STATE AGENCY ACTION REPORT ON APPLICATION FOR CERTIFICATE OF NEED

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1 STATE AGENCY ACTION REPORT ON APPLICATION FOR CERTIFICATE OF NEED A. PROJECT IDENTIFICATION 1. Applicant/CON Action Number Fort Walton Beach Medical Center, Inc./CON # Mar-Walt Drive Fort Walton Beach, Florida Authorized Representative: Mr. John A. Deardorff (850) Service District/Subdistrict District 1 (Escambia, Okaloosa, Santa Rosa and Walton Counties) B. PUBLIC HEARING A public hearing was not held or requested regarding the proposed project. The Agency received seven unduplicated letters of support for the project. Two were received independently by the Agency and five were included in CON Application #10093, Tab 8 Letters of Support. Bruce V. Ouellette, MD, Medical Director of the Stroke Center, White- Wilson Medical Center, P.A., states the existing facility provides exceptional care to his patients with some rather amazing improvements and recovery. Dr. Ouellette states he will refer his patients to the new location. Anthony DeCotis, MD, Medical Director, Inpatient Physical Rehabilitation Unit, Fort Walton Beach Medical Center, states he has served in this capacity for the past 14 years and that the program has grown and become well recognized in the community over the years. Dr. DeCotis states the following reasons support the project: private rooms, better and larger therapy space, more common areas and a transitional apartment that is more functional; more abundant parking and easier access for visitors and family; more outside activities with therapy and also a more enjoyable environment for both patients and staff.

2 Sarah Sam Seevers, Mayor, City of Destin and Shane A. Moody, CCE, IOM, President and CEO, Destin Area Chamber of Commerce, offer similar justifications to promote the project and state the new facility would be more conducive to patients and families which would aid in patient recovery. Mayor Seevers and Mr. Moody also state the project would be an important development in the local economy, bringing in construction activity and jobs valued at more than $1 million. R. Chad Hamilton, CPA, O Sullivan Creel, LLP, Lisa Jo Spencer, Fleet, Spencer & Kilpatrick, P.A., Attorneys & Counselors at Law and C. Jeffrey McInnis, Anchors, Smith and Grimsley, Attorneys at Law submitted letters with comments similar to Mayor Seevers and Mr. Moody s. C. PROJECT SUMMARY Fort Walton Beach Medical Center, Inc., an indirect wholly owned subsidiary of Hospital Corporation of America (HCA), Inc., proposes to relocate its existing 20-bed inpatient comprehensive medical rehabilitation (CMR) unit from its main campus in Fort Walton Beach, Okaloosa County, Florida to establish a Class III specialty CMR hospital at its Destin Emergency Care Center location at 996 Airport Road, Destin, Florida. The applicant states the purpose of the project is to expand and improve facility space at its existing hospital and to make better use of existing capital resources, especially physical plant resources. The driving distance from Fort Walton Beach Medical Center to the proposed site is approximately 14.5 miles 1. Fort Walton Beach Medical Center, Inc. is a 257-bed Class 1 hospital with the following bed complement: 179 acute care beds, 48 adult psychiatric beds, 20 CMR beds and 10 Level II NICU beds. No new beds or services will be added as a result of the project. The applicant s Schedule C indicates that Fort Walton Beach Medical Center, Inc. proposes to condition CON #10093 to: a minimum of 4.0 percent of total annual patient days to Medicaid and charity care patients and at least 4.0 percent of total annual patient days to Medicare and charity patients in its inpatient CMR program at the Destin campus 2. The applicant s proposed conditions are not clearly stated in Schedule C. The applicant also indicates that it is proposing to condition receipt of the CON upon its commitment to provide at least 4 1 Per website. 2 CON #7414, issued March 1, 1994 and licensed April 17, 1996 converted 20 acute care beds at Fort Walton Beach Medical Center, Inc. to 20 CMR beds. CON #7414 is conditioned to a minimum of 8.0 percent of total annual CMR patient days to Medicaid patients and 3.0 percent of total annual CMR patient days to charity care patients. 2

3 percent of total annual patient days to Medicare and charity patients" in its discussion of services to Medicaid and medically indigent patients (CON #10093, page 42). However, on page four of CON #10093 it is stated that; the applicant proposes on Schedule C, Conditions, to accept a condition for provision of a minimum of four percent of total patient days to Medicaid and charity patients in the planned inpatient CMR program at Destin. The applicant also indicates (CON #10093, pages 13 and 21) that the CMR condition on Schedule C, Conditions, is to provide a minimum of 4.0 percent of patient days in the relocated CMR unit to Medicaid and charity care. Therefore, the applicant s proposed condition would be accepted as a minimum of four percent of its CMR patient days being provided to Medicaid and charity care patients. This is below its historical provision of CMR services and below its current conditions for these patients. The total project cost is estimated at $1,509,510. The project involves 17,080 gross square feet (GSF) of renovation at a renovation cost of $1,176,000. There is no new construction. Renovation costs include: land, building, project development and start-up costs. D. REVIEW PROCEDURE The evaluation process is structured by the certificate of need review criteria found in Section , Florida Statutes, and rules of the State of Florida, Chapters 59C-1 and 59C-2, Florida Administrative Code. 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 evaluating the responses and data provided in the application, and independent information gathered by the reviewer. 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(s) best meets the review criteria. 3

4 Rule 59C-1.010(3) (b), Florida Administrative Code, prohibits any amendments once an application has been 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, Steve Love, analyzed the application with consultation from the financial analyst, Derron Hillman, who reviewed the financial data and architect, Scott Waltz, who evaluated the architecturals and the schematic drawings. E. CONFORMITY OF PROJECT WITH REVIEW CRITERIA The following indicate the level of conformity of the proposed project(s) with the review criteria and application content requirements found in sections , and ; 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? Or does the project proposed seek beds or services in excess of the fixed need pool? ss (1)(a), Florida Statutes, Rules 59C-1.008(2) and 59C-1.039(5), Florida Administrative Code. In Volume 36, Number 29, dated July 23, 2010 of the Florida Administrative Weekly, a fixed need pool of zero beds was published for CMR beds in District 1. This project is not proposed in response to the fixed need pool. The applicant is not seeking to add or expand CMR services in the district, rather, the applicant seeks to delicense 20 CMR beds at Fort Walton Beach Medical Center, Inc. to establish a Class III specialty CMR hospital in Destin. The applicant plans to hold the beds under the Fort Walton Beach Medical Center, Inc. s license, as a separate premise. 4

5 Below is a chart showing population estimates from July 2009 to the January 2016 planning horizon. Population Estimates for District 1 Counties and Percent Change by County for the January 2016 Planning Horizon County Total July 2009 Total January 2016 Percent Change Age 65+ July 2009 Age 65+ January 2016 Age 65+ Percent Change Escambia 314, , % 47,030 56, % Okaloosa 196, , % 27,332 35, % Santa Rosa 145, , % 18,413 24, % Walton 58,046 66, % 10,835 14, % District Total 714, , % 103, , % State Total 18,818,998 20,274, % 3,302,610 3,990, % Source: Agency for Health Care Administration Population Projections, published September As shown above, by percent, the expected growth in the elderly population by January 2016 for Okaloosa County is third highest of the four counties in District 1. The district overall is expected to experience a lower growth rate than the state overall, by 0.74 percent. However, for the age 65 and older population for the district, the estimated growth rate is estimated to be higher by 2.91 percent, compared to the state. As stated previously, the driving distance from Fort Walton Beach Medical Center to the proposed Destin site is approximately 14.5 miles. Below is a map showing the geographic location of Fort Walton Beach Medical Center, Inc., the applicant s proposed Destin site and the other licensed CMR provider in the district (West Florida Hospital, Pensacola). 5

6 MapPoint 2006 Rationale for the Relocation The applicant states two primary factors drive the project. First, the need for enhancements to the CMR program and second, the growing intensity of acute care patient care services at the Fort Walton Beach campus. Concerning the need for enhancements, current space is reported to meet minimum programmatic needs but be less than optimal. The applicant indicates that CMR programmatic standards and requirements have increased since the unit was opened and that four elements now required are not available at Fort Walton Beach Medical Center s existing unit. These include: airborne infection isolation unit, medical examination unit, patient activity room distinct from other spaces such as dining, and patient personal services (e.g., a hair salon/barber shop). 6

7 The Agency s architectural review confirms the Destin facility will include the above features. The applicant indicates that as an existing program it is not required to add these spaces and expansion at the existing site is impractical. The existing unit has only two private rooms and has somewhat undersized double occupancy rooms that have limited space for needed medical equipment, bedside nursing care and family visitation. The applicant contends that the unit s lack of private patient accommodations adversely impacts occupancy. The proposed relocation is stated to offer seven enhancements to the CMR program: conversion of nine double occupancy patient rooms to 18 single accommodations, two airborne infection isolation rooms, addition of a 109 square foot medical exam room, addition of a 560 square foot patient activity room, addition of a 100 square foot patient personal services room, 39 percent increase in square footage in nursing unit support areas and 63 percent increase in overall square footage from 6,497 to 10,594. Concerning the growing intensity of acute care services, the applicant indicates that patient requirements for acute care have changed. The acuity level of inpatients has increased and greater use of in-room medical technology has resulted in increased demand for patient privacy. The applicant concludes this contributes to the need for more space per patient accommodation. Fort Walton Beach Medical Center indicates that existing CMR unit space (on the fourth floor of the main campus in Fort Walton Beach) will be freed-up to help accommodate privacy and technology demands. Existing CMR space will be reconfigured to provide 14 private acute care patient rooms and a family resource area. The applicant indicates the 14 bed increase will be off-set by acute care reductions elsewhere in the hospital, to include: eight existing acute care double occupancy rooms on the fourth floor will be converted to single occupancy, three double occupancy rooms on the third floor will be converted to single occupancy, two licensed beds on the third floor will be converted to outpatient observation spaces; and one licensed bed located in the OB/GYN unit will be de-licensed and converted to a rooming-in accommodation for family members of NICU infants. 7

8 Project Timing Issues The applicant notes that initiation of patient care at the proposed site must coincide with the beginning of Fort Walton Beach Medical Center, Inc. s Medicare cost year (June 2011). Failure to do so is reported to lead to interim status for one year following the relocation and would reportedly adversely impact Medicare reimbursement during the same time period. Service Area Characteristics The applicant indicates that for the two-year period ending June 2010, the CMR unit discharged 699 patients. 580 of these were Okaloosa County residents, 54 were Walton County and 23 were Santa Rosa residents. No Escambia County residents received inpatient CMR services at FWBMC. Approximately percent of all FWBMC s CMR discharges were from this three county area of District 1. The applicant concludes this demonstrates that service area residents are seeking and receiving CMR services locally. Utilization Forecast The applicant indicates that for the two year period ending June 2010, the CMR patient average-length-of-stay (ALOS) was days. For the same period, total patient days for the unit are reported at 8,647 (for the 699 reported patient discharges). The applicant also states that the age 15 and older age cohort in the service area, combined in January 2009 and January 2010, was 414,781. In calculating a use rate, the applicant divides 699 discharges over the two-year period by the combined twoyear age 15 and older cohort in thousands to reach a use rate of (699/ =1.685) discharges per thousand population. The applicant estimates 59.7 percent utilization in year one (ending May 2012) and 60.7 percent utilization in year two. This is based on the projected age 15+ population at 209,558 in July 2012 and 212,655 in July 2013, discharges for the same periods at 353 and 358 and patient days at 4,367 at year one and at 4,429 at year two. 8

9 CON #10093 Utilization Forecast Years One & Two Ending May 2012 and May 2013 Year One Year Two Population (age 15+) 209, ,655 Discharge Rate Discharges ALOS Patient Days 4,367 4,429 Average Daily Census (ADC) Estimated Annual Occupancy 59.7% 60.7% Source: CON Application #10093, page #13. The applicant also estimates a 5.42 percent Medicaid patient day projection for both years one and two. As noted previously, the applicant conditions to provide a minimum of 4.0 percent of total annual patient days to Medicaid and charity care patients in its inpatient CMR program. The applicant s year one and year two projections appear to be achievable, given the applicant s calendar year 2009 utilization. Fort Walton Beach Medical Center contends that the new facility will spur utilization due to several factors. First, the new facility will have 20 private rooms compared to current unit s two. The applicant indicates private rooms afford greater flexibility in placing patients and make the inpatient rehabilitation treatment option more attractive to patients and families. Second, enhanced therapy spaces will promote a wider array of available interventions, broadening the number of conditions that can be treated. Third, the proposed site will improve access for the growing South Walton area 3. The applicant indicates it expects the new location to significantly increase the CMR unit s eight percent of its total patients being from Walton County. Further, the applicant states that once it obtains Level II trauma center certification, demand for inpatient CMR services will increase. 3 Walton County has the fastest growing population among the four counties in District 1. 9

10 Impact on Other Providers The applicant anticipates no material impact on the other existing CMR provider in District 1, West Florida Hospital (a sister affiliate of HCA, Inc.). There was no written opposition to CON Application # Agency Rule Criteria Please indicate how each applicable preference for the type of service proposed is met. Refer to Chapter 59C-1.039, Florida Administrative Code, for applicable preferences. (a) General Provisions: 1. Service Location. The CMR inpatient services regulated under this rule may be provided in a hospital licensed as a general hospital or licensed as a specialty hospital. The new Class III specialty hospital will be on Fort Walton Beach Medical Center, Inc. s license as a separate premise. 2. Separately Organized Units. CMR inpatient services shall be provided in one or more separately organized units within a general hospital or specialty hospital. The applicant plans for the proposed site to be a separately organized unit consisting of two patient wings of 10 separate rooms each. 3. Minimum Number of Beds. A general hospital providing comprehensive medical rehabilitation inpatient services should normally have a minimum of 20 comprehensive medical rehabilitation inpatient beds. A specialty hospital providing CMR inpatient services shall have a minimum of 60 CMR inpatient beds. The applicant proposes to create a Class III specialty (CMR) hospital, which does not meet the above rule criteria. However, the applicant plans to hold the beds under the Fort Walton Beach Medical Center, Inc. s license as a separate premise. 10

11 4. Conformance with Criteria for Approval. A CON for the establishment of new CMR inpatient services, the construction or addition of new CMR inpatient beds, or the conversion of licensed hospital acute care beds to CMR inpatient beds shall not normally be approved unless the applicant meets the applicable review criteria in Section , Florida Statutes, and the standards of need determination criteria set forth in this rule. The applicant is not seeking to add new or expand CMR services in the district, rather, the applicant seeks to delicense 20 CMR beds at Fort Walton Beach Medical Center, Inc. to establish a 20-bed CMR hospital in Destin, Florida. 5. Medicare and Medicaid Participation. An applicant proposing to increase the number of licensed CMR inpatient beds at its facility shall participate in the Medicare and Medicaid programs. Applicants proposing to establish a new comprehensive medical rehabilitation service shall state in their applications that they will participate in the Medicare and Medicaid programs. Fort Walton Beach Medical Center, Inc. is a Medicare and Medicaid participant. Because Fort Walton Beach Medical Center, Inc. does not hold a hospital license for the Destin facility, the proposed location will result in the creation of a new Class III specialty hospital. However, the applicant plans to include the new facility on Fort Walton Beach Medical Center, Inc. s license as a separate premise. The applicant proposes to condition the 20-bed facility to provide a minimum of 4.0 percent of its total annual patient days to Medicaid and charity care patients. Per Schedule 7B, Fort Walton Beach Medical Center, Inc. projects Medicaid to account for 5.4 percent (240/4,429) of the 20-bed facility s total patient days in year two ending May 31, Medicare and Medicare HMO days are projected at 83.1 percent of year two s total patient days. 11

12 (b) Required Staffing and Services. 1. Director of Rehabilitation. CMR inpatient services must be provided under the medical director of rehabilitation who is a board-certified or board-eligible physiatrist and has had at least two years of experience in the medical management of inpatients requiring rehabilitation services. Glennal Moore Verbois, MD, is stated to be the medical director of the project, once implemented. The applicant indicates that FWBMC has an agreement with Dr. Verbois for required services and the agreement is expected to stay in force through CMR project relocation. This agreement was not provided but the applicant states Dr. Verbois is board-certified in physical medicine (a physiatrist) and has more than 10 years of experience in the medical management of inpatients requiring rehabilitation services. Dr. Verbois out of date curriculum vitae is provided in CON Application #10093, Tab 7 Key Staff Resumes. 2. Other Required Services. In addition to the physician services, CMR inpatient services shall include at least the following services provided by qualified personnel: 1. Rehabilitation nursing 2. Physical therapy 3. Occupational therapy 4. Speech therapy 5. Social services 6. Psychological services 7. Orthopedic and prosthetic services The applicant reports that all the identified services above are currently available to patients at Fort Walton Beach Medical Center, Inc. and will continue to be available at the proposed Destin facility. (c) Criteria for Determination of Need: 1. Bed Need. A favorable need determination for proposed new or expanded comprehensive medical rehabilitation in patient services shall not normally be made unless a bed need exists according to the numeric need methodology in paragraph 59C- 1039(5)(c), Florida Administrative Rule. As previously stated, the applicant s project is not proposed in response to need. 12

13 (d) Priority Consideration for Comprehensive Medical Rehabilitation Inpatient Services Applicants. In weighing and balancing statutory and rule review criteria, the Agency will give priority consideration to: 1. An applicant that is a disproportionate share hospital as determined consistent with the provisions of section , Florida Statutes. The applicant states it neither owns nor operates a disproportionate share hospital. Fort Walton Beach Medical Center participates in the Low Income Pool (LIP) Payment Program. Agency Medicaid records indicate that the facility received $621,397 in LIP payments for FY See Item 3. g. below. 2. An applicant proposing to serve Medicaid-eligible persons. Fort Walton Beach Medical Center, Inc. proposes to condition approval to provide a minimum of 4.0 percent of 20-bed facility s total annual patient days to Medicaid and charity care patients. 3. An applicant that is a designated trauma center, as defined in section 10D , Florida Administrative Code. Fort Walton Beach Medical Center is not a designated trauma center. The applicant states that it has a letter of intent pending with the Florida Department of Health (DOH) to submit a trauma center application by April 1, However, the CMR facility will not be a designated trauma center. (e) Access Standard. Comprehensive medical rehabilitation inpatient services should be available within a maximum ground travel time of two hours under average travel conditions for at least 90 percent of the district s total population. Comprehensive medical rehabilitation inpatient services are available within a two-hour drive time for at least 90 percent of the district s total population. The applicant does not anticipate any change in the access standard as a result of the project. 4 The stated letter of intent with DOH is not provided in CON Application #10093, for Agency review. 13

14 (f) Quality of Care: Compliance with Agency Standards. CMR inpatient services shall comply with the agency standards for program licensure described in section 59A-3, Florida Administrative Code. Applicants who submit an application that is consistent with the agency licensure standards are deemed to be in compliance with this provision. The applicant states compliance with licensure standards. The applicant s current certifications include, but are not limited to those from the Joint Commission, the Commission on Accreditation of Rehabilitation Facilities and the Centers for Medicare & Medicaid Service. These documents are included in CON Application #10093, Tab 3 Quality Certifications. Agency complaint data indicates that for the three-year period ending September 9, 2010, Fort Walton Beach Medical Center (License #4363) had six substantiated complaints, with one each for the following: Chapter 374 Baker Act, emergency access, EMTALA, patient rights, medicine problem/error/formulary and plan of care. (g) Service Description. An applicant for CMR inpatient services shall provide a detailed program description in its certificate of need application including: A four-page Fort Walton Beach Medical Center Policy, Subject-Scope of Services (Policy No. 125-R), is included in CON Application #10093, Tab 4 - Rehabilitation Program Scope of Services. 1. Age groups to be served. The applicant states that it currently serves patients in all adult patient age ranges in the existing CMR unit at Fort Walton Beach Medical Center, Inc. The applicant further states that in calendar year 2009, of the 373 CMR patients discharged, 12 patients were in the 15 to 44 age range. The applicant s Policy No. 125-R indicates that it provides CMR services to patients age 18 and older. 14

15 2. Specialty inpatient rehabilitation services to be provided, if any (e.g. spinal cord injury; brain injury). The applicant indicates the CMR unit does not focus upon any particular specialized programming but does provide services to an array of patients with appropriate conditions, including the following: Stroke Brain injury Neurological disorders Spinal injury Amputations Orthopedic conditions Cardiac and Debility In addition to accreditations/certifications previously noted in this report, the applicant has Joint Commission certification of distinction as a primary stroke center. 3. Proposed staffing, including qualifications of the medical director, a description of staffing appropriate for any specialty program, and a discussion of the training and experience requirements for all staff who will provide CMR inpatient services. Glennal Moore Verbois, MD, who will be the medical director of the project, is board-certified in physical medicine (a physiatrist) and has more than 10 years of experience in the medical management of inpatients requiring rehabilitation services. Anthony DeCotis, MD, Medical Director, Inpatient Physical Rehabilitation Unit, Fort Walton Beach Medical Center, stated in his letter of support that he has served in this capacity for the past 14 years and that the program has grown and become well recognized in the community over the years. Dr. DeCotis is board-certified in internal medicine and in rheumatology. Dr. Verbois and Dr. DeCotis curricula vitae are provided in CON Application #10093, Tab 7 Key Staff Resumes. The applicant provides a discussion of the training and experience requirements for all CMR inpatient staff. 15

16 Schedule 6A indicates the applicant projects 37.8 FTEs for year one (ending May 31, 2012) and year two (ending May 31, 2013). The full staff complement is as follows: Administrator (1.0 FTE) Admissions Director (1.0 FTE) Secretary (1.0 FTE) Registered Nurses [RNs] (12.6 FTEs) Nurses Aides (4.2 FTEs) Nursing Other [Unit Secretary] (1.5 FTEs) Physical Therapist (3.0 FTEs) Speech Therapist (1.0 FTEs) Occupational Therapist (3.0 FTEs) Dietary Aides (3.0 FTEs) Social Service Director (1.0 FTEs) Housekeepers (2.5 FTEs) Maintenance Supervisor (1.0 FTEs) Maintenance Assistant (1.0 FTEs) Security (1.0 FTEs) The applicant indicates the project will have 11.8 more FTEs than the current CMR unit. 4. A plan for recruiting staff, showing sources of staff. The applicant estimates recruitment needs will be minimal. Recruitment sources include: internal promotion (when possible), efforts within HCA, utilization of corporate recruitment personnel, professional recruiting agencies and advertisement in local, state and national media and professional publications. 5. Expected sources of patient referrals. The applicant indicates that referral and admission patterns are not expected to change as a result of the project. The applicant indicates that in calendar year 2009, most referrals were generated from Fort Walton Beach Medical Center, Inc. 6. Projected number of CMR inpatient services patient days by payer type, including Medicare, Medicaid, private insurance, self-pay and charity care patient days for the first two years of operation after completion of the proposed project. Based on projected patient days, the applicant anticipates a patient mix as shown below. 16

17 Payer Mix Proposed Site May 2012 (Year One) and May 2013 (Year Two) Year One Year Two Self-Pay 1.5% 1.5% Medicaid 5.4% 5.4% Medicaid HMO 0.0% 0.0% Medicare 79.2% 79.2% Medicare HMO 2.9% 2.9% Commercial Insurance 0.5% 0.5% Other Managed Care 7.0% 7.0% Other Payers 3.4% 3.4% Total 100.0%* 100.0%* Source: CON Application #10093, Schedule 7B. * Based on the payer mix provided, Agency arithmetic calculations reach a 99.9 percent total, whereas the applicant reaches an arithmetic total of percent. Notes to Schedule 7B indicate that 1.5 percent of patient days are counted as self-pay/charity. Charity care days are not provided. 7. Admission policies of the facility with regard to charity care patients. The applicant indicates that it extends and will continue to extend services to all patients in need of care regardless of ability to pay or source of payment. The applicant proposes to condition approval to the provision of a minimum of 4.0 percent of the 20-bed CMR facility s total annual patient days to Medicaid and charity care patients. (i) Utilization Reports. Facilities providing licensed comprehensive medical rehabilitation inpatient services shall provide utilization reports to the Agency or its designee, as follows: (1) Within 45 days after the end of each calendar quarter, facilities shall provide a report of the number of comprehensive medical rehabilitation services discharges and patient days which occurred during the quarter. 17

18 (2) Within 45 days after the end of each calendar year facilities shall provide a report of the number of comprehensive medical rehabilitation inpatient days which occurred during the year, by principal diagnosis coded consistent with the International Classification of Disease (ICD-9). Fort Walton Beach Medical Center reports this data as required and commits to continue to do so. 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 (1)(a) and (b), Florida Statutes. The applicant is not seeking to add new or expand CMR services in the district. The applicant proposes to transfer 20 adult CMR beds from its main campus at 1000 Mar-Walt Drive, Fort Walton Beach, Florida to a new CMR site at 996 Airport Road, Destin, Florida These two locations are within the same district and county. District 1 has 78 licensed comprehensive medical rehabilitation beds that experienced percent occupancy during the 12-month period ending December 31, All 78 licensed comprehensive medical rehabilitation beds in the district are located in general hospitals. Comprehensive Medical Rehabilitation Bed Utilization District 1 Calendar Year 2009 Facility Beds Percent Occupancy Fort Walton Beach Medical Center % West Florida Hospital % District Total % Source: Florida Bed Need Projections & Service Utilization by District July 23, The two facilities are affiliated with Hospital Corporation of America, Inc. Historical utilization of CMR services in District 1 over the past three years is shown in the chart below: 18

19 District 1 CMR Utilization CY Number of Comprehensive Medical Rehab Beds Percentage Occupancy 34.73% 28.92% 39.32% Source: Florida Bed Need Projections & Services Utilization, published July 2008-July Note: Bed counts are as of December 31 for the appropriate years. As shown above, District 1 s CMR utilization declined from calendar year 2007 to 2008 but rose from calendar year 2008 to However, the applicant s project is the transfer of beds from its main location in Fort Walton Beach to its off-site emergency department location in Destin and does not involve adding new beds or a new service to District 1. The applicant states project approval is warranted based on enhancements to various patient care areas at the main campus and physical plant related aspects of care for CMR patients that the relocation would make possible. The applicant expects measures of CMR service availability, quality of care, accessibility and extent of utilization of existing health care facilities and health services in the applicant s service area to remain relatively constant. The applicant plans to enhance the CMR services in the district and for the population already being served, with minimal impact on CMR services at West Florida Hospital in Escambia County. b. Does the applicant have a history of providing quality of care? Has the applicant demonstrated the ability to provide quality care? ss (1)(c), Florida Statutes. Fort Walton Beach Medical Center, Inc. provides a 10-page performance improvement plan, with one review and 13 revisions since plan implementation in January The applicant also includes its patient bill of rights (CON Application #10093, Tab 6 Performance Improvement Plan & Patient Bill of Rights). Fort Walton Beach Medical Center, Inc. also reports a Plan-Do-Check-Act approach to problem solving in which all levels of the organization play a part. Fort Walton Beach Medical Center, Inc. s current certifications include Joint Commission certification for Hospital Accreditation Program, Joint Commission Certificate of Distinction as a Primary Stroke Center, the Commission on Accreditation of Rehabilitation Facilities, Chest Pain Center with PCI issued by The Society of Chest Pain Centers and the Centers for Medicare & Medicaid Service. The applicant provides copies of these and other certifications in CON Application #10093, Tab 3 Quality Certifications. 19

20 Fort Walton Beach Medical Center, Inc. (License #4363) had six substantiated complaints during the three-year period ending September 9, The substantiated complaints cited were for: Chapter 374 Baker Act, emergency access, EMTALA, patient rights, medicine problem/errors/formulary and plan of care. c. What resources, including health manpower, management personnel, and funds for capital and operating expenditures, are available for project accomplishment and operation? ss (1)(d), Florida Statutes. The financial impact of the project will include the project cost of $1,509,510 and year two operating costs of $3,969,243. The applicant is an indirect wholly owned subsidiary of Hospital Corporation of America (HCA), Inc. The applicant provided audited financial statements as of December 31, 2008 and The applicant also provided a copy of the December 31, 2009, 10-K for HCA, Inc. (parent). These statements were analyzed for the purpose of evaluating the applicant s ability to provide the capital and operational funding necessary to implement the project. Short-Term Position: Applicant - The applicant s current ratio of 2.8 is above average and indicates current assets are almost three times current liabilities, a good position. The working capital (current assets less current liabilities) of $20.9 million is a measure of excess liquidity that could be used to fund capital projects. The ratio of cash flow to current liabilities of 4.6 is well above average and a strong position. Overall, the applicant has a good short-term position. (See table below). Parent - The parent s current ratio of 1.5 is below average and indicates current assets are approximately one and a half times current liabilities, a slightly weak but adequate position. The working capital (current assets less current liabilities) of $2.3 billion is a measure of excess liquidity that could be used to fund capital projects. The ratio of cash flow to current liabilities of 0.6 is slightly below average and an adequate position. Overall, the applicant has an adequate short-term position. (See table below). 20

21 Long-Term Position: Applicant - The ratio of long-term debt to net assets of 0.0 indicates that the applicant has minimal long-term debt relative to equity, a strong position. The ratio of cash flow to assets of 13.0 percent is well above average and a good position. The most recent year had revenues in excess of expenses of $44,311,891, which resulted in an operating margin of 20.7 percent. Overall, the applicant has a strong long-term position. (See table below). Parent - The ratio of long-term debt to net assets of negative 3.5 percent indicates the parent has no positive equity to borrow against and may have difficulty obtaining future debt financing if necessary, a weak position. The ratio of cash flow to assets of 11.4 percent is well above average and a good position. The most recent year had revenues in excess of expenses of $2.0 billion which resulted in a 6.7 percent operating margin. Overall, the parent has a slightly weak but adequate long-term position. (See table below). Capital Requirements: The applicant indicates on Schedule 2 capital project $7.0 million and includes this project, routine capital budgets for FY 2010 through FY 2013, and renovation of the current 20-bed CMR space (to be used for non-cmr purposes). Available Capital: The applicant indicates on Schedule 3 of its application that funding for the project will be provided by the parent. In support of the related company financing, the applicant provided a letter from the parent expressing it will provide the applicant financing in an amount up to $1.5 million to relocate the 20 CMR beds and any operating expenses that will occur. The parent s 2009, 10-K report shows $2.2 billion in working capital and 2.7 billion in cash flows from operations. In addition, it appears the applicant could fund this project on its own if necessary with $20.9 million in working capital and $52.7 million in cash flow from operations. Staffing: In CON Application #10093, Schedule 6A, the applicant provides a count of 37.8 FTEs for year one (ending May 31, 2012) and year two (ending May 31, 2013). The total FTEs remain constant for both years. The full staff complement is as follows: 21

22 Administrator (1.0 FTE) Admissions Director (1.0 FTE) Secretary (1.0 FTE) Registered Nurses [RNs] (12.6 FTEs) Nurses Aides (4.2 FTEs) Nursing Other [Unit Secretary] (1.5 FTEs) Physical Therapist (3.0 FTEs) Speech Therapist (1.0 FTEs) Occupational Therapist (3.0 FTEs) Dietary Aides (3.0 FTEs) Social Service Director (1.0 FTEs) Housekeepers (2.5 FTEs) Maintenance Supervisor (1.0 FTEs) Maintenance Assistant (1.0 FTEs) Security (1.0 FTEs) The proposed project includes an additional 11.8 FTEs from the current complement, with 2.6 FTEs of the 11.8 FTEs being skilled medical professionals. The applicant estimates recruitment needs will be minimal. Recruitment sources include: internal promotion (when possible), efforts within HCA, utilization of corporate recruitment personnel, professional recruiting agencies and advertisement in local, state and national media and professional publications. 22

23 Conclusion: Funding for this project and the entire capital budget should be available as needed. Fort Walton Beach Medical Center, Inc. CON Application #10093 Applicant Parent 12/31/09 12/31/09 Current Assets (CA) $32,403,433 $6,577,000,000 Cash and Current Investment $13,785 $312,000,000 Total Assets (TA) $405,522,298 $24,131,000,000 Current Liabilities (CL) $11,528,370 $4,313,000,000 Due to/from Affiliates $321,381,303 $853,000,000 Total Liabilities (TL) $12,986,823 $32,109,000,000 Net Assets (NA) $392,535,475 ($7,978,000,000) Total Revenues (TR) $214,000,913 $30,052,000,000 Interest Expense (Int) $0 $1,987,000,000 Excess of Revenues Over Expenses (ER) $44,311,891 $2,002,000,000 Cash Flow from Operations (CFO) $52,711,809 $2,747,000,000 Working Capital $20,875,063 $2,264,000,000 FINANCIAL RATIOS 12/31/09 12/31/09 Current Ratio (CA/CL) Cash Flow to Current Liabilities (CFO/CL) Long-Term Debt to Net Assets (TL-CL/NA) Times Interest Earned (ER+Int/Int) NA 2.0 Net Assets to Total Assets (NA/TA) 96.8% -33.1% Operating Margin (ER/TR) 20.7% 6.7% Return on Assets (ER/TA) 10.9% 8.3% Operating Cash Flow to Assets (CFO/TA) 13.0% 11.4% d. What is the immediate and long-term financial feasibility of the proposal? ss (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 Schedule 7 and Schedule 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 23

24 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 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 Rehabilitation Hospital Group (Group 18). The Agency does not have case mix data available for rehabilitation hospitals so an intensity factor of was calculated for the applicant by taking the projected average length of stay indicated and dividing it by the weighted average length of stay for the peer group. This methodology is used to adjust the group values to reflect the intensity of the patient as measured by length of stay. 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, 2nd Quarter, 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. Projected net revenue per adjusted patient day (NRAPD) of $1,043 in year one and $1,056 in year two is between the control group median and highest values of $926 and $1,250 in year one and $952 and $1,285 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 below). Anticipated costs per adjusted patient day (CAPD) of $882 in year one and $896 in year two is between the control group median and highest values of $783 and $981 in year one and $805 and $1,009 in year two. 24

25 With projected cost between the median and highest value in the control group, the year one and two costs appear reasonable. (See table below). The applicant, Fort Walton Beach Medical Center, Inc. is proposing a condition that 4.0 percent of its patient days will be combined charity and Medicaid. The charity and Medicaid days projected by the applicant exceeds the proposed condition. The weighted average combined Medicaid and charity percentage in the group is 5.1 percent with eight of the 13 hospitals in the group projecting a percentage higher than the proposed condition. Therefore, the proposed condition appears achievable. The year two projected operating income for the project of $708,634 computes to an operating margin per adjusted patient day of $160 or 15.4 percent which is between the control group median and highest values of $145 and $317. Conclusion: This project appears to be financially feasible. 25

26 Fort Walton Beach Medical Center, Inc. (20-Bed CMR Unit) CON Application #10093 May-13 YEAR 2 VALUES ADJUSTED 2009 DATA Peer Group 18 YEAR 2 ACTIVITY FOR INFLATION ACTIVITY PER DAY Highest Median Lowest ROUTINE SERVICES 14,346,586 3,240 1, INPATIENT AMBULATORY INPATIENT SURGERY INPATIENT ANCILLARY SERVICES (P) 0 0 1, OUTPATIENT SERVICES (Q) TOTAL PATIENT SERVICES REV. (R) 14,346,586 3,240 2,498 1,474 1,298 OTHER OPERATING REVENUE TOTAL REVENUE 14,346,586 3,240 2,501 1,475 1,300 DEDUCTIONS FROM REVENUE 9,668,710 2, NET REVENUES 4,677,876 1,056 1, EXPENSES ROUTINE 927, ANCILLARY 1,457, AMBULATORY TOTAL PATIENT CARE COST 2,385, ADMIN. AND OVERHEAD 1,113, PROPERTY 269, TOTAL OVERHEAD EXPENSE (V) 1,382, OTHER OPERATING EXPENSE 201, TOTAL EXPENSES 3,969, , OPERATING INCOME 708, % PATIENT DAYS 4,428 ADJUSTED PATIENT DAYS 4,428 TOTAL BED DAYS AVAILABLE 7,300 VALUES NOT ADJUSTED ADJ. FACTOR FOR INFLATION TOTAL NUMBER OF BEDS 20 Highest Median Lowest PERCENT OCCUPANCY 60.66% 81.6% 73.2% 52.7% PAYER TYPE PATIENT DAYS % TOTAL SELF PAY % MEDICAID (BA) % 10.6% 2.4% 0.0% MEDICAID HMO 0 0.0% MEDICARE (AW) 3, % 84.3% 75.8% 54.4% MEDICARE HMO % INSURANCE % HMO/PPO (BF) % 42.1% 19.4% 10.1% OTHER % TOTAL 4, % 26

27 e. Will the proposed project foster competition to promote quality and cost-effectiveness? ss (1)(e) and (g), Florida Statutes. This project is not adding a new provider or beds to the district; rather it is simply moving 20 CMR beds approximately 14.5 miles away from the current location to the new site. Given the above, this project will not materially change the existing market in the district and therefore will not have a material impact on competition. f. Are the proposed costs and methods of construction reasonable? Do they comply with statutory and rule requirements? ss (1)(h), Florida Statutes; Ch. 59A-3 or 59A-4, Florida Administrative Code. The applicant proposes to relocate an existing 20-bed comprehensive medical rehabilitation (CMR) unit from its main campus to its Destin campus. Both facilities are located in Okaloosa County. The Destin campus is a former hospital building that currently serves as a remote emergency department for Fort Walton Beach Medical Center. The narrative describes the building as a one story, steel framed building and the construction type as FBC type IB and NFPA type II (2,2,2). Both construction types are sufficient for a single story I2/healthcare occupancy. The 20-bed CMR hospital would be located in the Destin facility s former medical/surgical nursing unit. The plans and narrative indicate that the patient rooms will be renovated to create a handicap accessible toilet rooms within each patient room. Two airborne isolation rooms will also be included in the unit and each of these rooms will have their own toilet/shower room. It is noted that the new toilet rooms infringe upon the required clear floor space on the pull side of the patient room doors. All patient rooms exceed the minimum required area and appear to have enough room to accommodate the changes necessary to provide the required clear floor space mentioned above. Two patient rooms are being renovated to create the required number of patient showers to serve the unit. 27

28 Other renovations include the conversion of existing spaces into a daily living unit, physical therapy department, and offices. The existing dietary department, dining area and public waiting area will be refurbished to serve the new hospital. Patient support areas will also receive finish upgrades. As a new licensed hospital, the building will be required to meet all current hospital requirements including the disaster preparedness requirement of the Florida Building Code. The narrative does not address disaster preparedness, but does indicate that the original hospital was built in 1986 with an ICU addition added in Given this construction date it is unlikely that the exterior opening meets the current missile debris impact requirements. It is also unclear whether the facility is located above the 100-year flood plain and category 3 storm surge elevation as required by the Florida Building Code. This will need to be verified with submission of construction documents to the Office of Plans and Construction. The project summary on the plan indicates compliance with current codes. Some additional architectural, mechanical and electrical physical plant standards such as the nurse call, generator requirements, and door hardware will need to be addressed as more detailed construction documents are produced, but the physical constraints of the spaces should accommodate these requirements. The estimated construction costs appear to be low, additional costs will likely be incurred to address the debris impact protection of the exterior units and other changes required to meet the current code requirements for a new hospital. The project completion forecast appears to be reasonable. The design as presented does not indicate any major impediments that would prevent the design and construction of a code compliant facility. The architectural review of the application shall not be construed as an in-depth effort to determine complete compliance with all applicable codes and standards. The final responsibility for facility compliance ultimately rests with the owner. 28

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