STATE AGENCY ACTION REPORT ON APPLICATION FOR CERTIFICATE OF NEED

STATE AGENCY ACTION REPORT ON APPLICATION FOR CERTIFICATE OF NEED A. PROJECT IDENTIFICATION 1. Applicant/CON Action Number St. Joseph s Hospital, Inc./CON #9991 3001 West Dr. Martin Luther King Jr. Boulevard Tampa, Florida 33607 Authorized Representative: Isaac Mallah (813) 870-4020 2. Service District/Subdistrict District 6 B. PUBLIC HEARING A public hearing was not held or requested regarding the establishment of an adult psychiatric hospital in District 6. Twenty-four letters of support were submitted as part of the application; however, 19 of these letters were duplicates. Letters of support were received from area physicians, mental health personnel, mental health treatment facilities, and community and state leaders. A majority of the letters discussed the applicant s history of providing quality services and care. Letters from United States Congressman Gus M. Bilirakis, (9 th District, Florida), Mike Fasano, State Senator District 11; John Legg (District 46), Dennis A. Ross (District 64) and Will Weatherford (District 61), Florida House of Representatives; and Thomas B. Fletcher, Manager of Hillsborough County s Veterans Affairs, indicate that Hillsborough

County has a large number of veterans who desperately need the services that the proposed facility would offer. These letters indicate that the proposed psychiatric hospital will have a dedicated program that will focus solely on veterans experiencing behavioral health challenges associated with Post Traumatic Stress Disorder (PTSD). Rose V. Ferlita, Jim Norman and Mark Sharpe; Hillsborough County Commissioners, Tampa Mayor Pam Iorio, and Tampa City Council members Gwendolyn Miller and Mary Mulhern, submitted letters which state that in addition to improving local economies by hiring approximately 80 employees for a total of over three million dollars in salary expense, residents will benefit from the new therapeutic environment designed for the needs of psychiatric patients. These letters indicate that St. Joseph s existing volume of psychiatric patients is expected to be served by the new facility because it will be located only four miles further east. They also indicate there should be no negative impact on the two other Tampa hospitals that provide psychiatric services because the new facility s location is further away from Tampa General and Memorial Hospital of Tampa. The Most Reverend Robert N. Lynch, Bishop of St. Petersburg, and Linda McKinnon, Chief Executive Officer, Central Florida Behavioral Health Network, Inc. cited additional benefits to the community including increased continuity of care between inpatient and outpatient service at one location; an optimal therapeutic environment, expanding support functions, and green spaces. While the current psychiatric facilities at St. Joseph s Hospital are adequate and appropriate, the ability to operate the proposed service in a facility specifically designed and developed to treat psychiatric patients will provide strong service enhancements; and continued ability to serve the psychiatric inpatients needing placement at St. Joseph s Hospital. Inpatient psychiatric services will still be available at the main hospital for those patients who need more medical attention; and more private inpatient rooms for medical or surgical patients available at St. Joseph s Hospital due to the space vacated by the move of psychiatric beds to the new building. Letters of support were also received from John M. Sheehan, MBA, Vice President, Behavioral Health for the BayCare Health System; Julian I. Rice, Chief Executive Officer of Mental Health Care, Inc. and eight health care professionals with St. Joseph s Hospital. These generally cite the quality care provided and benefits of the new facility as cited above. The Agency did not receive any letters of opposition. C. PROJECT SUMMARY 2

St. Joseph s Hospital, Inc. d/b/a St. Joseph s Hospital proposes to establish a 40-bed adult psychiatric hospital. The proposed adult inpatient psychiatric satellite hospital, St. Joseph s Psychiatric Hospital, will be located adjacent to the campus of Mental Health Care, Inc. at 2400 East Henry Avenue, Tampa, in Hillsborough County, District 6, Subdistrict 6-1. The proposed new hospital will be established via the relocation of 40 of St. Joseph s current licensed 42 adult psychiatric beds. Mental Health Care, Inc. is a private not for profit community mental health provider offering a continuum of crisis stabilization and ambulatory mental health services. This site is approximately 4.8 miles from St. Joseph s Hospital. The applicant proposes to condition CON approval to 22.1 percent of the project s annual patient days being provided to Medicaid/Medicaid HMO/charity/indigent patients. The applicant also proposes to condition CON approval to the addition of eight beds to the remaining two adult inpatient psychiatric beds. The applicant states that this will be accomplished by filing for an exemption upon approval and implementation of this project. The proposed project involves a total cost of $8,608,860. Construction costs are projected at $4,993,280 and the project will involve 21,248 gross square feet (GSF) of construction. D. REVIEW PROCEDURE The evaluation process is structured by the certificate of need review criteria found in Section 408.035, Florida Statutes, rules of the State of Florida, Chapters 59C-1 and 59C-2, Florida Administrative Code, and local health plans. 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 best meets the review criteria. Rule 59C-1.010(2) (b), Florida Administrative Code, prohibits any amendments once an application has been deemed complete. The 3

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, Cheslyn Green, analyzed the application in its entirety with consultation from the Financial Analyst, Ryan Fitch, who evaluated the financial data, and the Architect, Scott Waltz, who evaluated the architectural and the schematic drawings as part of the application. 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 408.035, and 408.037; applicable rules of the State of Florida, Chapters 59C-1 and 59C-2, Florida Administrative Code; and Local Health Plans. 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? Rule 59C-1.008(2), Florida Administrative Code. On July 27, 2007, AHCA published a fixed need pool (FNP) in Volume 33, Number 30, Florida Administrative Weekly for zero additional adult inpatient psychiatric beds in District 6. This project is not proposed in response to the fixed need pool. The applicant is constructing a new 40-bed adult inpatient psychiatric hospital by relocating 40 adult inpatient psychiatric beds from its existing facility. 2. 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 children and adolescents. 1. Applicants shall provide evidence in their applications that their proposal is consistent with the needs of the community 4

and other criteria contained in Local Health Council Plans, the district Alcohol, Drug Abuse and Mental Health Plan, and the State Health Plan. The applicant states that this project is consistent with the needs of the community and the plan for mental health services in Hillsborough County maintained by the Department of Children and Family Services. The Department monitors compliance with this plan through an annual survey of facilities in Hillsborough County. Appendix G contained the Department of Children and Families acceptance of the applicant s plan of corrections from the annual Baker Act facility monitoring inspection of March 12, 2007. 2. Rule 59C-1.040(4)(e) 2, Florida Administrative Code: Applications from general hospitals for new or expanded hospital inpatient psychiatric beds for adults shall normally be approved only if the applicant converts a number of acute beds, as defined in rule 59C-1.38, Florida Administrative Code, excluding specialty beds, which is equal to the number of hospital inpatient adult psychiatric beds proposed, unless the applicant can reasonably project an annual occupancy rate of 75 percent for the applicable planning horizon, based on historical utilization patterns, for all acute beds, excluding specialty beds. If the conversion of the number of acute care beds, which equals the number of proposed hospital inpatient general psychiatric beds for adults would result in an annual acute care occupancy exceeding 75 percent for the applicable planning horizon, the applicant shall only be required to convert the number of beds necessary to achieve a projected annual 75 percent acute occupancy for the applicable planning horizon, excluding specialty beds. This criterion is not applicable to the application under review, as the project does not involve the conversion of acute care beds to specialty beds. 3. 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. As of July 27, 2007, District 6 had 228 licensed adult psychiatric beds dispersed among eight facilities. District 6 Adult Psychiatric Facilities 5

Facility Type # Adult Beds Florida Hospital Lake Placid General Hospital 17 Memorial Hospital of Tampa General Hospital 32 St. Joseph s Hospital General Hospital 42 Tampa General Hospital General Hospital 22 Manatee Glens Hospital Freestanding 17 Manatee Memorial Hospital General Hospital 24 Lakeland Regional Medical Center General Hospital 46 Winter Haven Hospital General Hospital 28 Total District 6 228 Source: Florida Hospital Bed Need Projections and Service Utilizations by District, July 2007. Through Exemption (CON Exemption #0400029) Town & Country Hospital will be establishing 20 adult psychiatric beds; and Lakeland Regional Medical Center has nine adult psychiatric beds approved through Exemption #E0500014. Upon implementation of these 29 beds, the district will have 257 total adult psychiatric beds. Should the applicant implement its proposed 40 beds, there would be a total of 257 adult psychiatric beds in the district of which, 57 beds will not be allocated to a general hospital representing a 77.82 percent allocation to general hospitals. Upon approval of the project, St. Joseph s will submit an exemption to add eight adult inpatient psychiatric beds to the remaining two adult inpatient psychiatric beds at the main campus to specifically treat patients with co-occurring acute medical conditions. This would result in a total of 265 beds with 57 not allocated to a general hospital representing a 78.82 percent allocation to general hospitals. Accordingly, this criterion will be maintained with the approval of the proposed project. 4. 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. This criteria is not applicable, the project does not involve the addition of hospital inpatient general psychiatric beds in the district. The proposed project involves the relocation of 40 existing hospital inpatient general psychiatric beds from their current location at St. Joseph s Hospital to a new facility specifically developed to better meet the needs of adult inpatient general psychiatric patients. Upon approval of the project, St. Joseph s 6

will submit an exemption to add eight adult inpatient psychiatric beds to the remaining two licensed adult psychiatric beds; resulting in a 10-bed adult inpatient psychiatric service at St. Joseph s main campus to specifically treat patients with cooccurring acute medical conditions. b. Priority Considerations for hospital inpatient general psychiatric services (59C-1.040(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: 1. Provide Medicaid and charity care days as a percentage of their total patient days equal to or greater than the average percentage of Medicaid and charity care 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. The table below shows the amount of charity care, Medicaid, and HMO Medicaid provided to patients age 18 and older diagnosed with a mental disease or disorder for calendar year 2006 by existing adult psychiatric providers. District 6 Adult Inpatient Psychiatric Beds Percentage of Medicaid, Medicaid HMO, and Charity Care For Calendar Year 2006 Medicaid HMO Charity Care Facility Medicaid Florida Hospital Lake Placid 0.41% 0.02% 0.00% Memorial Hospital of Tampa 3.96% 0.02% 0.00% St. Joseph s Hospital 6.97% 10.61% 1.58% Tampa General Hospital 6.61% 10.23% 0.00% Manatee Glens Hospital 0.00% 9.90% 2.06% Manatee Memorial Hospital 1.89% 0.12% 0.12% Lakeland Regional Medical Center 2.86% 0.31% 0.00% Winter Haven Hospital 7.60% 18.20% 0.25% District 6 Average 4.50% 6.47% 0.60% Source: CY 2006 AHCA statewide patient level database, DRGs 425-432. 7

The applicant states that during 2006 it provided $64.8 million in community benefits including $17.8 million for care to charity care patients, $35.8 million to un-reimbursed costs to Medicaid and county welfare patients where reimbursement levels are below actual costs, $6.0 million in indigent care fund payments, and $5.2 million in unbilled community services. As the chart above shows, St. Joseph s Hospital with Medicaid at 17.58 percent and charity care at 1.58 percent exceeded the district average Medicaid (10.97 percent) and charity care (0.60 percent) for psychiatric inpatient days during CY 2006. 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. The applicant states that it will serve the most seriously mentally ill patients including suicidal patients, patients with acute schizophrenia, and patients with severe depression. 3. Propose to serve Medicaid-eligible persons. The applicant states that it will provide an average of 22.1 percent of total patient days to Medicaid/Medicaid HMO/charity/indigent patients. According to Schedule 7A, the applicant projects Medicaid at 8.40 percent and Medicaid HMO at 9.40 percent of total year two patient days. Schedule 7A notes indicate that charity care is included in the self-pay column and charity care is projected to be 4.3 percent of gross revenues for all three years. The applicant s Schedule 7A patient day projections for years two and three are identical. The applicant states that the proposed project will not have any additional impact on Medicaid since the proposed hospital will not be separately licensed as an inpatient psychiatric hospital. The applicant indicates that because the proposed St. Joseph s Psychiatric Hospital will be listed on St. Joseph s Hospital acute care license, the inpatient adult psychiatric services will be reimbursed as psychiatric services provided in a general acute care hospital. The applicant s projections seem to be reasonable if St. Joseph s will be able to be reimbursed under its current rates. 8

4. Propose to serve individuals without regard to their ability to pay. The applicant states that BayCare Health System will provide charity care to patients that are unable to pay for services due to financial hardship. According to the applicant, two programs are used to qualify patients for charity: 1. AHCA charity meets guidelines established by the State of Florida. 2. Hardship charity meets guidelines established by BayCare Health System and extends beyond expected AHCA charity provisions. The applicant further states that requests for charity can be made before, during, and after a service is provided. As stated above, the applicant states that it will provide 22.1 percent of the 40-bed facility s total annual patient days to Medicaid/Medicaid HMO/charity/indigent patients. Schedule 7A notes indicate that charity care is projected to be 4.3 percent of gross revenues for all three years. 5. Agree to be a designated public or private receiving facility. The applicant states that its proposed facility will be designated as a Baker Act receiving facility. 6. Provide a continuum of psychiatric services for children and adolescents, including services following discharge. The applicant s proposed project does not involve psychiatric services for children or adolescents. As the plans for the proposed adult inpatient satellite hospital indicate, the design allows for future expansion should community need indicate the need for child and adolescent beds at the proposed facility. 9

b. Minimum Size of Specialty Hospitals (Rule 59C-1.040(3)(e) F.A.C.). 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 (59C-1.040(5), Florida Administrative Code). The applicant states the proposed hospital will be licensed as a general hospital, not as a specialty hospital. 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 (59C-1.040(6), Florida Administrative Code). The travel time standard is met as it applies to District 6. 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 (59C-1.040(a), Florida Administrative Code). The applicant states it currently complies with all licensure standards described in Chapter 59A-3 Florida Administrative Code. 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 (59C-1.040(7)(d), Florida Administrative Code). The applicant states that as a BayCare facility, it will provide a broad range of both inpatient and outpatient services through BayCare Behavioral Health (BCBH). BCBH provides a 10

comprehensive continuum of behavioral health treatment services, encompassing traditional inpatient hospital facilities, as well as extensive continuum of ambulatory and community based services. The applicant states that inpatient services include crisis intervention, individual therapy, family therapy, group therapy, medication management, psychosocial evaluation, discharge planning, and coordination of after care 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 (59C-1.040(7)(e), Florida Administrative Code). According to the applicant, it currently provides hospital inpatient general psychiatric services that include and will continue to include the provision of a screening program to assess the most appropriate treatment for the patient. e. Services Description (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. St. Joseph s Hospital s adult inpatient psychiatric service currently treats patients age 18 and older and will continue to do so in its new facility. 2. Specialty programs to be provided. St. Joseph s Hospital will offer the following specialized adult programs: 11

Gender Specific: This type of treatment utilizes known behavioral health difference between men and women, in the design of treatment programming. For both men and women who have suffered trauma as a result of mental, physical and/or sexual abuse, providing psychiatric units separated by gender will provide a safe, predictable, therapeutic environment for treatment and recovery. Trauma/Post-Traumatic Stress Disorder: Evidence-based inpatient treatment approaches will be utilized. Services will include evaluation, education, individual and group therapy, family therapy, medication, and integrated case management. Military Veterans Program: Focuses on the re-integration and recovery of veterans experiencing psychological difficulty with the aftermath of war. This treatment program starts with comfort zone of specialized care for those veterans with diagnosable PTSD and his/her family. Dual Diagnosis Treatment: Dual diagnosis treatment will be provided to patients with diagnoses of a psychiatric disorder, as well as an alcohol or other drug dependence/addiction. The primary modality of treatment will consist of medical detoxification, therapy, education, and activities provided in group settings. 3. Proposed staffing, including the qualifications of the clinical director and a description of staffing appropriate for any specialty program. St. Joseph s Hospital is licensed for 883 beds including 799 acute care beds, 42 adult psychiatric beds, 15 Level II NICU and 27 Level III NICU. Schedule 6 includes the staffing patterns for the 883-bed facility and the new 40-bed facility. The new facility will consist of 79.2 FTE s for the first, second, and third year of operation. The Medical Director of Inpatient Psychiatry is Dr. Nestor E. Milian. Information on Dr. Milian and job descriptions were included in Appendix H of the application. 4. Patient groups by primary diagnosis ICD-9 code that will be excluded from treatment. The proposed St. Joseph s Psychiatric Hospital will treat patients with a wide range of adult psychiatric diagnoses. Pediatric and adolescent treatment services are not included in this proposal though beds may be expanded in the future to include that population. Adult patients who have a primary diagnosis of 12

substance abuse and no co-morbid psychiatric condition will be excluded from admission. 5. Therapeutic approaches to be used. The applicant states that all St. Joseph s Hospital s inpatient psychiatric patients receive the same continuum of services, including: Daily visits from psychiatrists Individual therapy sessions Group therapy sessions Family therapy sessions Psychotropic medication prescription, administration, monitoring, adjustment Consultation with internist up to once per day, if needed Comprehensive psychosocial assessment and discharge planning 6. Expected sources of patient referrals. The applicant states it expects that the greatest source of patient admission will come through the emergency department. A small percentage of individuals will be directly admitted to the psychiatric units by psychiatrists, or will be transferred from St. Joseph s medical floors, or from other area hospitals that do not have psychiatric facilities, or whose units are full. According to the applicant, YTD 2007 (January 1, through September 26, 2007) St. Joseph s Hospital accepted 667 mental health related transports from other hospitals, crisis centers, physician s offices, nursing homes, assisted living facilities, etc. 7. Expected average length of stay for the hospital inpatient general psychiatric services discharges by age group. The applicant anticipates that its average length of stay will be 6.5 days. 8. Projected number of hospital inpatient general psychiatric services patient days by payer type, including Medicare, Medicaid, Baker Act, private insurance, self-pay and charity care patient days for the first two years of operation after completion of the proposed project. 13

The following table relates to the applicant s proposed adult inpatient payer mix: St. Joseph s Psychiatric Hospital Payer Mix Charity 4.3% Other Self-Pay 5.7% Medicaid 8.4% Medicaid HMO 9.4% Medicare 32.9% Medicare HMO 3.5% Managed Care 19.6% Commercial Insurance 14.5% Other 1.7% Source: CON #9991, page 80. The following chart is based on the applicant s Schedule 7A for years one and two of the project. St. Joseph's Psychiatric Hospital Payer Mix by Patient Days Year 1 Ending Year 2 Ending Payer 9/30/2010 9/30/2011 Medicare 4,517 4,783 Medicaid 2,209 2,339 Insurance/Managed Care 4,231 4,480 Self-Pay 1,241 1,314 Source: CON #9991, pages 133 & 134. The applicant does not provide the number of Baker Act patient days in response to this question but does state that the facility will be a Baker Act Receiving Facility. Charity care days are not provided but the applicant indicates that they will account for 4.3 percent of gross revenue for all three years. 9. Admission policies of the facility with regard to charity care patients. The applicant states that the Patient Rights and Responsibilities Policy and Procedure for St. Joseph s Hospital states that patients have the right to receive medical treatment regardless of race, national origin, physical handicaps, or sources of payment All employees are required, as part of their corporate responsibility, to provide care in keeping with patients rights and responsibilities including committing to Deliver care without regard to race, color, creed, national origin, sex, handicap or ability to pay. 14

Appendix E included the BayCare System s charity care policy that the applicant states will be used for the new facility. As previously stated, notes to Schedule 7A indicate that charity care will account for 4.3 percent of gross revenue for all three years. f. Quarterly Reports (59C-1.040(10), Florida Administrative Code). Facilities providing licensed hospital inpatient general psychiatric services shall report to the Agency or its designee, within 45 days after the end of each calendar quarter, the number of hospital inpatient general psychiatric services admissions and patient days by age and primary diagnosis ICD 9 code. The applicant has complied and will continue to comply with all Agency reporting requirements. 4. Statutory Review Criteria a. Is need for the project evidenced by the availability, quality of care, efficiency, accessibility and extent of utilization of existing health care facilities and health services in the applicant's service area? ss. 408.035(2), 408.035(7), Florida Statutes. The applicant proposes to develop a 40-bed inpatient psychiatric hospital in Hillsborough County, District 6. There are a total of 228 adult psychiatric beds in District 6. The occupancy rate for January 2006 through December 2006 was 70.17 percent for adult psychiatric beds in the district. The following table indicates the facilities in District 6 that have adult psychiatric beds and their respective utilization rates for CY 2006: District 6 Adult Inpatient Psychiatric Utilization January 2006-December 2006 Facility County # Adult Beds Adult Patient Days Adult Occupancy Florida Hospital Lake Placid Highlands 17 4,600 74.13% Memorial Hospital of Tampa Hillsborough 32 8,954 76.66% St. Joseph s Hospital Hillsborough 42 13,315 86.86% Tampa General Hospital Hillsborough 22 5,536 68.94% Manatee Glens Manatee 17 3,870 62.37% Manatee Memorial Hospital Manatee 24 4,651 53.09% Lakeland Regional Medical Center Polk 46 10,172 60.58% Winter Haven Hospital Polk 28 7,300 71.43% District 6 Total 228 58,398 70.17% Source: Florida Hospital Bed Need Projections and Service Utilizations by District, published July 27, 2007. 15

The applicant maintains that this new psychiatric hospital will allow St. Joseph s to better serve its existing service area population in need of adult inpatient psychiatric services, while at the same time improve the delivery of services at its existing hospital site through the creation of capacity via the conversion of semi-private rooms to private rooms. The applicant states that this project will ensure that access to and availability of comprehensive health care services will not only be maintained, but also will enhance access and availability in Hillsborough County. The applicant states that as a result of the proposed project, St. Joseph s will provide a total of 50 adult psychiatric inpatient beds: 10 located at St. Joseph s main campus and 40 located at the proposed satellite facility. The 10 adult psychiatric beds at the main campus will be used to care for psychiatric patients who have acute medical concerns. St. Joseph s Psychiatric Hospital will be supported by and work in concert with St. Joseph s Hospital at Martin Luther King Jr. Boulevard (main campus). The applicant states that while the two campuses are approximately 4.5 miles apart by vehicle, wireless technology and high speed data/information transmission will allow them to function seamlessly as one in many service areas such as medical records, laboratory, billing and patient registration/admission. The applicant also asserts that the care provided at the proposed site will be integrated with the programs and services available at St. Joseph s Hospital main campus and will serve as an expansion of the hospital s existing treatment capacity. The applicant contends that the development of the proposed adult inpatient psychiatric hospital adjacent to the campus of Mental Health Care, Inc. will locate St. Joseph s psychiatric services on a site that is more centrally located to the population that tends to more frequently utilize this service. This location also provides greater access to families who want to visit their loved ones as they begin the recovery process. The following table provides data on existing adult inpatient psychiatric area providers and their driving distances and times from the applicant s proposed location: 16

District 6 Adult Inpatient Psychiatric Hospital Data (Location, Beds, Occupancy, Travel in Distance and Miles) % Occup. Adult 01/1/06 to Location Beds 12/31/06 Travel Distance In Miles Travel Distance In Time Facility Florida Hospital Lake Placid Lake Placid 17 74.13% 103.24 1hr 52 min Memorial Hospital of Tampa Tampa 32 76.66% 7.77 14 min St. Joseph s Hospital Tampa 42 86.86% 4.99 10 min Tampa General Hospital Tampa 22 68.94% 6.80 15 min Manatee Glen Hospital Bradenton 17 62.37% 48.85 56 min Manatee Memorial Hospital Bradenton 24 53.09% 46.57 52 min Lakeland Regional Medical Ctr Lakeland 46 60.58% 32.28 37 min Winter Haven Hospital Winter Haven 28 71.43% 48.53 58 min Source: http://www.mapquest.com for Travel Distance Miles & Time. Florida Hospital Bed Need Projections and Service Utilizations by District, published July 27, 2007 for Beds and CY 2006 utilization. As shown above, Memorial Hospital of Tampa and Tampa General Hospital are the closest competitor adult psychiatric providers to the proposed site. Memorial Hospital of Tampa s 32-bed adult averaged 76.66 percent occupancy during calendar year 2006. Tampa General s 22-bed adult-unit averaged 68.94 percent occupancy for the same reporting period. The proposed project involves the relocation of existing beds to a site estimated to be approximately four to five miles from the existing hospital. The applicant states that the Hillsborough County community will greatly benefit from the improved ability to serve psychiatric patients, improved location, improved admissions process, enhanced programs and services, improved facility design, improved service at St. Joseph s Hospital and improved emergency services to be offered by the proposed project. The applicant also states there would be no material adverse impact on existing providers in Hillsborough County. Improved Ability to Serve Psychiatric Patients The applicant states that its inpatient adult psychiatric unit often operates at or above optimal occupancy and it is often difficult to consistently utilize all of its existing capacity, despite the growing need for services. With approval to establish a psychiatric hospital, the applicant will be better equipped to serve its existing client base by focusing on the gender and programmatic patient-specific needs that are currently creating capacity issues at the existing psychiatric unit. 17

Improved Location The proposed adult inpatient psychiatric satellite hospital provides for the relocation of 40 of the 42 licensed existing adult inpatient psychiatric beds to a new facility to be constructed adjacent to the campus of Mental Health, Inc.; the coordinating Hillsborough County agency for Baker Act patients. Therefore, the new hospital will be next door to the central Baker Act assessment unit for Hillsborough County and to other community mental health services such as case management, residential, and outpatient follow-up services. Since the new site will serve as the primary intake area for psychiatric patients, the approval of this project will avoid sending patients through the emergency room and avoid the need for transport of indigent patients needing access to the services of the county funded crisis stabilization center next door. The location of the project and Mental Health, Inc. will reduce and make the transfers of patients significantly easier and save valuable time and resources currently used to transfer between sites. Many patients admitted for psychiatric services at St. Joseph s Hospital are already connected with the community resources involving case managers, short term residential programs, and outpatient therapy groups available through other community services. Improved Admissions Process Currently, psychiatric patients typically enter the St. Joseph s Hospital system through the emergency department. After being checked for serious medical conditions, the patient is cleared and escorted to the psychiatric emergency department which is located in a locked unit adjacent to the main St. Joseph s emergency department. The new psychiatric facility will offer a dedicated psychiatric emergency intake area where patients can walk-up or be transported by emergency services/law enforcement for immediate stabilization of their psychiatric symptoms. Since the proposed adult inpatient psychiatric satellite hospital will be located next door to Hillsborough County s central receiving facility (MHC, Inc.), patients will be able to bypass the acute care hospital emergency room visit, thereby eliminating delays in care. Enhanced Programs and Services The applicant indicates that while the existing St. Joseph s facility is adequate and quality care is provided, the existing inpatient units are located in space originally designed to meet the needs of medical patients. Although the space has been adapted over the years to meet safety requirements, there are limitations to converting acute care space to meet the needs of psychiatric patients. The new psychiatric hospital will allow clinicians to address other conditions and issues, such as gender specific treatment environment and specific clinical intervention for disorders related to trauma/post traumatic stress that the current 18

facilities cannot completely address due to a lack of appropriately designated space. The new facility will offer separate men s and women s progressive treatment units designed to incorporate the unique treatment needs of men and women experiencing a mental health crisis. Improved Facility Design The inpatient/residential areas of the proposed project will include a comfortable, physically-safe treatment environment, with ample green spaces, recovery, recreation, and wellness services, and pleasant family visitation areas. The project will include architectural features involving therapeutic design for psychiatric patients. These design features include: Space for patients to engage socially with family and other care givers, Internal and external areas that are warm and welcoming, Acoustical separation from sources of noise, Easy visual supervision of patients by staff, Central meeting area/living room for staff and patients, Exercise equipment for use when appropriate in plan of care, Outdoor areas and views and, Computer stations for patient use when patient profile and treatment program allow. Service Improvements at St. Joseph s Hospital The space to be vacated will house the existing two adult inpatient psychiatric beds remaining at St. Joseph s Hospital, which will become a 10-bed unit through exemption to add eight adult inpatient psychiatric beds. This new unit s focus will be primarily on treating co-occurring acute medical disorders and frail geriatric patients in a secure treatment milieu modified for psychiatric patients. To ensure the most appropriate level of care is provided for these patients, staffing enhancements will include a higher staff-to-patient ratio, more registered nurses on the unit than would typically be found on an inpatient psychiatric unit, and a wider variety of physician specialists to provide needed services to patients. Improved Emergency Services St. Joseph s emergency department and medical staff will benefit from the reduction in volume of adult psychiatric patients. Only psychiatric cases needing immediate medical attention, as determined by screening at the new hospital location or by EMS, will be seen in the emergency department. b. Does the applicant have a history of providing quality of care and has the applicant demonstrated the ability of providing quality 19

care? ss. 408.035(1)(c), Florida Statutes and Rule 59C-1.031-044, Florida Administrative Code. St. Joseph s is JCAHO accredited and has operated in the greater Tampa community for the past 70 years. The applicant provides a description of BayCare s quality of care and quality programs and initiatives, such as the deployment of a system-wide electronic medical record program. The applicant has had 15 confirmed complaints over the past three years: three for medicine/problem/error/formulary; two plan of care; one patient abuse/neglect; one EMTALA; one patient care; two patients rights; one nursing service; one for patient test management; one infection control, one administrative and one for physical plant. Two of the 15 confirmed complaints were without deficiency. c. What resources, including health manpower, management personnel, and funds for capital and operating expenditures, are available for project accomplishment and operation? ss. 408.037(6), Florida Statutes. This review is for St. Joseph s Hospital, Inc., applying to establish a 40- bed adult psychiatric satellite hospital in District 6, Subdistrict 1, Hillsborough County, Florida. The project will include the transfer of 40 beds from St. Joseph s Hospital s existing 42 psychiatric beds to the satellite. St. Joseph s Hospital will increase its remaining psychiatric beds to 10 following the transfer. The financial impact of the project will include the project cost of $8,608,860 and year two operating costs of $8,774,836. The audited financial statements of the applicant, for the periods ending December 31, 2005 and 2006 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: The applicant s current ratio of 1.6 is below average and indicates current assets are approximately one a half times current liabilities, an adequate position. The ratio of cash flows to current liabilities of 0.6 is slightly below average and an adequate position. The working capital (current assets less current liabilities) of $34.7 million is a measure of excess liquidity that could be used to fund capital projects. The applicant is affiliated with St. Joseph s Health Care Center (HCC) through its affiliation with Catholic Health East. Under HCC s cash management system, the applicant s cash receipts and disbursements are transferred through a centralized cash management account. As a result, a minimal cash balance is shown on the applicant s books for the years ending December 31, 2005 and 2006. According to the audit, the 20

$442 million due from affiliates is primarily the balance of net cash transfers to HCC. This sweeping of cash from the applicant to HCC understates current assets. Overall, the applicant has an adequate short-term position. Long-Term Position: The ratio of long-term debt to net assets of 0.4 is below average and indicates the applicant has excess equity in which it could use to acquire additional debt if needed, a good position. The ratio of cash flow to assets of 4.3 percent is well below average and a weak position. The most recent year had $65.1 million of income from operations, which resulted in an operating margin of 11.5 percent. Overall, the applicant has a good long-term position. Capital Requirements: Schedule 2 indicates the applicant has capital projects totaling $412.2 million. This includes $212 million for St. Joseph s Hospital North which was reviewed in CON #9610 and $156.8 million in CON #9993 which is currently under review. The applicant did not include current maturities of long-term debt of $42.8 million through 2010. In addition, the applicant is projecting a year one and year two combined operating loss of $8.3 million for the project in CON #9993. The applicant would have to fund the operating losses in addition to the capital projects listed on Schedule 2. Available Capital: Funding for this project will come from the applicant. Operating cash flows for the most recent year was $33.1 million. As discussed above, working capital is $34.7 million. The applicant provided a letter dated October 10, 2007, from Morgan Stanley indicating that it is highly confident that the applicant will be able to financing the debt portion of CON #9993 ($60 million) with tax-exempt revenue bonds. In our review of CON #9610 we found that the applicant had the financial resources to fund the St. Joseph s Hospital North project which included a $38 million tax exempt bond issue. As discussed above, the applicant has a due from affiliates amount of $442 million which primarily consists of excess cash swept to the cash management account that could be used to fund the capital budget. In addition, the applicant has a beneficial interest in St. Joseph s Hospital of Tampa Foundation, Inc. in the amount of $7.2 million. 21

CON #9991 - St. Joseph's Hospital, Inc. 12/31/06 12/31/05 Current Assets $92,050,000 $89,124,000 Cash and Current Investment $356,000 $203,000 Due from Affiliates $442,056,000 $387,644,000 Beneficial Interest in Foundation $7,175,000 $7,151,000 Total Assets $767,005,000 $709,025,000 Current Liabilities $57,365,000 $54,017,000 Total Liabilities $274,548,000 $279,795,000 Net Assets $492,457,000 $429,230,000 Total Revenues $565,352,000 $553,649,000 Interest Expense $10,179,000 $10,693,000 Excess of Revenues Over Expenses $65,106,000 $53,469,000 Cash Flow from Operations $33,144,000 $38,292,000 Working Capital $34,685,000 $35,107,000 FINANCIAL RATIOS 12/31/06 12/31/05 Current Ratio (CA/CL) 1.6 1.6 Cash Flow to Current Liabilities (CFO/CL) 0.6 0.7 Long-Term Debt to Net Assets (TL-CL/NA) 0.4 0.5 Times Interest Earned (NPO+Int/Int) 7.4 6.0 Net Assets to Total Assets (TE/TA) 64.2% 60.5% Operating Margin (ER/TR) 11.5% 9.7% Return on Assets (ER/TA) 8.5% 7.5% Operating Cash Flow to Assets (CFO/TA) 4.3% 5.4% Staffing: Schedule 6A shows 79.2 FTEs for years one through three. This number reflects the staff that will be added if this project is approved. The FTE s are as follows: RN s 30.4 FTE s, LPN s 2.6 FTE s, mental health techs 13.8 FTE s, case managers 3.5 FTE s, dietary supervisor 1.5 FTE s, dietary aides 2.5 FTE s, and medical director 0.9 FTE. The applicant currently has 3572.2 FTE staff. While the applicant indicates St. Joseph s Psychiatric Hospital will receive direct support services from St. Joseph s Hospital and will be staffed by St. Joseph s Hospital and BayCare employees, it does not provide a discussion of employee recruitment and retention policies. 22

Conclusion: Funding for this project should be available as needed. Funding for the entire capital budget is dependent in part on the applicant acquiring the debt financing as discussed in CON #9993. d. What is the immediate and long-term financial feasibility of the proposal? ss. 408.037(8), Florida Statutes. A comparison of the applicant s estimates to the control group values provides for an objective evaluation of financial feasibility, (the likelihood that the services can be provided under the parameters and conditions contained in Schedules 7 and 8), and efficiency, (the degree of economies achievable through the skill and management of the applicant). In general, projections that approximate the median are the most desirable, and balance the opposing forces of feasibility and efficiency. In other words, as estimates approach the highest in the group, it is more likely that the project is feasible, because fewer economies must be realized to achieve the desired outcome. Conversely, as estimates approach the lowest in the group, it is less likely that the project is feasible, because a much higher level of economies must be realized to achieve the desired outcome. These relationships hold true for a constant intensity of service 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. This application is for a 40-bed freestanding adult psychiatric hospital. Based on the applicant s projected average length of stay of 6.5 days, the applicant will be compared to hospitals in the short-term psychiatric hospital group (Group 13). A case mix of 0.6514 was calculated for the age 18 and above psychiatric discharges (MDC 19) in Hillsborough County in 2005. Per diem rates are projected to increase by an average of 3.5 percent per year. Inflation adjustments were based on the new CMS Market Basket, 2nd Quarter, 2007. Gross revenues, net revenues, and costs were obtained from Schedules 7 and 8 in the financial portion of the application. These were compared to the control group as a calculated amount per adjusted patient day. Projected net revenue per adjusted patient day (NRAPD) of $694 in year one and $736 in year two is between the control group median and highest values of $474 and $909 in year one and $488 and $934 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. A review of the projected increase in NRAPD from year 23

1 to year 2 indicates an increase of six percent. This is well above the CMS Market Basket inflation rate and indicates that net revenues may be overstated. The applicant proposed a condition of 22.1 percent of the satellite s patient days will be provided to Medicaid, Medicaid HMO, and charity/indigent patients. A review of the 2006 psychiatric discharge data indicates that Hillsborough County only had 12.74 percent patient days for Medicaid, Medicaid HMO, and charity/indigent patients. However, St. Joseph s existing share of these patients represented 19.72 percent of psychiatric patient days. This level is still below the condition proposed and indicates that the applicant will have to increase its share of Medicaid, Medicaid HMO, and charity/indigent days beyond its current level. Anticipated cost per adjusted patient day (CAPD) of $660 in year one and $654 in year two is between the group median and highest values of $515 and $901 in year one and $530 and $926 in year two. The highest level is generally viewed as the practical upper limit on efficiency. With anticipated cost between the median and highest value in the control group, the year two cost appear reasonable. The applicant is projecting a slight decrease in CAPD between year one and year two. The applicant is projecting an increase in occupancy from 85 to 90 percent between year one and year two. It would not be expected that this relatively small increase in occupancy between year one and two would result in lower costs through economies of scale. However, the applicant is projecting no change in patient staffing between year one and two (generally a variable cost). This is not unreasonable considering that 85 percent is virtually full operational capacity. The year two projected operating profit for the project of $1.1 million computes to an operating margin per adjusted patient day of $81 which is above the control group highest value of $64. The apparent overstatement in NRAPD has resulted in a margin above the group highest value. Only one hospital in the group has an operating margin as measured in percentage greater than the applicant s projected operating margin percentage. Considering the high occupancy of St. Joseph s existing psychiatric beds and the support of St. Joseph s Hospital, this project appears to be financially feasible; although the actual level of expected profitability is likely overstated. Considering the high occupancy of St. Joseph s existing psychiatric beds and the support of St. Joseph s Hospital, this project appears to be financially feasible. 24