within our area.‖ Furthermore, ―The proximity of Gulf Coast Medical Center’s NICU is excellent for our families as we encourage them to be

close to their baby.‖ The letter concludes that the applicant ―has provided timely and efficient service while extending family centered care to our patients‖. Nine Emerald Coast obstetrics and gynecology staff members

also signed this letter.

CON Action Number: 10111

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Samuel B. Wolf, Department of OBGYN Chairman at Gulf Coast Medical Center and a member of Emerald Coast Obstetrics, states that ―The

advancement to Level III status will prevent the need for numerous transfers per year.‖ He indicates that NICU care is traumatic enough for

a family and ―when the baby is a hundred miles away with no family support it can be even more emotionally devastating‖. Dr. Wolf also cites the expectation of a large population growth in North Florida and the

importance to implement changes to accommodate such growth. Three letters from the mothers of infants who were treated at Gulf Coast

Medical Center’s Level II NICU cite the facility’s provision of quality care. These are not signed.

C. PROJECT SUMMARY

Bay Hospital, Inc., d/b/a Gulf Coast Medical Center/CON #10111 an

existing provider of Level II NICU care, is applying to establish a six-bed NICU at its facility located in Panama City, Bay County, Florida (District 2). Gulf Coast Medical Center is a Class I general hospital licensed for

166 acute care and 10 Level II NICU beds. The applicant has notification #0600004 to add two Level II NICU beds, which will be in an area created by the construction associated with this project.

The applicant commits to a condition to provide a minimum 65.0 percent

of the Level III NICUs total annual patient days to the combination of Medicaid, Medicaid HMO and charity patients.

The total project cost for the project is estimated at $3,064,509. The project involves 4,470 gross square feet (GSF) of new construction. The project has a total construction cost of $1,363,000.

D. REVIEW PROCEDURE

The evaluation process is structured by the certificate of need review

criteria found in Section 408.035, Florida Statutes. These criteria form the basis for the goals of the review process. The goals represent

desirable outcomes to be attained by successful applicants who demonstrate an overall compliance with the criteria. Analysis of an applicant's capability to undertake the proposed project successfully is

conducted by assessing the responses provided in the application, and independent information gathered by the reviewer.


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Applications are analyzed to identify strengths and weaknesses in each proposal. If more than one application is submitted for the same type of project in the same district (subdistrict), applications are comparatively

reviewed to determine which applicant best meets the review criteria. Section 59C-1.010(3) (b), Florida Administrative Code, allows no

application amendment information subsequent to the application being deemed complete. The burden of proof to entitlement of a certificate

rests with the applicant. As such, the applicant is responsible for the representations in the application. This is attested to as part of the application in the certification of the applicant.

As part of the fact-finding, the consultant Marisol Novak analyzed the

application with consultation from the financial analyst Robert Smith, who reviewed the financial data and architect Scott Waltz, who evaluated the architectural and the schematic drawings.

E. CONFORMITY OF PROJECT WITH REVIEW CRITERIA

The following indicate the level of conformity of the proposed project with

the criteria and application content requirements found in Florida Statutes, sections 408.035, and 408.037, and applicable rules of the State of Florida, Chapters 59C-1 and 59C-2, Florida Administrative

Code.

1. Fixed Need Pool

a. Does the project proposed respond to need as published by a fixed need pool? Rules 59C-1.008(2) and 59C-1.042(3), Florida

Administrative Code. In Volume 37, Number 3, dated January 21, 2011 of the Florida

Administrative Weekly, a fixed need pool of zero beds was published for Level III NICU beds in District 2 for the July 2013 planning horizon.

District 2 has 17 currently licensed Level III NICU beds and two approved beds and experienced 74.96 percent utilization from July 2009-June

2010. Tallahassee Memorial Hospital is the only Level III NICU in the district. The applicant is applying outside of the fixed need pool.


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b. Regardless of whether bed need is shown under the need formula, the establishment of new Level III neonatal intensive care services

within a district shall not normally be approved unless the average occupancy rate for Level III beds in the district equals or exceeds 80

percent for the most recent 12-month period ending six months prior to the beginning date of the quarter of the publication of the fixed need pool.

As shown in the table below, District 2’s 17 licensed Level III NICU beds experienced an occupancy rate of 74.96 percent during the 12-month

period ending June 30, 2010.

Level III Neonatal Intensive Care Services for District 1 and 2 Facility Beds County Total Occupancy %

Tallahassee Memorial Hospital 17 Leon 74.96% Source: Florida Hospital Bed Need Projections & Service Utilization by District, January 2011 Batching Cycle.

c. Other Special Circumstances:

Gulf Coast Medical Center states that the proposed project is needed to assure residents of Gulf Coast’s service area timely access to NICU services. The applicant contends that Medicaid recipients and other low

income residents of the service area experience much more restricted access to NICU services than do other residents. Bay, Gulf, Holmes, Jackson, and Washington Counties are identified as the service area—

with Bay County as the primary service area (PSA). Below is a table identifying Gulf Coast Medical Center’s newborn discharges by county.

GCMC’s Newborn Discharges By County of Residence

July 2009-June 2010 County Number Percent

Bay 1,935 79%

Gulf 112 5%

Holmes 50 2%

Jackson 52 2%

Washington 151 6%

Other 137 6%

Total 2,437 100% Source: Page 8, CON application #10111

Gulf Coast Medical Center asserts that a Level III NICU program is

needed to enhance access to persons residing in Bay, Gulf, Holmes, Jackson and Washington Counties. This need arises from the five ―not normal‖ circumstances presented by the applicant:


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1. The existing Level III NICU program in District 2 is geographically mal-distributed. Tallahassee Memorial Hospital (TMH) is located in Tallahassee where residents of the westernmost portions of the

service area are at the two-hour travel time limit via ground transportation from this service. The estimated ground travel time from Gulf Coast Medical Center to the Level III unit at TMH is on

the cusp of two hours. Rule 59C-1.042 (7) states that ―Level III neonatal intensive care services shall be available within two hours

ground travel time under normal traffic conditions for 90% of the population in a service district‖. As of January 1, 2010 (the midpoint of the 12-month data reporting period), the population of

District 2 was 734,110 and the population of Bay County was 169,980 persons. Given that the travel time from Gulf Coast

Medical Center to TMH is right at the two-hour limit, and that a considerable amount of the population of Bay County lives south and/or west of the location of Gulf Coast Medical Center (including

the entire beaches area) it is likely that the travel time standard is not met in this case. The Level III NICU unit at Sacred Heart Hospital in Pensacola is less accessible. According to MapQuest

the travel time from Gulf Coast Medical Center to Sacred Heart is approximately 2.5 hours by ground transportation.

2. A nearly 200-mile gap exists between the Level III NICU programs

at TMH and Sacred Heart Hospital in Pensacola (Escambia County,

District 1). Gulf Coast Medical Center serves the area lying within this gap.

3. During the 12 months ended June 2010, 40 service area resident

neonates were discharged from Level III NICUs. According to the

Agency’s hospital discharge data, Sacred Heart Hospital and TMH are the primary destinations for Level III neonates born to service area residents. However, neither is within a two-hour travel time

of many service area residents. Furthermore, among Gulf Coast’s five service area counties, only 14 residents of Jackson County

utilized TMH (the Level III provider in District 2). Sacred Heart served 16 service area neonates. TMH did not serve Level III neonates who were residents of the four other counties including

Bay County.

4. The proposed Level III NICU at Gulf Coast Medical Center will be staffed by the same medical director and neonatologists now serving the Level II NICU. Patient management practices will

assure that all infants requiring NICU services are appropriately placed based on their specific care needs.

5. The proposed program will not adversely impact existing Level III NICU providers.


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The applicant asserts that the above stated special circumstances are

supported by a quantitative assessment of the service area and its needs. Analyses of use rates, population growth, demographic trends, and other

potential influences have been examined in order to estimate demand for Level III NICU services. Volume forecasts for the proposed program are based on 12-month periods beginning with the anticipated initiation of

service in January 2014. There are two licensed and operational NICU programs located within

AHCA Health Planning District 2. Gulf Coast Medical Center operates a 10-bed Level II NICU in Bay County. TMH operates a 13-bed Level II

NICU and a 17-bed Level III NICU at its campus in Leon County. The TMH programs accounts for 56.52 percent of District 2’s Level II NICU beds and all of the district’s Level III NICU beds. There are no other

licensed NICU beds located in District 2, but TMH does have six approved Level II NICU beds and two approved Level III NICU beds and

Gulf Coast has two approved Level II NICU beds. Gulf Coast Medical Center notes that Leon County is the most populated

county in District 2. However, the applicant states that while TMH serves Leon County along with the other seven counties east of the Apalachicola River plus Calhoun County—Gulf Coast serves the other

five counties which accounted for 40 percent of the live births in 2009. See table below.

Live Births By County, District 2, 2009

County

Births

Number Percent

Bay 2,310 27%

Gulf 138 2%

Holmes 225 3%

Jackson 548 6%

Washington 263 3%

GCMC Service Area 3,484 40%

Calhoun 176 2%

Franklin 128 1%

Gadsden 692 8%

Jefferson 155 2%

Leon 3,122 36%

Liberty 86 1%

Madison 229 3%

Taylor 285 3%

Wakulla 317 4%

Total 8,674 100% Source: Page 11, CON application #10111

The applicant contends that the Level III NICU programs serving

District 2 are mal-distributed—close to a 200-mile gap exists between the Level III NICU service at TMH and the Level III NICU service at Sacred

Heart (District 1) used by some residents of Gulf Coast’s service area.


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Gulf Coast maintains it serves the area lying within the gap, and if the proposed project is approved, it may improve access for residents of southern Okaloosa and Walton counties in District 1 as well.

Gulf Coast Medical Center states that as of January 1, 2010 (the midpoint of the 12-month data reporting period), the population of

District 2 was 734,110 and the population of Bay County was 169,980 persons1. Given that the travel time Gulf Coast to TMH is right at the

two-hour limit, and that Gulf Coast contends that considerable population in Bay County lives south and/or west of the location of Gulf Coast—the applicant concludes that the travel time standard in Rule

59C-1.042 (7) is likely not met in this case.

Below is a map of the current Level III NICU locations serving Gulf Coast’s service area, along with their proposed facility. As shown, Bay Hospital, Inc. states that no existing or approved Level III NICU program

lies within a 75-mile radius of Gulf Coast Medical Center. However, the applicant contends that approval of the proposed project would place all acute care hospitals in its five-county service area within a 60-mile

radius, comfortably within the two-hour travel requirement.

1 This data was confirmed by the reviewer with the AHCA Population Estimates 2000 to 2020

published September 2010.


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CON #10111 - Bay Hospital, Inc. d/b/a Gulf Coast Medical Center & Level III NICUs in Closest Proximity

Source: MapPoint 2006@Microsoft

As to current utilization of NICU beds in District 2, the applicant states

that the occupancy rate for the 10-bed Level II NICU at Gulf Coast Medical Center2 was 96.2 percent—well above the occupancy norm, indicating a high degree of need for such services within the service area.

Bay Hospital, Inc. contends that its occupancy rate provides clear evidence of its capability to effectively operate an NICU program.

Below are the annual occupancy rates for the district NICU beds and the quarterly occupancy rates for Gulf Coast Medical Center’s Level II NICU

according to the most recent published Agency data.

2 Gulf Coast Medical Center is currently approved by the Agency for two additional Level II NICU beds,

but has not licensed these beds.


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District 2 NICU Occupancy Rates, July 2009-June 2010

Hospital

County

Occupancy by Level

Level II Level III Total

Gulf Coast Medical Center Bay 96.16% NA 96.16%

TMH Leon 82.02% 74.96% 78.04%

Total 88.19% 74.96% 82.58% Source: Florida Hospital Bed Need Projections & Service Utilization by District, 1/2011

Gulf Coast Medical Center Quarterly Level II NICU Occupancy Rates

July 2009-June 2010 Bed # July-Sept Oct-Dec Jan-Mar Apr-Jun Total

10 106.63% 79.67% 89.00% 109.34% 96.16% Source: Florida Hospital Bed Need Projections & Service Utilization by District, 1/2011

Preliminary utilization data from the Local Health Council for January 2010-December 2010 shows a 106.55 percent annual utilization for Gulf Coast Medical Center’s Level II NICU service.

Gulf Coast Medical Center notes that Level III utilization at TMH (the only

Level III NICU service in District 2) averaged 75 percent, slightly below the 80 percent threshold. However, the applicant lists five mitigating factors it contends support approval of its application:

An addition of just one neonate per day at TMH would have resulted

in an annual occupancy in excess of 80 percent.

TMH’s Level III NICU occupancy rose dramatically during the first six

months of 2010.

TMH is approved for six additional Level II beds and two additional

Level III beds, indicating that TMH recognizes that these beds are in short supply in the district.

The estimated ground travel time from Gulf Coast to the Level III unit at TMH is on the cusp of two hours, leaving much of Bay and Gulf

County not meeting the travel time standard of Rule 59C-1.042 (7) F.A.C.

The Level III NICU unit at Sacred Heart Hospital in Pensacola is even

less accessible—approximately 2.5 hours by ground transportation.

Gulf Coast Medical Center’s five-county service area’s projected population growth among women 15-44 (child-bearing age) is -0.2 percent or a decrease of 248 women from January 2011- January 2015.

The applicant notes that given the flat rate of growth among fertile females within the service area, the number of live births is not expected

to vary much over the next five years. However, Gulf Coast cites the ―baby-boom echo‖ resulting in children of the baby-boom generation entering into their prime child-bearing years causing fertility rates to rise

over the next several years. Gulf Coast notes that it discharged 2,437 newborns during the 12-month period ending June 2010.


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The applicant gathered data on the 40 neonates who were residents of the five counties comprising Gulf Coast Medical Center’s NICU service

area who were discharged from a Florida Level III NICU during July 2009-June 2010. Thirty-three of the 40 discharges came from Bay and

Jackson Counties. Bay County accounted for 53.45 percent, 759 of 1,420, of the total patient days. The applicant indicates that neonates from Jackson County had an average length of stay of 23.1 days

compared to Bay’s 50.6 days suggesting a greater severity of illness associated with neonates from Bay County. Below is the Level III NICU utilization provided by the applicant.

Level III NICU Utilization: Gulf Coast Medical Center Service Area Residents

July 2009-June 2010 County of Residence

Bay Gulf Holmes Jackson Washington Total

Discharges 1

Sacred Heart 8 1 3 3 16

TMH 14 14

Shands 7 1 1 9

Healthpark MC 1 1

Total 15 1 4 18 2 40

Patient Days

Sacred Heart 589 62 95 72 71 889

TMH 334 334

Shands 170 -- 18 188

Healthpark MC 9 9

Total 759 62 95 415 89 1,420

Average Length of Stay (ALOS)

Sacred Heart 73.6 62.0 31.7 24.0 71.0 55.6

TMH 23.9 23.9

Shands 24.3 -- 18.0 20.9

Healthpark MC 9.0 9.0

Avg. Total 50.6 62.0 23.8 23.1 44.5 35.5 Source: Page 16 of CON application #10111

Gulf Coast gathered Level III NICU services by area of residence to show that access disparity has dampened the utilization of Level III NICU care.

The applicant contends that not only do service area residents use Level III NICU services less (1.2 percent vs. the District 1 and 2 average of 4.6 percent) but their ALOS is higher than the average (35.5 days vs. 18.8

days) because only the most critically-ill neonates are receiving Level III care.


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NICU III Utilization by Area of Residence, July 2009- June 2010

Discharges

Area NICU III Other Total % NICU III

Gulf Coast Medical Center Service Area 40 3,236 3,276 1.2%

District 1 227 7,704 7,931 2.9%

Other District 2 487 4,610 5,097 9.6%

Total 754 15,550 16,304 4.6%

Patient Days NICU III Other Total % NICU III

Gulf Coast Medical Center Service Area 1,420 9,175 10,595 13.4%

District 1 4,659 24,615 29,274 15.9%

Other District 2 8,096 11,098 19,194 42.2%

Total 14,175 44,888 59,063 24.0%

ALOS NICU III Other Total

Gulf Coast Medical Center Service Area 35.5 2.8 3.2

District 1 20.5 3.2 3.7

Other District 2 16.6 2.4 3.8

Total 18.8 2.9 3.6 Source: Page 17 of CON application #10111

The major ―not normal‖ circumstance justifying approval of the proposed project according to the applicant is access. Specifically, the applicant

cites that 90 percent of the population of District 2 is not within two hours ground travel time of a Level III NICU. According the Mapquest

data obtained on April 29, 2011, door-to-door travel time from Gulf Coast Medical Center to TMH is two hours and three minutes (119.89 miles) by I-10, two hours and eight minutes (98.03 miles) by SR-20. Therefore, the

applicant concludes that persons residing in Bay County south and/or west of Gulf Coast Medical Center are beyond two hours travel time to TMH. The applicant notes that Sacred Heart Hospital is used by some

residents of Gulf Coast’s PSA. According to MapQuest data obtained by the reviewer, door-to-door drive time from Gulf Coast Medical Center to

Sacred Heart is two hours and 25 minutes (134.59 miles). Gulf Coast Medical Center asserts that 113,122 is the estimated

population for the seven zip codes in District 2 that are outside the two-hour ground travel time of existing Level III NICU services (see table

below). The total population for the district is 730,613. Therefore, less than 90 percent of the district’s population is within two hours ground travel time and the access standard in the rule supports approval of the

project requested by the applicant.


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Bay and Gulf Counties 2010 Population Estimates by Zip Code Area

Zip City/Place Population

32401 Panama City 23,931



32407 Panama City Beach 9,322



32456 Port St. Joe/Mexico Beach 9,126

Total Beyond Two Hours 113,122

District 2 730,613

% Beyond Two Hours 15.5%

% Within Two Hours 84.5% Source: Page 18 of CON application #10111

The applicant calculated a utilization forecast for the proposed project

using a constant rate since the projected female population 15-44 will remain essentially flat so the 40 discharge rate from PSA remains constant as well. Gulf Coast Medical Center also assumed a 35.5

average length of stay (ALOS), a six percent out-of-area patient base, and 80 percent capture of need for year one and 90 percent capture of need

for year two. Below is a table containing the applicant’s projected utilization.

Gulf Coast Medical Center Utilization Forecast CY 2014 CY 2015

Percent of Need Met by Gulf Coast Medical Center 80% 90%

Service Area Resident Patient Days 1,136 1,278

Out-of-Area Days 73 82

Total Days 1,209 1,360

Average Daily Census 3.3 3.7

Beds 6 6

Occupancy 55.2% 62.1% Source: Page 20 of CON application #10111

The applicant maintains that 55.2 percent for year one and 62.1 percent

for year two are acceptable occupancy rates for a start-up program consisting of a modest six beds. Gulf Coast Medical Center states that given occasional peak census fluctuations, annual occupancies as

forecast will give it the flexibility to manage any peak loads without difficulty.

Gulf Coast Medical Center maintains that the proposed project will not negatively impact the financial viability or ability to provide high quality

care at existing Level III NICU programs. The applicant contends that the number of cases potentially redirected from these providers will, on an individual basis, be so small as to have no significant effect on the

overall operations or financial health of these large institutions.


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Based on current discharge data of Gulf Coast’s PSA residents (using a flat growth rate because of the projected female 15-44 population rate), TMH will lose 267 patient days or an average daily census of 0.7 in 2014.

Sacred Heart would lose 711 patient days, a 1.9 ADC. Shands at UF would lose 0.4 ADC.

2. Agency Rule Preferences

Please indicate how each applicable preference for the type of service proposed is met. Ch. 59C-1.042, Florida Administrative

Code.

a. Ch. 59C-1.042(3)(k), Florida Administrative Code - Services to Medically Indigent and Medicaid Patients. In a comparative review, preference shall be given to hospitals which propose to provide

neonatal intensive care services to Children’s Medical Services patients, Medicaid patients, and non-Children’s Medical Services patients who are defined as charity care patients. The applicant

shall estimate, based on its historical patient data by type of payer, the percentage of neonatal intensive care services patient days that

will be allocated to:

(1) Charity care patients;

(2) Medicaid patients; (3) Private pay patients, including self-pay; and

(4) Regional Perinatal Intensive Care Center Program and Step Down Neonatal Special Care Unit patients.

The applicant is the sole District 2 Level III NICU applicant in this batch. Gulf Coast expects to provide services to all patients who require Level III NICU services—as they already do in the existing Level II unit. Gulf

Coast indicates that utilization by payer for the project will be 68.1 percent Medicaid & Medicaid HMO, 16.0 percent commercial insurance,

14.4 percent Tricare and other federal government patients and approximately 0.8 percent private pay including self-pay patients. The applicant’s notes to Schedule 7A indicate that ―while no charity care is

identified specifically,‖ it will provide some charity care, which it includes in self-pay. Children’s Medical Services patient volume ―is expected to be

very small and would typically be a subset of Medicaid patients‖. No revenues are expected from patients covered through provisions for regional perinatal intensive care center program and step down neonatal

special care unit patients.


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b. Ch. 59C-1.042(4), Florida Administrative Code - Level III and Level

IIII Service Continuity. To help assure the continuity of services provided to neonatal intensive care services patients:

(1) The establishment of Level III neonatal intensive care services

shall not normally be approved unless the hospital also

provides Level II neonatal intensive care services.

Gulf Coast Medical Center provides Level II NICU services, and the

establishment of Level III services will be in compliance with this.

(2) Applicants proposing to provide Level II or Level III neonatal intensive care services shall ensure developmental follow-up on patients after discharge to monitor the outcome of care

and assure necessary referrals to community resources.

Gulf Coast Medical Center states that when developmental intervention needs are identified in the NICU, information is provided to staff, parents and volunteers. The developmentalist,

the dedicated NICU physical therapist, parents, neonatal nurse clinician and the NICU discharge teamwork together to identify developmental needs of babies at discharge and make referrals as

necessary to ensure those needs are met. Developmental follow-up is currently, and will continue to be, provided by the social worker

assigned to the unit after discharge to monitor the outcome of care.

c. Ch. 59C-1.042(5), Florida Administrative Code - Minimum Unit Size.

Hospitals proposing the establishment of new Level III neonatal intensive care services shall propose a Level III neonatal intensive care unit with a minimum of five beds and should have 15 or more

Level II neonatal intensive care unit beds. Hospitals under contract with the Department of Health and Rehabilitative Services’

Children’s Medical Services Program for the provision of regional perinatal intensive care center or step-down neonatal special care unit are exempt from these requirements.

Gulf Coast Medical Center is proposing a six-bed Level III NICU unit.

The applicant states that this is an appropriate Level III unit size for Gulf Coast and is expected to be adequate to meet anticipated service area patient utilization needs through at least 2020. The unit will be

fully integrated with the Level II unit, will be designed to the highest modern standards for facility and equipment and will be fully staffed at levels meeting or exceeding all requirements. Gulf Coast Medical Center

asserts the project is sound and viable from a financial perspective, thereby ensuring its operational stability.


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The applicant states that there is ample precedent for agency approval of the proposed unit because several NICU projects have been approved during the last several years with beds less than the 10-bed minimum.

Gulf Coast Medical Center concedes that unit size is one criterion employed to determine need, but that the Agency has indicated in the past the need for a program and ensuring the quality of the program are

more important considerations. The applicant believes it fully documents both the need for local access to Level III NICU services and

Gulf Coast’s commitment to development and operation of a quality program.

d. Ch. 59C-1.042(6) - Minimum Birth Volume Requirement. Hospitals applying for Level III neonatal intensive care services shall not

normally be approved unless the hospital has a minimum service volume of 1,500 live births for the most recent 12-month period ending six months prior to the beginning date of the quarter of the

publication of the fixed bed need pool. Specialty children’s hospitals are exempt from these requirements.

Gulf Coast Medical Center exceeded this standard by a substantial margin. Between July 2009 and June 2010, Gulf Coast reported 2,437

newborn discharges from the hospital.

e. Ch. 59C-1.042(7) - Geographic Access. Level II and Level III

neonatal intensive care services shall be available within two hours ground travel time under normal traffic conditions for 90 percent of

the population in the service district.

The applicant states that this standard is not currently met for Level III

NICU services in District 2. Gulf Coast Medical Center states that at present, 90 percent of the population of District 2 are not within two hours ground travel time under normal traffic conditions of a Level III

NICU. According to MapQuest, the door-to-door travel time from Gulf Coast Medical Center to Tallahassee Memorial Hospital, District 2’s only

Level III NICU provider, is right at two hours. Sacred Heart Hospital in District 1, the next closest Level III NICU, is less accessible at approximately 2.5 hours door-to-door from Gulf Coast.

Gulf Coast Medical Center asserts that 113,122 is the estimated

population for the seven zip codes in District 2 that are outside the two-hour ground travel time of existing Level III services (see table). The total population for the district is 730,613. Therefore, less than 90 percent of

the district’s population is within two hours ground travel time and the access standard in the rule supports approval of the project requested by the applicant.


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Bay and Gulf Counties 2010 Population Estimates by Zip Code Area

Zip City/Place Population







32456 Port St. Joe/Mexico Beach 9,126

Total Beyond Two Hours 113,122

District 2 730,613

% Beyond Two Hours 15.5%

% Within Two Hours 84.5% Source: Page 27 CON application 10111

f. Ch. 59C-1.042(8) - Quality of Care Standards.

(1) Physician Staffing: Level III neonatal intensive care services

shall be directed by a neonatologist or a group of neonatologists who are on active staff of the hospital with

unlimited privileges and provide 24-hour coverage, and who are either board-certified or board-eligible in neonatal-perinatal medicine. In addition, facilities with Level III

neonatal intensive care services shall be required to maintain a maternal fetal medical specialist on active staff of the hospital with unlimited staff privileges. A maternal fetal

medical specialist is defined as a board-certified obstetrician who is qualified by training, experience, or special competence

certification in maternal-fetal medicine. Specialty children’s hospitals are exempt from this provision.

Gulf Coast indicates that Helen V. Fountain, M.D. has been the NICU’s Medical Director for the last five years. Sheridan

Healthcare’s Children’s Services division provides the neonatal expertise and there are more than 10 additional neonatologists on staff. All neonatologists are on active staff of the hospital with full

privileges and provide 24 hours per day, seven days per week coverage. Curricula vitae for Dr. Fountain and the neonatologists and other NICU physicians are included in the application’s Tab 5.

The applicant indicates that while it does not have a maternal fetal medical specialist, it has a candidate for the position with

appropriate training, credentials, and experience and negotiations for him to join ―our active staff‖ are currently in progress.


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(2) Nursing Staffing: The nursing staff in Level II and Level III

neonatal intensive care units shall be under the supervision of

a head nurse with experience and training in neonatal intensive care nursing. The head nurse shall be a registered professional nurse. At least one-half of the nursing personnel

assigned to each work shift in Level II and Level III neonatal intensive care units must be registered nurses.

Gulf Coast Medical Center’s current newborn nursery and Level II nursery are now supervised by Jana Crosby a registered nurse

with appropriate training, including the Neonatal Resuscitation Program (NRP) of the American Heart Association, STABLE (Sugar,

Temperature, Assisted Breathing, Blood Pressure, Lab Work, and Emotional Support to Family), PALS (Pediatric Advanced Life Support) and PEARS (Pediatric Emergency Assessment Recognition

and Stabilization). The applicant anticipates that Ms. Crosby or a registered nurse with similar training and experience will continue to supervise the nursing staff of the Gulf Coast Medical Center

NICU following implementation of the Level III component. All nurses assigned to the Gulf Coast Medical Center NICU are and

will continue to be registered nurses. The applicant indicates that there are currently 29 nurses at Gulf

Coast Medical Center providing services in the existing Level II NICU. Schedule 6A indicates that the project will require an

additional 12.6 FTEs for registered nurses.

(3) Special Skills of Nursing Staff: Nurses in Level II and Level III

neonatal intensive care units shall be trained to administer cardio-respiratory monitoring, assist in ventilation, administer I.V. fluids, provide pre-operative and post-operative care of

newborns requiring surgery, manage neonates being transported, and provide emergency treatment of conditions

such as apnea, seizures, and respiratory distress. Gulf Coast states that all nursing staff are certified in the Neonatal

Resuscitation Program of the American Heart Association and all future nursing staff will be similarly credentialed prior to

assignment in the NICU. All of the RNs and respiratory therapists who work in the planned Gulf Coast Medical Center NICU are and will continue to be appropriately trained to assist in ventilation,

administer IV fluids, provide pre-operative and post-operative care of newborns requiring surgery, manage neonates being transported, and provide emergency treatment of conditions such

as apnea, seizures and respiratory distress. Additionally, all relevant NICU staff members will receive training in the STABLE


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(Sugar, Temperature, Assisted Breathing, Blood Pressure, Lab Work, and Emotional Support to Family) program.

(4) Respiratory Therapy Technician Staffing: At least one

certified respiratory care practitioner therapist with expertise in the care of Neonates shall be available in the hospitals with Level II or Level III neonatal intensive care services at all

times. There shall be at least one respiratory therapist technician for every four infants receiving assisted ventilation.

Gulf Coast Medical Center states it currently complies with this

requirement in its Level II NICU and will continue to comply with it in the proposed Level III NICU. The applicant indicates that project will require an additional 4.2 FTEs for respiratory therapists. This

is confirmed in Schedule 6A.

(5) Blood Gases Determination and Ancillary Service Requirements: Blood gas determination shall be available and accessible on a 24-hour basis in all hospitals with Level II or

Level III neonatal intensive care services.

The applicant asserts that blood gas determination is available and

accessible on a 24-hour basis.

(6) Ancillary Service Requirements: Hospitals providing Level II

or Level III neonatal intensive care services shall provide on-

site, on a 24-hour basis, x-ray, obstetric ultrasound, and clinical laboratory services. Anesthesia shall be available on

an on-call basis within 30 minutes. Clinical laboratory services shall have the capability to perform microstudies.

All of the services specified are currently available on-site at Gulf Coast Medical Center. Most are performed within the NICU, but CT scans, MRI scans and surgical procedures are transported to

the appropriate in-house department. Anesthesia is available, in-house, within 30 minutes. Gulf Coast Medical Center’s clinical

laboratory has the capability to perform microstudies.

(7) Nutritional Services: Each hospital with Level II or Level III

neonatal intensive care services shall have a dietician or nutritionist to provide information on patient dietary needs while in the hospital and to provide the patient’s family

instruction or counseling regarding the appropriate nutritional and dietary needs of the patient after discharge.


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The applicant maintains a registered dietician with special expertise in nutritional needs of neonates available to work with the NICU’s neonatologists, nursing and social work staff as well as

each family to provide dietary planning and nutrition counseling. This service is available during their hospital stay and after discharge.

(8) Social Services: Each hospital with Level II or Level III

neonatal intensive care services shall make available the services of the hospital’s social service department to patients’ families which shall include, but not be limited to,

family counseling and referral to appropriate agencies for services. Children potentially eligible for the Medicaid,

Children’s Medical Services, or Developmental Services Programs shall be referred to the appropriate eligibility worker for eligibility determination.

Gulf Coast Medical Center states that the current NICU social workers are familiar with neonatal developmental needs and the

resources and needs of NICU families. They make rounds in the unit to ensure that needs are being met within the hospital, and to

discuss potential social service needs and referrals for each patient. The social worker helps to ensure that the appropriate arrangements are made in preparation for discharge, matching the

needs of the neonate and family with appropriate community resources.

(9) Developmental Disabilities Intervention Services: Each

hospital that provides Level II or Level III neonatal intensive

care services shall provide in-hospital intervention services for infants identified as being at high risk for developmental disabilities to include developmental assessment,

intervention, and parental support and education.

Gulf Coast Medical Center states in-hospital services for infants identified as being at-risk for developmental disabilities are provided to NICU patients by the unit consultant developmentalist,

a developmental psychologist, physical therapist or other specialist as necessary. In-hospital interventions for infants includes, as

necessary, medical consultation and therapies, family support and caregiver education.


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The applicant maintains that developmental assessments are provided to babies at high developmental risk. Priority is given to

babies eligible for the state’s early intervention program, but assessments will be available for all NICU babies with physician’s

referral. Gulf Coast Medical Center states that the developmentalist, parents, neonatal nurse clinician and the NICU discharge teamwork together to identify developmental needs of

babies at discharge and make referrals as necessary to ensure those needs are met.

(10) Discharge Planning: Each hospital that provides Level II or Level III neonatal intensive care services shall have an

interdisciplinary staff responsible for discharge planning. Each hospital shall designate a person responsible for discharge planning.

Gulf Coast Medical Center states that one of the RNs assigned to

the NICU has the designated responsibility for coordinating discharge planning for each neonate, with interdisciplinary support from other team members, to ensure that an optimal discharge

plan is developed and implemented. The resulting discharge plan addresses the infant’s medical and social support needs following discharge in terms of rehabilitative therapies (PT, OT and/or

speech therapies), breastfeeding, family support and counseling and referral to community resources as needed.

g. Ch. 59C-1.042(10), Florida Administrative Code - Level III Neonatal

Intensive Care Unit Standards: The following standards shall apply

to Level III neonatal intensive care services: (1) Pediatric Cardiologist. A facility providing Level III neonatal

intensive care services shall have a pediatric cardiologist, who is either board-certified or board-eligible in pediatric

cardiology, available for consultation at all times. Gulf Coast Medical Center states that Mary Bailey Mehta, M.D., a

board-certified pediatric cardiologist, is currently on the active staff and is available for consultation at all times. Dr. Mehta has held

board-certification in pediatric cardiology since 1998.


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(2) Nurse to Neonate Staffing Ratio. Hospitals shall have a nurse to neonate ratio of at least 1:2 in Level III neonatal intensive care units at all times. At least 50 percent of the nurses shall

be registered nurses.

Gulf Coast Medical Center asserts that the nurse to neonate ratio

will be at least 1:2 for the Level III component of the Gulf Coast Medical Center NICU. All professional nursing staff assigned to the

NICU at Gulf Coast Medical Center are and will continue to be registered nurses.

Schedule 6A indicates 12.6 FTEs for RNs for the first year of operation and 12.6 in the second year of operation. The applicant

projects to have a 3.3 average daily census (ADC) in year one and an ADC of 3.7 in year two. Therefore, the applicant’s projections exceed the nurse to neonate staffing ratio.

(3) Requirements for Level III NICU Patient Stations. Each

patient station in a Level III NICU shall have, at a minimum:

a. Eighty square feet per infant;

b. Two wall-mounted suction outlets preferably equipped with a unit alarm to signal loss of vacuum;

c. Twelve electrical outlets;

d. Two oxygen outlets and an equal number of compressed air outlets and adequate provisions for mixing these

gases; e. An incubator or radiant warmer; f. One heated humidifier and oxyhood;

g. One respiration or heart rate monitor; h. One resuscitation bag and mask; i. One infusion pump;

j. At least one non-invasive blood pressure monitoring device for every three beds;

k. At least one portable suction device; and l. Availability of devices capable of measuring continuous

arterial oxygenation in the patient.

Both the existing Level II NICU beds and the proposed Level III

beds will be housed in a new 18-bed NICU to be constructed as part of a major critical care renovation and expansion project. The per bed area will be the same for both Level II and III beds and will

greatly exceed the 80 square foot standard. The applicant asserts


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that both the electrical and the medical gas requirements will be met and/or exceed requirements. Additionally, provisions for all

necessary equipment have been made, and appropriate costs are included in the project cost reflected in Schedule 1. Existing and

new equipment lists are included in Tab 7.

i. Ch. 59C-1.042(11) - Emergency Transportation Services: Each

hospital providing Level II neonatal intensive care services or Level III neonatal intensive care services shall have or participate in an emergency 24-hour patient transportation system.

(1) Provision of Emergency Transportation. Hospitals providing

Level II or Level III neonatal intensive care services must operate a 24-hour emergency transportation system directly, or contract for this service, or participate through a written

financial or non-financial agreement with a provider of emergency transportation services.

(2) Requirements for Emergency Transportation System. Emergency transportation system, as defined in paragraph (11)(a), shall conform to section 64E-2.003, Florida

Administrative Code.

Gulf Coast Medical Center states that it participates in a 24-hour

EMS patient transportation system operated by Bay Medical Center through contractual arrangement with Bay County. Gulf

Coast Medical Center transferred 27 newborn infants to other hospitals for care during calendar year 2010 with their primary destinations being Shands—Gainesville and Sacred Heart Hospital

in Pensacola. Both Shands and Sacred Heart operate their own independent transport helicopters and most neonatal transports are via their vehicles. The NICU transport team consists of at least

one neonatal RN and one respiratory technician (RT) qualified for transport duty. The applicant states that designated transport

team members are available within 30 minutes or less on a 24-hour basis to perform transport services.


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j. Ch. 59C-1.042(12) - Transfer Agreements: A hospital providing only Level II neonatal intensive care services shall provide documentation of a transfer agreement with a facility providing

Level III neonatal intensive care services in the same or nearest service district for patients in need of Level III services. Facilities providing Level III neonatal intensive care services shall not

unreasonably withhold consent to transfer agreements which provide for transfers based upon availability of service in the Level

III facility, and which will be applied uniformly to all patients requiring transfer to Level III, as defined in subparagraph (2)(e)2. An applicant for Level II or Level III neonatal intensive care services

shall include, as part of the application, a written protocol governing the transfer of neonatal intensive care services patients

to other inpatient facilities.

The applicant maintains that this standard is not applicable to the

proposed project. However, Gulf Coast Medical Center maintains transfer agreements with Shands Gainesville, Sacred Heart Hospital and Tallahassee Memorial Hospital. The applicant indicates that these

transfer agreements are expected to remain in effect following implementation of the proposed Level III NICU at Gulf Coast Medical

Center.

k. Ch. 59C-1.042(13) - Data Reporting Requirements: All hospitals with Level II or Level III neonatal intensive care services shall

provide the Agency or its designee with patient utilization and fiscal reports which contain data relating to patient utilization of Level II and Level III neonatal intensive care services.

1. Utilization Data.

2. Patient Origin Data As an existing provider of Level II NICU services, Gulf Coast Medical

Center currently complies with the Agency’s data reporting requirements. The applicant states that the Level III component of the NICU will be incorporated into their existing data compilation and reporting systems

immediately and seamlessly upon project initiation.


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3. Statutory Review Criteria

a. Is need for the project evidenced by the availability, quality of care,

accessibility and extent of utilization of existing health care facilities and health services in the applicant’s service area? ss. 408.035(1), (a) and (b), Florida Statutes.

Gulf Coast Medical Center states that many of the issues itemized in this question have been addressed previously in response to Question E.1.

Essentially, the applicant maintains a need for the project is evidenced by the availability, quality of care, accessibility and extent of utilization of

existing Level III NICU services in the applicant’s five county service area because none presently exist.

The applicant reiterates some of its earlier arguments for need of the proposed facility. Gulf Coast Medical Center notes that Level III

utilization at TMH (the only Level III NICU service in District 2) averaged 75 percent, slightly below the 80 percent threshold. However, the applicant lists several mitigating factors against this fact and in favor of

the application. Gulf Coast contends that any impact of the proposed program upon an

existing provider is expected to be small. Gulf Coast Medical Center does not contend that the quality of care provided by existing providers of

Level III NICU services is a rationale for approval. However, the applicant maintains that the project will improve quality in the service area by reducing the number of critically ill neonates who must be transported

and reducing the instances of separation of hospitalized mothers and critically ill neonates.

Gulf Coast Medical Center concludes by saying that the Level III NICU program will be staffed by the same physician group providing care in the

existing Level II NICU, thus enhancing quality and continuity of care.

b. Does the applicant have a history of providing quality of care? Has

the applicant demonstrated the ability to provide quality care? ss. 408.035(1)(c), Florida Statutes.

Gulf Coast Medical Center states that it opened its doors on January 3, 1977 as a 150-bed state-of-the-art acute care hospital. Currently, the

hospital is a 176-bed (166 acute care and 10 Level II NICU beds) regional referral center that is nationally ranked for the quality of health care provided to its patients every day. Gulf Coast Medical Center offers a full

range of patient care and ancillary services, directly or through referral, consultation, or contractual arrangement.


25

Gulf Coast Medical Center is accredited by the Joint Commission and holds Joint Commission certification in several programs. The Agency has also recognized the applicant as a primary stroke center. Gulf Coast

Medical Center states it recognizes the importance of patient safety and details several quality and patient safety initiatives it has undertaken. These initiatives are listed below:

Airstrip OB

Electronic Health Record

PatientKeeper Vitals Capture

Picture Archiving and Communications System

Voice Recognition

Methicillin-Resistent Staphylococcus Aureus

Electronic Medication Bar Coding

Nation’s First Infant Screening Program

From an organizational perspective, the proposed Level III NICU service at Gulf Coast Medical Center will be incorporated into the applicant’s existing care delivery and performance improvement structure. The

purpose of this plan is to ensure that the governing body, medical staff and professional service staff demonstrate a consistent mission to deliver

safe, effective, optimal patient care and services in an environment of minimal risk. The NICU quality/performance improvement plan establishes:

Priority Focus Area or Processes for Improvement

Measurement or Indicators

Benchmark or Standard

Data Collection Process & Responsibility

Time Frames for Measurement

Reporting Processes

The proposed Level III NICU will be integrated into a planned new 18-bed

NICU at Gulf Coast Medical Center to be constructed as part of a larger critical care renovation and expansion project at the hospital. The applicant contends that the Level III program will greatly enhance

continuity of care, reduce the necessity for transfers out of the local service area, and will help meet the two-hour access standard.

Gulf Coast Medical Center maintains that is has an extensive body of experience, resources, proven ability and reliability in the operation of its

facility and programs, and in the provision of quality health care in the service area. The applicant contends that its proven ability to provide

superior quality health care in its existing hospital operations, particularly the existing NICU, will also contribute to the ongoing success and effectiveness of the proposed Level III NICU program.


26

Bay Hospital, Inc. states that it currently provides care to Medicare and

Medicaid patients and is in good standing with both, along with the VA, workers comp, private insurance carriers, HMOs and other managed care

providers. The applicant has never had a hospital license or any other type of health care license denied, revoked or suspended—nor has it had any facility place into receivership at any time. Bay Hospital, Inc.

maintains full compliance with all applicable state licensing standards. Bay Hospital, Inc.’s parent company is the Hospital Corporation of

America (HCA). HCA has 41 licensed hospitals in Florida with a total of 9,955 beds. Agency data obtained April 20, 2011 indicates that HCA

affiliated hospitals had 129 substantiated complaints during the previous 36 months. A single complaint can encompass multiple complaint categories. The table below has these listed by complaint

categories.

HCA Substantiated Complaint Categories in the Past 36 Months Complaint Category Number Substantiated

Nursing Services 36

Emergency Access 23

Resident/Patient/Client Assessment 16

Quality of Care/Treatment 14

EMTALA 12

Patient Rights 12

Resident/Patient/Client Rights 11

Medicine Prob/Errors/Formulary 7

Infection Control 6

Plan of Care 6

Discharge Planning 5

Admission, Transfer & Discharge Rights 4

Restraints/Seclusion General 4

Administration/Personnel 3

Dietary Services 3

Physician Services 2

Chapter 394/Baker Act 2

Resident/Patient/Client Abuse 2

Pressure Sores 2

Cause for Denial 1

Call Lights 1

Lack of Supervision 1

Falsification of Records/Reports 1

Physical Environment 1

Environment 1

Specimen Handling 1

Patient Abuse/Neglect 1

State Licensure 1

Falls/Injury 1 Source: Agency for Health Care Administration complaint records

Gulf Coast Medical Center had two substantiated complaints during the previous 36 months, one for emergency access and one for EMTALA.


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c. What resources, including health manpower, management personnel, and funds for capital and operating expenditures, are available for project accomplishment and operation?

ss. 408.035(1)(d), Florida Statutes. The audited financial statements of the applicant for the periods ending

December 31, 2008 and 2009 were analyzed for the purpose of evaluating the applicant’s ability to provide the capital and operational

funding necessary to implement the project. The applicant indicated that its parent company HCA would provide funding for this project. Therefore, we have also evaluated the parent’s December 31, 2010, 10-K

to evaluate the parent’s ability to fund the project.

Short-Term Position (Applicant): The applicant’s current ratio of 2.5 is above average and indicates current assets are approximately 2.5 times current liabilities, a good

position. The working capital (current assets less current liabilities) of $14.6 million is a measure of excess liquidity that could be used to fund capital projects. The ratio of cash flow to current liabilities of 3.3 is well

above average and a strong position. Overall, the applicant has a good short-term position. (See Table 1). It should be noted that the applicant

participates in a cash management account with an affiliate. As of the audit date, the applicant had a due from affiliate in the amount of $165.9 million. Presumable this could also be accessed to fund capital projects.

Short-Term Position (Parent):

The parent’s current ratio of 1.6 is slightly below average and indicates current assets are approximately 1.6 times current liabilities, an adequate position. The working capital (current assets less current

liabilities) of $2.7 billion is a measure of excess liquidity that could be used to fund capital projects. The ratio of cash flow to current liabilities of 0.7 is slightly above average and an adequate position. Overall, the

parent has an adequate short-term position. (See Table 1).


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TABLE 1

Bay Hospital, Inc. d/b/a Gulf Coast Medical Center CON #10111

Applicant

Parent

12/31/09

12/31/10

Current Assets (CA) $24,655,362

$6,919,000,000

Cash and Current Investment $28,417

$411,000,000

Due from Affiliate $165,922,947

NA

Total Assets (TA) $236,979,746

$23,852,000,000

Current Liabilities (CL) $10,024,884

$4,269,000,000

Total Liabilities (TL) $11,113,186

$34,646,000,000

Net Assets (NA) $225,866,560

($10,794,000,000)

Total Revenues (TR) $168,293,501

$30,683,000,000

Interest Expense (Int) $0

$2,097,000,000

Excess of Revenues Over Expenses (ER) $26,813,827

$2,231,000,000

Cash Flow from Operations (CFO) $33,486,980

$3,085,000,000

Working Capital $14,630,478

$2,650,000,000

FINANCIAL RATIOS

12/31/09

12/31/10

Current Ratio (CA/CL) 2.5

1.6

Cash Flow to Current Liabilities (CFO/CL) 3.3

0.7

Long-Term Debt to Net Assets (TL-CL/NA) 0.0

-2.8

Net Assets to Total Assets (NA/TA) 95.3%

-45.3%

Operating Margin (ER/TR) 15.9%

7.3%

Return on Assets (ER/TA) 11.3%

9.4%

Operating Cash Flow to Assets (CFO/TA) 14.1% 12.9%

Long-Term Position (Applicant): The ratio of long-term debt to net assets of 0.0 percent means that the

applicant has virtually no long-term debt, a strong position. The ratio of cash flow to assets of 14.1 percent is well above average and a strong position. The most recent year had revenues in excess of expenses of

$26.8 million which resulted in a 15.9 percent operating margin. Overall, the applicant has a strong long-term position. (See Table 1).

It should be noted that an affiliate company provides financing and management of capital projects which helps explain the relative absence of any long-term liabilities for the applicant.

Long-Term Position (Parent): The ratio of long-term debt to net assets of negative 2.8 is below average

and indicates that long-term debt exceeds equity. With long-term debt exceeding equity, the parent may have difficulty obtaining future debt

financing if necessary. The ratio of cash flow to assets of 12.9 percent is above average and a good position. The most recent year had revenues in excess of expenses of $2.3 billion which resulted in a 7.3 percent

operating margin. Overall, the parent has an adequate long-term position. (See Table 1).


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Capital Requirements: The applicant indicates on Schedule 2 capital projects totaling $39.5 million which includes this project.

Available Capital: The applicant indicates on Schedule 3 of its application that funding for

the project will be provided by its parent. As of December 31, 2010, the parent had $2.7 billion in working capital and generated cash from

operations of approximately $3.1 billion. In addition, as of December 31, 2009, the applicant had $14.6 million in working capital and generated cash from operations of approximately $33.5 million.

Staffing:

Schedule 6A indicates that the project will consist of 19.9 incremental

FTEs in year one (CY 2014), which will remain constant for year two (CY 2015). These FTEs are as follows: administration 1.0 FTE, nursing 12.6

FTEs, and 6.3 ancillary FTEs. The applicant maintains that this staffing represents the incremental FTEs required for the six-bed Level III NICU. Many of the administrative positions currently in NICU are sufficient to

cover the additional six-bed Level III. Services for departments such as dietary, housekeeping and laundry will be provided by the hospital.

Additionally, other ancillary services such as psychological counseling and orthotic and prosthetic services will be provided under contract. The existing medical director, which is a contract position, will also oversee

the six Level III beds. Conclusion:

Funding for this project and the entire capital budget should be available as needed.

d. What is the immediate and long-term financial feasibility of the

proposal? ss. 408.035(1)(f), Florida Statutes.

A comparison of the applicant’s estimates to the control group values

provides for an objective evaluation of financial feasibility, (the likelihood that the services can be provided under the parameters and conditions contained in Schedules 7 and 8), and efficiency, (the degree of economies

achievable through the skill and management of the applicant). In general, projections that approximate the median are the most desirable, and balance the opposing forces of feasibility and efficiency. In other

words, as estimates approach the highest in the group, it is more likely that the project is feasible, because fewer economies must be realized to

achieve the desired outcome. Conversely, as estimates approach the lowest in the group, it is less likely that the project is feasible, because a much higher level of economies must be realized to achieve the desired

outcome. These relationships hold true for a constant intensity of service


30

through the relevant range of outcomes. As these relationships go beyond the relevant range of outcomes, revenues and expenses may,

either, go beyond what the market will tolerate, or may decrease to levels where activities are no longer sustainable.

The applicant will be compared to hospitals in the small suburban hospital group (group 3 which includes the applicant). We adjusted the

group using the applicant’s historic case mix index of 1.3601. This index is used to adjust the group values to reflect the intensity of the services offered. Per diem rates are projected to increase by an average of 2.8

percent per year. Inflation adjustments were based on the new CMS Market Basket, 4th Quarter, 2010.

Gross revenues, net revenues, and costs were obtained from Schedules 7 and 8 in the financial portion of the application and compared to the

control group as a calculated amount per adjusted patient day. Adjusted patient days were calculated using the applicant’s 2009 adjustment

factor as calculated in group 3.

Projected net revenue per adjusted patient day (NRAPD) of $2,519 in year

one and $2,540 in year two is between the control group median and highest values of $1,973 and $2,954 in year one and $2,030 and $3,039 in year two. With net revenues falling between the median and highest

level, the facility is expected to consume health care resources in proportion to the services provided. (See Table 2). The applicant’s

NRAPD in fiscal year 2009 was reported as $2,187. The difference in the NRAPD reported in 2009 and the year two projected NRAPD of $2,540 results in an average compound annual increase of approximately 2.5

percent. This level of increase is slightly lower than the inflation percentage outlined in the CMS Market Basket, 4th Quarter, 2010, index. Increasing net revenue at a slower rate than inflation is a

conservative assumption and therefore reasonable. Net revenues appear reasonable.

Anticipated costs per adjusted patient day (CAPD) of $1,779 in year one and $1,815 in year two are between the median and lowest group values

of $1,816 and $1,574 in year one and $1,869 and $1,619 in year two. With expenses falling between the median and lowest values, the facility

is considered to be an efficient provider of services. However, it appears that there may be an error in the projections. Property interest expense was listed as a negative number (or interest income instead of expense).

The amounts in question are $19.7 million in year one and $21.3 million in year two. This would appear to be interest income which should be listed as non-operating revenue. When the amounts of apparent interest

income are removed from property expense, the year one and two CAPD fall between the median and highest values and are considered feasible.

(See Table 2). The applicant’s CAPD in 2009 was reported as $1,781.


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The difference in the CAPD reported in 2009 and the year two projected CAPD of $1,815 results in an average compound annual increase of approximately 0.3 percent. This level of increase is significantly below

the inflation percentage outlined in the CMS Market Basket, 4th Quarter, 2010, index. This illustrates the apparent error above. When the year two CAPD is adjusted to remove the interest income, CAPD is $2,123 and

results in a compound annual increase of 3.0 percent which is slightly above the market basket rate and would be reasonable. As presented,

CAPD appear to be understated.

The applicant has proposed a condition that 65 percent of its patient

days will be from Medicaid, Medicaid HMO, and charity. Based on the most recent four quarters discharge data for MS-DRGs associated with

NICU care in Gulf, Holmes, Jackson, and Washington Counties, the total percentage of patient days that meet this condition was over 79 percent. Therefore, the applicant should be able to meet the proposed condition.

The year two projected operating income for the applicant of $50,105,919, computes to an operating margin per adjusted patient day

of $726, or 28.6 percent, which is between the groups median value of $60 and the highest value of $496. As discussed above, the expense

projected appear to be understated and although the margin per patient day is within the group range the percentage of 28.6 exceeds the maximum in the group of 21.5 percent. However, the applicant did

experience a healthy operating margin of 18.5 percent ($26.8 million) in 2009 and this project is not likely to have a material negative impact on

the overall operations of the hospital. The incremental loss in year two for this project is projected to be $165,574.


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TABLE 2

Gulf Coast Medical Center CON #10111 Dec-15 YEAR 2

VALUES ADJUSTED

2009 DATA Peer Group 3 YEAR 2 ACTIVITY

FOR INFLATION

ACTIVITY PER DAY

Highest Median Lowest

NET REVENUES 175,379,784 2,540

3,039 2,030 1,325

EXPENSES ROUTINE 51,288,975 743

401 281 188

ANCILLARY 34,140,059 494

1,032 700 474

AMBULATORY 0 0

0 0 0

TOTAL PATIENT CARE COST 85,429,034 1,237

0 0 0

ADMIN. AND OVERHEAD 45,051,054 653

0 0 0

PROPERTY -5,206,223 -75

0 0 0

TOTAL OVERHEAD EXPENSE (V) 39,844,831 577

1,544 859 658

OTHER OPERATING EXPENSE 0 0

0 0 0

TOTAL EXPENSES 125,273,865 1,815

2,975 1,869 1,619

OPERATING INCOME 50,105,919 726

496 60 -410

28.6%

PATIENT DAYS 43,322 ADJUSTED PATIENT DAYS 69,040 TOTAL BED DAYS AVAILABLE 66,430

VALUES NOT ADJUSTED

ADJ. FACTOR 0.6275

FOR INFLATION

TOTAL NUMBER OF BEDS 182

Highest Median Lowest

PERCENT OCCUPANCY 65.21%

82.7% 58.6% 27.1%

Conclusion:

This project appears to be financially feasible.

e. Will the proposed project foster competition to promote quality and

cost-effectiveness? ss. 408.035(1) (e) and (g), Florida Statutes.

The applicant is applying to add a six-bed Level III neonatal intensive care unit within the hospital. Level III neonatal intensive care needs are currently being provided by hospitals in Tallahassee and Pensacola,

Florida. Patients requiring these services must travel approximately 100 miles to Tallahassee, Florida with a travel time of two hours and five minutes or Pensacola, Florida (approximately 102 miles, two hours 26

minutes). If implemented, the level of competition generated by this project is likely to be mitigated by travel considerations of consumers in

the area.

General economic theory indicates that competition ultimately leads to

lower costs and better quality. However; in the health care industry there are several significant barriers to competition:


33

Price-Based Competition is Limited - Medicare and Medicaid account for almost 60 percent of hospital charges in Florida, while HMO/PPOs

account for approximately 30 percent of charges. While HMO/PPOs negotiate prices, fixed price government payers like Medicare and Medicaid do not. Therefore price-based competition is limited to non-

government fixed price payers. Price-based competition is further restricted as Medicare reimbursement in many cases is seen as the

starting point for price negation among non-government payers.

The User and Purchaser of Health Care are Often Different – Roughly 90

percent of hospital charges in Florida are from Medicare, Medicaid, and HMO/PPOs. The individuals covered by these payers pay little to none of

the costs for the services received. Since the user is not paying the full cost directly for service, there is no incentive to shop around for the best deal. This further makes price-based competition irrelevant.

Information Gap for Consumers – Price is not the only way to compete for patients, quality of care is another area in which hospitals can compete.

However, there is a lack of information for consumers and a lack of consensus when it comes to quality measures. In recent years there

have been new tools made available to consumers to close this gap. However, transparency alone will not be sufficient to shrink the information gap. The consumer information must be presented in a

manner that the consumer can easily interpret and understand. The beneficial effects of economic competition are the result of informed

choices by consumers.

In addition to the above barriers to competition, a study presented in

The Dartmouth Atlas of Health Care 2008 suggests that the primary cost driver in Medicare payments is availability of medical resources. The study found that excess supply of medical resources (beds, doctors,

equipment, specialist, etc.) was highly correlated with higher cost per patient. Despite the higher costs, the study also found slightly lower

quality outcomes. This is contrary to the economic theory of supply and demand in which excess supply leads to lower price in a competitive market. The study illustrates the weakness in the link between supply

and demand and suggests that more choices lead to higher utilization in the health care industry as consumers explore all alternatives without

regard to the overall cost per treatment or the quality of outcomes.


34

f. Are the proposed costs and methods of construction reasonable? Do

they comply with statutory and rule requirements? ss. 408.035(1)(h), Florida Statutes; Ch. 59A-3 or 59A-4, Florida

Administrative Code.

The establishment of the Level III NICU would be part of a larger project

to expand critical care at the hospital. The project would add 20 critical care beds on the first floor and an 18-bed NICU on the second floor. Six of the new NICU beds would be Level III beds. Two will be new Level II

NICU beds. A four-bed pediatric intensive care unit would also be added on the second floor. The construction type indicated in the narrative is

sufficient to comply with requirements.

The proposed new NICU would be conveniently located to labor and

delivery. The new unit would be served by a central nurse station and would have a mix of private rooms and open bays. The layout of the unit

appears to allow natural light to be provided to the unit as required by code. The size and layout of the space are sufficient to comply with code requirements. A clean holding room will need to be added for the NICU

to comply with current codes.

The schematic plans provide a current list of applicable codes including

the NFPA Life Safety Code and the Florida Building code. A complete listing of applicable codes and dates of the codes will be required for

future submissions.

The cost projections for construction are consistent with similar projects.

The schedule for construction from the time of building permit to final inspection is reasonable.

The design provides all of the functional spaces required for the patients

and staff for the new program. The design as presented does not indicate any major impediments that would prevent the design and construction of a code compliant facility.

g. Does the applicant have a history of providing health services to

Medicaid patients and the medically indigent? Does the applicant propose to provide health services to Medicaid patients and the medically indigent? ss. 408.035(1)(i), Florida Statutes.

Gulf Coast Medical Center states that it extends and will continue to extend services to all patients in need of care regardless of the ability to

pay or source of payment. Medicaid-sponsored, self-pay and indigent patients are currently served by the hospital, and this policy will


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continue in the future and at the proposed facility. The table below shows the historical indigent care payer proportions for Gulf Coast Medical Center for fiscal years 2005-2009.

Gulf Coast Medical Center Indigent Care Payer Proportions

FY 2005-2009 Fiscal Year Charity Care Medicaid Medicaid and Charity Bad Debt

2005 0.65% 21.03% 20.85% 11.90%

2006 0.48% 21.03% 21.00% 10.80%

2007 0.43% 19.81% 19.60% 12.50%

2008 0.71% 20.95% 21.34% 11.30%

2009 0.80% 23.18% 24.17% 11.10%

Average 0.61% 21.20% 21.39% 11.50% Source: Page 55 of CON application #10111

Schedule 7B indicates that Medicaid is projected to total 62.5 percent

and Medicaid HMO 6.4 percent of total annual Level III patient days. Gulf Coast Medical Center is proposing to condition the certificate of need for the project upon its commitment to provide at least 65 percent

of total annual patient days to Medicaid and charity patients.

F. SUMMARY

Bay Hospital, Inc. d/b/a Gulf Coast Medical Center (CON #10111) an existing provider of Level II NICU care, is applying to establish a six-bed NICU at its facility located in Panama City, Bay County, Florida (District

2).

The applicant commits to a condition to provide a minimum 65.0 percent of six-bed Level III NICU’s total annual patient days to the combination of Medicaid, Medicaid HMO and charity patients.

The total project cost for the project is estimated at $3,064,509. The project involves 4,470 gross square feet (GSF) of new construction. The

project has a total construction cost of $1,363,000.

Need: In Volume 37, Number 3, dated January 21, 2011 of the Florida

Administrative Weekly, a fixed need pool of zero beds was published for Level III NICU beds in District 2 for the July 2013 planning horizon.

District 2 has 17 currently licensed Level III NICU beds and two approved beds and experienced 74.96 percent utilization. The applicant is

applying outside of the fixed need pool.


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Gulf Coast Medical Center states that the proposed project is needed to

assure residents of Gulf Coast Medical Center’s service area timely access to NICU services.

A nearly 200-mile gap exists between the Level III NICU program at TMH and the Level III program at Sacred Heart Hospital in Pensacola

(Escambia County, District 1). Gulf Coast Medical Center serves the area lying within this gap.

Quality of Care:

The applicant states that Gulf Coast Medical Center is nationally ranked for the quality of health care provided to its patients every day. Gulf Coast Medical Center offers a full range of patient care and ancillary

services, directly or through referral, consultation, or contractual arrangement.

Bay Hospital, Inc.’s parent company is the Hospital Corporation of America (HCA). HCA has 41 licensed hospitals in Florida with a total of

9,955 beds. Agency data obtained April 20, 2011 indicates that HCA affiliated hospitals had 129 substantiated complaints during the previous 36 months. Gulf Coast Medical Center had two substantiated

complaints during the previous 36 months, one in emergency access and one in EMTALA.

The applicant demonstrated the ability to provide quality care.

Medicaid/Indigent Care:

Gulf Coast Medical Center states that it extends and will continue to

extend services to all patients in need of care regardless of the ability to pay or source of payment.

The applicant commits to a condition the Level III NICU to provide a minimum 65.0 percent of its total annual patient days to the

combination of Medicaid, Medicaid HMO and charity patients.

Financial/Cost: The applicant’s parent, HCA, will be funding this project. HCA has an

adequate short-term and long-term position. Gulf Coast Medical Center has a good short-term position and a strong long-term position.

Funding for this project and the entire capital budget should be available as needed. The project appears to be financially feasible.


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Due to the health care industry’s existing barriers in consumer-based competition, this project will not likely foster the type competition generally expected to promote quality and cost-effectiveness.

Architectural:

The project would add 20 critical care beds on the first floor and an18-bed NICU on the second floor. Six of the new NICU would be level III

beds. A four-bed PICU would also be added on the second floor. There are two Level II NICU beds being added. The construction type indicated in the narrative is sufficient to comply with requirements.

The layout of the unit appears to allow natural light to be provided to the

unit as required by code. The size and layout of the space are sufficient to comply with code requirements. A clean holding room will need to be added for the NICU to comply with current codes.

The design provides all of the functional spaces required for the patients and staff for the new program. The design as presented does not indicate

any major impediments that would prevent the design and construction of a code compliant facility.

The cost projections for construction are consistent with similar projects. The schedule for construction from the time of building permit to final

inspection is reasonable.

G. RECOMMENDATION:

Approve CON #10111 to establish a six-bed Level III NICU at Gulf Coast Medical Center located in Panama City, Bay County, Florida (District 2). The total project cost is $3,064,509. The project involves 4,470 GSF of

new construction and a total construction cost of $1,363,000.

CONDITION A minimum 65.0 percent of the six-bed Level III NICU’s total annual

patient days shall be provided to Medicaid, Medicaid HMO and charity patients on a combined basis.


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AUTHORIZATION FOR AGENCY ACTION

Authorized representatives of the Agency for Health Care Administration adopted the recommendation contained herein and released the State Agency

Action Report.

DATE:

James B. McLemore Health Services and Facilities Consultant Supervisor

Certificate of Need

Jeffrey Gregg

Chief, Bureau of Health Facility Regulation

Documents

STATE AGENCY ACTION REPORTahca.myflorida.com/MCHQ/CON_FA/Batching/pdf/10111.pdf · 2011-06-09 · STATE AGENCY ACTION REPORT ON APPLICATION FOR CERTIFICATE OF NEED A. PROJECT IDENTIFICATION