STATE AGENCY ACTION REPORTahca.myflorida.com/MCHQ/CON_FA/Batching/pdf/9941.pdf · 2006-12-13 ·...

STATE AGENCY ACTION REPORT

ON APPLICATION FOR CERTIFICATE OF NEED

A. PROJECT IDENTIFICATION 1. Applicant/CON Action Number

Promise Healthcare of Florida IX, Inc./CON #9940 999 Yamato Road, Suite 300 Boca Raton, Florida 33431-4403 Authorized Representative: Peter R. Baronoff (561) 869-3100 Kindred Hospitals East, L.L.C./CON #9941 680 South Fourth Street Louisville, Kentucky 40202 Authorized Representative: Bud Wurdock (502) 596-7718 Select Specialty Hospital – St. Lucie, Inc./CON #9942 2021 Church Street Nashville, Tennessee 37203 Authorized Representative: Greg Sassman (615) 284-6716

2. Service District District 9 (Indian River, Okeechobee, Martin, St. Lucie, and Palm Beach Counties)

B. PUBLIC HEARING A public hearing was not held or requested with regard to the establishment of the proposed long-term care hospitals in District 9. Letters of support were submitted as follows:

CON Action Numbers: 9940, 9941 & 9942

Promise Healthcare of Florida IX, Inc. (CON #9940) submitted two letters of support for its project. However, these letters were not current, having been signed in September 2005. The writers of these two letters, the chief executive officers (CEOs) of Lawnwood Regional Medical Center and St. Lucie Medical Center, also submitted letters of support for each of the co-batched applicants. These letters are relatively similar in content and attribute need for the proposed project to several factors: the lack of a long-term hospital in St. Lucie County; challenges specific to an aging population; the need for readily reachable access; a reluctance to change physicians; and conditions of the patients. It is noted that the discharge and transfer of a medically instable patients from an acute care hospital to a post-acute provider would need to be justified by the discharging physician. Instable patients are not typically discharged and transferred to post-acute providers, even other hospitals like LTCHS or Rehabilitation hospitals. It is further noted that doctors often do not follow patients to post-acute settings for a variety of reasons including the doctor for the acute episode is a specialist or a hospitalist. Data reported to the Agency in CY 2005 shows that 190 Palm Beach County, Indian River, Martin and St. Lucie County residents traveled outside of District 9 to receive LTCH services. Data further show that of the 190 District 9 residents who traveled in 2005 to receive LTCH services, 12 residents were from Martin County, 39 were from St. Lucie County, 11 were from Indian River County and six were from Okeechobee County. The majority of these 190 District 9 residents, 182 patients, traveled to one of the two Kindred District 10 (Broward County) LTCHs. District 10 is a greater distance from the northern parts of District 9 than Palm Beach County where two LTCHs have been approved to be located. Kindred Hospitals East, L.L.C. (CON #9941) submitted approximately 44 letters of support for the project to establish a long-term care hospital (LTCH) in District 9, the majority of which appeared to be various form letters. Nine of the 44 were not dated. Thirteen were not current, five having been signed in October 2005 and eight having been signed in September 2005. Twelve of the 44 were submitted by the same supporters and were either appreciably exact or near-exact as those previously signed. These letters were reasonably similar in content and attributed need for the proposed project to all or most of the following characteristics: traveling distance; the reluctance to change doctors; the limited number of facilities willing to accept medically complex patients; and the unstable conditions of the patients. It is noted that although these form letters were more than likely developed and sent to area health care providers by Kindred, the discharge and transfer of a medically instable patients from an acute care hospital to a post-acute provider would need to be justified by the discharging physician.

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CON Action Number: 9940, 9941 & 9942

Instable patients are not typically discharged and transferred to post-acute providers, even other hospitals like LTCHS or rehabilitation hospitals. It is further noted that doctors often do not follow patients to post-acute settings for a variety of reasons including the doctor for the acute episode is a specialist or a hospitalist. Of the 32 net letters submitted, three letters were received from Lawnwood Regional Medical Center. Lawnwood’s CEO supported both the remaining two applicants co-batched with Kindred. The St. Lucie Medical Center CEO also supported this applicant. Eighteen of the net form letters were signed by case managers. Case managers from Raulerson Hospital filled in a blank space to identify “more than 40” patients they believed would have benefited from LTCH care. The reasons listed as part of the form letter for not being transferred to the existing District 10 Kindred LTCHs was as follows: distance; reluctance to change physicians; or medical instability. Distance and change in physicians will clearly be a lesser consideration, once District 9 LTCHs are operational. It is not clear there would be justification for transfer of more than 40 “instable” patients. Ten letters were submitted by physicians in District 9. Of these 10 physician letters, six identified as few as two to as many as 150 that might have benefited from LTCH services. These physicians did not describe how care was given or what treatment option was selected. They did not include any reference to planned LTCH facilities in District 9 or how this could influence treatment options. Three of these 10 physicians stated that transport of medically complex/unstable patients in excess of an hour’s drive was a factor in not transporting them to District 10 facilities. It is noted that, per MapQuest, the driving time from Port St. Lucie to West Palm Beach is 53 minutes and again there is some questions about how many “unstable” patients would have actually been discharged and transferred to a LTCH because this type of action requires physician justification. Three physicians indicated “many” patients would have benefited. None of the physician letters offered the period of time within which these patients were identified. Therefore, it might have been between two and 150 over a year’s time or over 10 years’ time. Further, none of the physician letters acknowledged the approval of two new LTCHs for District 9. Select Specialty Hospital - St. Lucie, Inc. (CON #9942) submitted 67 letters of support; however, three of the 67 were by the same individual, resulting in a net support letter count of 64. Of the net support letters, support was offered regarding other counties in districts other than District 9, specifically Broward County and Brevard County were referenced repeatedly. It is noted that 27 of the net 64 support letters were submitted by faculty of Nova Southeastern University (Broward County) in support of a long-term care hospital in Broward County

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(District 10 not 9). Two of the net 64 were complimentary correspondence from former health care recipients or family members. The majority of all the letters were of a form letter variety. Of the letters dated, none were current; the most recent letters were dated October 17, 2005, the oldest letters were dated August 14, 2003. Twelve of the letters were not dated at all. There are two CON approved but not yet opened LTCHs in District 9. The Agency last understood that both CON holders plan to build in Palm Beach County. Either may choose to build in any county within District 9. None of the physician letters acknowledged approval of the two new LTCH facilities in the district. As noted above, several writers believe that patients are unlikely to travel for LTCH services. However, as shown below, 190 District 9 patients traveled for LTCH services in 2005. With the approval of two LTCH hospitals to serve this district, patients are expected to have reduced travel times once the two LTCHs become operational.

District 9 LTCH Discharges by Discharging Facility - 2005 AHCA ID 100016 100196 100115 23960043 100120 100042 23960028

Facility

Kindred Hospital

North Florida

Specialty Hospital

Jacksonville

Kindred Hospital Tampa

Select Specialty Orlando

Kindred Hospital - Fort

Lauderdale

Kindred Hospital

Hollywood

Select Specialty Hospital -

Miami County Total

District 4 4 6 7 10 10 11 County Clay Duval Hillsborough Orange Broward Broward Dade Indian River 10 1 11 Martin 1 1 10 12 Okeechobee 6 6 Palm Beach 1 1 1 111 8 122 Saint Lucie 1 35 3 39 Total District 9 1 1 2 2 172 11 190 Source: Florida Center for Health Information and Policy Analysis

C. PROJECT SUMMARY

Promise Healthcare of Florida IX, Inc. (CON #9940), a wholly owned subsidiary of Promise Healthcare, Inc. (Promise), proposes to construct a freestanding 40-bed LTCH to be located in St. Lucie County, District 9.

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This includes an eight-bed intensive care unit. Three potential sites in or near Port St. Lucie were identified in aerial photographs provided in Attachment K as possible locations for the LTCH. According to the applicant, the parent corporation is the licensee and operator of 11 LTCHs and one short-term acute care hospital located in six states, with a total bed count of 653. The applicant does not own or operate a facility in Florida. Promise has submitted four proposals in the current review cycle to develop LTCHs within the State of Florida. These involve proposals in Districts 3, 9, 10 and 11. The proposed hospital is planned to be 47,951 gross square feet (GSF) of new construction. The applicant indicates the facility would be comprised of all private rooms. Total construction cost is estimated to be $10,170,405 and total project cost is $22,469,7871. As a condition of approval, the applicant agrees to a combined provision of two percent of patient days to Medicaid and charity patients. Kindred Hospitals East, L.L.C. (CON #9941), a wholly owned subsidiary of Kindred Healthcare, Inc. (Kindred), proposes to construct a 50-bed freestanding LTCH to be located in St. Lucie County, District 9. Of the 50 beds, 10 are to be for intensive care and 40 as private rooms. The applicant gave no specific information relative to the proposed site location in District 9, other than it would be in St. Lucie County. It is noted that the applicant is already approved to establish a 70-bed LTCH in District 9 under CON #9662. The applicant (Kindred) indicates that it owns and operates 23 long-term care hospitals, including freestanding as well as hospitals within hospitals (HIH). This includes seven freestanding hospitals and one HIH in Florida. Kindred’s eighth and most recently licensed facility in Florida is a 31-bed HIH in Ocala, District 3. The applicant has submitted one additional proposal for the current review cycle to develop an LTCH. This proposal is a 60-bed facility in District 11. The proposed project is planned to be 59,400 GSF of new construction, consisting of 40 private rooms. The total construction costs are estimated to be $18,768,925 with total project costs of $30,436,872. As a condition of approval, the applicant agrees to a combined provision of 2.5 percent of its total patient days to Medicaid and charity patients starting with the second year of operation.

1 The applicant stated total project costs of $22,469,787 on both Schedules A and 1. However, the architectural schedule showed total costs of $22,469,788.

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Select Specialty Hospital - St. Lucie, Inc. (CON #9942), a wholly owned subsidiary of Select Medical Corporation, proposes to establish a 44-bed freestanding LTCH to be located in District 9, St. Lucie County. The applicant indicates that the proposed facility would be located near Lawnwood Regional Medical Center, which is in Fort Pierce, St. Lucie County. It is noted that the applicant is already approved to establish a 60-bed LTCH in District 9 under CON #9661. According to the applicant, Select Medical Corporation currently has 96 long-term care hospitals spread over 26 states; of the 96 hospitals, three are in Florida. The operational facilities in Florida are located by district as follows: Miami-Dade County -Miami, District 11; Orange County - Orlando, District 7; Bay County – Panama City, District 2. In addition to the approved facility in District 9, Select Specialty has approved CONs to open a 54-bed LTCH in District 1, a 29-bed LTCH in District 2, a 31-bed LTCH in District 3, and a 40-bed LTCH in District 7. On November 19, 2004, Select Medical Corporation announced that it signed an agreement to acquire and merge with SemperCare, Inc., and as a result of this transaction obtained the Panama City and Orlando LTCHs, assuming operation of these around February 1, 2005 and changing the facilities names effective March 15, 2005. Select Medical Corporation has submitted four proposals in the current review cycle to develop LTCHs in Districts 3, 9, 10 and 11. The proposed hospital will consist of 51,160 gross square feet of new construction with construction cost of $12,790,000. The 44-bed facility would be comprised of all private rooms. The total project cost is estimated to be $21,660,056. The applicant proposes to condition award of the certificate of need on the provision of a combined 2.8 percent of the facility’s patient days to Medicaid and charity patients.

D. REVIEW PROCEDURE

The evaluation process is structured by the certificate of need review criteria found in Section 408.035, Florida Statutes. These criteria form the basis for the goals of the review process. The goals represent desirable outcomes to be attained by successful applicants who demonstrate an overall compliance with the criteria. Analysis of an applicant's capability to undertake the proposed project successfully is conducted by assessing the responses provided in the application, and independent information gathered by the reviewer.

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Applications are analyzed to identify strengths and weaknesses in each proposal. If more than one application is submitted for the same type of project in the same district (subdistrict), applications are comparatively reviewed to determine which applicant best meets the review criteria. Chapter 59C-1.010(2)(b), Florida Administrative Code, allows no application amendment information subsequent to the application being deemed complete. The burden of proof to entitlement of a certificate-of-need 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 Lloyd Tribley, who evaluated the financial data and the architect Scott Waltz, who evaluated the architecturals 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 criteria and application content requirements found in Florida Statutes, Sections 408.035 and 408.037 and applicable rules of the State of Florida, Chapter 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? Ch. 59C-1.008, Florida Administrative Code.

Need is not published by the Agency for long-term care hospital (LTCH) beds. It is the applicant’s responsibility to demonstrate need. A long-term care hospital is defined as a hospital licensed under Chapter 395, Florida Statutes, which meets the requirements of Part 412, subpart B, paragraph 412.23(e), Code of Federal Regulations; seeks exclusion from the acute care Medicare prospective payment system for inpatient hospital services and is usually the most costly post-acute care setting. These higher costs are attributed, at least in part, to medically complex patients that require prominently higher usage rates of advanced medical technology devices (the highest single LTCH diagnostic related group [DRG[ being respiratory system diagnosis with ventilator support), notably higher nursing-hours-to-patient ratios and more frequent if not daily physician-to-patient visits than would be characteristic in facilities that provide a lesser acuity of care. For

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example, according to the Medicare Payment Advisory Commission (MedPAC) in fiscal year 2004, for patients with the most common LTCH diagnosis, Medicare rates for LTCHs range from 0.9 to 4.4 times as much as estimated rates for inpatient rehabilitation facilities, and about three to almost 12 times as much as estimated rates for skilled nursing facilities. The MedPAC is a commission that makes recommendations to Congress and the Secretary of the federal Department of Health and Human Services (DHHS) regarding reimbursement for long-term hospital services. Medicare is the primary payer for LTCH services. Under the current reimbursement system, Medicare reimbursement accounts for case-mix differences between patients, but does not account for differences within each case-mix category and therefore provides an incentive to LTCHs to admit patients with the least need for resources among those in the same diagnostic group. MedPAC determined in its 2006 review, that in 2004, 73 percent of all LTCH discharges were reimbursed by Medicare. As the Medicare program is paying for much of LTCH care in the United States, the Commission made several recommendations to the Centers for Medicare and Medicaid (CMS) in its 2006 Report to Congress: • CMS should define LTCHs by facility and patient criteria to ensure

patients admitted to LTCHs are medically complex and have a good chance of improvement.

• CMS should use quality improvement organizations to review LTCHs for admissions for medical necessity and monitor whether facilities comply with criteria established under its first recommendation. This measure is particularly needed because without admissions standards, there is no real way to measure quality of care under the current admission system. For example, an increase in admissions and a decrease in the number of patients dying in the LTCH or readmitted to an acute hospital cannot suggest improved quality of care as the LTCH may have been admitting healthier patients during the time frame measured.

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The 2006 MedPAC report indicated that implementation of these recommendations was “urgent” as it found that 29 percent of the 1,400 randomly selected LTCH Medicare admissions in 2004 did not need hospital-level care.2 After its study, the Commission concluded that LTCHs could accommodate the cost of caring for Medicare beneficiaries in 2007 without an increase in the base rate. MedPAC made essentially the same recommendation regarding facility and patient admission criteria and quality improvement organizations in its June 2004 report to Congress. In that report, MedPAC further recommended the following: Facility-level criteria should characterize this level of care by features

such as staffing, patient evaluation and review processes, and mix of patients.

Patient-level criteria should identify specific clinical characteristics and treatment modalities.

Quality improvement organizations should be required to review long-term care hospital admissions for medical necessity and monitor that these facilities comply with defining criteria.

These recommendations were made based on the commission’s findings that this type of post-acute care is provided to a small number of medically complex patients and that acute care and skilled nursing facilities are the principle alternatives to LTCHs. Additionally, that LTCH patients cost Medicare more than similar patients using alternative settings, however when LTCH care is targeted to patients of the highest severity, the cost is comparable. It is noted that in response to the Commission’s 2004 recommendations, CMS contracted with Research Triangle Institute International to examine the feasibility to implementing those recommendations. As of this writing, there has been no report published from the Research Triangle Institute International. On September 28, 2006, CMS published a policy council document3 regarding a post-acute care reform plan, stating that it is a plan to improve Medicare's payment for post-acute care services and the coordination of these services. The plan reviewed current industry practices and established overarching principles and a vision for post-

2 The 2006 MedPAC Report to Congress references the written testimony of John Votto of the National Association of Long-Term Hospitals before the Committee on Ways and Means, Subcommittee on Health, U.S. House of Representatives, 109th Congress, 1st session, June 16, 2005. 3 http://www.cms.hhs.gov/SNFPPS/Downloads/pac_reform_plan_2006.pdf

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http://www.cms.hhs.gov/SNFPPS/Downloads/pac_reform_plan_2006.pdf


acute care reform. Post-acute care is care that is provided to individuals who need additional help recuperating from an acute illness or serious medical procedure. The four post-acute care settings discussed in the document were: skilled nursing facilities, home health, long-term care hospitals and inpatient rehabilitation facilities, which in Florida are called comprehensive medial rehabilitation services or hospitals. CMS notes in the document that there are mandated assessment tools in place for three of the four provider types, with LTCHs being the service without a mandated assessment tool. CMS states a vision for a post-acute care system that is organized around the individual’s needs, rather than around the setting where care is delivered and is in the process of evaluating assessment tools to that end. For example, the document indicates that CMS currently has activities underway with regard to pay-for-performance for both the home health and SNF settings, indicating that “nursing homes will be offered financial incentives to provide high quality care and/or to improve the level of care that they provide.”4 The document acknowledges the family’s role in recovery but it would be premature to interpret that to mean LTCHs, like nursing homes, should be available within close proximity of any community as cost will be a factor in any determination made by CMS and skilled nursing care at one time provided a higher level of services than is currently being provided and may again be able to care for more medially complex, higher acuity patients should this “pay-for-performance” reimbursement be available. This document appears to indicate that reimbursement will again be offered to skilled nursing facilities to provide that higher level of service and that a common assessment tool for all four post-acute care venues will be developed to ensure the most appropriate care is received. CMS concludes that “[E]economic incentives resulting from the intricacies of the four separate payment systems interfere with the PAC (post-acute care) placement decisions being made on a patient-centered basis.”5

In its June 2004 report, MedPAC also looked at the role long-term care hospitals play in providing care and determined that most LTCH patients are discharged to the LTCH from an acute care facility and that a small number are medically complex, more stable than patients in an acute care intensive care unit, but still have complex medical conditions. These complex conditions typically include need for ventilator support for respiratory problems including tracheotomy diagnosis, failure of two or more major organ systems, neuromuscular damage, contagious infections, or complex wounds that need extended care.

4 Ibid, page 4. 5 Ibid

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In this comparative batch review, the three co-batched applicants have each described their respective patient populations as “medically complex” and indicated they were high acuity patients. As noted by MedPAC, some portion of LTCH patients nationwide can be described in the way the co-batched applicants have described their respective patient populations, while others are of a lesser acuity level and could be treated in another post-acute care setting. As discussed below, it is the burden of any CON applicant applying outside of a state published fixed need pool to define its patient population and base need projections on that defined patient population. If, as here, the applicant proposes to serve a medically complex, high acuity patient population, then need projections should clearly identify that population and the medically complex and high acuity population should be the only target. In its 2004 report, MedPAC also indicated that it studied where clinically similar patients, who lived in areas with no LTCHs received care and found the following: Patients transferred to LTCHs have shorter acute care stays by

approximately seven days, suggesting that when there is no LTCH in an area that patients might stay an additional seven days on average in an acute care facility.

Freestanding skilled nursing facilities are the primary alternative to LTCH care.

Even when there is no LTCH in an area, some patients needing this service travel to receive it.

Between seven and eight percent of patients with the highest probably of using LTCHs used rehabilitation hospital services in markets both with and without LTCHs.

Several facility and patient criteria recommendations were made in the report involving clinical characteristics of the patient, minimum staffing levels based on patient characteristics including patient mix and severity levels, admission assessment tools, physician availability, length of stay and multidisciplinary team requirements. Because these parameters have not been assigned, MedPAC concludes that the role of LTCHs is unclear. The need for assigned facility and patient criteria was underscored by a medical records review identified by MedPAC in which of the 1,400 randomly selected LTCH Medicare admissions in 2004, 29 percent did not need hospital care. Additionally, it appears from the September 28, 2006 policy council document, CMS will be reviewing and developing a “uniform” assessment tool that will address admissions and

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that can be used to evaluate quality of care for all four post- acute care settings. Currently, CMS has the MDS 2.0 for skilled nursing facilities, the IRF-PAI for rehabilitation facilities and OASIS for home health care, but has no tool for LTCHs. The report further suggests that if its recommendations are developed, a facility that typically serves one primary hospital will need to broaden its base presumably because it will not have sufficient patient volume otherwise. As noted earlier, an applicant for LTCH services must define its patient population. Medicare is identified by each co-batched applicant as it primary payer. Unlike what is used by CMS for other post-acute care providers, CMS does not have an accepted assessment tool for LTCH services and government evaluators have found some portion of LTCH admissions do not meet the patient profile described by each of the three co-batched applicants as the population it intends to serve. Of interest in this review is MedPAC’s note that two-thirds of the LTCHs in the United States are owned by two chains – Kindred Healthcare and Select Medical. Therefore, MedPACs findings relative to patient admissions not meeting the profile described by all three applicants is of particular interest in this review. Given the above, it is important that the determination of specific clinical complexity and clinical instability along with severity of conditions and multi-morbidities of patients being served in LTCHs be identified and that the establishment of a LTCH does not represent a more costly and possibly duplicative post-acute care option. It is further important that appropriate staff be identified and that sufficient patient volume-based on need for services be demonstrated.

b. Determination of Need.

In the absence of agency policy regarding long-term care hospital beds and services, Chapter 59C-1.008 (2)(e), Florida Administrative Code, provides a needs assessment methodology which must include, at a minimum, consideration of the following topics, except where they are inconsistent with the applicable statutory or rule criteria: a. Population demographics and dynamics; b. Availability, utilization and quality of like services in the district,

subdistrict or both; c. Medical treatment trends; and d. Market conditions.

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The existence of unmet need will not be based solely on the absence of a health service, health care facility, or beds in the district, subdistrict, region or proposed service area. At present, there are 14 long-term care hospitals (LTCHs) with 876 beds licensed to operate in the State of Florida. There are an additional 482 approved, but not yet licensed LTCH beds in nine facilities. The following table illustrates the distribution of approved, but not yet licensed LTCH beds in Florida.

Florida Approved-Not Yet Licensed Long-Term Care Hospital Beds Hospital District Beds Select Specialty Hospital - Escambia, Inc. (CON #9800) 1 54 Select Specialty Hospital – Tallahassee (CON #9644) 2 29 Select Specialty Hospital - Alachua, Inc. (CON # 9704) 3 44 Kindred Hospital - North Florida (NF 0400074) 4 20 University Community Hospital, Inc. (CON # 9754) 5 50 Baycare Long Term Acute Care, Inc. (CON # 9753) 5 48 Select Specialty Hospital – Orange (CON # 9654) 7 40 Select Specialty Hospital - Lee, Inc. (CON #9656) 8 60 Kindred Hospitals East, LLC (CON # 9662) 9 70 Select Specialty Hospital – Palm Beach, Inc. (CON # 9661) 9 60 Select Specialty Hospital – Miami, Inc. (NF 0600005) 11 7 Total 482

Source: Florida Hospital Bed Need Projections & Service Utilization by District published 07/28/06. As shown in the table above, there are 482 approved, but not yet licensed LTCH beds distributed throughout Florida in Districts 1 – 5, 7 – 9 and 11. There are two LTCHs approved in District 9 with a total of 130 beds. LTCHs may add any number of beds to an existing facility, outside of CON review. The average occupancy of the operational programs reporting utilization was 64.70 percent for the January - December 2005 reporting period. LTCH programs in operation for the total 12-month reporting period, ranged in occupancy from a low occupancy rate of 55.48 percent for Specialty Hospital Jacksonville (District 4) to a high of 95.1 percent for Select Specialty Hospital-Miami (District 11). As shown above, the Select Miami facility has notified the Agency of its intent to add seven LTCH beds. Calendar year 2005 occupancy represents a downward trend in LTCH occupancy over the past five years. The following chart shows statewide occupancy by year for the past five years.

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Statewide LTCH Occupancy

2001-2005

2001 75.93% 2002 76.84% 2003 68.17% 2004 67.14% 2005 64.70%

Source: Florida Hospital Bed Need Projections & Service Utilization by District published 07/28/06.

The decline is due in some measure to there being new facilities experiencing start-up periods, which typically reflect low occupancy as shown in the chart below. It is noted that there are 482 new LTCH beds approved, seven in new facilities and two in existing facilities and that LTCHs can add beds through notification to the agency without CON review. As previously noted, two of the CON approved, not yet operational facilities are approved to be located in District 9. The following table shows the beds, patient days and occupancy of Florida's operational LTCHs for the January through December 2005 reporting period:

Florida Long-Term Care Hospital Bed Utilization Calendar Year 2005

Hospital

District

# Beds

Bed Days

Patient Days

Occupancy

Select Specialty Hospital – Panama City 2 30 10,950 6,299 57.53% Kindred Hospital – Ocala* 3 31 2,046 206 10.07% Kindred Hospital - North Florida 4 60 21,900 18,645 85.14% Specialty Hospital Jacksonville 4 107 39,055 21,668 55.48% Kindred Hospital - Bay Area - St. Petersburg 5 82 29,939 20,269 67.72% Kindred Hospital - Central Tampa 6 102 37,230 23,474 63.05% Kindred Hospital - Bay Area-Tampa 6 73 26,645 15,850 59.49% Select Specialty Hospital-Orlando, Inc. 7 35 12,775 9,398 73.57% HealthSouth Ridgelake Hospital** 8 40 8,240 578 7.01% Kindred Hospital - South Florida – Hollywood 10 124 45,260 26,268 58.04% Kindred Hosp.-South Florida-Fort Lauderdale 10 70 25,550 14,750 57.73% Kindred Hospital South Florida Coral Gables 11 53 19,340 16,423 84.90% Select Specialty Hospital-Miami*** 11 40 14,600 13,884 95.10% Sister Emanuel Hospital for Continuing Care 11 29 10,585 9,046 85.46% State Total 876 304,111 196,758 64.70%

Source: Florida Hospital Bed Need Projections & Service Utilization by District published 07/28/06. Notes: *Kindred Hospital -Ocala was license effective 10/27/05. **HealthSouth Ridgelake Hospital was licensed effective 6/9/05. *** Select –Miami notified the Agency of its intent to add seven LTCH beds.

The applicant states that it only plans to serve the residents of St. Lucie County, District 9. It is significant to note that currently 130 LTCH beds have been approved for District 9, though not yet licensed. This was the first such approval in District 9. Although both CON approved applicants stated their intention to establish the newly approved LTCHs in Palm Beach County, there is no prohibition against either locating in

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another District 9 county. The service area for LTCH services is the district, not the county, yet LTCH bed utilization statewide has actually declined from 2004 to 2005; the decline is by 2.43 percent (a statewide average of 67.14 percent utilization in 2004 compared to 64.10 percent in 2005). The chart below illustrates the number of LTCH discharges in District 9 in 2005 and the discharging LTCH. As shown below, 190 District 9 LTCH patients were discharged from LTCHs outside of the district, with the majority being discharged from Kindred’s two District 10 facilities. One Palm Beach County resident traveled as far as to Kindred’s Clay County facility and a Martin County resident traveled to one of Kindred’s Hillsborough County facilities. One Indian River County LTCH patient traveled to Select’s Dade County facility.

District 9 LTCH Discharges by Discharging Facility - 2005 AHCA ID 100016 100196 100115 23960043 100120 100042 23960028

Facility

Kindred Hospital

North Florida

Specialty Hospital

Jacksonville

Kindred Hospital Tampa

Select Specialty Orlando

Kindred Hospital -

Fort Lauderdale

Kindred Hospital

Hollywood

Select Specialty Hospital -

Miami County Total

District 4 4 6 7 10 10 11 District 9 County Clay Duval Hillsborough Orange Broward Broward Dade Indian River 10 1 11 Martin 1 1 10 12 Okeechobee 6 6 Palm Beach 1 1 1 111 8 122 Saint Lucie 1 35 3 39 Total District 9 1 1 2 2 172 11 190

Source: Florida Center for Health Information and Policy 2005 data The number of LTCHs in Florida has grown sizably in the past 10 years. In 1995, there were seven LTCHs in the state. By the end of 2005 that number had increased to 14, a 100 percent increase in a 10-year period. Following is an inventory of existing, recently licensed, and CON approved LTCH beds by district:

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Florida Long-Term Care Hospital Bed Inventory by District

As of 6/16/06 Hospital

District

# Beds

Status

Select Specialty Hospital - Escambia, Inc. 1 54 CON approved Select Specialty Hospital – Tallahassee 2 29 CON approved Select Specialty Hospital – Panama City 2 30 Licensed in 2003 Select Specialty Hospital - Alachua, Inc. 3 44 CON approved Kindred Hospital – Ocala 3 31 Licensed in 2005 Kindred Hospital - North Florida Notified AHCA of intention to add 20 LTCH beds

4 60

+20

Operational prior to 1996 Notified in 2004

Specialty Hospital Jacksonville 4 107 Operational prior to 1996 Kindred Hospital – Bay Area – St. Petersburg 5 82 Licensed in 1997 University Community Hospital, Inc. 5 50 CON approved BayCare Long Term Acute Care, Inc. 5 48 CON approved Kindred Hospital - Central Tampa 6 102 Operational prior to 1996 Kindred Hospital - Bay Area-Tampa 6 73 Operational prior to 1996 Select Specialty Hospital-Orlando, Inc. 7 35 Licensed in 2003 Select Specialty Hospital – Orange 7 40 CON Approved HealthSouth Ridgelake 8 40 Licensed in 2005 Select Specialty Hospital – Lee, Inc. 8 60 CON Approved Select Specialty Hospital – Palm Beach, Inc. 9 60 CON Approved Kindred Hospitals East, LLC 9 70 CON Approved Kindred Hospital - South Florida – Hollywood 10 124 Operational prior to 1996 Kindred Hosp.-South Florida-Fort Lauderdale 10 70 Operational prior to 1996 Kindred Hospital South Florida Coral Gables 11 53 Operational prior to 1996 Select Specialty Hospital-Miami Notified AHCA of intention to add 7 LTCH beds

11 40

+7

Licensed in 2002 Notified in 2006

Sister Emanuel Hospital for Continuing Care 11 29 Licensed in 2004 State Total 1,358

Source: Florida Hospital Bed Need Projections & Service Utilization by District published 07/28/06 and licensure records *Currently, 482 LTC beds have CON approval but are not yet licensed, 876 are licensed statewide. The current bed complement, patient days and average occupancy of acute care hospital other forms of post-acute care in District 9 is presented as follows:

Acute Care and Post-Acute Care Providers District 9 Beds and Utilization

Calendar Year 2005 Facility Type

Total Beds District 9

District 9 Average Occupancy

Acute Care 4,482 64.77% Comprehensive Medical Rehabilitation 292 59.48% Skilled Care Community Nursing Homes 8,760 86.48% Long-Term Care Hospital* 130* N/A

Source: Florida Hospital Bed Need Projections & Service Utilization by District for acute care & CMR beds for January 1, 2005 through December 31, 2005. Florida Nursing Home Utilization by District & Subdistrict July 1, 2005 through June 30, 2006. HBSNU by District & Subdistrict as of October 20, 2006. *Select Specialty Hospital – Palm Beach, Inc. is approved for 60 beds while Kindred Hospitals East, LLC is approved for 70 beds. Neither facility is operational. Below are statistics pertinent to acute care hospital bed occupancy in counties within District 9 excluding Palm Beach County and the district total (including Palm Beach County).

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Acute Care Providers District 9 Beds and Utilization

Calendar Year 2005 Partial District Comparisons Total Beds Total Occupancy District.9 – St. Lucie County Only 467 64.50% District 9 Total (excluding Palm Beach County) 1,264 60.84% District 9 Total (all counties) 4,482 64.77%

Source: Florida Hospital Bed Need Projections & Service Utilization by District for acute care beds January 1, 2005 through December 31, 2005. Per the above data, the county planned for LTCH establishment (St. Lucie County) is averaging acute care bed occupancy slightly below that of the district as a whole. Further, the counties of Indian River, St. Lucie, Martin and Okeechobee, in the aggregate, experience acute care bed occupancy at an even lower rate than District 9 overall (60.84 percent for District 9 [excluding Palm Beach County] as opposed to 64.77 percent for District 9 in total). LTCH planning areas are districts. Data shown here does not suggest that locating a LTCH in any one county within District 9 would dramatically improve hospital to LTCH transport times other than there being significantly more patients discharged from acute care hospitals in Palm Beach County. As noted a number of times above, there are two LTCHs approved but not yet licensed for District 9. Both providers indicated that they intend to build in Palm Beach County, but there is no prohibition against either locating in any county within the district. As previously noted, LTCHs are designed to treat patients with medical conditions requiring extended hospital-level services, for a period of time of at least 25 days on average. The applicants state that their proposals will provide LTCH services to patients with complex conditions that cannot be adequately addressed in licensed acute care beds, comprehensive medical rehabilitation beds, hospital-based skilled nursing unit beds, and nursing home beds in the service planning area. However, despite claims that proposals are for medically complex and multiple co-morbidity high acuity patients, no co-batched applicant demonstrated through existing data-driven evidence that this patient population and their families: were unable to find and access needed LTCH care outside of District

9; burdened the existing District 9 acute care resources through

extended acute care stays that correlated with LTCH-eligible only patients who continued in the acute care environment; or

received inappropriate care.

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Promise indicated that in CY 2005, almost all long-term care patients (approximately 96.8 percent) in District 9 traveled to District 10 for LTCH care and no objectively measurable data-driven evidence was provided to show how that option was harmful to any of the parties.

The MedPAC analysis of LTCHs found that between seven and eight percent of patients with the highest probability of using LTCHs used rehabilitation hospital services in markets both with and without LTCHs. Rehabilitation utilization in District 9 was 59.48 percent during CY 2005. This percentage is substantially below the 85 percent benchmark for that service, as defined by Section 59C-1.039 Florida Administrative Code. As MedPAC points out, the diagnostic related group (DRG) itself or the length of stay in any particular group is not necessarily an indicator of need. MedPAC’s findings indicate that lower acuity patients within any DRG can appropriately be served in a skilled nursing facility (SNF) at a lower cost as LTCHs are usually the most costly post-acute care setting at about three to 12 times that of SNFs. As noted above, SNF utilization in District 9 averaged 87.43 percent for the most recent reporting period. This utilization rate is below the benchmark for SNF care set at 94 percent (Subsection 408.034 (5), Florida Statutes, as amended July 1, 2004). These comments are not proposed to suggest that extended lengths of stay in acute care beds are necessarily inappropriate or that the acute care facility should have transferred or discharged the patient sooner. It is recognized that all need methodologies discussed below identify patients in acute care, not skilled nursing or rehabilitation, beds. These data are presented to show access to post-acute care. It cannot be assumed that patients in acute care beds for lengths of time beyond Medicare’s geometric mean length of stay are necessarily candidates for LTCHs; that extended stay in the acute bed is an inappropriate venue of care. Even if there was a LTCH located across the street from the acute care hospital, these long-stay patients would not necessarily be discharged to that LTCH. The applicant in this CON application is responsible for demonstrating these patients could not access the most appropriate level of care for their illness and recovery. To the other end, MedPAC has identified that not all LTCH patients are medically complex/high acuity and some percentage could have appropriately been treated in a less costly manner. So that it is most likely that the patients in District 9 that were discharged to a skilled nursing or rehabilitation facility were appropriately discharged and did not need LTCH care and the fact that these facilities are below Agency benchmarks for their respective service indicates there is not an access problem. Applicants contend that an aging population is a major factor in the need for LTCH penetration. Presented below are general findings regarding expected population growth in the district within the next five years:

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Population Estimates for District 9 Counties and Percent Change by County

County

Total

July 2006

Total

July 2011

Percent Change

Age 65+

July 2006

Age 65+

July 2011

65+ Percent Change

Indian River 134,199 150,991 12.51% 35,980 41,768 16.09% Martin 145,437 159,950 10.21% 39,744 46,017 15.78% Okeechobee 37,851 39,959 5.57% 6,356 6,883 8.29% Palm Beach 1,299,853 1,453,043 11.79% 277,764 318,066 14.51% St. Lucie 253,772 290,924 14.64% 54,195 65,134 20.18% District Total 1,870,812 2,094,867 11.98% 414,039 477,868 15.42% State Total 18,422,450 20,395,880 10.71% 3,109,366 3,642,495 17.15%

Source: AHCA Population Projections, published September 2006.

As shown above, the overall population in District 9 is expected to increase over the next five years by 11.98 percent. The 65 and over age range is estimated to increase by 15.42 percent. St. Lucie County is projected to experience the highest growth, however, there are significantly fewer people living in St. Lucie County than in Palm Beach County. Discussion of each applicant’s need analysis follows. Promise Healthcare of Florida IX, Inc. (CON #9940) indicated three potential sites in or near Port St. Lucie as possible locations for the LTCH. The applicant provides a discussion of the LTCH hospital patient setting compared to other care settings. The LTCH patient is described as meeting the necessity for acute care, needing medically complex care with multiple co-morbidities (five or more diagnosis identified) and having access to critical, intense medical interventions and services such as acute ventilator management and weaning, cardiac monitoring, pharmacy, diagnostic services, etc. However, as previously discussed, the June 2004 MedPAC Report to Congress indicates concern over the current LTCH practice of serving patient populations with lower acuity levels that could appropriately and more cost-efficiently be served in SNFs or other post-acute care settings. The applicant emphasizes that comprehensive assessment is key in most efficiently admitting a patient into the most medically appropriate setting, acknowledging that depending on any given range of severity on a number of diagnoses, a patient’s needs may be adequately addressed in non-LTCH settings. As previously stated, within the current Medicare reimbursement system (which although it does account for case-mix differences between patients, it does not account for differences within each case-mix category), an incentive exists to admit patients with lesser or even the least need for resources among those in the same diagnostic group. In the patient admission process, Promise states it utilizes the InterQual criteria and provides in its application an Attachment F – Promise Specialty Hospital Pre-Admission Screening Document. Promise

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incorporates these tools in its performance improvement system to address LTCH-appropriate admissions. The applicant has provided no CMS approved assessment tool to ensure that it will only serve the population it describes nor has it agreed to condition award of the CON upon serving only the high acuity, medically complex population with multiple co-morbidities and needing access to critical, intense medical interventions and services. The applicant provides a detailed description of the levels of care and resources commonly available in each of the following environments: LTCH; short-term acute care; inpatient medical rehabilitation care; and skilled nursing. These are offered in chart format. The applicant eliminates home health care as an option due to the lack of 24-hour nursing care, stating this is unsuitable for medically complex patients. Essentially these contend that LTCH care is acute care, which is distinct and superior from short-term acute care, rehabilitation care and skilled nursing care. It should be noted that while the LTCH industry including this applicant, contends that the care it provides is acute care, LTCHs are not licensed as acute care hospitals in Florida, are expressly defined in CON regulations6 as providers of care other than acute and not considered to be “acute” facilities by CMS as discussed at the beginning of this section. With regard to hospital-based or nursing home skilled care, the applicant contends that these patients are generally less medically complex. It is generally accepted and the Agency does not challenge that LTCHs are designed to serve a higher acuity patient population than other forms of post-acute care and are subsequently reimbursed for this higher level of care at a substantially higher level. However, in discussing need for this service in District 9, it is the applicant’s burden to show that this medically complex high acuity patient population that cannot be served

6 Section 59C-1.002 (1), Florida Administrative Code: "Acute care bed" means a patient accommodation or space licensed by the Agency pursuant to Chapter 395, Part I, Florida Statutes. Acute care beds exclude neonatal intensive care beds, comprehensive medical rehabilitation beds, hospital inpatient psychiatric beds, hospital inpatient substance abuse beds, beds in distinct skilled nursing units, and beds in long term care hospitals licensed pursuant to Chapter 395, Part I, Florida Statutes.

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in other post-acute venues does not have access to appropriate care and therefore a facility is needed in the area. The applicant indicates its facility will be designed to serve the District 9 counties of Indian River, St. Lucie, Martin and Okeechobee without impacting Palm Beach County providers that are CON approved but not yet operational. However, this was not demonstrated. The applicant contends that distance is a major negative factor in access, stating that in the northern District 9 hospitals (those excluding Palm Beach County) the planned service area is 60 to 70 miles from planned LTCH CON approved locations. Promise further holds that the nearest existing LTCHs are an even greater distance and that District 9’s two approved LTCHs will not meet the need for the four northern counties. Because no LTCH is currently operational in District 9, 96.8 percent of long-term care patients from District 9 are stated to have out migrated mostly to Kindred Hospital – Fort Lauderdale, with a much smaller number out migrating to Kindred Hospital – Hollywood. According to data reported to the Agency, 183 long-term care District 9 patients were discharged from District 10 LTCHs during calendar year 2005. Following is a chart illustrating, by county, LTCH discharges to Kindred’s two District 10 facilities:

District 9 LTCH Discharges to District 10 Facilities

Calendar Year (CY) 2005

County Kindred Hospital - Fort Lauderdale

Kindred Hospital - Hollywood Total

Indian River 10 10 Martin 10 10 Okeechobee 6 6 Palm Beach 111 8 119 Saint Lucie 35 3 38 Total 172 11 183

Source: Florida Center for Health Information and Policy As shown above, Broward County (District 10) discharged 183 LTCH patients (District 9 residents) in CY 2005. As shown earlier, Kindred Hospital – Fort Lauderdale, the LTCH with all the patient discharges from Indian River, Martin and Okeechobee Counties and 91.4 percent of all the St. Lucie County discharges, averaged occupancy of 57.73 percent during CY 2005. Occupancy rates at Kindred Hospital – Fort Lauderdale are below the state average of 64.70 percent. It is reasonable to expect some residents will continue to seek services at these and other existing LTCH facilities, but it is also likely that a number of residents will seek services in District 9 facilities approved but not yet licensed (CON #’s 9661 and 9662) which will add an additional 130 beds. There are several factors that based on this information do not support a need for additional LTCH beds in District 9. These factors are as follows: a near 100 percent discharge of northern District 9 LTCH patients to the

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nearest source of available LTCH care; the discharge destination being District 10, which itself is under-utilized; 40 LTCH CON approved beds not yet operational and 35 existing LTCH beds in District 7, with the latter having only a 73.57 percent occupancy rate (District 7 is the next nearest source of LTCH care after District 10); and 130 CON approved but not yet operational LTCH beds are planned for the southern portion of District 9. Though closer-to-home services would be a greater convenience, Promise provided no objectively measurable data-driven evidence that affected parties are unable to utilize the access system as it currently exists. Promise states that in CY 2005, long stay discharges from District 9 hospitals resulted in an average length of stay (ALOS) of 33.1 days. The applicant indicates this was 2,435 applicable discharges with an aggregate of 80,512 patient days. This would average 9.1 days worth of acute care bed relief, per applicable patient, in District 9 hospitals, should this proposal be approved. However, it has already been shown that acute bed occupancy in northern District 9 is already lower than the district as a whole. The applicant provides driving time estimates from area acute care hospitals to Fort Lauderdale (existing LTCHs) and to Port St. Lucie (proposed city of location) and concludes that District 9 northern county long-term care patients travel distance would be reduced by anywhere from 48 to 91 minutes. It is noted that with the two approved LTCHs in Palm Beach County, patients requiring LTCH services will already have a closer facility option than Fort Lauderdale. Driving time from Port St. Lucie to Fort Lauderdale is 82 minutes; to West Palm Beach is 47 minutes, a reduction of 35 minutes one-way. Promise indicates that its need analysis contains certain assumptions: acute care facilities and intensive rehabilitation facilities (IRFs) are not appropriate substitutes for LTCHs [IRF is a term used by the federal government and the corresponding Florida term is a comprehensive medical rehabilitation (CRM) facility]; a SNF would require specialized programs to care for similar populations7; LTCH patients cost Medicare more than similar patients who use alternative settings if similar services are available, but when long-term care is targeted to patients of the highest severity, the cost is similar. The applicant offered the number of CY 2005 discharges from District 9 hospitals (excluding newborns and those patients at least 18 years of age). In addition, the length of stay exceeded the geometric mean length of stay (GMLOS) plus 15 days and has one DRG identifier consistent with one DRG from a Florida LTCH. A

7 It is noted that CMS is currently looking at a “pay-for-performance activity” which it indicates would include skilled nursing facilities that improve the level of care they provide, among other things, per the September 28, 2006 Policy Council Document, page 3-4.

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listing of DRGs was provided in Attachment L of the application. According to the applicant, this resulted in 2,435 acute care long-stay District 9 hospital discharges and approximately 80,512 patient days, or an ALOS of 33.1 days. No data-driven evidence was provided to confirm that these patients required but did not receive LTCH services. The Agency cannot reasonably conclude that because a patient was in an acute care bed a certain number of days past the GMLOS, he or she likely needed LTCH services, without additional supporting evidence which was not provided. No acuity level was provided to account for this set of patients. It cannot be assumed that certain DRGs signify acuity levels or that the age of the patient is an automatic indicator of acuity. As discussed earlier, the DRG alone is not an indicator of acuity level. CMS has contracted with a group to make recommendations on appropriate acuity measures for LTCH admissions because the DRG system does not function in that capacity and is looking at assessment tools for post-acute providers to ensure most appropriate care, as previously discussed. The applicant uses a weighted average population growth rate and a future market size reduction of 25 percent due to anticipated more stringent admissions criteria in calculating bed need. It is noted that while the applicant’s consideration of the likelihood that CMS changes in LTCH reimbursement will result in a reduction in admissions to LTCHs is to the point, supported by information presented earlier, and appropriate, it is not clear from any information submitted by the applicant that the reduction could be calculated at 25 percent. This percentage appears arbitrary and does not factor in the likelihood of reductions in admissions at existing LTCHs already serving residents in District 9 or the two new LTCHs approved for this district. Promise estimates LTCH discharges, by 2011, to be 2,096. Maintaining a constant 32-day LTCH ALOS against the estimated discharges of 2,096, a total of 67,072 patient days results. The applicant equates this scenario to a bed need of 230. It is noted that the method by which the applicant determined this number included the application of a projection of 80 percent occupancy; long-term care hospitals statewide experienced 64.7 percent occupancy in CY 2005. District 9 heavily utilizes District 10 LTCH facilities which, in CY 2005, averaged 57.89 percent occupancy, again below the state average. In addition to the applicant’s noted consideration regarding anticipated reduction in admissions at LTCHs because of MedPAC’s recommendations it is further

23


noted that this need methodology does not address or factor in potential bed additions that might occur prior to the actual building of its facility, should the CON be awarded at either or both of the two recently CON approved, not yet licensed, facilities. The applicant failed to demonstrate that patients needing LTCH services were not receiving them, or that there was a potential future patient population that would not be able to access LTCH care when needed. Kindred Hospitals East, L.L.C. (CON #9941) did not submit a site for the project, but states that its facility would be located in St. Lucie County. As shown in tables above, Kindred was the recipient of CON approval to have 70 LTCH beds licensed in Palm Beach County. Kindred contends that unmet need now exists in the northern counties of District 9 – Indian River, Okeechobee, St. Lucie and Martin. The applicant presented a long-term care hospital bed need based on acute care discharges and utilization data from local hospitals. Kindred provides a detailed description of the levels of care and resources commonly available in each of the following environments: LTCH; short-term acute care; inpatient medical rehabilitation care; and skilled nursing. These are offered in chart format. The applicant eliminates home health care as an option due to the lack of 24-hour nursing care, stating this is unsuitable for medically complex patients. As noted in the Promise review above, while the LTCH industry including this applicant, contends that the care it provides is acute care, LTCHs are not licensed as acute care hospitals in Florida, are expressly defined in CON regulations8 as providers of care other than acute and not considered to be “acute” facilities by CMS as discussed at the beginning of this section. Kindred contends utilization (patient days/bed days) is affected by timing of referrals and length of time a patient stays at the LTCH. Kindred estimates patients will be referred five days after they have passed the DRG specific geometric mean length of stay (GMLOS) at an attending acute care facility. The five-day window after the GMLOS is explained as accounting for assessment and transitioning. The projected ALOS in a LTCH is of financial consequence, since Medicare requires an ALOS of 25 days or more.

8 Section 59C-1.002 (1), Florida Administrative Code: "Acute care bed" means a patient accommodation or space licensed by the Agency pursuant to Chapter 395, Part I, Florida Statutes. Acute care beds exclude neonatal intensive care beds, comprehensive medical rehabilitation beds, hospital inpatient psychiatric beds, hospital inpatient substance abuse beds, beds in distinct part skilled nursing units, and beds in long term care hospitals licensed pursuant to Chapter 395, Part I, Florida Statutes.

24


The bed need analysis promoted by Kindred consists of six steps: The first step is to exclude patients who are not appropriate because they require care not usually provided at a LTCH. These discharges contain all diagnosis related groups (DRGs) within the major diagnostic categories (MDC) of: 13-female reproductive system; 14-pregnancy; 15-newborns and other neonates; 19-mental disease and disorders; 20-alcohol and substance abuse; 22-burns; and 23-factors influencing health factors. Promise stated only 15 newborn and other neonates. Kindred provided a list of the 390 acute care DRGs representing potential LTCH admissions. This list was included in Attachment 4 of Kindred’s application. The second step is to identify discharges that are: o Assigned to one of the 390 LTCH potential referral DRGs; o Patients are 18 years of age or older; and o Have a length of stay exceeding the GMLOS by 15 days.

The third step is to total the potential long-term care hospital days produced by LTCH appropriate patients. For the 12 months ending September 2005, Kindred estimates 58,632 long-term hospital days were provided by the 20 local acute care hospitals, which results in an average daily census of 160. Since the Palm Beach County hospitals were not excluded, it cannot be inferred that Palm Beach County residents are ruled out as part of the bed need analysis, though the narrative of the application as well as other portions seem to isolate the four northern counties as the area to be served. Because this 160 average daily census is described as the “potential” pool of patient days, it can be concluded that this would be the greatest possibility of patient days, and therefore the probable average daily census could be significantly less.

The fourth step according to the applicant is to identify the number of patient days that are seeking LTCH services outside District 9. The applicant’s market includes Indian River, Okeechobee, Martin and St. Lucie Counties; however, again, the applicant did not exclude Palm Beach County patients from the analysis. Whether it has excluded adjacent Palm Beach County from its proposed service area because it and co-batched applicant Select are planning to establish the LTCHs recently approved for the district in Palm Beach County is not stated. Therefore, the applicant must demonstrate that District 9, in aggregate, needs this service and is unable to receive it, even in light of the fact that 130 applicable beds have already been approved for this district. It does not follow that the services will not be available to any given geographic portion of District 9 because there is not a hospital physically located within any given geographic location within the district. If this scenario

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were embraced by the Agency, then any applicant wishing to establish a hospital or any other regulated health care facility or service to serve any given or combination of zip code(s), census tract(s), city block(s) or any other geographically distinct area could claim that services were needed because there was an absence of services within the identified geo-political boundaries. Depending on where the line was drawn, this could mean immediately adjacent to or otherwise near an existing underutilized hospital. As noted at the beginning of this section and pursuant to section 59C-1.008 (2) (e) 3, Florida Administrative Code, the existence of unmet need will not be based solely on the absence of a health service, health care facility, or beds in the district, subdistrict, region or proposed service area. The applicant states that for the 12-month period ending September 2005, 211 District 9 residents were discharged from LTCHs outside District 9. Further, the applicant states that these patients received 7,110 days of LTCH care, with an ADC of 19, with seven of those attributable to District 9, northern county residents. The proposed location of this LTCH is in St. Lucie County, which is separated from Fort Lauderdale by Palm Beach County, which has two approved long-term care hospitals that will result in 130 long-term care beds established in the same designated planning area with this daily census of seven in the counties north of Palm Beach County. It is noted that despite claims in letters of support that area residents opt not to travel to obtain needed services it appears some do and are able and willing to travel much further distances than they will need to in the future when the two approved LTCHs for this area are established. Shown again for convenience, the chart below illustrates District 9 discharges from Kindred’s two District 10 LTCHs by county:

District 9 LTCH Discharges to District 10 Facilities

Calendar Year (CY) 2005

County Kindred Hospital –

Fort Lauderdale Kindred Hospital

- Hollywood Total Indian River 10 10 Martin 10 10 Okeechobee 6 6 Palm Beach 111 8 119 Saint Lucie 35 3 38 Total 172 11 183

Source: Florida Center for Health Information and Policy As shown above, Broward County accounted for 183 LTCH patient discharges during CY 2005, with patients originating from District 9. Occupancy rates at Kindred Hospital – Fort Lauderdale are below the state average of 64.70 percent. It is reasonable to expect many residents will continue to seek services at these facilities, but it is also very likely

26


that a number of residents will seek services in District 9 facilities approved but not yet licensed. Northern county District 9 residents are already traveling further than will be necessary once Palm Beach County facilities are operational. The applicant is competing with itself for patients. The loss of 64 patients from northern District 9 counties at an average of 30 days per patient equates to 1,920 patient days. With occupancy levels low and declining at Kindred’s District 10 facilities, the loss of 1,920 patient days could be significant to that facility. In addition, assuming that some portion of the 119 patients (representing 3,570 patient days at 30 days average per stay) also do not travel to District 10 when Kindred’s District 9 facility is licensed and occupancy levels continue to decease, Kindred’s District 10 facility occupancy could go below 50 percent.

Kindred District 10 LTCH Occupancy 2001- 2005 District County Facility 2001 2002 2003 2004 2005

10

Broward

Kindred Hospital- South Florida-Hollywood

70.10%

71.37%

68.22%

59.74%

58.04%

10

Broward

Kindred Hospital-South Florida- Fort Lauderdale

88.14%

91.65%

82.12%

66.41%

57.73%

Source: Florida Hospital Bed Need Projections & Service Utilization by District 2001-2005 The fifth step detailed by the applicant is to consider the population growth projections for both total population and over-65 populations. The applicant states that the over-65 population of the four counties it has included in its service area is projected to increase by 16.9 percent over the next five years, with the total population of these counties increasing 12.8 percent; therefore, the applicant concludes that the LTCH market will increase by at least 12.2 percent during this time, which would result in a potential average daily census (ADC) at the proposed facility of 53 in the year 2011. The sixth and final step is to apply an 85 percent occupancy rate to the ADC of 53, yielding a projected need of 236 beds in District 9. More stringent admissions criteria are likely to reduce this estimate. An 85 percent occupancy rate would not only be significantly higher than the state average, which nearest LTCH facilities are already not meeting and are in fact dropping from last year, an 85 percent occupancy rate would equate to the fourth most occupied LTCH in Florida, using CY 2005 statistics. There are also some assumptions previously stated that were not verified through objectively measurable data-driven evidence that cannot be reasonably inferred. For instance, because a patient was in an acute care bed a certain number of days past the GMLOS, it cannot be assessed that the patient in fact needed LTCH services. No acuity level was established for any of the patients used in the projection. It cannot be assumed with reasonable certainty that selected DRGs signify acuity levels or that the age of the patient is an automatic indicator of acuity. As discussed earlier, the DRG alone is not an indicator of acuity level.

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CMS has contracted with a group to make recommendations on appropriate acuity measures for LTCH admissions because the DRG system does not function in that capacity and is looking at assessment tools for post-acute providers to ensure most appropriate care, as previously discussed. Additionally, as noted above, Kindred is one of the two primarily operators of LTCHs in the United States. Therefore, MedPACs findings relative to patient admissions not meeting the profile described by all three applicants is of particular interest in this review. Kindred claims traveling long distances for extended periods of time imposes a great burden on patients and their families, as well as being impractical. However, the application did not specify the proposed site for this facility so the burden on the families could not be determined by analyzing the driving distances. LTCH services are the most expensive post-acute care service and are generally provided to patients with complex medical conditions and therefore are not generally needed in each acute care planning area or dedicated to each acute care hospital. They provide to a greater extent services similar to comprehensive medical rehabilitation hospitals in this way and a planning area larger than a subdistrict planning area is more appropriate for LTCH services, due largely to cost. The applicant has not met its burden to demonstrate that the patient population it has identified is not already receiving needed care. Additionally, given that two new LTCHs have been approved for this area and are to be located in a nearby county, there is no evidence that any future need for LTCH care will not be met by these two approved facilities. The applicant failed to demonstrate that patient needing LTCH services were not receiving them, or that there was a potential future patient population that would not be able to access LTCH care when needed. Select Specialty Hospital - St. Lucie, Inc. (CON #9942) (Select) indicates that the typical patients who benefit from long-term care include post-surgical and trauma patients, wound care patients, head injury and spinal cord injury patients, patients with diseases such as muscular dystrophy, Guillain Barre syndrome and Myasthenia Gravis, respiratory/ventilator-dependent patients and other medically complex patients who require extensive physiological monitoring, intravenous therapies, dialysis or post-operative care. Select’s services are indicated to include medically complex care for a wide range of underlying conditions and symptoms requiring intensive therapies and nursing care to maintain normal breathing without mechanical support, specialized care for patients with acute or chronic respiratory disorders who may have tracheotomies, ventilators or require extensive respiratory treatments to maintain normal breathing without mechanical support, wound/skin care, and care for patients who are unable to withstand

28


three hours of intensive therapy a day or who require too high a degree of nursing or respiratory care to be acceptable for most acute rehabilitation programs. The applicant contends that LTCH services are more comparable to intensive care unit nursing services in a short-term acute care facility than to lower acuity facilities. Further, the applicant contends that there are no nursing home facilities in District 9 counties, excluding Palm Beach County that serve ventilator-dependent patients. However, there are two nursing homes in District 9 that provide ventilator care and one is in West Palm Beach and the other in Boca Raton according to the AHCA Nursing Home Guide on-line, as of November 8, 2006. As noted in the Promise and Kindred reviews above, while the LTCH industry including this applicant, contends that the care it provides is acute care, LTCHs are not licensed as acute care hospitals in Florida, are expressly defined in CON regulations9 as providers of care other than acute and not considered to be “acute” facilities by CMS as discussed at the beginning of this section. The applicant states it intends to serve all of District 9; however, this application is designed to highlight the remaining District 9 counties north of Palm Beach County, those being St. Lucie, Indian River, Okeechobee and Martin. Select considers its primary service area to be these latter four counties in District 9. It considers its core service area to be the area within a 20-mile radius of central St. Lucie County. According to the applicant, this will encompass the most populated portions of Martin and St. Lucie Counties. Like co-batched applicant Kindred, it has presumably excluded adjacent Palm Beach County from its proposed service area because it and Kindred are planning to establish the LTCHs recently approved for the district in Palm Beach County. The applicant states that the need for long-term care hospitals stems from the fact that patients are surviving complicated surgical interventions, traumatic injuries and other similarly severe illnesses only to need long-term life support and various other therapies that the applicant contends are not most efficiently and effectively treated by acute care facilities. With regard to services, the applicant states that LTCH care exceeds comprehensive medical rehabilitation (CMR) care in terms of nurse hours per patient, with up to 12 hours provided at a LTCH versus 3-5½ hours at a CMR. With regard to hospital-based or

9 Section 59C-1.002 (1), Florida Administrative Code: "Acute care bed" means a patient accommodation or space licensed by the Agency pursuant to Chapter 395, Part I, Florida Statutes. Acute care beds exclude neonatal intensive care beds, comprehensive medical rehabilitation beds, hospital inpatient psychiatric beds, hospital inpatient substance abuse beds, beds in distinct part skilled nursing units, and beds in long-term care hospitals licensed pursuant to Chapter 395, Part I, Florida Statutes.

29


nursing home skilled care, the applicant contends that sub-acute patients placed in a SNF must be medically stable and yet they require more intensive nursing care than is normally provided in a nursing home facility. However, there was no objectively measurable data-driven evidence provided to show that at any given time any given medically complex post-acute patient was inappropriately cared for through the services currently available and utilized. As discussed earlier, criteria needed for LTCH admissions is being reviewed by CMS, which the applicant acknowledges. Lesser acuity medically complex patients are more appropriately treated in post acute settling other than LTCH, which is the most expensive. The applicant claims that its admissions are designed to draw higher acuity patients. However, as noted earlier, two-thirds of the LTCHs in the United States are owned by two chains – Kindred Healthcare and Select Medical. Therefore, MedPACs findings relative to patient admissions not meeting the profile described by all three applicants is of particular interest in this review. Select is one of the two providers of the majority of LTCH care. Additionally, two LTCH hospitals are approved to serve District 9 and have not yet begun operations. The applicant provided an analysis of the District 9 population growth broken down by county. According to the applicant's projections, the District 9 total population is expected to grow by 11.2 percent from July 2005 to July 2010 and the District 9 total population excluding Palm Beach County is projected to grow 11.6 percent for the same time period. The applicant states that the over-65 population is expected to increase by 10.4 percent throughout District 9 and by 11.6 percent in the defined or primary service area. In the absence of an approved methodological approach to need for LTCH beds, the applicant presents four general steps for estimating need. The first involves an extended length of stay analysis specific to the four defined service area counties (all of District 9 excluding Palm Beach

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County) based on the discharges from the seven area acute care hospitals. The second method addresses the geometric mean length of stay (GMLOS) plus 15 days for the same four counties. The third method factors in the long-stay “short-term” acute care hospital penetration with that of LTCHs. The fourth method is a discharge analysis of patient lengths of stay average 28 days (based on its operational experience). With regard to the extended length of stay analysis, the applicant selected what it determined to be the top DRGs from St. Lucie, Indian River, Martin and Okeechobee County hospitals it considered appropriate for LTCH stay. The evaluation of the hospital discharges excluded lengths of stay of less than 24 days, patients under the age of 14, patients with psychiatric diagnoses, substance abuse diagnoses, obstetric diagnoses, newborn diagnoses and rehabilitation diagnoses. The net number of discharges was then identified in an attempt to show potential need for LTCH beds. The applicant arrived at a total of 780 hospital discharges with a length of stay 24 days and greater for the total service area. Select then applied the population estimates for the next five years. The Medicaid and charity care population was then excluded, since the applicant has committed to 2.8 percent to this population regardless of need. The applicant then eliminated what it defined as the lowest level of severity and any categorizations not in a defined severity group. The net after adjustments above was then 654 for the primary service area. Continued adjustment resulted from the 12.4 percent population growth, the operational experience of 28 day ALOS calculation and the average daily census. This resulted in a final net bed need of 66. This was with an 85 percent occupancy rate. To maintain such an occupancy rate would significantly exceed the CY 2005 state average of 64.7 percent (statewide) and also the average of District 10 counts that experienced an even lesser occupancy rate (57.89 percent). In CY 2005, only three Florida LTCHs exceeded occupancy of 85 percent: two of the three exceeded 85 percent by less than one percent. Unlike Kindred, Select does not indicate a particular focus on ventilator-dependent patients and in fact, points out that in CY 2005 this patient population comprised 40.4 percent of its discharges compared to a state average of 45.9 percent. No objectively measurable data-driven evidence was presented to indicate that current LTCH eligible patients are not already receiving services in their current circumstances or that the 130 previously CON approved beds will not accommodate existing need in the district. As with any ALOS methodology, certain variations in patient characteristics can alter assumptions of need. These include the patient's functional ability, availability of caregivers at home, ethnicity, age, socio-demographics and dependence on technology.

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In summary, the applicant failed to provide data driven evidence to support that patients are lacking current adequate mechanisms to achieve acceptable standards of care. The applicant has not provided evidence that because a patient was in an acute care bed a certain number of days past the GMLOS, he or she likely needed LTCH services. The Agency cannot hold that certain DRGs signify acuity levels or that the age of the patient is an automatic indicator of acuity. As discussed earlier, the DRG alone is not an indicator of acuity level. CMS has contracted with a group to make recommendations on appropriate acuity measures for LTCH admissions because the DRG system does not function in that capacity. MedPAC determined that even when there is a LTCH with available beds in the area, patients continue to remain in an acute bed and are not immediately discharged to the LTCH. As noted above and like co-batched applicants, despite claims that this proposal is for medically complex high acuity patients needing and not receiving the most appropriate level of care, the applicant failed to show that a large portion of these identified patients are not currently appropriately being served in other post-acute settings after acute care discharge or that a number of patients are kept in acute care beds where treatment resulted in inappropriate care or where outcomes would have improved had long-stay patients been treated in a LTCH. The applicant failed to demonstrate that patients needing LTCH services were not receiving them, or that there was a potential future patient population that would not be able to access LTCH care when needed.

2. Agency Rule Criteria

The Agency does not currently have adopted preferences or Rule criteria relating to LTCHs.

3. 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) and 408.035(7), Florida Statutes. In charts below, utilization for area acute and post-acute care providers is again presented as is LTCH inventory and utilization statewide.

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Occupancy in existing LTCHs does not demonstrate demand for this service and despite that fact, a number of additional LTCH facilities have been approved in recent years so that there is now an existing or approved LTCH(s) in every state district planning area. Additionally, as previously discussed, utilization in area acute and post-acute care beds is not high, indicating that there are acute and post-acute beds available for district residents to access. CONs have been issued to establish two LTCHs within District 9 for a total of 130 LTCH beds. Neither facility is operational; therefore, LTCH utilization in District 9 LTCH cannot be shown at this time. As discussed in E. 1 above, with the implementation of additional LTCH beds and facilities, LTCH utilization has decreased over the past five years:

LTCH Occupancy for Calendar Years 2001 - 2005 District County Facility CY2001 CY2002 CY2003 CY2004 CY2005

2 Bay Select Specialty Hospital - Panama City 30.52% 57.53% 3 Marion Kindred Hospital - Ocala 10.07% 4 Clay Kindred Hospital - North Florida 88.92% 90.51% 90.72% 89.53% 85.14% 4 Duval Specialty Hospital Jacksonville 55.54% 52.21% 54.22% 55.60% 55.48% 5 Pinellas Kindred Hospital-Bay Area- St. Petersburg 98.02% 100.15% 77.65% 67.12% 67.72% 6 Hillsborough Kindred Hospital - Central Tampa 75.01% 79.42% 70.33% 69.52% 63.05% 6 Hillsborough Kindred Hospital - Bay Area - Tampa 68.63% 67.50% 65.93% 62.64% 59.49% 7 Orange Select Specialty Hospital - Orlando 27.61% 71.28% 73.57% 8 Sarasota HealthSouth Ridgelake Hospital 7.01%

10 Broward Kindred Hospital - So. Florida - Hollywood 70.10% 71.37% 68.22% 59.74% 58.04% 10 Broward Kindred Hospital - So. FL - Ft Lauderdale 88.14% 91.65% 82.12% 66.41% 57.73% 11 Miami-Dade Kindred Hospital - So. FL. - Coral Gables 88.05% 88.90% 85.28% 82.08% 84.90% 11 Miami-Dade Select Specialty Hospital - Miami 32.67% 83.39% 95.10%

11 Miami-Dade Sister Emmanuel Hospital for Continuing Care 82.64% 85.46%

Florida Occupancy 75.93% 76.84% 68.17% 67.14% 64.70% Source: Florida Hospital Bed Need Projections & Service Utilization by District 2001-2005

As evidenced by the chart above, to some extent the decrease is due to start up periods for new LTCH. However, there are an additional 482 LTCH beds approved, but not yet licensed in Florida. Based on MedPAC findings, it is also reasonable to assume that inappropriate placement of lower acuity patients accounts for some of the reported occupancy in

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Florida facilities. As noted earlier, two providers, Kindred and Select operate two-thirds of the LTCHs in the United States from which MedPAC found that 29 percent of the 1,400 randomly selected LTCH Medicare admissions in 2004 did not need hospital-level care.10

LTCH bed capacity over a five-year period is provided below.

Florida LTCH Licensed and CON Approved Beds Calendar Year 2001- 2005 District County Facility CY2001 CY2002 CY2003 CY2004 CY2005 APPROVED

1 Escambia Select Specialty Hospital - Escambia, Inc. (CON #9800) 54 2 Bay Select Specialty Hospital - Panama City 30 30 2 Leon Sempercare Hospital of Tallahassee (CON #9644) 29 3 Alachua Select Specialty Hospital - Alachua, Inc. (CON #9704) 44 3 Marion Kindred Hospital - Ocala 31 4 Clay Kindred Hospital - North Florida (+20 N#0400074) 60 60 60 60 60 20 4 Duval Specialty Hospital Jacksonville 107 107 107 107 107 5 Pasco University Community Hospital, Inc. (CON #9754) 50 5 Pinellas Kindred Hospital - Bay Area - St. Petersburg 60 60 82 82 82 5 Pinellas BayCare Long Term Acute Care, Inc. (CON #9753) 48 6 Hillsborough Kindred Hospital - Central Tampa 102 102 102 102 102 6 Hillsborough Kindred Hospital - Bay Area - Tampa 73 73 73 73 73 7 Orange Select Specialty Hospital - Orlando 35 35 35 7 Orange Select Specialty Hospital - Orange (CON #9654) 40 8 Lee Select Specialty Hospital - Lee, Inc. (CON #9656) 60 8 Sarasota HealthSouth Ridgelake Hospital 40 9 Palm Beach Select Specialty Hospital - Palm Beach, Inc. (CON #9661) 9 Palm Beach Kindred Hospitals East, LLC (CON #9662) 70

10 Broward Kindred Hospital - South Florida - Hollywood 124 124 124 124 124 10 Broward Kindred Hospital - South Florida - Fort Lauderdale 64 64 64 70 70 11 Miami-Dade Kindred Hospital - South Florida - Coral Gables 53 53 53 53 53 11 Miami-Dade Select Specialty Hospital - Miami (+7 N0600005) 40 40 40 40 7 11 Miami-Dade Sister Emmanuel Hospital for Continuing Care 29 29

Total Beds 643 683 740 805 876 482 Total Facilities 8 9 10 12 14 9

Source: Florida Hospital Bed Need Projections & Service Utilization by District for appropriate years Promise Healthcare of Florida IX, Inc. (CON #9940): The applicant’s claims of evidence of access problems are not clearly supported. Specific documentation from area providers with regard to delays in care that will not be addressed by the two CON approved LTCHs would have been supportive and beneficial in showing an access problem to long-term care in the area. The two letters of support that were provided were not current, both dated in September 2005, a full-year prior to the application submission. Regarding availability and utilization of like services, the applicant did not comment on the two LTCH facilities recently approved with a sum

10 The 2006 MedPAC Report to Congress references the written testimony of John Votto of the National Association of Long-Term Hospitals before the Committee on Ways and Means, Subcommittee on Health, U.S. House of Representatives, 109th Congress, 1st session, June 16, 2005.

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total of 130 planned beds. It focused on the fact that nursing care hours are shorter at skilled nursing facilities than at LTCHs and that only one such facility in District 9 is equipped with a ventilator. However, per the AHCA Nursing Home Guide on-line as of November 8, 2006, there are two SNFs in District 9 that provide ventilator support, one in West Palm Beach and the other in Boca Raton. In its Table 19, the applicant states that District 9 is experiencing an 88 percent occupancy rate in SNF beds. However, per Agency records, District 9 experienced 86.5 percent occupancy in CY 2005. As referenced earlier, CMS is looking at offering skilled nursing facilities funding for providing high quality care and/or to improve the level of care they provide, suggesting that some may again begin providing care to the a more higher acuity patient, including ventilator patients. In response to quality of care, the applicant discussed its corporate emphasis on service, customer attentiveness, patient satisfaction and continuous process improvement. The applicant did not demonstrate need for the project as evidenced by the availability, quality of care, efficiency, accessibility, and extent of utilization of existing health care facilities and health services in the district. Kindred Hospitals East, L.L.C. (CON #9941) contends the two approved LTCHs for this district will be up to 80 miles away from the most northern reaches of the district, and therefore would not be accessible for the populations outside of Palm Beach County in District 9. However, as previously indicated, with District 9 patients who live in Indian River, Martin and St. Lucie Counties currently accessing LTCH care in facilities in District 10 (Broward County) which is far greater than 80 miles away is evidence that services are currently accessible to those being served there and the establishment of two new LTCHs in closer proximity to these residents makes the services even more accessible. As a reminder, once operational, the two CON approved LTCHs in District 9 could add applicable beds, should it deem the need, without CON approval.

Availability and accessibility would increase with this project, according to the applicant, as skilled nursing facilities (SNFs) and other sub-acute providers are stated to be inadequate due to a lack of staff, equipment, facilities or capabilities to provide the services proposed, and acute care

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hospital facilities would not be subject to financial burdens resulting from low bed turnover. As discussed above, it is not clear that the number of patients fitting the applicant’s admission criteria is sufficient to warrant long-term care beds in addition to the 130 already approved. The applicant states the proposed facility would improve efficiency of LTCH services by integrating the continuum of care to ensure patients are placed in the most independent setting for their condition. Administrative services would reportedly be shared between the proposed facility and other Kindred facilities. Also as shown earlier in this report, as Kindred is one of the two major LTCH chains in this industry, MedPAC has reported an upswing in adverse patient safety indicators from which Kindred cannot be ruled out as a contributing entity. The applicant did not demonstrate need for the project as evidenced by the availability, quality of care, efficiency, accessibility, and extent of utilization of existing health care facilities and health services in the district. Select Specialty Hospital - St. Lucie, Inc. (CON #9942) states that there are no like and existing LTCH facilities in the northern District 9 area and that clinically-appropriate patients are remaining in inappropriate bed situations. However, despite these claims, the applicant did not demonstrate this to be the case. It is noted that the planning area for a LTCH proposal is the district, and District 9 has two currently approved but not yet licensed LTCHs. It is also noted that the applicant did not provide any fact-based evidence that long stays in acute care hospitals are automatic confirmation of a need for an LTCH presence; quite to the contrary, it has been stated previously that the Agency cannot assess need in the absence of supporting evidence. With LTCH patients in Indian River, Martin and St. Lucie Counties currently obtaining LTCH services in District 10, there is evidence that appropriate care is being provided. The establishing of two new LTCHs closer to these counties will only serve to enhance access to this service. As previously discussed, the applicant did not provide letters from area physicians regarding potential LTCH referrals in light of the two facility approvals. In fact, as previously stated, none of the letters were current, the most recent being dated in October 2005, a full-year prior to the submission of this application.

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In response to quality of care, the applicant discussed its corporate experience in monitoring care, outcomes and patient satisfaction. Also as shown earlier in this report, as Select is one of the two major LTCH chains in this industry nationwide, MedPAC has reported an upswing in adverse patient safety indicators from which Select cannot be ruled out as a contributing entity. The applicant did not demonstrate need for the project as 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.

b. Does the applicant have a history of providing quality of care? Has the applicant demonstrated the ability to provide quality care? ss. 408.035(3), Florida Statutes. Promise Healthcare of Florida IX, Inc. (CON #9940) is a new, development stage corporation, and as such has no operating history. However, the applicant is a controlled entity of Promise Specialty Hospital, Inc., an existing provider of LTCH services in six states and all its LTCH counterparts are Joint Commission on Accreditation of Hospital Organizations (JCAHO) accredited. The applicant provides a reasonable description of Promise Healthcare’s quality of care. Kindred Hospitals East, L.L.C. (CON #9941) states all of its currently licensed LTCHs are accredited by the JCAHO and the necessary components are in place to ensure delivery of care. The applicant provided an in-depth description of services, case management plan, admission and assessment, care planning, discharge planning and strategic quality initiatives/customer satisfaction. Agency records indicate 14 confirmed complaints for the eight Kindred licensed LTCHs in the state for the three-year period ending September 28, 2006. These 14 complaints were in the following areas: patient care (four); medicine problems/errors/formulary (three); patient rights (two); nursing services (two); untrained/unqualified staff (one); infection control (one); and stolen item (one). Select Specialty Hospital - St. Lucie, Inc. (CON #9942) is a new, development stage corporation, and as such has no operating history. However, the applicant is a controlled entity of Select Medical Corporation, an existing major provider of LTCH services nationwide with 96 existing facilities in 26 states, including three that are operational in Florida. The applicant provided a description of Select Medical Corporation’s performance improvement plan that establishes specific methods and techniques for monitoring and improving care delivery. A

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copy of Select Specialty Hospital’s 65 page “Plan for the Provision of Patient Care/Services – Statement of Operation” is included in Attachment 9 of Volume 2 of the application. Attachment 12 (Volume 3) includes an extensive (over 148 pages) “Quality Improvement Plan”. Attachment 21 (Volume 3) contained Select’s Utilization Review Plan. Agency records indicate six confirmed complaints have been received on the parent corporation’s Miami facility and five on the Orlando facility, all as of the three-year period ending September 28, 2006. These involve patient care (three), pressure sores (one), use of restraints (two), medicine problems/errors/formulary (two), patient abuse/neglect (one), infection control (one) and nursing services (one). The Panama City facility licensed on January 5, 2004, does not have any confirmed complaints.

c. What resources, including health manpower, management

personnel, and funds for capital and operating expenditures, are available for project accomplishment and operation? ss. 408.035(4), Florida Statutes. Promise Healthcare of Florida IX, Inc. (CON #9940) indicates that the planned financial impact of the project will include the project cost of $22,469,787 and year two operating costs of $15,789.161. The applicant is a development stage company incorporated on August 2, 2005. An audit of the development stage company revealed total assets of $60,000 and no results from operations. Because this applicant is a development stage company and the applicant did not provide audited financial statements of its parent company (Promise Healthcare, Inc. – a privately held company), the applicant’s financial position cannot be determined. Capital Requirements: Schedule 2 indicates that the only project planned is the construct of the 40-bed LTCH which is the subject of this application. That would assume this is the only project approved of the four submitted in this review cycle by this applicant. The total cost of this project is $22,469,787. It should be noted that the applicant is projecting an operating loss of $3 million during the first year of this project. Medicare requires a six-month period (demonstration period) before a hospital is eligible for reimbursement under the LTCH PPS. This period is required to demonstrate a minimum 25-day average length of stay. During the demonstration period the hospital is reimbursed at the acute care rate.

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The projected loss is attributable to the difference in Medicare reimbursement rates for acute care hospitals and LTCHs as well as low occupancy during the first year. Available Capital: The notes to Schedule 3 indicate that the applicant intends to fund this project through debt financing. The applicant provided a letter of interest dated October 13, 2006, from Founding Partners Capital Management Company (Lender) expressing an interest in financing the project and working capital. A letter of interest dated October 16, 2006, was also provided from Wachovia Bank and indicated the bank had a relationship with the parent company since November 2003 and the parent maintained depository balances in excess of seven figures. A letter of interest is not considered a firm commitment to lend. In the absence of a firm commitment to lend, AHCA would typically evaluate the financial strength of the company to determine the likelihood that the applicant would be able to obtain debt financing. The stronger the applicant’s financial position, the more likely it would be able to obtain additional debt. The weaker the applicant’s financial position, the less likely the applicant would be able to acquire and maintain additional debt. As discussed above, this is a development stage company with no reported operating results. Therefore, the applicant’s likelihood to be able to secure financing could not be determined. In this situation, the applicant would have to rely on the financial position of the parent company to secure debt financing. However, no audited information was provided regarding the parent company’s financial position. Therefore, the Agency is unable to determine the financial position of the parent company and cannot reach a conclusion about the parent company’s ability to secure debt financing for the applicant. Conclusion: Funding for this project is dependent on the applicant’s ability to obtain debt financing. Based on the information provided, the Agency cannot determine the likelihood that the applicant will be able to obtain the financing necessary to fund this project and the associated working capital. Staffing: Schedule 6 indicates 105.7 total FTEs for the second year of operations at the proposed facility, allotting for 0.0 unit/program director, 19.6 for registered nurses (RNs), 14.4 for licensed practical nurses (LPNs) and 14.4 for nurses’ aides. Promise states it has over 1,500 staff nationwide. The applicant offers comprehensive initial orientation and mentoring of staff that do not have

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experience working with complex medical patients. On-going training and development is mentioned but there is no detail offered. Recruiting and retention is discussed in the context of well trained and appropriate nurse-to-patient ratios only. There is no description of mechanisms to attract and retain staff outside of this perspective. Kindred Hospitals East, L.L.C. (CON #9941) indicates that the planned financial impact of the project will include the project cost of $30,436,872 and year two operating costs of $14,433,584. The audited financial statements of the applicant for the period ending December 31, 2005, were analyzed for the purpose of evaluating the applicant’s ability to provide the capital and operational funding necessary to implement the project. Schedule 3 of the application indicates that Kindred Healthcare, Inc. (Parent) will provide funding for the project. Therefore, the audited financial statements of the parent for the period ending December 31, 2005, were also analyzed. The table below provides a list of the accounts and ratios used in the analysis. CON #9941 APPLICANT PARENT KINDRED HOSPITALS EAST, LLC 12/31/2005 12/31/2005 Current Assets $ 82,189,643 $ 944,964,000 Cash and Current Investment $ 1,043,901 $ 83,420,000 Assets Restricted for Capital Projects $ - $ - Total Assets $ 133,909,368 $ 1,760,561,000 Current Liabilities $ 36,931,389 $ 620,627,000 Total Liabilities $ 36,953,678 $ 890,025,000 Net Assets $ 96,955,690 $ 870,536,000 Total Revenues $ 411,998,229 $ 3,923,999,000 Interest Expense $ 0 $ 8,098,000 Operating Income $ 34,578,578 $ 128,630,000 Cash Flow from Operations $ 48,059,719 $ 263,133,000 Working Capital $ 45,258,254 $ 324,337,000 Current Ratio (CA/CL) 2.2 1.5 Cash Flow to Current Liabilities (CFO/CL) 1.3 0.4 Long-Term Debt to Net Assets (TL-CL/NA) 0.0 0.3 Times Interest Earned (NPO+Int/Int) 0.0 16.9 Net Assets to Total Assets (TE/TA) 72.4% 49.4% Operating Margin (ER/TR) 8.4% 3.3% Return on Assets (ER/TA) 25.8% 7.3% Operating Cash Flow to Assets (CFO/TA) 35.9% 14.9% Applicant: The applicant current ratio of 2.2 is above average and indicates that current assets are over two time’s current liabilities, a good position. The ratio of cash flow to current liabilities of 1.3 is above average and a good position. Working capital (current assets less current

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liabilities) of $45 million is a measure of excess liquidity that could be used to fund capital projects. Overall the applicant has a good short-term position. Parent: The parent’s current ratio of 1.5 is below average and indicates that current assets are one and a half times current liability, an adequate position. The ratio of cash flow to current liabilities of 0.4 is also below average and a moderately weak position. Working capital (current assets less current liabilities) of $324.3 million is a measure of excess liquidity that could be used to fund capital projects. Overall the parent has an adequate short-term position. Long-Term Position: Applicant: The ratio of long-term debt to equity of 0.0 is the result of carrying no long-term debt on the books of the applicant. Long-term debt is carried on the books of the parent corporation. The ratio of cash flows to assets of 35.9 percent is above average and a strong position. The most recent period had an operating profit of $34.6 million, resulting in a margin of 8.4 percent. Overall, the applicant has a good long-term position. Parent: The ratio of long-term debt to net assets of 0.3 is well below average and a good position. The ratio of cash flows to assets of 14.9 percent is above average and a strong position. The most recent period had an operating profit of $128.6 million, resulting in a margin of 3.3 percent. Overall, the parent has a good long-term position. Capital Requirements: Schedule 2 indicates the applicant has capital projects totaling $224.6 million. In addition, the applicant is projecting a year one net operating loss of $4.5 million for this project. The applicant would have to fund this operating loss in addition to the capital projects and maturities of long-term debt discussed above. Available Capital: As discussed above, funding for this project and all capital projects will come from the parent. The ratio analysis of the parent discussed above indicates that operating cash flows for the most recent year was $263.1 million with $324.3 million in working capital. CONCLUSION: Based on the audited financial statements of the applicant, and the financial strength of the parent, funding for this project and all capital projects is likely to be available as needed. Staffing:

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Schedule 6 indicates 102.6 total FTEs for the second year of operations at the proposed facility, with 1.2 allotted for a medical director (physician), 17.1 for registered nurses (RNs), 15.7 for licensed practical nurses (LPNs) and 14.0 for nurses’ aides. Kindred makes note that nursing turnover is high nationwide and that qualified and available staff is limited. To this end, Kindred provides affirmation that allocates substantial resources to attract and retain staff through various incentives, such as a competitive salary and benefits (including tuition reimbursement), recognition and promotional opportunities. It further states its means of outreach, these include media advertising, job fairs, direct marketing and internet advertising. Further, it states it will recruit for staff with the skills and experience necessary to meet the needs of this patient population. Select Specialty Hospital - St. Lucie, Inc. (CON #9942) indicates that the planned financial impact of the project will include the project cost of $21,660,056 and incremental operating costs in year two of $14,049,174. The audited financial statements of the applicant were reviewed to assess the financial position as of the balance sheet date and the financial strength of its operations for the period presented. The applicant is a development stage company with $10 in assets as of December 31, 2005. The applicant is a wholly owned subsidiary of Select Medical Corporation (Parent). Select Medical Corporation will provide funding for this project. The audited financial statements of the parent for the periods ending December 31, 2004 and 2005 were analyzed for the purpose of evaluating the parent’s ability to provide the capital and operational funding necessary to implement the project. The table below presents the accounts and ratios used in the analysis.

The parent company underwent a merger during 2005 with a subsidiary (Select Medical Holdings Corp.). The merger transaction had a material impact on the operations of the previous entity including the issuance of additional debt and expenses associated with the merger. As noted above, the parent also provided a June 30, 2006, 10-Q statement to show operations of the new combined entity.

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SELECT MEDICAL CORPORATION

12/31/2005 12/31/2004 Current Assets $ 395,850,000 $ 549,335,000 Cash and Current Investment $ 35,861,000 $ 247,476,000 Assets Restricted for Capital Projects $ - $ - Total Assets $ 2,163,369,000 $ 1,113,721,000 Current Liabilities $ 307,496,000 $ 235,620,000 Total Liabilities $ 1,652,848,000 $ 591,111,000 Net Assets $ 506,165,000 $ 515,943,000 Total Revenues $ 1,858,442,000 $ 1,601,524,000 Interest Expense $ 88,403,000 $ 33,299,000 Operating Income $ (19,491,000) $ 192,885,000 Cash Flow from Operations $ 64,128,000 $ 174,276,000 Working Capital $ 88,354,000 $ 313,715,000

FINANCIAL RATIOS Current Ratio (CA/CL) 1.3 2.3 Cash Flow to Current Liabilities (CFO/CL) 0.2 0.7 Long-Term Debt to Net Assets (TL-CL/NA) 2.7 0.7 Times Interest Earned (NPO+Int/Int) 0.8 6.8 Net Assets to Total Assets (TE/TA) 23.4% 46.3% Operating Margin (ER/TR) -1.0% 12.0% Return on Assets (ER/TA) -0.9% 17.3% Operating Cash Flow to Assets (CFO/TA) 3.0% 15.6%

Short-Term Position: The current ratio of 1.3 indicates current assets are slightly greater than current liabilities, an adequate position. The ratio of cash flows to current liabilities of 0.2 is below average and considered a weak position. The working capital (current assets less current liabilities) of $88.4 million is a measure of excess liquidity that could be used to fund capital projects. Overall, the parent company has a moderately weak but adequate short-term position. Long-Term Position: The ratio of long-term debt to net assets of 2.7 indicates long-term debt is greater than equity. This is well above average and a weak position. The cash flow to assets ratio of three percent is below average and a moderately weak position. The most recent year had a loss from continuing operations of $19.5 million, which resulted in a negative 1.0 percent margin. It should be noted that the loss includes $54.8 million in expenses associated with the merger. This is a non-recurring expense and without the $54.8 million in merger cost, the parent’s continuing operations would have been $35.3 million. Overall, the applicant has a weak long-term position. (See Table above). Capital Requirements: Schedule 2 indicates the applicant has capital projects and maturities of long-term debt through the start of this project totaling $21.8 million. It should be noted that the applicant is projecting an operating loss of $2.8 million during the first year of this project. Medicare requires a six-month period (demonstration period) before a hospital is eligible for

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reimbursement under the LTCH PPS. This period is required to demonstrate a minimum 25-day average length of stay. During the demonstration period the hospital is reimbursed at the acute care rate. The projected loss is attributable to the difference in Medicare reimbursement rates for acute care hospitals and LTCHs as well as low occupancy during the first year. Available Capital: As discussed above, the parent corporation will be providing funding for this project. The ratio analysis discussed above indicates that operating cash flows for the most recent audited year were $64.1 million with $88.4 million in working capital. As of December 31, 2005, the parent also has access to approximately $193.0 million in a revolving credit facility. Subsequent to the audit, the parent sold a subsidiary for $79 million; the 2005 audited financials classified the subsidiary sold as $13.9 million in assets held for sale. Conclusion: The costs associated with the applicant’s corporate merger discussed below had a material impact on the parent’s financial position. However, the acquisition is a one-time event. The parent’s historic audited operating results and recent 10-Q report indicate that sufficient cash should be generated on a going forward basis to fund this project. Therefore, funding for this project and working capital should be available as needed. However, it should be noted that, although positive, the parent’s financial position on a going forward basis is significantly weaker than it was prior to the merger. This increased weakness in the financial position of the parent increases the risk of the parent’s ability to fund its entire capital budget. Staffing: Schedule 6 indicates 100.0 total FTEs for the second year of operations at the proposed facility, allotting for 0.0 unit/program director, 20.0 for registered nurses (RNs), 10.0 for licensed practical nurses (LPNs) and 17.0 for nurses’ aides. Select provided extensive descriptions of its employee benefit and recruitment efforts. Volume 3 Attachment 20 of the application includes Select Medical Corporation Employee Benefits, effective April 1, 2005. This is a 25 page booklet on such topics as health, dental, disability, life and dismemberment insurance plans, paid time off and company matched 401 (k) options. Attachment 21 of the same volume includes Select Medical Corporation Recruitment Strategies and Resources. This includes numerous topics including the following: competitive salary; skills, job and trade fairs; individualized orientation; tuition reimbursement and clinical scholarships. Web-based recruitment tools

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are also referenced. These are designed to attract and retain staff to help support Select’s company goals.

d. What is the immediate and long-term financial feasibility of the proposal? ss. 408.035(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. Promise Healthcare of Florida IX, Inc. (CON #9940): The applicant will be compared to the hospitals in Group 12 (LTCH Group). Per diem rates are projected to increase by an average of 3.9 percent per year. Inflation adjustments were based on the new CMS Market Basket, 2nd Quarter, 2006. The applicant did not provide the anticipated case mix for the project. Therefore, the Agency used the Group 12 average case mix of 1.4022. Gross revenues, net revenues, and costs were obtained from Schedules 7 and 8 in the financial portion of the application and were compared to the control group as a calculated amount per patient day. Medicare requires a six-month period (demonstration period) before a hospital is eligible for reimbursement under the LTCH PPS. This period is required to demonstrate a minimum 25-day average length of stay.

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During the demonstration period the hospital is reimbursed at the acute care rate. Only the second year of operation will be considered for comparison with the control group because the hospital will be operating at acute care reimbursement rates during the first six months of operation, thereby distorting net revenues when compared to the control group. Projected net revenue per patient day (NRPD) of $1,525 in year two is between the control group median and lowest values of $1,538 and $1,467. With net revenues falling between the control group median and lowest values the facility is expected to consume health care resources in proportion to the services provided. (See Table below). The applicant offered a condition to provide a combined 2.0 percent of its patient days as Medicaid/charity. There appears to be a sufficient Medicaid/charity population in the service area to support the applicant’s proposed condition as 7.9 percent of the patient days in the service area were Medicaid/charity. However, the Medicaid/charity population discharged from general acute care facilities historically has not translated into a proportional number of Medicaid/charity days in LTCHs. In the 2004 year, approximately 14.9 percent of total patient days statewide were Medicaid/charity while only 2.6 percent of the patient days in LTCHs were patient days. There may be both clinical and financial reasons for this disparity. Projected cost per patient day (CPD) of $1,410 in year two is between the group median and lowest value of $1,411 and $1,183. With cost per patient day falling between the median and lowest level, these estimates appear to be reasonable and costs appear to be efficient. (See Table below). The year two-projected operating income is $1.3 million, which computes to an operating margin per adjusted patient day of $115. This is between the control group median and lowest value of $160 and a negative $17. Conclusion: Assuming projections can be met, this project appears to be financially feasible.

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PROMISE HEALTHCARE OF FLORIDA IX, INC. CON #9940 Mar-11 YEAR 2 VALUES ADJUSTED 2004 DATA Peer Group 12 YEAR 2 ACTIVITY FOR INFLATION ACTIVITY PER DAY Highest Median LowestROUTINE SERVICES 51,912,000 4,635 2,032 1,246 902 INPATIENT AMBULATORY 0 0 18 0 0 INPATIENT SURGERY 0 0 0 0 0 INPATIENT ANCILLARY SERVICES 0 0 4,770 3,751 2,383 OUTPATIENT SERVICES 0 0 63 0 0 TOTAL PATIENT SERVICES REV. 51,912,000 4,635 5,907 5,185 3,689 OTHER OPERATING REVENUE 252,414 23 8 2 0 TOTAL REVENUE 52,164,414 4,658 5,908 5,190 3,689

DEDUCTIONS FROM REVENUE 35,084,427 3,133 0 0 0 NET REVENUES 17,079,987 1,525 1,786 1,538 1,467

EXPENSES ROUTINE 4,553,582 407 495 388 261 ANCILLARY 4,657,713 416 597 370 287 AMBULATORY 0 0 0 0 0 TOTAL PATIENT CARE COST 9,211,295 822 0 0 0 ADMIN. AND OVERHEAD 2,722,321 243 0 0 0 PROPERTY 3,659,321 327 0 0 0 TOTAL OVERHEAD EXPENSE 6,381,642 570 714 658 461 OTHER OPERATING EXPENSE 196,224 18 0 0 0 TOTAL EXPENSES 15,789,161 1,410 1,736 1,411 1,183

OPERATING INCOME 1,290,826 115 334 160 -17 7.6% PATIENT DAYS 11,200 ADJUSTED PATIENT DAYS 11,200 TOTAL BED DAYS AVAILABLE 14,600 VALUES NOT ADJUSTED ADJ. FACTOR 1.0000 FOR INFLATION TOTAL NUMBER OF BEDS 40 Highest Median LowestPERCENT OCCUPANCY 76.71% 89.5% 69.5% 55.7%

PAYER TYPE PATIENT

DAYS % TOTAL SELF PAY 224 2.0% MEDICAID 128 1.1% 5.8% 0.3% 0.0% MEDICAID HMO 0 0.0% MEDICARE 8,608 76.9% 98.7% 77.9% 55.0% MEDICARE HMO 0 0.0% INSURANCE 224 2.0% HMO/PPO 2,016 18.0% 23.6% 16.0% 0.0% OTHER 0 0.0% TOTAL 11,200 100%

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Kindred Hospitals East, L.L.C. (CON #9941): The applicant will be compared to the hospitals in Group 12 (LTCH Group). Per diem rates are projected to increase by an average of 4.1 percent per year. Inflation adjustments were based on the new CMS Market Basket, 2nd Quarter, 2006. The average case mix in Group 12 is 1.40. Gross revenues, net revenues, and costs were obtained from Schedules 7 and 8 in the financial portion of the application and were compared to the control group as a calculated amount per patient day. It should be noted that seven of the 11 facilities in Group 12 are Kindred facilities.

Medicare requires a six-month period (demonstration period) before a hospital is eligible for reimbursement under the LTCH PPS. This period is required to demonstrate a minimum 25-day average length of stay. During the demonstration period the hospital is reimbursed at the acute care rate. Only the second year of operation will be considered for comparison with the control group because the hospital will be operating at acute care reimbursement rates during the first six months of operations, thereby distorting net revenues when compared to the control group.

Projected net revenue per patient day (NRPD) of $1,498 in year two is between the control group median and lowest values of $1,526 and $1,455. With net revenues between the control groups median and lowest values the facility is expected to consume health care resources in proportion to the services provided. (See Table below). NRPD appears reasonable.

The applicant offered a condition to provide a combined 2.5 percent of its patient days as Medicaid/charity. In their application, the applicant stated that their hospitals in Florida provided an average of 2.2 percent combined Medicaid and charity care adult patient days in 2004. There appears to be a sufficient Medicaid/charity population in the service area to support the applicant’s proposed condition as 7.9 percent of the patient days in the proposed service area were Medicaid/charity.

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However, the Medicaid/charity population discharged from general acute care facilities historically has not translated into a proportional number of Medicaid/charity days in LTCHs. In the 2004 year, approximately 14.9 percent of total patient days statewide were Medicaid/charity while only 2.6 percent of the patient days in LTCHs were patient days. There may be both clinical and financial reasons for this disparity.

Projected cost per patient day (CPD) of $1,439 in year two is between the group high and median values of $1,722 and $1,400. With projected CPD close to the median value of the group, costs appear reasonable. (See Table below). The year two projected operating income is $585,619, which computes to an operating margin per adjusted patient day of $58. This is between the control group median and lowest values of $160 and -$17. Virtually all of the revenue projections and a majority of expense projections are dependant on the applicant’s occupancy assumptions. An overstatement of the level of occupancy could have a materially negative affect on the projected financials. Conclusion: Assuming projections can be met, this project appears to be financially feasible.

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KINDRED HOSPITALS EAST, LLC CON #9941 Dec-10 YEAR 2 VALUES ADJUSTED 2004 DATA Peer Group 12 YEAR 2 ACTIVITY FOR INFLATION ACTIVITY PER DAY Highest Median LowestROUTINE SERVICES 47,079,169 4,695 2,016 1,237 895 INPATIENT AMBULATORY 0 0 17 0 0 INPATIENT SURGERY 0 0 0 0 0 INPATIENT ANCILLARY SERVICES 11,769,792 1,174 4,733 3,721 2,365 OUTPATIENT SERVICES 0 0 62 0 0 TOTAL PATIENT SERVICES REV. 58,848,961 5,868 5,861 5,145 3,660 OTHER OPERATING REVENUE 0 0 8 2 0 TOTAL REVENUE 58,848,961 5,868 5,862 5,150 3,660

DEDUCTIONS FROM REVENUE 43,829,759 4,371 0 0 0 NET REVENUES 15,019,202 1,498 1,772 1,526 1,455

EXPENSES ROUTINE 4,469,497 446 491 385 259 ANCILLARY 3,248,220 324 593 368 285 AMBULATORY 0 0 0 0 0 TOTAL PATIENT CARE COST 7,717,717 770 0 0 0 ADMIN. AND OVERHEAD 3,315,575 331 0 0 0 PROPERTY 3,400,291 339 0 0 0 TOTAL OVERHEAD EXPENSE 6,715,866 670 709 653 458 OTHER OPERATING EXPENSE 0 0 0 0 0 TOTAL EXPENSES 14,433,583 1,439 1,722 1,400 1,174

OPERATING INCOME 585,619 58 334 160 -17 3.9% PATIENT DAYS 10,028 ADJUSTED PATIENT DAYS 10,028 TOTAL BED DAYS AVAILABLE 18,250 VALUES NOT ADJUSTED ADJ. FACTOR 1.0000 FOR INFLATION TOTAL NUMBER OF BEDS 50 Highest Median LowestPERCENT OCCUPANCY 54.95% 89.5% 69.5% 55.7% PAYER TYPE PATIENT DAYS % TOTAL SELF PAY 0 0.0% MEDICAID 120 1.2% 5.8% 0.3% 0.0% MEDICAID HMO 0 0.0% MEDICARE 7,372 73.5% 98.7% 77.9% 55.0% MEDICARE HMO 0 0.0% INSURANCE 2,407 24.0% HMO/PPO 0 0.0% 23.6% 16.0% 0.0% OTHER 129 1.3% TOTAL 10,028 100%

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Select Specialty Hospital - St. Lucie, Inc. (CON #9942): The applicant will be compared to the hospitals in Group 12 (LTCH Group). Per diem rates are projected to increase by an average of 3.9 percent per year. Inflation adjustments were based on the new CMS Market Basket, 2nd Quarter, 2006. The applicant indicated that the projections assume a case mix between 1.15 and 1.20. Therefore, we have used an average of the applicant’s assumptions (1.175) for the case mix. It should be noted that the average case mix in Group 12 is 1.40. Gross revenues, net revenues, and costs were obtained from Schedules 7 and 8 in the financial portion of the application and were compared to the control group as a calculated amount per patient day.

Medicare requires a six-month period (demonstration period) before a hospital is eligible for reimbursement under the LTCH PPS. This period is required to demonstrate a minimum 25-day average length of stay. During the demonstration period the hospital is reimbursed at the acute care rate. Only the second year of operation will be considered for comparison with the control group because the hospital will be operating at acute care reimbursement rates during the first six months of operation, thereby distorting net revenues when compared to the control group. Projected net revenue per patient day (NRPD) of $1,190 in year two is below the control group lowest value of $1,220. On average, the hospital is consuming fewer health care dollars in proportion to services being provided than all of the hospitals in the control group. The applicant provided an explanation that it arbitrarily reduced the reimbursement level closer to a DRG of 1.0 to reflect the applicant’s effective case management resulting in shorter lengths of stay and therefore, lower reimbursement rate. It is unclear that such economies of operation would be achieved in the first two years. NRAPD is most likely understated. (See Table below).

The applicant offered a condition to provide a combined 2.8 percent of its patient days as Medicaid/charity. There appears to be a sufficient Medicaid/charity population in the service area to support the

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applicant’s proposed condition as 7.9 percent of the patient days in the proposed service area were Medicaid/charity. However, the Medicaid/charity population discharged from general acute care facilities historically has not translated into a proportional number of Medicaid/charity days in LTCHs. In the 2004 year, approximately 14.9 percent of total patient days statewide Medicaid/charity while only 2.6 percent of the patient days in LTCHs were patient days. There may be both clinical and financial reasons for this disparity.

Projected cost per patient day (CPD) of $1,157 in year two is between the group median value of $1,173 and lowest value of $984. With cost per patient day falling between the median and lowest level, these estimates appear to be reasonable and costs appear to be efficient. (See Table below).

The year two projected operating income is $399,736. Net revenues appear understated; therefore the projected operating margin cannot be relied on. However, understating revenues is a conservative assumption considering that the parent corporation has successfully operated similar hospitals. Conclusion: Assuming projections can be met, this project appears to be financially feasible.

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SELECT SPECIALTY HOSPITAL - ST. LUCIE, INC. CON # 9942 Dec-10 YEAR 2 VALUES ADJUSTED 2004 DATA Peer Group 12 YEAR 2 ACTIVITY FOR INFLATION ACTIVITY PER DAY Highest Median LowestROUTINE SERVICES 11,530,150 950 1,689 1,036 750 INPATIENT AMBULATORY 25,905,318 2,134 15 0 0 INPATIENT SURGERY 506,051 42 0 0 0 INPATIENT ANCILLARY SERVICES 0 0 3,966 3,118 1,982 OUTPATIENT SERVICES 0 0 52 0 0 TOTAL PATIENT SERVICES REV. 37,941,519 3,126 4,911 4,311 3,067 OTHER OPERATING REVENUE 0 0 6 2 0 TOTAL REVENUE 37,941,519 3,126 4,912 4,315 3,067 DEDUCTIONS FROM REVENUE 23,492,608 1,935 0 0 0 NET REVENUES 14,448,911 1,190 1,485 1,279 1,220 EXPENSES ROUTINE 4,299,087 354 411 323 217 ANCILLARY 5,049,507 416 497 308 239 AMBULATORY 0 0 0 0 0 TOTAL PATIENT CARE COST 9,348,594 770 0 0 0 ADMIN. AND OVERHEAD 1,846,496 152 0 0 0 PROPERTY 2,854,085 235 0 0 0 TOTAL OVERHEAD EXPENSE 4,700,581 387 594 547 384 OTHER OPERATING EXPENSE 0 0 0 0 0 TOTAL EXPENSES 14,049,175 1,157 1,443 1,173 984

OPERATING INCOME 399,736 33 334 160 -17 2.8% PATIENT DAYS 12,138 ADJUSTED PATIENT DAYS 12,138 TOTAL BED DAYS AVAILABLE 16,060 VALUES NOT ADJUSTED ADJ. FACTOR 1.0000 FOR INFLATION TOTAL NUMBER OF BEDS 44 Highest Median LowestPERCENT OCCUPANCY 75.58% 89.5% 69.5% 55.7%

PAYER TYPE PATIENT

DAYS % TOTAL SELF PAY 97 0.8% MEDICAID 243 2.0% 5.8% 0.3% 0.0% MEDICAID HMO 0 0.0% MEDICARE 9,414 77.6% 98.7% 77.9% 55.0% MEDICARE HMO 0 0.0% INSURANCE 1,788 14.7% HMO/PPO 596 4.9% 23.6% 16.0% 0.0% OTHER 0 0.0% TOTAL 12,138 100%

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e. Will the proposal foster competition to promote quality and cost-effectiveness? ss. 408.035(9), Florida Statutes. Competition to promote quality and cost-effectiveness is generally driven primarily by the best combination of high quality and fair price. Promise Healthcare of Florida IX, Inc. (CON #9940): This application is for a 40-bed LTCH in District 9. Currently, there are two approved LTCH facilities in this planning area. The impact of the price of services on consumer choice is limited to the payer type. Most consumers do not pay directly for hospital services rather they are covered by a third-party payer. The impact of price competition would be limited to third-party payers that negotiate price for services, namely managed care organizations. The applicant is projecting that approximately 18 percent of its patient days are expected to come from managed care organizations. Although there are two other planned LTCH providers in the district, price-based competition is limited to 18 percent of the applicants projected patient days. Therefore, the impact that this project will have on price-based competition will be limited. Kindred Hospitals East, L.L.C. (CON #9941): This application is for a 50-bed LTCH in District 9. Currently, there are two approved LTCH facilities in this planning area; one of the two will be operated by the applicant. The impact of the price of services on consumer choice is limited to the payer type. Most consumers do not pay directly for hospital services rather they are covered by a third-party payer. The impact of price competition would be limited to third-party payers that negotiate price for services, namely managed care organizations. The applicant is projecting that approximately 24 percent of its patient days are expected to come from insurance companies. It is noted that the applicant will be competing with itself. Therefore, the impact that this project will have on price-based competition will be limited if any. Select Specialty Hospital - St. Lucie, Inc. (CON #9942): This application is for a 44-bed LTCH in District 9. Currently, there are two approved LTCH facilities in this planning area, one of the two will be operated by the applicant’s affiliate.

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The impact of the price of services on consumer choice is limited to the payer type. Most consumers do not pay directly for hospital services rather they are covered by a third-party payer. The impact of price competition would be limited to third-party payers that negotiate price for services, namely managed care organizations. The applicant is projecting that approximately 20 percent of its patient days are expected to come from insurance and managed care organizations. It is noted that the applicant will be competing with itself. Therefore, the impact that this project will have on price-based competition will be limited if any.

f. Are the proposed costs and methods of construction reasonable? Do they comply with statutory and rule requirements? ss. 408.035(10), Florida Statutes; Ch. 59A-3 or 59A-4, Florida Administrative Code. Promise Healthcare of Florida IX, Inc. (CON #9940) proposes to establish a new 40-bed freestanding long-term care hospital (LTCH) located within St. Lucie County, District 9. This new hospital will be designed as a single-story, protected, non-combustible fully sprinklered building. All of the 40 LTCH medical patient rooms are private and exceed the minimum size requirements for new hospitals. Each medical bedroom has a private toilet room with a lavatory and shower. It appears that more than 10 percent of the new bedrooms have been made accessible. The patient support spaces appear to meet all of the space requirements of the current edition of the Florida Building Code (FBC). According to the application and the submitted plan, this new hospital will consist of three medical bed wings, and two four-bed critical care units (CCU). The medical beds are supported from a large centralized nursing station with several sub-nursing units located in each of the patient room wings of seven beds, 11 beds and 14 beds. The CCU rooms contain four beds each and are separated into two areas by two dedicated sub-nursing stations. There is one patent toilet and shower for each of these rooms that meet the FBC requirements. The centralized nurse station contains a multi-purpose room, nourishment station, medicine distribution cart, staff toilet, and a pharmacy. There is also a respiratory therapy area located in one of the patient wings.

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The therapy suite includes hydrotherapy, occupational therapy, physical therapy and speech therapy. There is an emergency department that contains triage room, a treatment room, an emergency holding area for several patients. This area also contains a small lab and a CT scan room. The operating suite contains an operating room, a two-bed post-anesthesia care unit with an isolation room, one pre-op bed, and control and nursing stations. Spaces have been included for a future OR, two recovery stations and an additional pre-op bed. All other supporting service elements appear to be provided for this operating suite. In addition all of the supporting service areas such as administration, medical records, dining, dietary, maintenance, storage, and other spaces and utilities as required by the FBC have all been provided for a fully functional facility. According to the plans and the application, the entire building will comply with all new codes and standards including the hurricane provisions of the FBC, Chapter 4, and Section 419.4 including onsite water storage, and protection of all utilities. It is also intended that the complete building utilities including the HVAC will be connected to emergency generators. The cost estimated for the construction of the new LTCH appears to be reasonable. There is no indication of a specific site on which to build this facility so total cost of the project is not possible to determine. The time schedule of a 14-month construction period from the time of building permit to final inspection seems ambitious but possible. The plans submitted with this application were schematic in detail with the expectation that they will necessarily be revised and refined during the design development (preliminary) and contract document stages. The architectural review of the application shall not be construed as an in-depth effort to determine complete compliance with all applicable codes and standards. The final responsibility for facility compliance ultimately rests with the owner.

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Kindred Hospitals East, L.L.C. (CON #9941) proposes to establish a new 50-bed freestanding long-term care hospital (LTCH) located in St. Lucie County, Florida. This new hospital will be designed as a two-story, protected, non-combustible building. Although not specified by the submission, it is assumed the building will be fully sprinklered to meet the minimum codes and standards. Forty of the 50-bed LTCH medical patient rooms are private and appear to exceed the minimum size requirements for new hospitals. Two of these rooms are designated to be isolation rooms. The plans also show 10 intensive care unit (ICU) rooms. Each medical bedroom has a private toilet room with a lavatory and shower. It appears that more than 10 percent of the new bed rooms are meant to be made accessible. Because of the insufficient information provided on the plan, it is impossible to tell if the patient support spaces will meet all of the space requirements of the current edition of the Florida Building Code (FBC). According to the application and the submitted plan, this new hospital will consist of two medical bed wings, and a 10-bed (ICU). The medical beds are supported from large centralized nursing stations. The ICU suite contains 10 beds, all of which appear to meet the minimum codes and standards. The plan provides all the required support spaces, such as soiled utility, clean utility, nourishment room, and medication room and all of these spaces appear to be adequately sized and positioned within the unit. The operating suite contains one operating room which appears to meet the size requirements of the AIA Guidelines. Two spaces have been provided to be used for both pre-operative holding and post-anesthetic care. These spaces are permitted to serve both functions, but neither space provides the clearance on the sides the bed required by the Guidelines for Design and Construction of Hospitals and Health Care Facilities. It also appears that the toilet rooms within the staff area are too small to comply with the accessibility requirements of the building code. It appears that enough space exists around the pre-op/recover station and the toilet rooms to accommodate the required modifications. All of the other required support spaces have been provided and are appropriately sized and arranged. There are supporting service areas such as administration, dietary, maintenance, storage, emergency treatment, training, pharmacy, therapy, radiology and other support spaces have been provided and appear to meet requirements.

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The plans indicate compliance with current codes, such as the Florida Building Code (FBC) and Life Safety Code (LSC). There is no information regarding building utilities. Based on the information which has been provided the cost estimated for the construction of the new LTCH is reasonable. The time schedule for construction from the time of building permit to final inspection is reasonable. The plans submitted with this application indicate some of areas which require revision to comply with current codes and standards; however it appears that the design would facilitate all the necessary modifications. The architectural review of the application shall not be construed as an in-depth effort to determine complete compliance with all applicable codes and standards. The final responsibility for facility compliance ultimately rests with the owner.

Select Specialty Hospital - St. Lucie, Inc. (CON #9942) proposes to establish a new 44-bed freestanding long-term care hospital (LTCH) located within St. Lucie County, District 9. This new hospital will be designed as a single-story, protected, non-combustible fully sprinklered building. All of the 44 LTCH medical patient rooms are private and exceed the minimum size requirements for new hospitals. Each medical bedroom has a private toilet room with a lavatory and shower. It appears that more than 10 percent of the new bedrooms have been made accessible. The patient support spaces appear to meet all of the space requirements of the current edition of the Florida Building Code (FBC). According the information from submitted plan, this new hospital will consist of two medical bed wings or areas, and one wing or suit of intensive care units (ICU). The medical beds are supported from two centralized nursing stations that serve 19 beds each. The ICU suite contains a total of six beds and is served by a dedicated nurse station. There is one patent toilet and shower for each of the medical rooms that meet the FBC requirements. The ICU rooms do not have a dedicated shower or toilet for each room but this design is permitted by the FBC. There is an isolation room provided for the ICU suite and one isolation room is provided for each of the two medical patient beds areas. The medical nursing stations contain a staff room, nourishment station, medicine room, staff toilet, equipment storage spaces.

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The therapy suite includes physical therapy and respiratory therapy. There is an emergency entrance that leads to an emergency treatment room. This area also contains a CT scan room. There is a centrally located pharmacy and lab area. This centralized area also contains a patient assisted shower and a site bathroom. The operating suite contains one operating room, a two-bed post-anesthesia care unit with an isolation room, one pre-op or holding bed, and control and nursing stations. All other supporting service elements appear to be provided for this operating suite including locker/change rooms. In addition all of the supporting service areas such as administration, medical records, dining, dietary, maintenance, storage, and other spaces and utilities as required by the FBC have all be provided for a fully functional facility. It is assumed the entire building will comply with all new codes and standards including the hurricane provisions of the FBC, Chapter 4, and Section 419.4., including onsite water storage and protection of all utilities although this is never alluded to in the application. The cost estimated for the construction of the new LTCH appears to be reasonable. There is no indication of a specific site on which to build this facility so total cost of the project is not possible to determine. The time schedule of construction from the time of building permit to final inspection seems reasonable. The plans submitted with this application were at the advanced schematic stage with the expectation that they will be revised and refined during the design development (preliminary) and contract document stages. The plans are very similar to projects which have previously been reviewed by the Office of Plans and Construction. The design professionals are strongly advised to review the comments of the previous project and to incorporate the necessary modifications to expedite project approval. The architectural review of the application shall not be construed as an in-depth effort to determine complete compliance with all applicable codes and standards. The final responsibility for facility compliance ultimately rests with the owner.

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

Medicaid patients and the medically indigent? Does the applicant propose to provide health services to Medicaid patients and the medically indigent? ss. 408.035(11), Florida Statutes.

According to the 2005 Hospital Financial Data Report, reporting the most recent data available (CY 2004), LTCHs in the state averaged 0.80 percent Medicaid patient days and 1.70 percent charity patient days. Promise Healthcare of Florida IX, Inc. (CON #9940) is a new development stage company with no operating history. The applicant proposes to condition the award of the certificate of need on the combined provision of two percent of patient days to Medicaid and charity care patients. Schedule 7B indicates that, by year two of operation, 1.1 percent of the facility’s annual patient days will be provided to Medicaid patients and 2.0 percent to self-pay patients, the latter being identified as charity care in the notes to Schedule 7B. While Schedule 7B shows an apparent 3.1 percent of patient days to Medicaid and charity care, Schedule C, Part C, Number 2 indicates two percent to Medicaid and charity care. Kindred Hospitals East, L.L.C. (CON #9941) states it has a history of providing Medicaid and charity care at its facilities, and states that its dedication to such care is demonstrated by its request for a condition on the provision of 2.5 percent of patient days for combined Medicaid and charity care patients. Schedule 7A indicates a 1.2 percent provision to Medicaid in the second year of operation; charity care is not identified on the schedule. The applicant states that it does not discriminate or deny any individual access to care or services regardless of his or her ability to pay. Select Specialty Hospital - St. Lucie, Inc. (CON #9942) is a new development stage company with no operating history. The applicant indicates its parent company’s LTCH counterparts in Florida provided 2.5 percent Medicaid patient days in CY 2005. It is noted that AHCA Hospital Financial Data 2005, reporting 2004 data which is the most recent available, indicates that Select Specialty Hospital – Miami, the only LTCH operated by Select throughout 2004 provided 0.7 percent (87 of 12,209 total patient days) to Medicaid patients. Select Specialty – Orlando provided 0.1 percent (12 of its 9,137) patient days to Medicaid

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patients and Select Specialty – Panama City provided no Medicaid patient days. As the calendar year and the Select Florida facilities’ fiscal years end December 31, 2004, Select’s Medicaid patient day’s average fell below the statewide average of .80 percent. These same facilities reflect a zero percent for charity patient days, while the state average was 1.7 percent. Select proposes to condition the award of the certificate of need on the combined provision of 2.8 percent of patient days to Medicaid and charity care patients. Schedule 7A indicates that two percent of the facility’s annual patient days will be provided to Medicaid patients and 0.8 percent to charity care. This would exceed the parent corporation’s experience in Florida for CY 2004.

F. SUMMARY

Promise Healthcare of Florida IX, Inc. (CON #9940) proposes to construct a freestanding 40-bed LTCH to be located in St. Lucie County, District 9. Three potential sites in or near Port St. Lucie were identified in aerial photographs provided in Attachment K as possible locations for the LTCH. The proposed hospital totals 47,951 gross square feet (GSF) of new construction. The applicant indicates the facility would be comprised of all private rooms. Total construction cost is estimated to be $10,170,405 and total project cost is $22,469,788. The applicant proposes to condition award of the CON on the provision of two percent of its total annual patient days to Medicaid and charity on a combined basis. Kindred Hospitals East, L.L.C. (CON #9941) proposes to construct a 50-bed freestanding LTCH in St. Lucie County, District 9. The applicant indicated its proposed location would serve the Port St. Lucie and Fort Pierce market, but gave no specific information relative to the proposed site. The proposed project totals 59,400 GSF of new construction, consisting of 40 private rooms (with 10 intensive care beds). The total construction costs are estimated to be $18,768,925 with total project costs of $30,436,872. As a condition of approval, the applicant agrees to a combined provision of 2.5 percent of its total patient days to Medicaid and charity patients starting with the second year of operation.

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Select Specialty Hospital - St. Lucie, Inc. (CON #9942) proposes to establish a 44-bed freestanding LTCH to be located in District 9, St. Lucie County. The applicant indicates that the proposed facility would be located near Lawnwood Regional Medical Center, which is in Fort Pierce, St. Lucie County. The proposed hospital will consist of 51,160 GSF of new construction with construction cost of $12,790,000. The 44-bed facility would be comprised of all private rooms. The total project cost is estimated to be $21,660,056. The applicant proposes to condition award of the certificate of need on the provision of a combined 2.8 percent of the facility’s patient days to Medicaid and charity patients.

After weighing and balancing all applicable review criteria, the primary issues are summarized below: Need: Need is not published by the Agency for long-term care hospital beds. It is the applicant's responsibility to demonstrate need. Two LTCH hospitals are CON approved but not yet licensed for Palm Beach County, District 9. This creates a total of 130 LTCH beds in the district where there were none before. All co-batched applicants indicate that they believe there is need in District 9 beyond 130 beds, but none provided any evidence that any patients were currently unable to obtain appropriate care or that population growth in the area was so great that the establishment of 130 LTCH beds would not meet any future need. Promise Healthcare of Florida IX, Inc. (CON #9940): Population demographics were not shown to substantially justify LTCH establishment. In like terms, availability of care, particularly existing utilization and quality of care were not shown as appreciably deficient. There was no objectively measurable data-driven and fact-based evidence (as opposed to hypothetical or generalized information) provided to show that residents are unable to access needed care or that care currently being provided lacks reasonable outcomes. Kindred Hospitals East, L.L.C. (CON #9941): Need and access arguments were not supported by objectively measurable data-driven and fact-based evidence (as opposed to hypothetical or generalized information). Although support letters state that many patients would

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have benefited from LTCH services, patient disposition was not stated and the Agency cannot assess patient disposition in the absence of such evidence. Population demographics were not shown to substantially justify LTCH establishment. In like terms, availability of care, particularly existing utilization and quality of care were not shown as appreciably deficient. There was no data-driven and fact-based evidence provided to show that residents are unable to access needed care or that care currently being provided lacks reasonable outcomes. Select Specialty Hospital - St. Lucie, Inc. (CON #9942): The applicant failed to provide objectively measurable data-driven and fact-based evidence (as opposed to hypothetical or generalized information) to support that patients in District 9 are unable to access needed care or that care currently being provided lacks reasonable outcomes. Although support letters state that many patients would have benefited from LTCH services, patient disposition was not stated and the Agency cannot assess patient disposition in the absence of such evidence. Quality of Care: Promise Healthcare of Florida IX, Inc. (CON #9940) is a new development stage corporation and as such has no operating history. However, the applicant is a controlled entity of Promise Specialty Hospital, Inc., an existing provider of LTCH services in six states and all of its LTCH counterparts are JCAHO accredited. The applicant provides a reasonable description of Promise Specialty’s quality of care mechanisms, including corporate emphasis on service, customer attentiveness, patient satisfaction and continuous process improvement. Kindred Hospitals East, L.L.C. (CON #9941) provided reasonable descriptions of quality of care, including services, case management plan, admission and assessment, care planning, discharge planning and strategic quality initiatives/customer satisfaction. Agency records indicate 14 confirmed complaints for the eight Kindred licensed LTCHs in the state for the three-year period ending September 28, 2006. These 14 complaints were in the following areas: patient care (four); medicine problems/errors/formulary (three); patient rights (two); nursing services (two); untrained/unqualified staff (one); infection control (one); and stolen item (one). Select Specialty Hospital - St. Lucie, Inc. (CON #9942) is a new, development stage corporation, and as such has no operating history. However, the applicant is a controlled entity of Select Medical Corporation, and currently operates three facilities in Florida. The applicant provided a reasonable description of its quality of care

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protocols and procedures, these being included in various in-depth attachments to the application. Agency records indicate six confirmed complaints have been received on the parent corporation’s Miami facility and five on the Orlando facility, all as of the three year period ending September 28, 2006. These involve patient care (three), pressure sores (one), use of restraints (two), medicine problems/errors/formulary (two), patient abuse/neglect (one), infection control (one) and nursing services (one). The Panama City facility licensed on January 5, 2004, does not have any confirmed complaints. Cost/Financial Analysis Promise Healthcare of Florida IX, Inc. (CON #9940): Funding for this project relies upon the acquisition of debt financing. Based on the information provided, the likelihood that the applicant will be able to obtain the financing necessary to fund this project and the associated working capital is not determinable. Assuming projected occupancy is met, the project appears to be financially feasible. An overstatement of the level of occupancy could have a materially negative affect on the projected financials. Kindred Hospitals East, L.L.C. (CON #9941): Funding for this project and all capital projects is likely to be available as needed. The applicant’s short-term position is good; the parent’s position is adequate. The applicant’s and parent’s long-term positions are both good. The proposal shows immediate and long-term financial feasibility assuming projections are met. An overstatement of the level of occupancy could have a materially negative affect on the projected financials. Select Specialty Hospital - St. Lucie, Inc. (CON #9942): The parent’s short-term position is moderately weak; the applicant’s long-term position is weak. However, the proposal shows, overall, immediate and long-term financial feasibility assuming projections are met. An overstatement of the level of occupancy could have a materially negative affect on the projected financials.

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Architectural Analysis: Promise Healthcare of Florida IX, Inc. (CON #9885): The cost estimated for the construction of the new LTCH appears to be reasonable. There is no indication of a specific site on which to build this facility so total cost of the project is not possible to determine. The time schedule of a 14-month construction period from the time of building permit to final inspection seems ambitious but possible. Kindred Hospitals East, L.L.C. (CON #9941): The cost estimated for the construction of the new LTCH and the time schedule from the time of building permit to final inspection are both reasonable. Though not stated in the plan submission, it’s presumed the facility will be fully sprinkled. Information as submitted is insufficient to determine if patient support spaces will meet all of the space requirements of the current edition of the FBC. The operating suite bed clearance, pursuant to the Guidelines for Design and Construction of Hospitals and Health Care Facilities, is insufficient. Though the plans submitted indicate there are necessary revisions to comply with all current codes and standards, it appears that the design would facilitate all the necessary modifications. Select Specialty Hospital - St. Lucie, Inc. (CON #9942): The cost estimated for the construction of the new LTCH appears to be reasonable. There is no indication of a specific site on which to build this facility so total cost of the project is not possible to determine. The time schedule of construction from the time of building permit to final inspection seems reasonable.

G. RECOMMENDATION

Deny CON #’s 9940, 9941 and 9942.

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AUTHORIZATION FOR AGENCY ACTION

Authorized representatives of the Agency for Healthcare Administration adopted the recommendation contained herein and released the State Agency Action Report.

DATE: Karen Rivera Health Services and Facilities Consultant Supervisor Certificate of Need Jeffrey N. Gregg

Chief, Bureau of Health Facility Regulation

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STATE AGENCY ACTION REPORTahca.myflorida.com/MCHQ/CON_FA/Batching/pdf/9941.pdf · 2006-12-13 ·...

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