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 Oglethorpe of Orlando, Inc./CON # Amberly Drive, Suite 300 Tampa, Florida Authorized Representative: Mr. James O Shea, COO (813) Service District District 7 (Brevard, Orange, Osceola and Seminole Counties) B. PUBLIC HEARING A public hearing was requested and a hearing was held on Friday, October 26, 2012 at the Health Council of East Central Florida, Inc., Conference Room, 2461 West SR 426, Suite 2041, Oviedo, Florida Ken Peach, MBA, FACHE, the Health Council of East Central Florida, Inc. s Executive Director, conducted the hearing. Though offered the opportunity to present first, Michael Glazer of Ausley & McMullen, P.A., representing the applicant, deferred his time in support of the projects until after the opposition had presented and no objection was stated to this arrangement. Geoffrey Smith, Smith & Associates, Attorneys and Counselors at Law, representing Universal Health Systems and two of its hospitals, Central Florida Behavioral Hospital and University Behavioral Center, spoke in opposition to the project. Mr. Smith stated that a fixed need pool does not automatically mean there is need and does not mean that an applicant is automatically approved but that there is a presumption of need and that the Agency is to consider the statutory review criteria and decide if there truly is need. Mr. Smith indicated the key opposition argument was regarding availability, accessibility and extent of

2 utilization of existing facilities. He stated that two facilities are accessible in the area, with Central Florida Behavioral Hospital just seven miles north of the Osceola County line and that there are accessible highway systems for linkage. Sunrail commuter rail was mentioned as a future transportation option that will go by Central Florida Behavioral Health and University Behavioral Center. Regarding quality, Mr. Smith asked the Agency to consider reviewing CON application #10032 and the history of the applicant, commenting that a principal of the applicant (Mr. Robert Cohen) plead guilty to Medicare fraud in Mr. Smith submitted written materials related to this topic. David Beardsley, CEO, University Behavioral Health Center stated that the Agency had recently approved 28 adult psychiatric beds (Exemption #120012) and 20 adult substance abuse beds (Exemption # effective October 23, 2012) at his facility 2. Mr. Beardsley also stated his facility can meet the published need much more quickly and at a fraction of the cost of building a new facility. Vickie Lewis, CEO, Central Florida Behavioral Hospital, stated her facility, which opened in 2008, was strategically planned for the southern end of Orange County and is close to Kissimmee. She stated that Central Florida Behavioral increased its licensed adult psychiatric beds in 2010, 2011 and 2012 and had over 600 adult admissions from the Osceola area in CY Ms. Lewis concluded that she believes her facility is meeting the needs of the area. Patricia Greenberg of National Healthcare Associates indicated that the projects are not needed for several reasons: existing providers have already accommodated the published need (by way of exempted projects); published demand is being driven largely by Brevard County, not Orange or Osceola Counties; 1 Robert M. Cohen, Manager/Member of Oglethorpe of Orlando, Inc., pleaded guilty to Medicare fraud on December 4, This may be grounds for denial, suspension or revocation of a hospital license in accord with Chapter (1) (e) Florida Statutes. 2 Exemption #120012, originally approved on September 14, 2012 to establish a 24-bed adult inpatient psychiatric unit was modified on October 23, 2012 to establish a 28-bed adult inpatient psychiatric unit by delicensing 28 child/adolescent inpatient psychiatric beds. University Behavioral Center s exemptions were filed after the June 8, 2012 batching cycle inventory cut-off date. 2

3 many MDC 19 and/or MDC 20 diagnosed patients seek services at acute care hospitals because of acute episodes, not for treatment of their condition(s) and that the applicant s use rates and out-migration determinations are flawed ; in this market in-migration is two and half times greater than outmigration; the projects, if approved, would clearly negatively impact the existing infrastructure in the mental health community ; the financial feasibility of the applicant s projects is questionable; residential treatment and related alternatives are available; and about 80 percent of the Osceola County adult population is within 20 minutes drive to Central Florida Behavioral Hospital. Ms. Greenberg also submitted written material opposing the projects which will be discussed at the end of the public hearing section. Michael Glazer, representing the applicant, stated the projects were submitted in response to a fixed need pool and the applicant is an experienced provider that will provide some competition in the service area. He stated that Oglethorpe, Inc. s three Florida hospitals; Springbrook, Port St. Lucie Hospital and The Willough at Naples are Joint Commission accredited and had 80 to 88 percent occupancy in CY Mr. Glazer stated that the proposed facility is 18 miles from the nearest provider (Central Florida Behavioral Center). Mr. Glazer also indicated that Osceola County residents in need of psychiatric services are being treated in medical/surgical beds, which is an indication of pent-up demand. He stated that CY 2011 s significant out-migration of about 20 percent of Osceola County residents leaving District 7 for the proposed services is another indicator of pent-up demand. Mr. Glazer stated that in 2011, Oglethorpe s Brooksville facility treated, in excess of 100 patients from Osceola County and many Brevard County residents go to Oglethorpe s Port St. Lucie facility. 3

4 Mr. Glazer indicated that increased beds and/or bed conversions at Central Florida Behavioral Hospital and University Behavioral Health Center, used to deny demand, is the polar opposite of what is happening. Mr. Glazer stressed that the Agency has commented that existing providers that oppose the need for new hospitals are at the same time expanding their own services because they can without CON. Mr. Glazer went on to say this practice is disingenuous, and especially regarding University Behavioral Health Center which Mr. Glazer stated is some 34 miles from the applicant s proposed site. Mr. Glazer indicated that University Behavioral Health Center s bed conversion will likely mean hundreds and hundreds of children and adolescents will be turned away just so they can come in and oppose this application. Mr. Glazer also reported that less than three percent of University Behavioral s patient origin was from Osceola County. Finally, Mr. Glazer stated his client takes great offense about the comments made by Mr. Smith regarding Robert Cohen. James O Shea MHA, Oglethorpe, Inc. s Chief Operating Officer, stated that over the past three years, Oglethorpe, Inc. s facilities have served over 1,000 patients from District 7. Mr. O Shea stated that the exemption process is not a guarantee that beds will be licensed (due to the Agency s Office of Plans and Construction requirements) and questioned the expediency of getting beds on-line by seeking them through exemption. John Picciano, LCSW, Oglethorpe, Inc. s Chief Executive Officer, stated he is a former Roman Catholic priest, is familiar with the area and lives in Orange County. Mr. Picciano made positive comments about Oglethorpe, Inc. s management, facilities and finances and stated that Oglethorpe is now valued at over $300 MIL dollars, with no debt other than trade debt. He also stated the projects would bring about 130 jobs (higher level jobs) to Osceola County. Mr. Picciano stated that Mr. Cohen has been reinstated by Medicare and that one thing that Oglethorpe stands for is rehabilitation and once issues are resolved, you move on. James Shanks, President and CEO, Park Place Behavioral Health Care stated that Park Place Behavioral Health is the community mental health agency for Osceola County. He also stated his facility is the only Baker Act receiving facility in Osceola County. Mr. Shanks reported his facility sometimes sends patients to Oglethorpe, Inc. facilities and has a good relationship with Springbrook. He stated that the Osceola County population growth, by percent, was well over any other county in District 7 and that more services are needed in Osceola County. 4

5 Mr. Peach then asked any materials be presented to him and then adjourned the public hearing. Ms. Greenberg s written material indicates that: Central Florida Behavioral Hospital and University Behavioral Center have met the Agency s published need for 28 adult psychiatric beds and 14 substance abuse beds in District 7. Also, La Amistad Residential Treatment Center, LLC (located in Orange County) should be taken into consideration as an adult substance abuse treatment option. Oglethorpe does not identify any not normal circumstances to justify the projects separate and apart from the published bed need. The applicant s forecasted utilization and market share assumptions virtually ignore the previously mentioned recent bed conversions, exemptions and notifications. Fixed Need Pool The applicant has apparently determined that the most appropriate method to meet District 7 s need is to build a new $11.4 million hospital on land costing $3.2 million, equating to a cost of nearly $272,000 per bed. However, less costly and more appropriate alternatives exist. University Behavioral Center s adult psychiatric and substance abuse exemptions (E and E120016) will be more expedient and will cost $1.2 million, or $24,417 per bed. The published need has been met by University Behavioral Center s exemptions which is clearly in keeping with federal (and) state initiatives to curtail unnecessary healthcare spending. Population - Central Florida Behavioral Hospital and University Behavioral Center can meet the needs of District 7 based on the distribution of the population of the entire district. Orange County has nearly 50 percent of District 7 s population. In addition, Orange County s population aged 18 and over is expected to increase by 136,323 compared to 53,578 or by 2½ times more than Osceola County (from 2011 to 2018). Ms. Greenberg notes that as of CY 2011, Orange County s 886,644 aged 18 and over population is already four times the size of Osceola County (204,008). Therefore, additional beds should be located in Orange County (as is happening through the exemption process). 5

6 Availability and Access Regarding availability, in 2011, higher adult inpatient psychiatric bed occupancy occurred in Brevard and Seminole County facilities than in Orange County facilities. Central Florida Behavioral Hospital is toward the southernmost part of Orange County and is within 45 minutes in driving time to the southernmost portions of Osceola County. This facility is also within 30 minutes driving time for the majority of the Osceola County population and within 10 to 15 minutes driving time of Kissimmee (the most populous city in Osceola County). Demand for Services the applicant s assumptions inflate demand for psychiatric and substance abuse services by including hospital discharges from facilities that do not have licensed mental health beds. Ms. Greenberg indicates that these patients may not be admitted for treatment of the addiction but rather treatment of an acute condition or near-death episode. The applicant should not have counted these discharges as treatment of the underlying mental condition. She contends that many of these persons are discharged to outpatient psychiatric treatment, residential treatment, partial hospitalization or in worse cases, inpatient treatment in a licensed facility. Ms. Greenberg notes that Osceola County resident inpatient psychiatric discharges increased from 754 in 2009 to 1,028 in However, out-migration declined from 153 cases (20.3 percent) in 2009 to 106 (10.3 percent) in She concludes that this decline is due to Central Florida Behavioral Hospital opening in She states that the majority of growth is in Orange County and the need for Osceola County can easily be met by the existing provider expansion. The applications are not conditioned on the proposed site acquisition and there is no documentation that the location is appropriately zoned and permitted to satisfy the proposal. The applicant s projects are not financially feasible because the facility will not be able to meet its projected occupancy. 6

7 Letters of Support Of the total 35 unduplicated letters of support (32 submitted through CON application #10170 and three received independently by the Agency), all were signed, 28 indicated residence or a working address within District 7, 22 were of a form letter variety, 12 were dated during September 4 through October 4, 2012 (23 were not dated), two were from elected officials and one was from a physician. Below is a brief summary of some of the comments in these letters. Former State Senator Paula Dockery, District 15, The Florida Senate, stated that the project would, fill a desperate need for psychiatric and substance abuse beds in the area and the facility would serve as a Baker Act Receiving Facility and provide crisis stabilization. Jim Swan, Mayor, City of Kissimmee, Florida, stated the applicant is committed to work closely with local community mental health agencies in order to avoid any duplication of services and that the project would eliminate the need for residents to travel to other areas for treatment. Ramarao Makkena, MD, stated he has known the parent company, for many years and found them to provide quality care services to the populations in need. Dr. Makkena also stated he recognizes the shortage of inpatient mental health in Osceola County. Robert Brooks, FACHE, Chief Executive Officer, St. Cloud Regional Medical Center, stated his facility does not have mental health professionals on staff and we are faced with holding psychiatric patients for long periods of time due to no bed openings in the region. Mr. Brooks also stated he would look forward to having staff psychiatrists of the new facility having privileges at his hospital. James Shanks, President/CEO, Park Place Behavioral Healthcare, stated his facility is Osceola County s community mental health agency and only Baker Act facility. He stated Park Place has referred well over 100 Medicare patients in the last six months (to facilities in neighboring counties) who could be better served in their own community. Mr. Shanks concluded that many of these referrals were to Oglethorpe s Brooksville facility, which has been a very responsive and cooperative partner. 7

8 Sergeant Jaime Alberti, Kissimmee Police Department, stated that during his 13-year history with the department, he has seen many patients ending up on the street, untreated and that the project would make a positive impact in meeting the needs of an already strained social services community. Begonia Ayo, General Manager, Finlay Clinical Laboratories, Inc., stated her organization has worked with Oglethorpe, Inc., through its three hospitals: Springbrook Hospital, Willough Hospital and Port St. Lucie Hospital for several years. Ms. Ayo stated these hospitals provide the highest standard of care and Oglethorpe, Inc., personnel have always demonstrated the highest degree of competence. The applicant s form letters of support stated: Currently there are no inpatient psychiatric hospitals (in Osceola County) that serve individuals with mental health and substance abuse problems, which cause jails and emergency rooms (to be) crowded, with no appropriate services for this population. The applicant has served the needs of the county (Osceola County residents) through their hospital in Brooksville, Florida-Springbrook Hospital. C. PROJECT SUMMARY Oglethorpe of Orlando, Inc. (CON #10170), a private for-profit development stage corporation and wholly owned subsidiary of Oglethorpe, Inc. (the parent), proposes to establish a new 28-bed adult inpatient psychiatric program in District 7, Osceola County, Florida. This application accompanies co-batched CON application #10171, which seeks to establish a new 14-bed adult inpatient substance abuse program. Oglethorpe states that the projects will result in a 42-bed Class III specialty hospital that will be located on Beehive Circle, off Commerce Center Drive near the intersection at Brown Chapel Road in St. Cloud, Florida, The applicant indicates that the site has easy access to the Florida Turnpike, US Highway 92 and Osceola Parkway. Oglethorpe states that the facility will provide inpatient and outpatient psychiatric and substance abuse programs. Oglethorpe, Inc. operates three other hospitals in Florida - Springbrook Hospital, Port St. Lucie Hospital and The Willough at Naples. In addition to the Agency s published need projections, the applicant summarizes five major factors that justify the project, as follows: 8

9 Osceola County has the highest population growth within District 7; Osceola County currently has no licensed adult inpatient psychiatric beds; Osceola County residents are more likely to receive inpatient psychiatric care at general acute care hospitals that do not have licensed psychiatric beds; Osceola County residents are more likely to leave the district for inpatient psychiatric care; and Residents that seek inpatient psychiatric care outside the district have longer lengths of stay. The proposed project involves a total cost of $8,930,886. The total project cost includes: land, building, equipment, project development, financing and start-up costs. The applicant indicates that the project consists of 20,668 gross square feet (GSF) of new construction and a total construction cost of $3,978,242. The total facility including CON application #10171, involves a total cost of $11,411,836, with 27,495 GSF of new construction and construction cost of $5,337,383. The applicant proposes to condition the project as shown below. The facility will be located within Osceola County. The provision of charity care at a minimum of 3.35 percent of the 28-bed adult psychiatric unit s total annual patient days, or 4.36 percent of the 42-bed hospital s total annual patient days. D. REVIEW PROCEDURE The evaluation process is structured by the certificate of need review criteria found in Section , Florida Statutes; and applicable 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 9

10 project in the same district, applications are comparatively reviewed to determine which applicant(s) best meets the review criteria. 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 in its entirety with consultation from the financial analyst, Felton Bradley, who evaluated the financial data and Said Baniahmad of the Office of Plans and Construction, who reviewed the application for conformance with the architectural criteria. E. CONFORMITY OF PROJECT WITH REVIEW CRITERIA The following indicate the level of conformity of the proposed project with the review criteria and application content requirements found in Sections , 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? Rules 59C-1.008(2) and 59C-1.040(4) Florida Administrative Code. In Volume 38, Number 29, dated July 20, 2012 of the Florida Administrative Weekly, a fixed need pool of 28 beds was published for adult inpatient psychiatric beds in District 7 for the January 2018 planning horizon. Therefore, the applicant s project is in response to published need shown in the fixed need pool. As of June 8, 2012, District 7 had 309 licensed and 27 approved but not licensed adult inpatient psychiatric beds. The 27 approved beds consist of 14 at Central Florida Behavioral Hospital (N#120023) and 13 (N# eight and N# five beds) at South Seminole Hospital. The district s licensed beds experienced percent utilization from January 2011-December During CY 2011, the adult inpatient psychiatric bed count rose from 300 to 309 as Central Florida Behavioral Hospital added nine adult inpatient psychiatric beds, effective October 21, Subsequent to the published need, Central 10

11 Florida Behavioral Hospital licensed 14 adult inpatient psychiatric beds (N#120023) effective October 1, 2012 and University Behavioral Center was approved to establish a 28-bed adult inpatient psychiatric unit (E#120012) through delicensing 28 child/adolescent inpatient psychiatric beds. University Behavioral Center also has exemption # to establish a 20-bed adult substance abuse unit by delicensing 20 child/adolescent psychiatric beds. Because University Behavioral Center s 112 licensed child/adolescent beds averaged percent utilization in CY 2011, the reduction of 48 child/adolescent beds could result in access problems for child/adolescent patients. Of the six facilities in District 7 with licensed adult psychiatric beds, three are general hospitals (Class 1) and three are freestanding (Class 3), as follows: District 7 Adult Inpatient Psychiatric Utilization Calendar Year 2011 Facility Service Class County # Adult Beds Adult Occupancy Central Florida Behavioral Hospital Class 3 Orange % Circles of Care Class 3 Brevard % Florida Hospital Class 1 Orange % Lakeside Behavioral Healthcare, Inc. Class 3 Orange % South Seminole Hospital Class 1 Seminole % Wuesthoff Medical Center-Rockledge Class 1 Brevard % District 7 Total % Source: Florida Hospital Bed Need Projections and Service Utilizations by District, July 2012 Batching Cycle and Hospital Beds and Services List, July Osceola County is the sole county in District 7 that lacks licensed adult inpatient psychiatric beds. The following is a map of District 7 s licensed adult inpatient psychiatric facilities, including the applicant s proposed location. 11

12 District 7 Adult Inpatient Psychiatric Facilities* and the Applicant s Proposed Location Source: Microsoft MapPoint 2012 Note: *Through Exemption #120012, effective September 14, 2012, University Behavioral Center was approved to establish a 24-bed adult inpatient psychiatric unit (by delicensing 24 child/adolescent inpatient psychiatric beds). 3 Though this approval was granted after the batching cycle inventory cut-off date applicable to this review, it is presented here for geographic reference. 3 University Behavioral Center s Exemption # was amended on October 23, 2012, to establish a 28-bed adult inpatient psychiatric unit by delicensing 28 child/adolescent inpatient psychiatric beds. 12

13 The chart below contains the population estimates for the total adult population (age 18 and older) in District 7 (Brevard, Orange, Osceola and Seminole Counties) for July 2011 and the January 2018 planning horizon. District 7 Brevard, Orange, Osceola and Seminole Counties Population Age 18 and Over July 2011 and January 2018 Population Age 18 And Over July 2011 Population Age 18 And Over January 2018 Population Age 18 And Over Increase July 2011-Jaunary 2018 As shown above, District 7 s population age 18 and over is expected to experience 5.94 percent greater growth than the state. Osceola County is expected to have the second highest resident population increase in this same age cohort in District 7 (49,855 residents) but the highest population growth rate (24.44 percent). Percent Change County Brevard 439, ,022 38, % Orange 886,644 1,013, , % Osceola 204, ,863 49, % Seminole 328, ,403 31, % District Total 1,858,480 2,105, , % State Total 14,931,874 16,027,835 1,095, % Source: Agency for Health Care Administration Population Projections, published February Below is a table to account for calendar year 2011, District 7/Osceola County adult residents (age 18 and older) discharged from hospitals with and without licensed adult inpatient psychiatric beds, who had a psychiatric discharge of MDC 19 (MS-DRGs 876, 880, 881, 882, 883, 884, 885, 886 and 887). 13

14 CY 2011 Hospital Discharge Data Osceola County Adult Residents (age 18 and older) MDC 19 Discharges Osceola Co. Adult MDC 19 Discharge Osceola Co. Adult Patient Days Facility Service Class County Total Percent Central FL Behavioral Hospital Class 3 Orange % 3,839 Circles of Care Class 3 Brevard % 15 Florida Hospital-Orlando Class 1 Orange % 1,173 Lakeside Behavioral Health Care, Inc. Class 3 Orange % 438 South Seminole Hospital Class 1 Seminole % 348 Wuesthoff Medical Center-Rockledge Class 1 Brevard % 42 Total District 7 Hospitals w/licensed Adult Psych Beds % 5,855 Other District 7 Hospitals/Facilities % 530 Other Non-District 7 Hospitals % 1,179 Total Other Hospitals/Facilities % 1,709 Grand Total 1, % 7,564 Source: Florida Center for Health Information and Policy Analysis. As shown in the table above, in CY 2011, 935 or percent of Osceola County residents (aged 18 and over) who received adult inpatient psychiatric service received the service from a District 7 hospital with licensed adult psychiatric beds. The majority of these discharges (596 discharges or percent) were from Central Florida Behavioral Hospital. There were 115 (9.91 percent) Osceola resident discharges from District 7 hospitals that did not have licensed adult inpatient psychiatric beds and 110 residents (9.48 percent) left the district for treatment. The applicant states that Osceola County is projected to have the highest population growth rate in District 7 for the next several years. Also, it is argued that 20 percent of Osceola County residents received care either from a hospital that did not have a developed program of psychiatric care or left the district. The applicant indicates this out-migration and use of hospitals without developed psychiatric programs suggests under-supply which this project is designed to address. In addition, the applicant notes that Osceola County is the sole county in the district that lacks licensed adult inpatient psychiatric beds. 14

15 Availability and Access Per the applicant, the project will increase availability and access to residents in District 7 seeking adult inpatient psychiatric services in that the services will be more widely available by creating a more even distribution of beds throughout the district. Below the applicant provides a table indicating that even with project approval, by 2016 (the second year of operation), Osceola County will have the lowest ratio of adult inpatient psychiatric bed per 1,000 residents (age 18 and over) in District 7 and Osceola s ratio will be lower than the state overall. Adult Psychiatric Inpatient Beds per 1,000 Population Age 18 and Over By County For 2011 and 2016, 2 nd Year of the Project Current Availability Availability After the Project County 2011 Population 18+ Licensed & Approved Beds* Beds per 1, Population 18+ Licensed Beds Beds per 1,000 Brevard 439, , Orange 886, , Osceola 204, , Seminole 328, , District 7 1,858, ,048, Florida 14,931,874 3, ,150,458 3, *Licensed and Approved Beds includes the 24 beds approved under Exemption #E subsequent to the publication of the fixed need pool. Source: CON application #10170, Tab 1-2, page #1-7. The reviewer confirms the above table s 2011 and 2016 population estimates are consistent with the Agency s Population Estimates publication, issued February The reviewer also confirms the table s current licensed and approved bed counts, by county and for District 7, are consistent with the Agency s Florida Hospital Bed Need Projections & Service Utilization by District publication, for the July 2012 batching cycle, issued July 20, 2012, with the addition of 24 adult inpatient psychiatric beds per Exemption # approved subsequent to the publication. The reviewer further confirms that, as the table indicates, by 2016, provided that all licensed beds remain licensed, all approved beds become licensed and no other beds become licensed or approved other than the project s proposed 28 beds, the bed count would be 388 (392 with amended Exemption # s 24 to 28 adult inpatient psychiatric beds). The amended exemption has no impact on Osceola County and minimal impact on the district and state ratio. 15

16 Access Within Osceola County Oglethorpe notes that in calendar year 2011, 20 percent (922 of 1,147 discharges) of Osceola County adult residents received care either from a hospital that did not have a developed program of psychiatric care or left the district. However, residents of the other District 7 counties received psychiatric care or left the district at lower percentages than Osceola County residents who sought inpatient psychiatric care. While Osceola County was 20 percent, Brevard and Orange Counties was 14 percent and Seminole County was 12 percent. Per the applicant, this indicates that residents of Osceola County are proportionately less likely to receive applicable care in a District 7 licensed inpatient psychiatric facility than residents of Brevard, Orange and Seminole. The reviewer notes that Osceola County residents have to leave their home county for inpatient psychiatric care. Demand for both Psychiatric and Substance Abuse Programs Oglethorpe indicates there is often ambiguity over whether a mental condition creates the conditions for substance abuse or whether substance abuse establishes a pattern of disordered thinking that creates a psychiatric problem. The applicant indicates this often leads to a dual diagnosis, which is the primary reason to submit CON applications #10170 and #10171 as companions. Per the applicant, in calendar year 2011, approximately 18 percent of those admitted at authorized psychiatric providers in District 7 (the six hospitals listed in part E.1.a of this report), had a principal diagnosis of substance abuse. Oglethorpe states that South Seminole Hospital is licensed for both adult inpatient psychiatric beds and adult inpatient substance abuse beds and therefore will be more likely to have both types of principal admissions (psychiatric and substance abuse). See the table below. District 7 Psychiatric Providers Treating Principal Diagnoses of Substance Abuse, CY 2011 Facility (MDC 20) Substance Abuse Discharges Facility Total MDC 19 & 20 Discharges Substance Abuse as Percent of Total MDC 19 & 20 D7 Provider Discharges Authorized Psychiatric Providers Central Florida Behavioral Hospital 8 2, % Circles of Care 755 2, % Florida Hospital-Orlando 314 2, % Lakeside Behavioral Healthcare, Inc. 18 2, % South Seminole Hospital 1,368 4, % Wuesthoff Medical Center-Rockledge 372 1, % Total 2,835 16, % Source: CON application #10170, Table 1-4, page #

17 The applicant concludes that approval of both projects will promote treatment for dually diagnosed psychiatric and substance abuse patients. Market Characteristics Oglethorpe indicates that in most psychiatric diagnoses, the preferred clinical course of treatment is medical management, often in group settings. Treatment in the acute care setting (often crisis stabilization), outpatient services and specialty residential programs are reported as not sufficient in and of themselves to adequately accommodate the degree and acuity of psychiatric services available in the inpatient psychiatric setting, as proposed in this project. Oglethorpe concludes that the projects will address the current situation which often leads to fragmented care, with too few contact points for specialty services and a lack of organized post-discharge options. Project Utilization The applicant indicates that the calendar year 2011 Major Diagnostic Category (MDC) 19 use rate by county for District 7 residents age 18 and over was used to forecast demand for psychiatric care. Per the applicant, the District 7 use rate for the period was approximately 6.58, while the Osceola County use rate was approximately 5.08, the lowest reported use rate of District 7 s four counties. In calendar years 2015, 2016 and 2017 (the first three years of operation), Oglethorpe expects an MDC 19 diagnosis case total in Osceola County of 1,545 in year one, 1,594 in year two (see Table 1-6 immediately below) and 1,646 in year three. For the same three years, the applicant expects a District 7 case total of 13,548 in year one, 13,810 in year two and 14,064 in year three (see Table 1-6 below). Below is the applicant s table that shows projected admissions, patient days, occupancy and other related characteristics for the first three years of operation. The applicant s expected MDC 19 admissions/cases in Osceola County and District 7 overall, stated previously, tie in to this table, unless otherwise indicated. 17

18 Projected Utilization for Oglethorpe of Orlando, Inc., First Three Years CY 2015 (Year One) Baseline Expected Expected CY 2011 Market Osceola Oglethorpe ALOS Share Market Admissions District 7 MDC 19 Admissions Oglethorpe Patient Days ADC Occup. County Brevard 3, % Orange 6, % , Osceola 1, % , Seminole 2, % TOTAL 13, , , % District 7 MDC 19 Admissions Baseline CY 2011 ALOS CY 2016 (Year Two) Expected Expected Market Osceola Oglethorpe Share Market Admissions Oglethorpe Patient Days ADC Occup. County Brevard 3, % Orange 6, % , Osceola 1,596* % 1, , Seminole 2, % TOTAL 13,812** 5.7 1,795 1,076 6, % District 7 MDC 19 Admissions Baseline CY 2011 ALOS CY 2017 (Year Three) Expected Expected Market Osceola Oglethorpe Share Market Admissions Oglethorpe Patient Days ADC Occup. County Brevard 3, % Orange 6, % , Osceola 1, % 1, , Seminole 2, % TOTAL 14, ,293 1,345 7, % Source: CON application #10170, Table 1-6, page #1-14. * The reviewer notes this total of 1,596 differs from the total 1,594 found on CON application #10170, Table 1-5, page #1-13. Table 1-5 actually added up to 1,595, so rounding may be the reason for the difference. **The reviewer notes this total of 13,812 differs from the total 13,810 found on CON application#10170, Table 1-5, page #1-13. Rounding is in all likelihood the reason for minor differences. Oglethorpe utilizes the CY 2011 average length of stay (ALOS) days for each county and the district overall in the first three years of operation. The applicant expects its Osceola resident age 18 and over market share to expand from 55.0 percent in year one, to 70.0 percent in year two, and 75.0 percent in year three. Oglethorpe expects its annual patient days and average daily census (ADC) to rise for each of the first three years, as shown in the table. 18

19 No Adverse Impact The applicant anticipates minimal impact on existing providers for two primary reasons adult population growth over the next several years in both Osceola County in particular and District 7 overall and expected corresponding increases in admissions at existing adult inpatient psychiatric providers facilities due to the aforementioned growth. Oglethorpe projects the existing adult inpatient psychiatric providers in District 7 will lose approximately two to three percent market share of MDC 19 admissions from calendar year 2011 to 2017 if the project is approved. However, the applicant contends that the district s projected adult population growth will compensate for the market share loss such that existing providers will actually have more admissions. Below is a table showing the applicant s and existing providers projected first three calendar years MDC 19 adult inpatient psychiatric admissions. The reviewer notes that the applicant s year one, two and three admissions are consistent with its Table 1-6 (immediately above). Projected MDC 19 Adult Psychiatric Admissions by Facility CY MDC 19 Admissions Central Florida Behavioral Hospital Circles of Care Florida Hospital- Orlando Lakeside Behavioral Healthcare South Seminole Hospital Wuesthoff Medical Center- Rockledge Oglethorpe of Orlando Total Year 1 2,459 2,007 2,026 2,082 3,038 1, ,548 Year 2 2,325 2,030 1,978 2,049 3,035 1,319 1,076 13,812 Year 3 2,313 2,046 1,964 2,032 3,035 1,330 1,345 14,064 Distribution 16.4% 14.5% 14.0% 14.4% 21.6% 9.5% 9.6% % Source: CON application #10170, Table 1-8, page # Agency Rule Criteria/Preferences a. Chapter 59C-1.040, Florida Administrative Code, contain factors to be considered in the review of Certificate of Need Applications for hospital inpatient general psychiatric services for adults. 1. Rule 59C-1.040(4)(e) 1, Florida Administrative Code: Applicants shall provide evidence in their applications that their proposal is consistent with the needs of the community and other criteria contained in Local Health Council Plans, the district Alcohol, Drug Abuse and Mental Health Plan, and the State Health Plan. This criterion is no longer applicable. There is no longer a local health council plan or state health plan from which to correlate project proposals. However, the applicant states review of the Florida Department of Children & Families Substance Abuse and 19

20 Mental Health Services Plan: The applicant states its intent to work with the Circuit 9 (Orange and Osceola Counties) regional substance abuse and mental health director to ensure a continuum of care to serve the needs of the community, including both inpatient and outpatient care. 2. Rule 59C-1.040(4)(e) 3, Florida Administrative Code: In order to ensure access to hospital inpatient general psychiatric services for Medicaid-eligible and charity care adults, 40 percent of the gross bed need allocated to each district for hospital inpatient general psychiatric services for adults should be allocated to general hospitals. District 7 Adult Psychiatric Hospitals Licensed Beds Facility Type County Central Florida Behavioral Hospital Freestanding Orange 72 Circles of Care Freestanding Brevard 52 Florida Hospital-Orlando General Orange 59 Lakeside Behavioral Healthcare, Inc. Freestanding Orange 56 South Seminole Hospital General Seminole 46 Wuesthoff Medical Center-Rockledge General Brevard 24 District 7 Total 309 Source: Florida Hospital Bed Need Projections & Service Utilization by District, July 20, As shown above, District 7 presently has 129 of 309 (or percent) of its adult inpatient psychiatric beds in general hospitals. As of June 8, 2012, there were 13 beds approved for South Seminole Hospital and 14 approved for Central Florida Behavioral Hospital. Central Florida Behavioral Hospital licensed the 14 beds effective October 1, 2012 and should South Seminole add its 13 beds prior to licensure of the applicant s project, there would be 142 of 336 or percent of the district s beds in general hospitals. The applicant s project would add 28 beds in a freestanding facility resulting in percent (142/364) of the district s adult psychiatric beds licensed to general hospitals 4. 4 The licensure of University Behavioral Center s 28-bed unit (Exemption #120012), would lower District 7 s ratio of adult psychiatric beds in general hospitals to percent (142/392). 20

21 Oglethorpe notes that the project could reduce the allocation of adult inpatient psychiatric beds at acute care hospitals in District 7 below the 40 percent threshold. However, the applicant points out that acute care hospitals are allowed to add beds without CON review. Further, Oglethorpe believes the project may spur competition, causing growth in what the applicant calls, acute care hospital-based adult psychiatric units. In addition, the applicant states current approvals may not become licensed. Therefore, Oglethorpe contends that this criterion is constantly in flux. The applicant concludes that if all approved beds become licensed beds and the project is approved, adult inpatient psychiatric beds in acute care hospitals in the district would represent 39 percent of total beds which is, close to the target allocation. As a freestanding psychiatric hospital, the applicant states no intent to seek participating directly in the Medicaid program but does state intent to negotiate with Medicaid HMOs. The Florida Medicaid program currently estimates that approximately 85 percent of Medicaid recipients will be covered by managed care programs when the current legislated mandate transition to managed care is complete. 3. Rule 59C-1.040(4)(e) 4, Florida Administrative Code: Regardless of whether bed need is shown under the need formula, no additional hospital inpatient general psychiatric beds for adults shall normally be approved in a district unless the average annual occupancy rate of the licensed hospital inpatient general psychiatric beds for adults in the district equals or exceeds 75 percent for the 12-month period ending six months prior to the beginning date of the quarter of the publication of the fixed bed need pool. District 7 s adult inpatient psychiatric beds experienced percent occupancy during the CY 2011 reporting period. b. Priority Considerations for hospital inpatient general psychiatric services (Rule 59C (5) (i), Florida Administrative Code) (NOTE: All references to child/adolescent psychiatric services are deleted). In weighing and balancing statutory and rule review criteria, preference will be given to both competing and non-competing applicants who: 21

22 1. Provide Medicaid and charity care days as a percentage of their total patient days of total patient days provided by other hospitals in the district, as determined for the most recent calendar year prior to the year of the application for which data are available from the Health Care Board. Per the applicant, District 7 adult inpatient psychiatric providers provided 19.5 percent of total MDC 19 diagnosis patient days to Medicaid recipients in calendar year During the 28-bed adult psychiatric unit s first two years of operation, the applicant expects to have Medicaid HMO patient days of 703 and 1,205, respectively, representing 19.5 percent of total patient days. When taking into consideration both CON applications #10170 and #10171, the applicant expects the 42-bed facility to have Medicaid HMO patient days of 937 and 1,587, in years one and two (17.1 percent of each year s total), respectively. Oglethorpe indicates that 2.2 percent of the district s CY 2011 total MDC 19 patient days were provided to charity care recipients. The 28-bed adult inpatient psychiatric unit is projected to have 115 charity care patient days in year one and 207 in year two, respectively, representing 3.19 percent of year one s and 3.35 percent of year two s total annual patient days. Oglethorpe conditions to the provision of charity care at a minimum of 3.35 percent of total annual patient days for the 28-bed adult psychiatric unit, or 4.36 percent of the 42-bed hospital s total annual patient days. 2. Propose to serve the most seriously mentally ill patients to the extent that these patients can benefit from a hospitalbased organized inpatient treatment program. Per the applicant, the hospital will be equipped to serve the most seriously mentally ill patients, including suicidal patients, patients with acute schizophrenia and patients with severe depression. Oglethorpe states programs will provide care targeted at those for whom outpatient care is not clinically appropriate. 3. Propose to serve Medicaid-eligible persons. The applicant has previously stated that as a freestanding psychiatric hospital, Oglethorpe is restricted by statute from participating directly with the Medicaid program; however, the applicant will negotiate with Medicaid HMOs. 22

23 4. Propose to serve individuals without regard to their ability to pay. Oglethorpe proposes a charity care policy as follows: The hospital will provide charity care to eligible clients in conformance with the Federal Poverty Guidelines 5. The guidelines to apply where there is no compensation and the patient qualifies under one of these two guidelines: Family income for 12 months preceding the determination does not exceed 150 percent Federal Poverty Guidelines, or Hospital charges exceed 25 percent of the patient s annual income and family income does not exceed four times the poverty level. The applicant further indicates plans to provide coverage for Medicaid HMO, self-pay clients and will, offer courtesy discounts for worthy clients who do not meet the aforementioned guidelines but have serious need. As previously stated, Oglethorpe proposes to condition approval to the provision of a minimum of 3.35 percent of the 28-bed adult psychiatric unit s total annual patient days, or 4.36 percent of the 42-bed hospital s total annual patient days to charity care. 5. Agree to be a designated public or private receiving facility. The applicant does not propose to become a Baker Act private receiving facility and includes The Florida Senate Interim Report , issued September 2011 (CON application #10170, Additional Information), as justification for this decision. The reviewer notes that James Shands, President and CEO of Park Place Behavioral Health (Osceola County s existing Baker Act receiving facility), spoke at the public hearing and submitted a letter of support for Oglethorpe s project. 5 The reviewer notes the U.S. Department of Health and Human Services issues federal poverty guidelines each year in the Federal Register and can be found at this website: 23

24 b. Minimum Size of Specialty Hospitals (Rule 59C-1.040(3)(e) Florida Administrative Code). A specialty hospital providing hospital inpatient general psychiatric services shall have a minimum total capacity of 40 beds. The minimum capacity of a specialty hospital providing hospital inpatient general psychiatric services may include beds used for hospital inpatient substance abuse services regulated under Rule 59C-1.041, Florida Administrative Code. The separately organized units for hospital inpatient general psychiatric services for adults in specialty hospitals shall have a minimum of 15 beds (Rule 59C-1.040(5), Florida Administrative Code). The joint companion projects, CON application #10170 and CON application #10171 meet this criterion. c. Access Standard. Hospital inpatient general psychiatric services should be available within a maximum ground travel time of 45 minutes under average travel conditions for at least 90 percent of the district's total population (Rule 59C-1.040(6), Florida Administrative Code). At least 90 percent of District 7 s residents are within 45 minutes under average travel conditions to reach a hospital for inpatient general psychiatric services. The applicant states that over 46,292 of the total 1,818,906 residents of the district lack this access standard. This 46,292 resident count is approximately 2.55 percent of 1,818,906 residents. In summary, the applicant believes the project will improve geographic access for Osceola County residents. d. Quality of Care. 1. Compliance with Agency Standards. Hospital inpatient general psychiatric services for adults shall comply with the Agency standards for program licensure. Applicants who include a statement in their certificate of need application that they will meet applicable Agency licensure standards are deemed to be in compliance with this provision (Rule 59C (7)(a), Florida Administrative Code). Oglethorpe states it will comply with Agency standards for program licensure. 24

25 2. Continuity. Providers of hospital inpatient general psychiatric services shall also provide outpatient services, either directly or through written agreements with community outpatient mental health programs, such as local psychiatrists, local psychologists, community mental health programs, or other local mental health outpatient programs (Rule 59C-1.040(7)(d), Florida Administrative Code). The applicant states intent to provide continuity when patients are discharged from the inpatient setting, with a wide variety of outpatient services. 3. Screening Program. All facilities providing hospital inpatient general psychiatric services shall have a screening program to assess the most appropriate treatment for the patient. Patients with a dual diagnosis of a psychiatric disorder shall be evaluated to determine the types of treatment needed, the appropriate treatment setting, and, if necessary, the appropriate sequence of treatment for the psychiatric and substance abuse disorders (Rule 59C-1.040(7)(e), Florida Administrative Code). Oglethorpe states it has a screening program to assess the most appropriate treatment for each patient, including patients with dual diagnosis of a psychiatric disorder and substance abuse and it will be implemented at the facility. The screening process is stated to include patient assessment, history and physical, nursing assessment, initial psychiatric evaluation, psychological evaluation and activity assessment. e. Services Description (Rule 59C-1.040(8), Florida Administrative Code). An applicant for hospital inpatient general psychiatric services shall provide a detailed program description in its certificate of need application including: 1. Age groups to be served. Oglethorpe proposes to serve adult patients (age 18 and over) including geriatric patients (age 65 and over). 25

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