STATE AGENCY ACTION REPORT ON APPLICATION FOR … · Select Specialty Hospital-Daytona Beach, Inc. will provide services to Medicaid, Medicaid HMO, and uncompensated charity care

STATE AGENCY ACTION REPORT

ON APPLICATION FOR CERTIFICATE OF NEED

A. PROJECT IDENTIFICATION

1. Applicant/CON Action Number

Select Specialty Hospital-Daytona Beach, Inc./CON #10199

1087 Denison Avenue Columbus, Ohio 43201

Authorized Representative: Michael T. McGovern, Senior Vice President

(614) 458-9016

2. Service District

District 4 (Baker, Nassau, Duval, Clay, St. Johns, Flagler and Volusia

Counties)

B. PUBLIC HEARING A public hearing was not held or requested with regard to the

establishment of the proposed long-term care hospital in District 4, Volusia County.

Letters of Support

Select Specialty Hospital-Daytona Beach, Inc. (CON #10199) submitted 18 letters of support for the project (CON application #10199, Attachment 3), all except Ms. Klemm’s were signed and dated during

June 25 through September 25, 2013.

Steve Harrell, CEO Bert Fish Medical Center, states “we often transfer patients (to LTCHs); unfortunately the closest is over an hour away. Having a long-term care (hospital) facility within 30 minutes would prove

to be very beneficial to our patients and their families as it would reduce travel time significantly”.

Valerie J. Ziesmer, MBA, CPA, Chief Financial Officer, Florida Hospital Flagler, writes that “Flagler County has a large population of retired

individuals; our facility’s inpatient census payor mix is over 70 percent

CON Action Number: 10199

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Medicare and Managed Medicare. In serving our community we have noted an increase in the acuity of our patients due to existing co-morbidities. In fact, in this current week we have made four referrals to

the closest LTACHs… due to the distance of these facilities, one in Green Cove Springs (70 miles) the other in Orlando (80 miles), convincing the

families to agree to allow their loved one to be transferred can be difficult”. She states that “Florida Hospital Memorial is within 20 miles of our hospital…and approval of this application would provide easier

access for the families and lessen the strain on families and patient”. Leslie Yadi, JD, LCSW, Administrative Director, Case Management and

Value Based Care for Florida Hospital, states that “my responsibility covers the eight Florida Hospitals in Central Florida”. She attests to the

positive relationship she has experienced between Select Specialty and Florida Hospital. Ms. Yadi writes that as a 17-year employee of Florida Hospital system, “…the dawn of an LTACH in the Orlando market was a

very positive addition to the care available, in our community, to help meet our patients’ needs. Select Specialty has been transformative in

physician culture towards LTACH, opening a new willingness amongst multiple physician specialties, to consider and utilize an LTACH option in the continuum of patient care”.

Karen Klemm, RN, BSN, ACM and Director of Case Management at Florida Hospital Memorial Medical Center, states that “an LTACH

provides a much needed service to those patients who could benefit from a longer stay to address clinical conditions…” Ms. Klemm also states

that “we have both patients and family members who refuse to discuss or even consider the option of transferring to an LTACH because of…the long distance to the ‘closest’ LTACH in our area…patients are deprived of

this much needed service because of the time and expense required and the safety issue involved in traveling back and forth by their loved ones.

Many of the family members are elderly who no longer feel comfortable or safe traveling this distance”.

Rose Martin, RN BSN CCRN CPUR, Director of Case Management & Social Services for Florida Hospital Fish Memorial, states that “during this past winter we had two patients who each had to wait two to three

days to get a bed at Select” (LTAH in Orlando – District 7). She also states “We’ve had Medicaid patients who have needed an LTACH and

they’ve not been accepted due to their insurance. If we had more LTACH beds available, it may be easier to obtain a bed for these patients”.

Sandra K. Carson, RN, MBA, CCM, Director Case Management and Clinical Documentation for Florida Hospital Deland, states an “LTCH in

Orlando is approximately 40 miles away but often there isn’t an available


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bed”, many refuse “transfer to an LTCH more than 50 miles away”. She also indicates that the distance to current LTACHs is prohibitively difficult for many patients to manage, particularly those who are elderly.

Pat Stark, Chief Nursing Officer at Florida Hospital DeLand indicates

that patients who require LTCH services require family support and “Jacksonville and Orlando are too far for many of our patients to travel”.

Dr. Suresh Desai, a doctor practicing in Ormond Beach, states that “I have been practicing in this area for approximately 30 years and have seen the need for this type of rehab facility for patients from both Halifax

Medical Center and Florida Hospital Memorial Medical Center”, adding that an LTCH “within Florida Hospital Memorial Medical Center would

allow our patients to remain in our community and provide their family easier access to their loved ones and be supportive in the patient’s recovery”.

Eight doctors submitted variations of a form letter which cites the

inconvenience current travel distances place on patients and families who need LTCH services currently unavailable in the applicant’s service area. These physicians include:

Dany Obeid, MD

Hezi Cohen, MD

Arjun Aneja, MD

V. John D’Souza, MD

Wahba Wahba, MD

Robert J. Martin, MD

Christian L. Birkedal, MD

T. Christopher Windham, MD, FACS.

David A. Burt, an attorney practicing in Daytona Beach, and Lonnie T. Brown, Florida Hospital Memorial Medical Center hospital board member submitted letters which voice travel concerns for local LTCH patients and

their families. Letters of Opposition

Tim Simpson, Division Vice President of Operations Kindred Healthcare

Hospital Division, on behalf of Kindred Hospital North Florida, states that “approval of an application for an additional long term care hospital beyond the two LTCHs which operate in District 4, will have a

significantly adverse impact on the future of Kindred Hospital North Florida. During the 12 months ending September 2013, 74 admissions

to Kindred Hospital North Florida came from hospitals in Volusia and Flagler Counties, and those patients produced $5.2 million in net


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revenue. It is obvious that should Select Medical develop its own long-term care hospital in Daytona Beach, many of these patients would no longer come to Kindred Hospital North Florida.”

Barbara B. Walsh, Chief Executive Officer Specialty Hospital

Jacksonville, states that:

Both existing LTCHs in District 4 “continue to have excess capacity”.

“There is no need for the proposed new LTCH under the section

408.035(1), Florida Statutes, CON review criteria. Residents of District 4 and Volusia County are currently well served by existing long-term care hospitals…there are no financial, geographic, or other

barriers to access to LTCH services for District 4 and Volusia County residents”.

“The occupancy rates of the existing LTCHs reflect a large number of unoccupied beds. During the period calendar year 2012, Specialty

experienced an occupancy rate of 51.49 percent; and Kindred experienced an occupancy rate of 70.73 percent; with a total District 4 occupancy rate of only 59.72 percent. During CY 2012, Specialty’s

average daily census (ADC) was 55 patients for its 107 licensed beds, meaning that 52 beds were unoccupied. Kindred’s CY 2012 ADC was 57 patients, with 23 unoccupied beds. During CY 2012 the average

number of unoccupied LTCH beds each day in District 4 was 75 beds”.

“Need is not demonstrated for approval of Select’s CON application”.

“Development of the proposed new LTCH would not result in any

material improvement in geographic access. Long-term care hospital patients are generally transported from acute care hospital settings by

emergency vehicles…there is no evidence that accessing existing LTCHs or travel conditions compromised patient safety or quality of care…”

“Approval of a new LTCH in District 4, Volusia County would result in significant adverse impact to the existing LTCHs in the District…

Adverse impact on existing providers would not be substantially reduced by Select’s proposal of a “hospital within a hospital” by

locating beds within Florida Memorial…(because)… effective October 1, 2013, if a LTCH admits more than 25 percent of its

patients from a single acute care hospital, Medicare will no longer pay for the excess admissions using full LTCH rates; but instead will substantially lower payments”. Therefore, the applicant “will have to

seek the vast majority of its admissions from other acute care hospitals from whom Kindred and Specialty currently receive patients”.


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C. PROJECT SUMMARY Select Specialty Hospital-Daytona Beach, Inc. (CON #10199),

proposes to establish a new 34-bed long-term acute care (LTCH)1 hospital-within-a-hospital (HwH)2 on the 11th floor of Florida Hospital

Memorial Medical Center at 301 Memorial Medical Parkway, Daytona Beach, in Volusia County. The primary service area will be Volusia and Flagler Counties.

The proposed project involves 25,195 gross square feet (GSF) of renovation. Total construction cost is estimated to be $4,564,087 and

total project cost $7,188,806.

The applicant proposes the following five conditions on approval:

The proposed facility will be a hospital within a hospital and located

within existing space of Florida Hospital Memorial Medical Center, Daytona Beach, Florida.

Select Specialty Hospital-Daytona Beach, Inc. will provide to area hospitals case manager education programs on LTCH clinical

specialization on no less than a semi-annual basis. This will be measured by submission of an annual report of the education

programs provided and the dates of those programs.

Select Specialty Hospital-Daytona Beach, Inc. will provide to area

hospitals physician education programs on LTCH clinical specialization on no less than a semi-annual basis. This will be measured by submission of an annual report of the education

programs provided and the dates of those programs.

Select Specialty Hospital-Daytona Beach, Inc. will provide services to

Medicaid, Medicaid HMO, and uncompensated charity care patients at a combined total of at least 2.8 percent of its patient days annually.

Select Specialty Hospital-Daytona Beach, Inc. will maintain its electronic medical record system and integrated software systems

which currently include HMS eMAR, Clinical View and Patient Care. This will be measured by submission of an annual report by the hospital certifying this system is maintained.

1 The applicant uses the acronym LTAC throughout this report, which the CON reviewer has changed

to LTCH. 2 The applicant uses the acronym HIH throughout this report, which the CON reviewer has changed to

HwH.


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D. REVIEW PROCEDURE

The evaluation process is structured by the certificate of need review

criteria found in Section 408.035, Florida Statutes; and applicable rules of the State of Florida, Chapters 59C-1 and 59C-2, Florida

Administrative Code. These criteria form the basis for the goals of the review process. The goals represent desirable outcomes to be attained by successful applicants who demonstrate an overall compliance with the

criteria. Analysis of an applicant's capability to undertake the proposed project successfully is conducted by evaluating the responses and data provided in the application, and independent information gathered by the

reviewer.

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

determine which applicant best meets the review criteria.

Chapter 59C-1.010 (3) (b), Florida Administrative Code, prohibits any amendments once an application has been deemed complete. The burden of proof to entitlement of a certificate rests with the applicant.

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

Certification of the Applicant.

As part of the fact-finding, the consultant, Jessica Hand analyzed the application with consultation from Financial Analyst, Everett “Butch” Broussard, who evaluated the financial data, and Said Baniahmad of the

Office of Plans and Construction, who reviewed the application for conformance with the architectural criteria.

E. CONFORMITY OF PROJECT WITH REVIEW CRITERIA

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


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1. Fixed Need Pool

a. Does the project proposed respond to need as published by a fixed need pool? ss. 408.035(1)(a), Florida Statutes and Ch. 59C-1.008(2),

Florida Administrative Code.

Need is not published by the Agency for LTCH beds. It is the applicant’s

responsibility to demonstrate need. An LTCH is defined as a hospital licensed under Chapter 395, Florida

Statutes, which meets the requirements of Title 42, subpart B, paragraph 412.23(e), Code of Federal Regulations (CFR); the provider must have an

agreement under 42 CFR Part 489 and the facility must have an average Medicare inpatient length of stay of greater than 25 days.

In addition to meeting the condition of participation applicable to acute care hospitals, as of 20073, LTCHs are now required to:

Have a patient review process that screens patients both before

admission and regularly throughout their stay to ensure appropriateness of admission and continued stay, although the law does not specify the patient criteria to be used to determine

appropriateness

Have active physician involvement with patients during their

treatment, with physician on-site availability on a daily basis to review patient progress and consulting physicians on call and capable of

being at the patient’s side within a period of time determined by the Secretary

Have interdisciplinary treatment teams of health care professionals,

including physicians, to prepare and carry out individualized treatment plans for each patient.

MedPAC is a commission that makes recommendations to Congress and the Secretary of the U.S. Department of Health and Human Services

(DHHS) regarding reimbursement for long-term hospital services. Medicare is the primary payer for LTCH services—in 2011, Medicare

spent $5.4 billion on care furnished in an estimated 424 LTCHs nationwide.4 Under the current reimbursement system, Medicare reimburses LTCHs prospective per discharge rates based primarily on the

patient’s diagnosis and the facility’s wage index.

3 As part of the Medicare, Medicaid and SCHIP (State Children’s Health Insurance Program) Extension

Act of 2007. 4 According to the MedPAC Report to the Congress: Medicare Payment Policy, March 2013.


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MedPAC indicates that nationwide most chronically critically ill (CCI) patients are treated in acute care hospitals but a growing number are treated in LTCHs. CCI patients are patients with clinically complex

problems, such as multiple acute or chronic conditions, which need hospital-level care for relatively extended periods. The highest single

LTCH diagnostic related group [DRG] was respiratory system diagnosis with ventilator support for 96 or more hours in fiscal year 2011.

According to MedPAC, over the past decade, there has been marked growth in the number and the share of critically ill patients transferred from acute care hospitals to LTCHs. However, some areas have no

LTCHs, underscoring the fact that medically complex patients can be treated in other settings. The commission indicates that patients who

can be appropriately treated in settings of lower acuity should not be admitted to LTCHs—because the cost of care in LTCHs is so high. However, it was noted by MedPAC that LTCH care may have value for

very sick patients. While research has shown that Medicare pays more for patients using LTCHs than for similar patients in other settings,

payment differences were not statistically significant when LTCH care was targeted to the most severely ill patients.

The commission has long held that payment for the same set of services should be the same regardless of the treatment setting where services are provided to ensure beneficiaries receive appropriate high-quality care in

the least costly setting consistent with the patient’s clinical condition. The MedPAC report concludes that the commission is investigating ways

to rationalize Medicare’s payments for CCI beneficiaries. The commission cites its analysis of claims from 2010 found that in

markets where LTCHs are used most frequently, the average LTCH case mix was lower than in markets where LTCHs are used less often. In

2010, about 47 percent of acute care hospital discharges to LTCH cases were patients who spent three or fewer days in the acute care hospital intensive care or cardiac care unit before discharge. MedPAC states that

this raises concerns about the extent to which LTCH care is provided unnecessarily.

MedPAC determined in its 2013 review, that Medicare accounts for about

two-thirds of LTCH discharges. The commission determined that between 2005 and 2008, growth in cost per case outpaced that for payments. Payments per case climbed 5.5 percent, more than twice as

much as the growth in costs between 2008 and 2009. This was due in part to congressional actions that halted or rolled back the

implementation of CMS regulations designed to address overpayments to LTCHs. Payment growth slowed to 1.6 percent between 2009 and 2011, while growth in costs increased less than one percent per year. In 2011,


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the Medicare margin for LTCHs was 6.9 percent and it is estimated that LTCHs’ aggregate Medicare margin will be 5.9 percent in 2013. After its study, the commission concluded that LTCHs could accommodate the

cost of caring for Medicare beneficiaries in 2014 without an update to the payment rate.

Unlike most other health care facilities, LTCHs do not submit quality data to the Centers for Medicare and Medicaid Services (CMS). In the

absence of this data, MedPAC uses unadjusted aggregate trends in rates of in-facility mortality, mortality within 30 days of discharge and readmissions from LTCHs to acute care hospitals. It should be noted

that the Patient Protection and Affordable Care Act of 2010 mandates that CMS implement a pay-for-reporting program for LTCHs by 2014.

MedPAC considers a pay-for-reporting program to be a first step toward pay for performance.

The commission has recommended that CMS develop patient and facility criteria that could be used to define LTCHs and ensure that patients

admitted to such facilities were medically complex and had a good chance of improvement. On October 1, 2013, CMS intends to begin pay for reporting for three measures—urinary catheter-associated urinary

tract infections, central line catheter-associated bloodstream infections, and new or worsened pressure ulcers—and has begun collecting the necessary data.

CMS will begin collecting data on two other measures—the share of

patients assessed for and appropriately given influenza vaccine and influenza vaccination coverage among health care personnel on January 1, 2013 with pay for reporting on these measures beginning on October

1, 2015. The commission states that these quality measures are already in use in acute care hospitals and post-acute care. However, additional

measures need to be developed for the conditions that are commonly treated in LTCHs. CMS has stated that future measures could include rates of other health care-acquired infections, such as ventilator-

associated pneumonia and surgical site infections; avoidable adverse events, such as re-hospitalizations, injuries secondary to poly-pharmacy, and air embolism, and nursing care injuries.

There have been several provisions related to long-term care hospitals

passed from 2007-20105 and have been implemented. These include:

5 These provisions are part of the Medicare, Medicaid and SCHIP Extension Act of 2007 subsequently amended in the American Recovery and Reinvestment Act of 2009 and the Patient Protection and

Affordable Care Act of 2010.


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A moratorium on new LTCHs and new beds in existing facilities, which began on December 29, 2007 and ended on December 28,

2012.

The Secretary of the Department of Health and Human Services is

prohibited from applying the 25 percent rule to freestanding LTCHs before cost-reporting periods beginning on July 1, 2012.6 Effective October 1, 2013, implementation of the 25 percent rule for hospitals

within hospitals and satellites, limits the proportion of Medicare patients who can be admitted from a hospital within a hospital or a

satellite’s host hospital during a cost-reporting period.

The Secretary implemented payment reductions for LTCH cases with

the shortest lengths of stay effective December 29, 2012.

The Secretary is prohibited from applying any budget-neutrality

adjustment to the current LTCH prospective payment system until December 29, 2012. MedPAC indicates that the budget-neutrality adjustment in 2013 will decrease payments by about 3.75 percent

over three years.

CMS is required to implement a pay-for-reporting program for LTCHs

by 2014. The program should require LTCHs to report a specified list of quality measures—to be determined by CMS—each year in order to

receive a full update to Medicare payment rates in the ensuing year. As discussed above, CMS established a pay–for-reporting program with data collection of three measures effective October 1, 2013.

An annual update to the LTCH standard rate shall be reduced by a quarter of a percentage point in 2010 and by half of a percentage

point in 2011. For rate years 2012-2019, any update shall be reduced by the specified productivity adjustment. Commission policy

changes include payment reductions required by the Patient Protection and Affordable Care Act of 1.1 percent in 2012 and 0.8 percent in 2013.

Despite the moratorium imposed in July 2007 on new LTCHs and new beds in existing LTCHs, the number of LTCHs filing Medicare cost

reports increased 9.3 percent (from 388 to 424 LTCHs) between 2008 and 2011 with most of the growth (23 of the 36 new LTCHs) taking place

in 2009. MedPAC found that beneficiaries’ use of services suggests that access has not been a problem since the moratorium was imposed. Controlling for the number of fee-for-service beneficiaries, the

commission found that the number of LTCH cases rose 2.8 percent between 2010 and 2011—suggesting that access to care increased during this period.

6 CMS established a 25 percent rule that uses payment adjustments to limit the percentage of Medicare patients who are admitted from a hospital within a hospital or satellite’s host hospital and

paid for at full LTCH payment rates.


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It is noted in the March 2013 MedPAC report that LTCHs are not distributed evenly across the nation. Some areas have many LTCHs and others have none. The commission concludes that the absence of LTCHs

in many areas of the country suggests that medically complex patients can be treated appropriately in other settings—making it difficult to

assess the need for LTCH care and, therefore, the adequacy of supply. In fact, MedPAC’s analysis of LTCH claims from 2010 found that average case mix for LTCH admissions is lower in communities with the highest

use of LTCHs compared with communities with the lowest use of LTCHs. The commission states that these findings suggest that an oversupply of LTCH beds in a market may result in admissions to LTCHs of less

complex cases that could appropriately be treated in less costly settings.

Additionally, the commission questions the clustering of LTCHs in certain markets as LTCHs are supposed to be serving unusually sick patients, a relatively rare occurrence. MedPAC states that an oversupply

of LTCH beds in a market may result in admission to LTCHs of less complex cases that could be appropriately treated in other, less costly

settings. The commission also cites that there is little evidence that patient outcomes in LTCHs are superior to those achieved in other settings.

MedPAC questions whether, now that the federal LTCH moratorium has ended, LTCH companies will act quickly to open new facilities or proceed

cautiously given the continued scrutiny of Medicare spending on LTCH care. Kindred Healthcare’s “cluster market” strategy, whereby the

company operates SNFs, home health agencies, and LTCHs within a single market in order to position itself as an integrated provider of post-acute is briefly addressed. MedPAC notes Kindred’s August 2012

purchase of IntegraCare, which provides home health and hospice care in 47 locations in Texas, indicates the intent of Kindred’s strategy is to

improve the chain’s ability to control costs and limit the impact of payment policy changes in any one industry.

The commission notes that it is important that potential patients that are

identified as medically complex should also be likely to benefit from a LTCH program, as some of the most severely ill medically complex patients are too sick for LTCH care or because their prognosis for

improvement is so poor. MedPAC states that other options may be better suited to these patient’s needs and may cost Medicare less.

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


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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.

The Changing Role of Long-Term Acute Hospitals

The applicant discusses the changing role of LTCH, citing federally mandated rules and regulations governing the definition, criteria, and

role of LTCHs in health care reform. In order to demonstrate the changing medical conditions requiring

treatment in LTCHs the applicant submits the following chart:

Changing Patterns in LTCH Admissions by Selected Conditions Share of all LTCH

admissions

Condition

Volume increase (decrease) over 6 Years

CY 2004

CY 2010

Ventilator and tracheostomy 45.0 11.6% 14.9%

Respiratory infections 48.8 3.8% 5.0%

Pulmonary edema/ respiratory failure 133.2 4.1% 8.5%

Septicemia (including ventilator) 141.0 3.5% 7.4%

Osteomyelitis 93.5 1.5% 2.6%

Degenerative nervous system disorders (60.6) 4.5% 1.6%

Rehabilitation (69.0) 4.1% 1.1%

Heart failure and shock (31.1) 3.0% 1.9%

Aftercare (musculoskeletal) (45.4) 4.9% 2.4%

Aftercare (other) (42.4) 4.4% 2.2%

Chronic obstructive pulmonary disease (20.3) 3.9% 2.8%

All LTCH conditions (12.5) 100.0% 100.0% Source: CON application #10199, page 54.

Per the applicant, the trend in DRG reveals an increasing severity of

LTCH patients during CY 2007-2010, as shown below.


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Distribution of LTCH Claims by MS-LTC-DRGs, CY 2006-2010

Source: Based on the applicant’s Exhibit 2 on page 56 of CON application #10199. Note: MS-LTC-DRG is the Medicare Severity Long-Term Care Diagnosis Related Groups used by the Centers

for Medicare and Medicaid Services.

Select Specialty Hospital-Daytona Beach, Inc. states that further evidence of the increasing severity of LTCH patients is seen in separate

analyses done of secondary diagnoses on the prior acute care hospital inpatient prospective payment system (IPPS) claims for patients transferred to LTCHs for each year from 2007 through 2010, and in prior

critical care use for patients transferred in CY 2006 as compared to CY 2010. The applicant states between CY 2007 and CY 2010 the

proportion of index IPPS discharges referred to LTCH with either ventilator/tracheostomy MS-DRG or an MCC rose from 68 to 77 percent, while the proportion with CCs only feel from 26 to 19 percent. IPPS

claims with no complications or comorbidities fell from five percent of IPPS referrals to two percent.

The applicant includes a copy (Volume 1, Attachment 5) and discusses the results of a study7 which found acute care hospital ICU clinicians

were generally positive about the role of LTCHs, with most reporting the primary motivation for seeking LTCH services was the need to free up critical care beds.

7 Kennell and Associates, Inc., Research Triangle International, “Determining Medical Necessity and

Appropriateness of Care for Medicare Long-Term Care Hospitals” submitted to CMS July 2012.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

CY 2007 CY 2008 CY 2009 CY 2010

Ungrouped MS-DRGs

No complications or comorbidconditions

Complications or comorbidconditions only but no MCCs

MCCs and Ventilator MS-DRGs


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Select Specialty Hospital-Daytona Beach, Inc. discusses the differences between sub-acute care and LTCHs, the advantages of LTCHs for high acuity care patients, and the role Medicare reimbursement plays in

discharge options for long-staying patients. The applicant addresses admission conditions appropriate to discharge from acute care hospitals

to LTCHs, noting that there is agreement among physicians that “sick but stable” is a theme in describing “ideal” LTCH patients.

Characteristics of Long-Term Acute Care Patients in Florida, 2012 Select Specialty Hospital-Daytona Beach, Inc. states that over 70 percent

of total (11,865) discharges from LTCH facilities in Florida in 2012 were patients age 65 and over. The applicant next provides a description of

the specific attributes of medically complex patients appropriate for LTCH admission per the Nierman and Nelsons definition8. These include:

Prolonged mechanical ventilation

Multiple organ failure

Multiple or chronic comorbidities (such as coronary artery disease,

chronic obstructive pulmonary disease, stroke, diabetes and renal failure)

Multiple community-acquired or hospital acquired infections or ulcers.

Select Specialty Hospital-Daytona Beach, Inc. states that an analysis of

Agency data was conducted to identify diagnosis and procedure codes in the first five listed fields of the database shared by the majority of acute care patients discharged to LTCH. The number of patients discharged to

LTCHs represented only 78 percent of LTCH discharge volume in the same period. The applicant addresses this discrepancy in the final steps

of the CCI methodology need estimate (see below). Complex Critically Ill Methodology (CCI)

Select Specialty Hospital-Daytona Beach, Inc. states that CCI methodology identifies one or more of seven diagnosis codes and/or

mechanical ventilation procedure codes that are in the records of 85 percent of acute care patients identified as discharged to LTCHs:

8 Determining medical necessity and appropriateness of care for Medicare long-term care hospitals was

prepared under contract to the Centers for Medicare and Medicaid Services in 2010 by Kennell and Associates, Inc.


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Mechanical ventilation for 96 hours or more (procedure codes 36.71

and 36.72)

Respiratory failure (diagnosis code 518)

Renal failure (diagnosis codes 584 to 586)

Congestive heart failure (diagnosis code 528)

Sepsis (diagnosis code 38

Encephalopathy (diagnosis code 348.3)

Metabolic disorders (diagnosis code 276) of fluid electrolyte and acid-

base balance; and

Osteomyelitis (diagnosis code 730).

The applicant provides the following table:

Identifying LTCH Candidates in Acute Care Hospitals, 2012

Source: CON application 10199, page 62. Select Specialty Hospital-Daytona Beach, Inc. notes that while all patients had at least one of the identified diagnosis or procedure codes,

the CCI analysis showed that statewide 57 percent of the 9,326 acute care patients discharged to LTCHs in 2012 experienced more than one of

these codes during the acute care stay. The applicant concludes that these codes represent a simplification of many codes that may be used to determine transfer to an LTCH. Select Specialty states the most common

conditions LTCH patients experienced included mechanical ventilation, respiratory failure and renal failure and referenced the chart below.

11,865 LTCH Discharges

•78% of LTCH Discharges identified in discharge disposition field of acute care database

9,326 Acute Care Discharges to LTCH

(Discharge Disposition Code 63)

•85% of Acute Care to LTCH patients captured using diagnosis and procedure codes

7,883 Identified Complex Discharges from Acute Care to

LTCH

•Result


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Incidence of Selected Diagnoses and Mechanical Ventilation Procedure Code

Acute Care Patients Discharged to LTCH, 2012 Discharges Percent of Total

State

District 4

Service Area

State

District 4

Service Area

Total Acute Care to LTCH 9,326 971 160 100% 100% 100%

None 1,443 149 15 15% 15% 9%

Mechanical Ventilation 2,321 229 59 25% 24% 37%

Respiratory Failure 4,220 440 110 45% 45% 69%

Renal Failure 2,824 302 30 30% 31% 19%

Congestive Heart Failure 1,185 101 17 13% 10% 11%

Sepsis 2,834 349 67 30% 36% 42%

Encephalopathy 1,333 110 26 14% 11% 16%

Metabolic Disorders 1,343 118 12 14% 12% 8%

Osteomyelitis 423 73 -- 5% 8% 0%

Unduplicated, One or More 7,883 822 145 85% 85% 91%

At least one 2,577 264 44 28% 27% 28%

Two 2,788 299 45 30% 31% 28%

Three 1,693 184 40 18% 19% 25%

Four 732 68 13 8% 7% 8%

Five 93 7 3 1% 1% 2% Source: CON application #10199, page 63.

Select Specialty Hospital-Daytona Beach, Inc. states that two need methodologies commonly used by applicants for LTCH services are long-stay and use rate. The long-stay approach quantified the number acute

care patients with extended acute care stays of usually 12 to 15 days or more, or a specific number of days beyond the geometric mean for specific MS-DRGs. This methodology was used as a proxy to identify CCI

patients. Over the last 10 years acute care case managers have worked to identify and place potential LTCH candidates earlier during their stay,

usually between days five and 10 of the acute care stay. As a result, in 2012 over half of acute care discharges to LTCH experienced lengths of stay of 13 days or less. Select Specialty contends that the long-stay

approach would not capture half of the patients who were actually transferred to LTCH in 2012. The applicant provides an analysis of the

state’s acute care hospitals (Code 62) discharges to LTCHs in CY 2012.


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Source: CON application #10199, page 76. NOTE: LOS refers to patient length of stay.

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.

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 24 LTCHs with 1,398 beds licensed to operate in

the State of Florida. There are an additional 252 approved but not yet licensed LTCH beds.

The following table illustrates the distribution of approved, but not yet licensed LTCH beds in Florida.

0

100

200

300

400

500

600

1.00 10.00 13.00 30.00 51.00

Acute Care Discharges to LTCH by Acute Care LOS 2012

Average LOS

Median LOS=13

Days

Number of

Discharges


18

Florida Approved-Not Yet Licensed Long-Term Care Hospital Beds

Hospital District Beds

Select Specialty Hospital Pensacola, Inc. 1 21

Select Specialty Hospital-Tallahassee Inc. 2 16

Select Specialty Hospital-Orlando (South Campus) 7 16*

Landmark Hospital of Southwest Florida, LLC (CON #10137) 8 50

Select Specialty Hospital - Lee, Inc. (CON #9715)*** 8 60

Kindred Hospital-South Florida-Coral Gables 11 5**

Select Specialty Hospital - Miami 11 24

Select Specialty Hospital - Dade, Inc. (CON #9892)*** 11 60

Total -- 252 Source: Florida Hospital Bed Need Projections & Service Utilization by District published 07/19/13.

Note: *This facility revised notification #120047 from 16 to 24 beds effective 2/28/13. **Kindred licensed two of these beds on 9/17/13 and indicated it will not license the remaining three

from notification #130007. ***The applicant’s parent sold these entities via 100% stock purchase to Promise Healthcare.

The average occupancy of Florida’s operational LTCHs was 66.21 percent for the CY 2012 reporting period. LTCH occupancy ranged from a low of

30.92 percent for Promise Hospital of Florida At The Villages (District 3) to a high of 96.24 percent for Select Specialty Hospital-Pensacola

(District 1). The following chart shows statewide occupancy by year for the past five years.

Statewide LTCH Occupancy

Calendar Years 2008 - 2012 Time Period Occupancy Rate Total Patient Days

CY 2008 57.79% 249,044

CY 2009 61.38% 280,727

CY 2010 62.03% 307,447

CY 2011 63.98% 320,965

CY 2012 66.21% 338,774 Source: Florida Hospital Bed Need Projections & Service Utilization by District published in July 2009-2013.

The service area for LTCH services is the district, not the county or any one geographic section or part of a county, or even necessarily a cluster of counties. Planning District 4 is comprised of Baker, Clay, Duval,

Flagler, Nassau, St. Johns, and Volusia Counties. Two facilities currently serve this district, Kindred Hospital-North Florida in Green

Cove Springs, Clay County has 80 licensed LTCH beds with 70.73 percent occupancy, and Specialty Hospital Jacksonville in Duval County has 107 licensed LTCH beds with 51.49 percent occupancy for CY 2012.

District 4 had 187 licensed long-term care hospital beds during CY 2012, which averaged 59.72 percent occupancy. The map below shows the location of the applicant’s project, District 4 LTCHs, and the two District

7 (Orlando) LTCHs presently serving Volusia and Flagler County residents.


19

Select Specialty Hospital-Daytona Beach, Inc. (CON application #10199) and LTCH

Providers Serving Volusia & Flagler Residents

Source: Microsoft® MapPoint® 2013.


20

Two LTCH providers currently exist in District 4. The applicant presents the following data for each facility.

Specialty Hospital of Jacksonville

Reports 107 licensed beds

Operates only 62 beds

Delivered 20,163 patient days of care in CY 2012, with an average daily census (ADC) of 55.1

Drew 78.9 percent of its patients from Duval and Clay Counties

Drew less than one percent of its patients from Volusia and Flagler

Counties.

Kindred Hospital North Florida

Reports 80 licensed beds

Delivered 20,170 patient days of care in CY 2012, with an ADC of

55.1

Drew 49.0 percent of its patients from Duval and Clay Counties

Drew 14.1 percent of its patients from Volusia and Flagler Counties

Captured 30.6 percent of its patients from outside District 4, including 15.1 percent from Georgia and 8.1 percent from Putnam

County in District 3.

Select Specialty Hospital-Daytona Beach, Inc. states the service area for

the proposed project is Volusia and Flagler Counties, and discusses need in the following categories:

1. Access Barriers to Care Exist in Service Area Counties

The applicant states that a measure of access barriers is low utilization of services, and notes the low utilization rates for Volusia and Flagler compared to other District 4 counties and the state in the following

chart:


21

2012 District 4 and Statewide Resident LTCH Use Rates per 10,000 Population

County

Ages 18 to 64 Ages 65 and Over

Population Discharges Use Rate Population Discharges Use Rate

Clay 120,618 74 6.1 24,449 141 57.7

Duval 561,729 277 4.9 103,927 423 40.7

Baker 17,186 7 4.1 3,141 6 19.1

St. Johns 121,178 20 1.7 32,875 42 12.8

Nassau 46,145 21 4.6 13,028 11 8.4

Flagler 55,578 11 2.0 24,635 19 7.7

Volusia 297,659 58 1.9 108,202 76 7.0

District 4 1,220,093 468 3.8 310,257 718 23.1

Statewide 11,682,265 3,348 2.9 3,425,139 7,943 23.2

Source: CON application #10199, page 4.

The reviewer confirms the total discharges above for Volusia and Flagler

County residents (164) match Agency discharge data, accounting for 14 percent (164/1186) of District 4 total discharges. The applicant notes

age 65 and over user rates are only one-third of the District 4 average and less than one-fifth of the rates for Clay and Duval Counties where existing LTCH are located.

The applicant includes the chart below which demonstrates that Volusia and Flagler residents were discharged to LTCHs at a much lower rate

and after twice the acute care length of stay compared to Clay and Duval residents.

Acute Care to LTCH discharges and Length of Stay by County, 2012

County

Discharges

Acute Care Length of Stay

Median Average

Baker 7 6 10

Clay 231 9 13

Duval 503 10 14

Flagler 30 22 21

Nassau 27 13 14

St. Johns 43 12 17

Volusia 130 22 23 Source: CON application #10199, page 69.

The total discharges from LTCH for Volusia and Flagler County residents are shown by facility below:


22

Volusia and Flagler County Residents Discharges by Facility

CY 2012 Facility

Facility District

and County

Flagler & Volusia County Resident

Discharges

Kindred Hospital-North Florida 4 (Duval) 85

Select Specialty Hospital-Orlando North 7 (Orange) 27

Select Specialty Hospital-Orlando South 7 (Orange) 22

Specialty Hospital Jacksonville 4 (Duval) 7

Select Specialty Hospital-Gainesville 3 (Alachua) 7

Other Florida LTCHs -- 16

Total Discharges 164 Source: Florida Center For Health Information and Policy Analysis Data.

As shown above, 52 percent (85/164) of Flagler and Volusia County

residents were served at Kindred Hospital North Florida, while two Select Specialty Hospitals of Orlando served 30 percent (49/164) of service area residents in their North and South campuses. The applicant states the

use rates for Volusia and Flagler Counties for residents ages 65 and over were among the lowest in the state.

Lowest Resident LTCH Use Rates

per 10,000 Population by County, CY 2012

County

District Pop.

18-64

Discharges Use Rate

Pop. 65+

Discharges

Use Rate

Lee 8 365,262 23 0.6 151,331 41 2.7

Hardee 6 16,318 3 1.8 3,673 1 2.7

Collier 8 177,217 18 1.0 88,449 32 3.6

Indian River 9 76,228 11 1.4 38,662 20 5.2

Martin 9 81,882 8 1.0 41,086 22 5.4

Monroe 11 48,046 5 1.0 13,480 8 5.9

Volusia 4 297,659 58 1.9 108,202 76 7.0

Glades 8 7,676 1 1.3 2,825 2 7.1

Flagler 4 55,578 11 2.0 24,635 19 7.7

Charlotte 8 83,570 11 1.3 55,779 45 8.1 Source: CON application #10199, page 4.

Select Specialty Hospital-Daytona Beach, Inc. notes that four counties shown above in District 8 (Charlotte, Collier, Glades and Lee) will soon have improved LTCH access through an approved but not yet operational

LTCH in Lee County (CON #9715) and Collier County (CON #10137).

The applicant states that distance between LTCHs and residents are a significant determinant of access to services. Clay and Duval Counties, where residents experience use rates several times those of service area

residents, acute care providers are all within 15 miles of a LTCH.


23

Distances in Miles from Acute Care Providers to LTCH Providers

Clay and Duval Counties Kindred Hospital

North Florida Specialty Hospital of

Jacksonville

Shands Jacksonville Medical Center 29 8

Orange Park Medical Center 15 21

St. Vincent’s Medical Center Riverside 26 7

Baptist Medical Center Downtown 28 5

Baptist Medical Center Beaches 41 15

Baptist Medical Center South 23 11

Mayo Clinic 38 12

Memorial Hospital Jacksonville 32 2

St. Vincent’s Medical Center Southside 31 3 Source: CON application #10199, page 85.

The applicant notes St. Johns County is the exception, and experiences low use rates despite a distance of 29 miles from Flagler Hospital in St. Augustine to Kindred North Florida, and 35 miles to Specialty Hospital,

perhaps reflecting a lack of outreach by existing providers to the St. Johns County population.

Per the applicant, within the service area of Volusia and Flagler Counties only one provider, Florida Hospital Fish Memorial, is within 30 miles of

an LTCH; all other service area providers are 50 miles or more from an LTCH. The following chart highlights the shortest distance to an LTCH

for each acute care provider:

Distances in Miles from Acute Care Providers to LTCH Providers Volusia and

Flagler Counties Select

Specialty Orlando (North)

Select Specialty Orlando (South)

Kindred Hospital

North Florida

Specialty Hospital

Jacksonville

Florida Hospital Flagler 71 78 54 63

Bert Fish Medical Center 53 60 92 101

Florida Hospital Oceanside 61 68 71 80

Florida Hospital Memorial Medical Center

55

62

70

79

Halifax Health Medical Center 51 58 79 87

Halifax Health Medical Center Port Orange

54

61

83

92

Florida Hospital Fish Memorial 27 34 98 108

Florida Hospital DeLand 41 45 82 95 Source: CON application #10199, page 6.

The applicant notes traveling long distances places a burden on families of patients and the elderly in particular: 70 percent of LTCH patients are

ages 65 and over. Approval of the proposed project would shorten this distance for all but one of the service area acute care providers:


24

Reduction in Travel Distance to LTCH with Approval of Proposed Project

Distance to Florida Hospital

Memorial Medical Center

Distance to

Closest LTCH Provider

Difference in Distance

Percent

Reduction in Distance

Florida Hospital Flagler 18 54 36 67%

Bert Fish Medical Center 24 53 29 55%

Florida Hospital Oceanside 7 61 54 89%

Florida Hospital Memorial Medical Center

XX

55

55

100%

Halifax Health Medical Center

5

51

45

89%

Halifax Health Medical Center Port Orange

12

54

42

77%

Florida Hospital Fish

Memorial

30

27

(3)

-11%

Florida Hospital DeLand 24 41 17 41% Source: CON application #10199, page 7.

2. Out-migration of Service Area Residents

Select Specialty Hospital-Daytona Beach, Inc. states that the percentage of patients who leave District 4 to receive LTCH services indicate the existence of access barriers. Per the applicant, out-migration of Volusia

County residents is disproportionately high compared to other District 4 Counties:

2012 Patient Destination of District 4 Residents

Long-Term Acute Care Services Provider

Baker

Clay

Duval

Flagler

Nassau

St. Johns

Volusia

District 4

Kindred Hospital-North FL 4 162 133 26 5 29 59 418

Specialty Hospital Jacksonville

9

44

555

3

24

30

4

669

Subtotal, District 4 LTCH Facilities

13

206

688

29

29

59

63

1,087

Select Specialty Orlando (North)

-

-

-

1

-

-

26

27

Select Specialty Orlando (South)

-

1

-

-

-

-

22

23

All Others - 8 12 - 3 3 23 49

Subtotal D7 & All Others - 9 12 1 3 3 71 99

Total 13 215 700 30 32 62 134 1,186

Percent Outmigration 0.0% 4.2% 1.7% 3.3% 9.4% 4.8% 53.0% 8.3% Source: CON application #10199, page 8.

Additionally, the applicant states no Medicaid patients were discharged from either District 4 provider in 2012, although three Medicaid patients

residing in Volusia County were discharged from other LTCHs.


25

Patient Origin of District 4 Long-Term Care Hospitals CY 2012

County

Kindred-North Florida Specialty Total District 4

Discharges % Total Discharges % Total Discharges % Total

Duval 133 22.1% 555 73.1% 668 50.6%

Clay 162 26.9% 44 5.8% 206 15.1%

Volusia 59 9.8% 4 0.5% 63 4.6%

St. Johns 29 4.8% 30 4.0% 59 4.3%

Flagler 26 4.3% 3 0.4% 29 2.1%

Nassau 5 0.8% 24 3.2% 29 2.1%

Baker 4 0.7% 9 1.2% 13 1.0%

District 4 418 69.4% 669 88.1% 1,087 79.9%

Out of State 94 15.6% 66 8.7% 160 11.8%

Putnam 49 8.1% 13 1.7% 62 4.6%

All Others 41 6.8% 11 1.4% 52 3.8%

Other 184 30.6% 90 11.9% 274 20.1%

Total 602 100.0% 759 100.0% 1361 100.0% Source: CON application #10199, page 10.

The applicant states utilization reported by Specialty Hospital and

Kindred North Florida declined by 8.5 percent between 2008 and 2012, while statewide LTCH utilization rates rose 36.0 percent during the same period.

LTCH Patient Days Statewide and in District 4

During CY 2008-2012

2008

2009

2010

2011

2012

Change 2008-

2012

% Change 2008-

2012

Statewide 249,044 280,727 307,447 320,965 338,774 89,730 36.0%

District 4 44,668 42,960 42,407 40,087 40,873 (3,795) (8.5%)

Specialty Hospital

22,300

19,803

20,397

21,415

20,163

(2,137)

(9.6%)

Kindred North FL

22,368

23,157

22,010

18,672

20,710

(1,658)

(7.4%)

Source: CON application #10199, page 11.

Select Specialty Hospital-Daytona Beach, Inc. concludes that declining utilization in District 4, alongside increases statewide in LTCH

utilization, and very low use rates in Volusia and Flagler Counties, indicate that existing LTCH providers have been unwilling or ineffective

meeting the need for these services outside of Jacksonville and southeastern Georgia.

3. Complex Critically Ill Need Methodology: Identification of Patients Needing LTCH by Analysis of Diagnosis and Procedure Codes

The applicant discusses Agency criteria for LTCH applications and states the following specific attributes of medically complex patients:


26

Prolonged mechanical ventilation

Multiple organ failure

Multiple or chronic comorbidities (such as coronary artery disease,

chronic obstructive pulmonary disease, stroke, diabetes and renal failure)

Multiple community-acquired or hospital acquired infections or ulcers.

Select Specialty Hospital-Daytona Beach, Inc. states that an analysis of Agency data was conducted to identify diagnosis and procedure codes in

the first five listed fields of the database shared by the majority of acute care patients discharged to LTCH. The number of patients discharged to

LTCH represented only 78 percent of LTCH discharge volume in the same period. The applicant addresses this discrepancy in the final steps of the CCI methodology need estimate (see below).

Complex Critically Ill Methodology (CCI)

Select Specialty Hospital-Daytona Beach, Inc. states that CCI methodology identifies one or more of seven diagnosis codes and/or

mechanical ventilation procedure codes that are in the records of 85 percent of acute care patients identified as discharged to LTCH:

Mechanical ventilation for 96 hours or more (procedure codes 36.71 and 36.72)

Respiratory failure (diagnosis code 518)

Renal failure (diagnosis codes 584 to 586)

Congestive heart failure (diagnosis code 528)

Sepsis (diagnosis code 38)

Encephalopathy (diagnosis code 348.3)

Metabolic disorders (diagnosis code 276) of fluid electrolyte and acid-

base balance; and

Osteomyelitis (diagnosis code 730).

The applicant notes that these codes represent a simplification of many codes that may be used to determine transfer to an LTCH, and that

statewide 57 percent of 9,326 acute care patients discharged to LTCH in 2012 experienced more than one of the codes during their acute care

stay. CCI Bed Need Methodology

Select Specialty Hospital-Daytona Beach, Inc. presents six steps in the

CCI bed need methodology:


27

1. Identify all patients in 2012 Agency Inpatient Database with one or more of seven diagnosis codes or mechanical ventilation procedure code which are shared by 85 percent of acute care patients

discharged to LTCH. 2. Exclusion by discharge disposition and length of stay of patients

who would not be critically ill at time of discharge. 3. Calculation of “conversion rate” for acute care patients discharged

to LTCH for each combination of diagnosis/procedure codes.

4. Apply conversion rate to service area discharges to identify LTCH patients.

5. Adjust projected cases to compensate for lack of completeness in

the Agency discharge disposition coding. This adjustment was necessary because the number of LTCH discharges in the Agency

database exceeded the number of acute care discharges to LTCH. The 9,326 acute care discharges to LTCH were 78 percent of the 11,865 LTCH discharges in 2012.

6. Calculate bed need by applying an average length of stay and assuming 75 percent bed occupancy.

The applicant expands on the above steps, explaining that to estimate the conversion rate in step 3, the conversion rates were calculated for the

17 Florida counties with LTCH facilities: the overall rate was 35.85 per thousand patients ages 18-64 and 36.89 per thousand patients ages 65 and over.

In step 4, the applicant states that the difference between actual

discharges to LTCH in 2012 and the number predicted by the conversion rates resulted in identification of the types of underserved patients in the service area: the greatest number of CCI patients who would have

received LTCH care if conversion rates were applied to the service area were patients with renal failure and respiratory failure. The applicant

found that 64 service area residents’ ages 18-64 and 84 residents ages 65 and over were discharged to LTCH in 2012. By applying the conversion rates cited, the applicant projects 2,218 potential cases ages

18-64 and 6,254 patients ages 65 and over. Applying the estimated LTCH discharges at the county rate, LTCH discharges would increase to 99 service area residents’ ages 18-64 and 220 residents ages 65 and over

that could have been discharged to LTCH.

In step 5 the applicant adjusted predicted discharge volumes to reflect that 78 percent of LTCH discharges were identified using the discharge disposition to LTCH from acute care hospitals. The applicant calculated

the CCI Methodology use rates per 10,000 populations and applied it to the projected service area populations in the first three years of operation

of the proposed project:


28

Adjustment to Correct Discharge Disposition Discrepancy Volusia 18-64 65+ Total

CCI Methodology 89 187 276

Adjustment from 78% to 100% 114 240 354

Flagler


Adjustment from 78% to 100% 13 42 55

Service Area


Adjustment from 78% to 100% 127 282 409 Source: CON application #10199, page 17.

Select Specialty Hospital-Daytona Beach, Inc. provides the following population projections in support of its need argument.

Population Growth in the Service Area and District 4, 2013-2018

Total Population

2013

2018 Change 2013-

2018 % Change 2013-2018

Flagler 104,780 129,986 25,206 24.1%

Volusia 503,841 528,380 24,539 4.9%

Total Service Area 608,621 658,366 49,745 8.2%

Total Other District 4 1,391,606 1,520,777 129,171 9.3%

Total District 4 2,000,227 2,179,143 178,916 8.9%

Elderly Population (65+)

Flagler 25,996 34,791 8,795 33.8%

Volusia 110,639 126,111 15,472 14.0%

Service Area 136,635 160,902 24,267 17.8%

Other District 4 186,253 235,504 49,251 26.4%

Total District 4 322,888 396,406 73,518 22.8%

Adult Population (18-64)

Flagler 58,430 71,043 12,613 21.6%

Volusia 299,769 305,892 6,123 2.0%

Total Service Area 358,199 376,935 18,736 5.2%

Total Other District 4 878,819 938,026 58,207 6.6%

Total District 4 1,238,018 1,314,961 76,943 6.2% Source: CON application #10199, page 74 from AHCA Florida Population Estimates, 2010-2025, February 2012.

The applicant notes that:

Total population is projected to increase by 8.9 percent in District 4

(2,000,227 in 2013 to 2,179,143 in 2018) and 8.2 percent in the service area (608,621 to 658,366) from 2013 to 2018.

The population aged 65 and over, which represented 70 percent of LTCH discharges in 2012, is projected to increase by 22.8 percent

(District 4) and 17.8 percent in the service area from 2013 to 2018.


29

Population ages 18 to 64, which represented the remainder of LTCH discharges, is projected to increase by 6.2 percent in District 4 and

5.2 percent in the service area.

Volusia County population is primarily projected to increase in the

age 65 and over cohort during the period (by 15,472) while a majority of growth in Flagler County is the 18-64 age cohort (by 12,613).

When applying a 28 day average length of stay and assuming target occupancy of 75 percent, the applicant projects need for 46 LTCH beds to

serve residents of Volusia and Flagler Counties in 2016:

CCI Methodology: Projected Service Area LTCH Bed Need 2012 Need: CCI

Methodology

Projected

2015 2016 2017

Volusia

Population 18-64 297,659 304,115 304,947 305,512

2012 CCI Methodology Rate 3.83 3.83 3.83 3.83

Discharges 18-64 114 116 117 117

Population 65+ 108,202 115,994 119,405 122,769


Discharges 65+ 240 257 265 272

Total LTCH Discharges 354 373 382 389

Flagler

Population 18-64 55,578 64,863 67,238 69,257


Discharges 18-64 13 15 16 16

Population 65+ 24,635 29,250 31,177 33,010


Discharges 65+ 42 50 53 56

Total LTCH Discharges 55 65 69 72

Total Service Area

Discharges 18-64 127 131 133 133

Discharges 65+ 282 307 318 328

Total 409 438 451 461

Average Length of Stay 28.0 28.0 28.0

Patient Days 12,264 12,628 12,908

Bed Need @ 75% Occupancy 45 46 47 Source: CON application #10199, page 18.

4. Use Rate Methodology: Projected Need for LTCH Services in District 4 and the Service Area

Select Specialty Hospital-Daytona Beach, Inc. states need for LTCH beds in District 4 and the service area were projected assuming utilization in

each county would be at statewide 2012 average use rates, which were calculated to be 2.87 discharges per 10,000 ages 18 to 64, and 23.19 for

ages 65 and over.


30

The applicant applied a 28.0 day average length of stay to residents of Volusia and Flagler Counties, and applied 2012 use rates and length of stay to other District 4 counties, since the proposed project is not

expected to impact the latter. At 75 percent occupancy the use rate methodology projects LTCH bed need at 46 beds in 2016 for the service

area. Per the applicant, the use rate methodology resulted in a projected net

need of one bed in 2017, using licensed and approved beds, although this does not reflect the lack of need for beds in northern District 4, as demonstrated by the operation of only 62 beds at Specialty Hospital of

Jacksonville. Use of operational beds results in a net need for 40 beds in 2016 and 46 beds in 2017, reflecting misdistribution of beds in District 4

and supports need for a program in Volusia and Flagler Counties.

Use Rate Methodology: Service Area and District 4 Projected LTCH Utilization Bed Need, 2015-2017

Beds Needed for Volusia and Flagler Counties

2015

2016

2017

Discharges 443 455 470


Patient Days 12,404 12,740 13,160

Beds Needed @ 75% Occupancy 45 46 48

Increase in Patient Days from 2012

Volusia and Flagler Counties 7,119 7,455 7,875

Other District 4 3,082 4,103 5,074

Total District 4 10,201 11,558 12,949

Projected Select-Daytona 5,058 7,912

Percent of Total Service Area 41% 62%

District 4 2015 2016 2017

Discharges 1,580 1,630 1,681


Patient Days 43,233 44,590 45,981

Out of State Patient Days 5,458 5,458 5,458

Total Patient Days 48,691 50,048 51,439

Beds Needed @ 75% Occupancy 178 182 188

Licensed and Approved Beds 187 187 187

Net Bed Need Licensed & Approved (9) (5) 1

Operational Beds 142 142 142

Net Bed Need Operational Beds 36 40 46 Source: CON application #10199, page 20.

Select Specialty Hospital-Daytona Beach, Inc. states both the CCI and use rate methodologies support need for the proposed 34-bed LTCH.


31

Service Area Need Projections, CCI and

Use Rate Need Methodologies 2015-2017 LTCH Discharges 2015 2016 2017


Use Rate Methodology 443 455 470

LTCH Patient Days at 28.0 ALOS

CCI Methodology 12,264 12,628 12,908

Use Rate Methodology 12,404 12,740 13,160

Beds Needed @ 75% Occupancy


Use Rate Methodology 45 46 48 Source: CON application #10199, page 21.

Select Specialty Hospital-Daytona Beach, Inc., address its proposed compliance with the CMS 25 percent rule, indicating that an important

consideration for a LTC hospital within a hospital is that reimbursement is reduced to approximately the same rate as received by acute care hospitals for each Medicare patient beyond a threshold for the host

hospital and separate thresholds for each referring hospital. The threshold for either the host or referring hospital is the greater of its

market dominance within a core based statistical area, or CBSA (up to 50 percent) or 25 percent of Medicare discharges (that had not reached outlier status proper to admission to the LTCH).

The applicant proposes to locate the 34-bed LTC HwH in Florida Hospital Memorial Medical Center. Per the applicant, in 2012 Florida Hospital

Memorial Medical Center represented only 22 percent of the a service area’s total Medicare discharges and 20 percent of total Medicare acute

care discharges to LTCH acute care providers in Volusia and Flagler Counties. The applicant expects to receive sufficient referrals to allow it to operate with less than 25 percent of its patients referred from the host

facility, as shown in the following two charts:

Service Area Acute Care Facilities Medicare Discharges, 2012 Facility Discharges % Total

Halifax Medical Center 6,190 26%

Florida Hospital Memorial Medical Center 5,364 22%

Florida Hospital Flagler 3,431 14%

Florida Hospital Fish Memorial 3,144 13%

Florida Hospital DeLand 3,112 13%

Bert Fish Medical Center 1,506 6%

Halifax Medical Center-Port Orange 832 3%

Florida Hospital Oceanside 512 2%

Total 24,091 100% Source: CON application #10199, page 22.


32

Service Area Acute Care Facilities Medicare Discharges

from Acute Care to LTCH, 2012 Facility Discharges % Total

Halifax Medical Center 24 32%

Florida Hospital Memorial Medical Center 15 20%

Florida Hospital DeLand 19 25%

Florida Hospital Flagler 8 11%

Florida Hospital Fish Memorial 7 9%

Bert Fish Medical Center 2 3%

Halifax Medical Center-Port Orange 1 1%

Total 76 100% Source: CON application #10199, page 22.

The applicant projects that in the second year of operations (2016) over

450 Volusia and Flagler County residents will be discharged from LTCH facilities, 283 of which will be discharged from Select-Daytona Beach.

These 283 represent approximately 63 percent of total service demand. Per the applicant, the increase in projected service area demand is

significantly more than the utilization projected for Select-Daytona Beach and will not result in adverse impact on existing providers. Additionally,

neither existing District 4 LTCH is highly dependent on patients from Volusia or Flagler Counties, who during CY 2012 represented just 14.1 percent of patients at Kindred-North Florida and less than one percent of

patients at Specialty Hospital of Jacksonville.

5. Strong Clinical Support for the Project

Select Specialty Hospital-Daytona Beach, Inc. reviews eight of the letters

submitted in support of the proposed 34-bed HwH LTCH facility. These letters were discussed above in the Letters of Support section of this report.

6. Case Studies of Patients who Did Not Receive LTCH Services

In order to demonstrate support for the proposed project, the applicant reviews 12 cases of patients adversely affected by the lack of needed

LTCH services. 7. Select LTCH Background and Clinical Programs

Select Specialty Hospital-Daytona Beach, Inc. reviews the company

history and mission of providing quality complex medical care to patients across 28 states.

The applicant discusses the profile of patients typically admitted to LTCHs, and includes a “Straight A” report card compiled by Select

Medical from patient and family care satisfaction scores.


33

Select Medical Hospital-Daytona Beach, Inc. provides an in-depth discussion of their LTCH services, including specialized teams focused

on:

Cardiac Care

Infectious Disease

Neurological Post-Trauma Recovery

Ventilation

Renal Care

Wound Care.

The reviewer notes that the applicant incorrectly numbered eight sections of the need portion of the application, resulting in mismatched

information between the index and information provided. A section listed in the index as “7. Advantages of Hospital-in-Hospital LTCHs” was not included.

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, accessibility, and extent of utilization of existing health care facilities and health services in the applicant’s service area?

ss. 408.035(1)(a) and (b), Florida Statutes. Select Specialty Hospital-Daytona Beach, Inc. restates the need

arguments presented previously in the application including the availability, quality of care, accessibility, and utilization of existing

District 4 LTCHs, outmigration patterns, and obstacles to LTCH services for District 4 residents specifically in Volusia and Flagler Counties. The applicant reviews 12 case studies of successful LTCH patient care.

The applicant discusses advantages of the vent weaning experience in a LTCH compared to a hospital:


34

24/7 respiratory therapy consultants, experienced in weaning patients from prolonged mechanical ventilation (staffing ratio not as

robust in acute care setting)

Dedicated RT driven weaning protocols that facilitate the weaning

process o Higher frequency of vent weaning attempts due to smaller unit size

and RT attention

Mobilization protocols that accelerate weaning process (well documented in the literature)-this is certainly improved by on site

physical therapists

Difficult airway policies and experience with downsizing of airways

and patient communication while on vent (Passey-Muir valve)

On site pulmonary program directors with quality oversight

On site resources to facilitate secretion mobilization (inclusive of

bronch if appropriate)

Pharmacy oversight regarding nebulized therapy and known program

to reduce use of sedative agents (the latter is known to improve weaning outcome)

Regional oversight by Senior RT group-monthly review of metrics and

education of lead RTs

Lead RTs present at each hospital with oversight of staff RTs

Patients requiring home ventilation are given extensive “hands-on”

education on all aspects of vent operation, response to vent alarms and management of emergencies.

As stated previously, Select’s overall wean rate is approximately 70 percent and includes patients previously deemed “unwean-able” at acute

care facilities. Per the applicant, other difference in Select LTCHs care compared to an

acute hospital includes:

Multidisciplinary approach with focuses on

o Neuroendocrine o Nutrition

o Wound care o Infection control

o Weakness improvement o Altered sensorium-active delirium screen program o Incontinence

o Respiratory Failure prevention protocols.


35

Comparisons with acute care setting o CCI patients in Select LTCHs do not require daily blood work or

imaging, which reduces iatrogenic anemia, radiation exposure, patient suffering, and medical costs

o Active on site pharmacist

o Multidisciplinary rounds with key members of the team o Family education

o Key focus on a return to functional status while managing ongoing chronic critical illness.

The applicant concludes that LTCHs’ focus on clinically effective strategies with functional recovery as a key outcome facilitates best

practices in providing care, communication with patients and families, reducing medical errors and enhancing satisfaction for all stakeholders.

b. Does the applicant have a history of providing quality of care? Has the applicant demonstrated the ability to provide quality care? ss. 408.035(1) (c), Florida Statutes.

The applicant states that the parent, Select Medical Corporation,

operates 110 specialty hospitals (including eight LTCHs in Florida and one additional specialty hospital) providing care in four areas of expertise: long-term acute care, inpatient medical rehabilitation,

outpatient physical therapy and contract therapy. In addition to LTCH hospitals, Select Medical offers nearly 1,000

outpatient clinics for those in need of physical rehabilitation, and in a typical day Select Medical treats a total of approximately 30,000 patients.

The applicant includes a copy of “Select Medical 2013 Quality and Corporate Responsibility Report” (Volume 1, Attachment 4) and

discusses quality of care in the following areas:

Ventilator Weaning-approximately 70 percent of patients who failed to wean from a ventilator in other settings, achieve ventilator weaning

while in a Select Medical LTCH.

Select Medical LTCHs have a case mix index (CMI) above the industry

average, reflecting success treating patients with the severest clinical acuity. Select Medical CMI for 2012 was 1.21, compared to 1.13 for other LTCHs and 1.15 industry-wide.


36

Infection Control-Select Medical LTCHs submit annual reports to the National Health Safety Network, which measures ventilator associated

pneumonia (VAP) among other infections, and with the exception of one quarter, Select Medical average VAP rates were 36 to 71 percent lower than the CDC LTCH mean VAP rates during the past two years.

75 percent of Select Medical Hospitals have zero VAP infections. The applicant states catheter-associated urinary tract infections and

central line associated blood stream infections are both trending downward as well.

Antibiotic Stewardship-The applicant states this reflects industry

concern about over-use of antibiotics. The average antibiotic charge per patient day decreased from 2009-2011 at Select Medical LTCHs

that participate in the Antibiotic Stewardship program.

Other Quality Indicators-The applicant states Select Medical LTCH’s

hospital-acquired pressure ulcer rates have been decreasing since the beginning of 2010, reaching a hospital average of less than one in

1,000 patient days for 2011. The applicant also notes that falls with injury (severity level 2 or greater per 1,000 patient days) are tracked.

Patient Satisfaction-The applicant states that Select Medical uses a

patient perception of care survey to assess patient and family satisfaction following an LTCH stay, and the overall average positive

raw score since the first quarter of 2011 has been 92 percent or higher. Select Specialty Hospital-Daytona Beach, Inc. notes that the patient satisfaction survey return rate is approximately 50 percent.

The applicant discusses four patient cases to demonstrate quality of

care, and provides an overview of nationwide medical staff, management organization, and regional and corporate leadership goals and qualifications.

Select Specialty Hospital-Daytona Beach, Inc.’s parent, Select Medical

Corporation, has nine licensed hospitals (of which eight are LTCHs) in Florida with a total of 399 licensed beds.9 Agency data obtained September 12, 2013 indicates that Select Medical Corporation facilities

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

9 West Gables Rehabilitation Hospital, a 60-bed CMR hospital in Miami-Dade County (District 11) is

Select Medical Corporation’s Florida hospital that is not an LTCH.


37

Select Medical Corporation Substantiated Complaint Categories

in the Past 36 Months Complaint Category Number Substantiated

Quality of Care/Treatment 5

Resident/Patient/Client Assessment 2

Administration/Personnel 2

Physician Services 1

Dietary Services 1

Nursing Services 1 Source: Agency for Health Care Administration complaint records.

c. What resources, including health manpower, management

personnel, and funds for capital and operating expenditures, are

available for project accomplishment and operation? ss. 408.035 (1)(d), Florida Statutes.

The applicant is a development stage corporation established July 24, 2013 to develop and operate a long-term acute care hospital in Daytona

Beach, Florida. According to the audit, the applicant has $96,645 in total assets and $86,645 in intercompany payables and with no

operations. The applicant is a wholly-owned subsidiary of Select Medical

Corporation, which is wholly-owned by Select Medical Holdings Corporation.

The applicant provided consolidated audited financial statements of its parent and ultimate parent companies, Select Medical Corporation, and

Select Medical Holdings Corporation, for the periods ending December 31, 2012 and 2011. These statements were analyzed for the purpose of evaluating the parent’s (Select Medical Corporation) ability to provide the

capital and operational funding necessary to implement the project.

Short-Term Position: The parent company’s current ratio of 1.2 is below average and indicates current assets are 1.2 times current liabilities, a slightly weak position.

The ratio of cash flows to current liabilities of 0.8 is slightly below average, an adequate position. The working capital (current assets less current liabilities) of $63.2 million is a measure of excess liquidity that

could be used to fund capital projects. Overall, the applicant has an adequate short-term position (see Table 1).


38

Long-Term Position: The ratio of long-term debt to net assets of 1.6 is well above average and indicates that long-term debt is greater than equity, a weak position.

The ratio of cash flow to assets of 11.2 percent is slightly above average and an adequate position. The most recent year had revenues in excess

of expenses of $155.5 million which resulted in a 5.3 percent operating margin. Overall, the parent has an adequate long-term position (see Table 1).

Capital Requirements: Schedule 2 indicates the applicant has capital projects totaling $7.2

million, which consists of the exclusively of the CON subject to this review.

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

the project will be provided by the parent. In support of the related company financing, the applicant provided a letter from the parent

stating it has available funds and will commit those funds for the project. The parent’s 2012, audited financial statements indicate $63.2 million in working capital and $309.4 million in cash flows from operations.

Staffing:

The applicant’s year one and two staffing is presented in the table below.


39

Select Specialty Hospital-Daytona Beach, Inc.

Staffing Patterns for Year One and Year Two of Operations

Year One FTEs Ending 12/31/2015

Year Two FTEs Ending 12/31/2016

Administration

Administrator 1.0 1.0

Director of Nursing 1.0 1.0

Admissions Director 1.0 1.0

Bookkeeper 1.0 1.0

Secretary 2.0 2.0

Medical Records Clerk/Dir. 1.0 1.0

Other: PBX Operator 1.0 1.0

Other: Payroll/Data Processor 0.3 0.5

TOTAL 8.3 8.5

Physicians

Medical Director 0.0 0.0

Total 0.0 0.0

Nursing

RNs 16.7 29.2

L.P.N.s 0.0 0.0

Nurses’ Aides 8.5 20.0

Other: Unit Clerk 1.0 1.0

TOTAL 26.2 50.2

Ancillary

Pharmacist 1.0 1.5

RT Manager 2.0 2.0

RT 8.0 10.4

PT 1.0 2.7

PT Aide 1.0 1.0

OT 1.0 1.0

OT Aide 0.5 1.5

ST 1.0 1.0

TOTAL 15.5 21.1

Dietary

Dietary Supervisor 2.0 2.0

Cooks 2.0 2.0

Dietary Aides 0.5 2.0

TOTAL 4.5 6.0

Social Services

Case Management Director 1.0 1.0

Marketing Director 1.0 1.0

Quality Management Director 1.0 1.0

Education 0.1 0.0

Total 3.1 3.0

Housekeeping

Housekeeping Supervision 0.0 1.0

Housekeepers 1.4 1.8

Total 1.4 2.8

Laundry

Laundry Supervisor 0.0 0.0

Laundry Aides 0.0 0.0

Total 0.0 0.0

Plant Maintenance

Maintenance Supervisor 1.0 1.0

Security 1.0 1.0

Other: Supply Supervisor 1.0 1.0

TOTAL 3.0 3.0

GRAND TOTAL 62.0 94.6

Source: CON application 10199, Schedule 6.


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Select Specialty Daytona does not include FTEs for laundry service in Schedule 6 or its narrative. The applicant does not address this in its application.

TABLE 1

CON application #10199

Select Specialty Hospital--Daytona Beach

Select Medical Corporation (Parent Company)

(In Thousands)

12/31/2012

12/31/2011

Current Assets (CA) $453,663

$483,410

Cash and Current Investment $40,144

$12,043

Total Assets (TA) $2,760,313

$2,770,738

Current Liabilities (CL) $390,446

$386,062

Total Liabilities (TL) $1,850,566

$1,760,633

Net Assets (NA) $909,747

$1,010,105

Total Revenues (TR) $2,948,969

$2,804,507

Interest Expense (Int) $83,759

$81,232

Excess of Revenues Over Expenses (ER) $155,504

$126,447

Cash Flow from Operations (CFO) $309,371

$240,053

Working Capital $63,217

$97,348

FINANCIAL RATIOS

12/31/12

12/31/11

Current Ratio (CA/CL) 1.2

1.3

Cash Flow to Current Liabilities (CFO/CL) 0.8

0.6

Long-Term Debt to Net Assets (TL-CL/NA) 1.6

1.4

Times Interest Earned (ER+Int/Int) 2.9

2.6

Net Assets to Total Assets (NA/TA) 33.0%

36.5%

Operating Margin (ER/TR) 5.3%

4.5%

Return on Assets (ER/TA) 5.6%

4.6%

Operating Cash Flow to Assets (CFO/TA) 11.2% 8.7%

Conclusion: Funding for this project and all capital projects should be available as needed.

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

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

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

provides for an objective evaluation of financial feasibility, (the likelihood that the services can be provided under the parameters and conditions


41

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

The applicant will be compared to hospitals in the Long-Term Acute Care

Group (Group 12). An intensity factor for comparative purposes of 1.3548 was calculated based on the average of the group. This methodology is used to adjust the group values to reflect the intensity of

the patient as measured by case mix. Per diem rates are projected to increase by an average of 2.7 percent per year. Inflation adjustments were based on the CMS Market Basket, 2nd Quarter, 2013.

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 2nd 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.

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

control group as a calculated amount per adjusted patient day.


42

Projected net revenue per adjusted patient day (NRAPD) of $1,560 in year two is between the control group median and lowest values of $ $1,738 and $762. With net revenues falling between the median and lowest

level, the facility is expected to consume health care resources in proportion to the services provided (see Table 2).

Anticipated costs per adjusted patient day (CAPD) of $ $1,462 in year two is between the control group median and lowest values of $1,646 and

$663. With projected cost between the control group median and lowest values, costs appear reasonable (see Table 2). The applicant is projecting a 4.3 percent decrease in CAPD between year one and year two from

$1,527 to $1,462. It should be noted that this application is for a new facility. The first year of operation has a below average occupancy rate.

The low occupancy rate decreases economies of scale and as the occupancy rate increases, CAPD would be expected to decrease.

The year two projected operating income for the project of $776,862 computes to an operating margin per adjusted patient day of $98, or 6.3

percent, which is between the control group median and lowest values of $67 and negative $228.

Conclusion: This project appears to be financially feasible.


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TABLE 2

Select Specialty Hospital-Daytona Beach CON application #10199 Dec-16 YEAR 2

VALUES ADJUSTED

2011 DATA Peer Group 12 YEAR 2 ACTIVITY

FOR INFLATION

ACTIVITY PER DAY

Highest Median Lowest

ROUTINE SERVICES 37,699,457 4,765

2,782 1,688 679

INPATIENT AMBULATORY 0 0

8 0 0

INPATIENT SURGERY 0 0

0 0 0

INPATIENT ANCILLARY SERVICES 0 0

7,365 4,233 1,292

OUTPATIENT SERVICES 0 0

9 0 0

TOTAL PATIENT SERVICES REV. 37,699,457 4,765

10,148 5,965 1,972

OTHER OPERATING REVENUE 0 0

12 3 0

TOTAL REVENUE 37,699,457 4,765

10,149 5,969 1,972

DEDUCTIONS FROM REVENUE 25,355,740 3,205

0 0 0

NET REVENUES 12,343,717 1,560

2,198 1,738 762

EXPENSES ROUTINE 5,587,689 706

554 452 203

ANCILLARY 3,371,446 426

573 410 231

AMBULATORY 0 0

0 0 0

TOTAL PATIENT CARE COST 8,959,135 1,132

0 0 0

ADMIN. AND OVERHEAD 581,443 73

0 0 0

PROPERTY 1,627,390 206

0 0 0

TOTAL OVERHEAD EXPENSE 2,208,833 279

1,425 835 230

OTHER OPERATING EXPENSE 398,887 50

0 0 0

TOTAL EXPENSES 11,566,855 1,462

2,507 1,646 663

OPERATING INCOME 776,862 98

268 67 -228

6.3%

PATIENT DAYS 7,912 ADJUSTED PATIENT DAYS 7,912

TOTAL BED DAYS AVAILABLE 12,444

VALUES NOT ADJUSTED

ADJ. FACTOR 1.0000

FOR INFLATION

TOTAL NUMBER OF BEDS 34

Highest Median Lowest

PERCENT OCCUPANCY 63.58%

95.1% 66.3% 43.0%

PAYER TYPE PATIENT DAYS % TOTAL

SELF PAY 47 0.6%

MEDICAID 174 2.2%

8.5% 1.2% 0.0%

MEDICAID HMO 0 0.0% MEDICARE 5,380 68.0%

90.8% 62.4% 47.4%

MEDICARE HMO 1,187 15.0% INSURANCE 1,124 14.2%

HMO/PPO 0 0.0%

50.8% 32.9% 5.0%

OTHER 0 0.0%

TOTAL 7,912 100%


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e. Will the proposal foster competition to promote quality and cost-

effectiveness? ss. 408.035 (1)(e), Florida Statutes.

Competition to promote quality and cost-effectiveness is driven primarily

by the best combination of high quality and fair price. Competition forces entities to ultimately increase quality and reduce charges/cost in order to remain viable in the market. The health care industry has

several factors that limit the impact competition has to promote quality and cost-effectiveness. These factors include a disconnect between the payer and the end user of health care services as well as a lack of

consumer friendly quality measures and information. These factors make it difficult to measure the impact this project will have on

competition to promote quality and cost-effectiveness. However, we can measure the potential for competition to exist in a couple of areas.

Provider-Based Competition: There are two existing long-term acute care hospitals totaling 187 beds

in District 4. Therefore, this 34-bed project would increase the number of active beds and be an 18.2 percent increase in the approved beds in the area.

Price-Based Competition: 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-

based competition would be limited to third-party payers that negotiate price for services, namely managed care organizations. Therefore, price competition is limited to the share of patient days that are under

managed care plans. In year two, the applicant is projecting approximately 0.6 percent of its patient days from self-pay patients, 14.2

percent from Insurance, and approximately 85.2 percent of patient days expected to come from fixed price government payer sources (Medicare and Medicaid) (Table 2).

Conclusion: The potential for provider-based competition will increase; however, price-based competition will likely be limited.

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

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

The architectural review of the application shall not be construed as an

in-depth effort to determine complete compliance with all applicable


45

codes and standards. The final responsibility for facility compliance ultimately rests with the owner.

The proposed 34-bed LTCH will be a hospital within a hospital located on the 11th floor of Florida Hospital Memorial Medical Center. The new

hospital will be constructed within the existing building of Florida Building Code (FBC) Type IA and NFPA Type I (443). Both construction types are suitable for the proposed facility. According to the narrative

the building will be fully sprinklered. All 34 LTCH medical patient rooms are private and exceed the minimum

size requirements of the Guidelines for Design and Construction of Health Care Facilities. Each medical bedroom has a private toilet room

with a lavatory and shower. Plans indicate that more than 10 percent of the new bedrooms have been made accessible. However it appears that the toilet rooms do not meet the required turning space to comply with

FBC – Accessibility.

The plans and narrative provide all the required support spaces, such as a nurse station, soiled utility, clean room, nourishment room, medication room, staff lounge/locker and toilets. All of these spaces appear to be

adequately sized and positioned within the unit. There is also a physical therapy room and pharmacy located on this level. Other required hospital departments including dietary and radiology have not been

provided. Some of these services may be shared with the host facility.

Plans show two isolation rooms in LTCH unit; a minimum of one isolation room is needed to be in compliant with Florida Building Code – Accessibility.

The architectural plans show the proposed LTCH is divided into smoke

compartments to comply with the current codes. The narrative indicates the building will comply with all new codes and standards including the hurricane provisions of the FBC, Chapter 4, and Section 419.4.

Overall, the proposed project as submitted is designed to be functional and efficient and does not indicate any major impediments that would

prevent the design and construction of a code compliant facility.

The cost estimated for the construction of the new LTCH appears to be reasonable.

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


46

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.

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

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

The LTCHs that serve the vast majority of Volusia and Flagler residents, all Select Medical Corporation and Florida LTCHs’ provision of Medicaid

and charity care is presented below. This is based on the Agency’s Florida Hospital Uniform Report System (FHURs) financial data for FY

2012 and 2011.

LTCHs Serving Flagler & Volusia Residents Medicaid, Medicaid HMO and Charity Care

Fiscal Years 2012-2011 FY 2012*

Medicaid and Medicaid HMO

Days

Medicaid and Medicaid HMO

Percent

Percent of Charity Care

Percent Combined Medicaid,

Medicaid HMO and Charity Care

Select Specialty Hospital-Orlando* 316 1.44% 0.00% 1.44%

Kindred Hospital-North Florida 25 0.12% 1.30% 1.42%

Specialty Hospital Jacksonville 0 0.00% 0.46% 0.46%

All Select Specialty Hospitals 1,912 1.88% 0.00% 1.88%

State Total 5,095 1.53% 0.79% 2.31%

FY 2011

Kindred Hospital-North Florida 152 0.82% 2.33% 3.14%

Select Specialty Hospital-Orlando* 271 1.26% 0.00% 1.26%

Specialty Hospital Jacksonville 0 0.00% 0.43% 0.43%

All Select Specialty Hospitals 2,152 1.78% 0.08% 1.86%

State Total 5,676 1.81% 0.98% 2.78% Source: Agency for Health Care Administration Florida Hospital Uniform Reporting System. Note: * All LTCHs in the State use the calendar year as their fiscal year.

**Select Specialty Hospital-Orlando (North Campus) and Select Specialty Hospital-Orlando (South Campus)

submit combined financial reporting.

Select Specialty Hospital-Daytona Beach, Inc. states the parent, Select

Specialty Corporation, has a history of providing care to Medicaid and charity patients, with an average provision of 2.4 percent of Medicaid and 0.2 percent charity care to patients at Florida facilities during the 12-

month period ending July 2013, including $2,366,262 patient charges as bad debt during the same period. The applicant submits the following chart demonstrating these findings:


47

Medicaid and Charity Care at Florida Select Specialty Hospitals

12 Months Ended July 2013

Facility Patient Days Percent of Total

Bad Debt Medicaid Charity Medicaid Charity

Gainesville 370 19 3.4% 0.2% $ 331,464

Miami 35 - 0.2% 0.0% $ 585,114

Orlando South 308 - 2.3% 0.0% $ 272,696

Orlando North 102 - 1.2% 0.0% $ 348,790

Palm Beach 566 13 3.5% 0.1% $ 257,564

Panama City 220 104 2.3% 1.1% $ 23,204

Pensacola 479 70 2.5% 0.4% $ 292,730

Tallahassee 349 37 3.6% 0.4% $ 254,700

Total Florida 2,429 243 2.4% 0.2% $2,366,262 Source: CON application #10199, page 119.

Per the applicant, the existing two LTCHs serving District 4, with combined total discharges of 1,361, served no Medicaid patients in CY 2012, and three Volusia and Flagler County Medicaid patients

accessed LTCH services outside District 4.

2012 LTCH Medicaid Discharges by Provider, Districts 3, 4, and 7

Facility

District

Total

Discharges

Total Medicaid

Discharges

Percent Medicaid

State 11,865 166 1.4%

Kindred Hospital-North Florida 4 602 - 0.0%

Specialty Hospital Jacksonville 4 759 - 0.0%

Select Specialty Hospital-Orlando (North Campus)

7

269

3

1.1%

Select Specialty Hospital-Orlando (South Campus)

7

435

6

1.4%

Kindred Hospital-Melbourne 7 411 8 1.9%

Kindred Hospital-Ocala 3 267 5 1.9%

Select Specialty Hospital-Gainesville 3 417 15 3.6%

Promise Hospital of Florida at The Villages 3 179 - 0.0% Source: CON application #10199, page 120.

The applicant provides the following patient days by payer for year one and two of the proposed project:

Select Specialty Hospital-Daytona Beach, Inc.

Projected Patient Days by Payer

Years One and Two

CY 2015 and CY 2016

Payer Patient Days Percent of Patient Days

Year One (2015) Year Two (2016) Years One and Two

Medicare 3,439 5,380 68.0%

Medicare/HMO 759 1,187 15.0%

Commercial Insurance 719 1,124 14.2%

Medicaid 111 174 2.2%

Self-Pay 30 47 0.6%

Total 5,058 7,912 100.0% Source: CON application #10199, Schedule 7B.


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The applicant proposes to condition approval of CON #10199 on the provision of 2.8 percent Medicaid and charity care total annual patient

days. As shown above, the proposed condition would exceed Select Specialty’s provision of Medicaid and charity care during the previous

two calendar years of 1.88 percent (2012) and 1.86 percent (2011), respectively.

F. SUMMARY

Select Specialty Hospital-Daytona Beach, Inc. (CON #10199) proposes to establish a new 34-bed long-term acute care hospital-within-

a-hospital located in District 4 on the 11th floor of Florida Hospital Memorial Medical Center at 301 Memorial Medical Parkway, Daytona Beach, in Volusia County. The primary service area will be Volusia and

Flagler Counties.

The proposed project involves 25,195 gross square feet (GSF) of renovation. Total project cost per bed is $211,435. Total construction cost is estimated to be $4,564,087 and total project cost is $7,188,806.

The applicant proposes the following five conditions on approval:

The proposed facility will be a Hospital within a Hospital and located within existing space of Florida Hospital Memorial Medical Center,

Daytona Beach, Florida.


hospitals case manager education programs on LTCH clinical specialization on no less than a semi-annual basis. This will be

measured by submission of an annual report of the education programs provided and the dates of those programs.


hospitals physician education programs on LTCH clinical specialization on no less than a semi-annual basis. This will be

measured by submission of an annual report of the education programs provided and the dates of those programs.

Select Specialty Hospital-Daytona Beach, Inc. will provide services to Medicaid, Medicaid HMO, and uncompensated charity care patients

at a combined total of at least 2.8 percent of its patient days annually.

Select Specialty Hospital-Daytona Beach, Inc. will maintain its

electronic medical record system and integrated software systems which currently include HMS eMAR, Clinical View and Patient Care. This will be measured by submission of an annual report by the

hospital certifying this system is maintained.


49

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. Planning District 4 is comprised of Baker, Clay, Duval, Flagler, Nassau,

St. Johns, and Volusia Counties. Two facilities currently serve this district, Kindred Hospital-North Florida in Green Cove Springs, Clay County has 80 licensed LTCH beds with 70.73 percent occupancy, and

Specialty Hospital Jacksonville in Duval County has 107 licensed LTCH beds with 51.49 percent occupancy for CY 2012. District 4 had 187

licensed long-term care hospital beds during CY 2012, which averaged 59.72 percent occupancy.

Total discharges for Volusia and Flagler County residents (164) accounted for just 14 percent (164/1186) of District 4 total LTCH

discharges in CY 2012. During CY 2012, 56.10 percent (92/164) of Flagler and Volusia County

residents were served at Kindred Hospital North Florida (85 patients) and Specialty Hospital Jacksonville (seven patients), while two Select Specialty hospitals in Orlando served 30 percent (49/164) of the service

area residents in their north and south campuses. Out-migration to non-District 4 LTCHs accounted for 44.90 percent (71 Volusia County

and one Flagler resident) of the two county service area’s total LTCH patient discharges in CY 2012.

The applicant notes traveling long distances places a burden on families of patients and the elderly in particular: 70 percent of LTCH patients are

ages 65 and over. Within the service area of Volusia and Flagler Counties only one provider, Florida Hospital Fish Memorial, is within 30 miles of an LTCH; all other service area providers are 50 miles or more

from an LTCH. The applicant’s project would result in an LTCH being located within 30 miles of the proposed service area’s eight acute care facilities.

The applicant’s bed need methodology projects need for 46 LTCH beds to

serve residents of Volusia and Flagler Counties in 2016, far more than the 34 beds requested for this project.


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Quality of Care:

The applicant provides a detailed discussion of the parent’s, Select Medical Corporation, ability to provide quality care.

Select Medical Corporation has nine licensed hospitals (of which eight are LTCHs) in Florida with a total of 399 licensed beds. Agency data

obtained September 12, 2013 indicates that Select Medical Corporation had seven substantiated complaints during the previous 36 months.

Cost/Financial Analysis

Funding for this project and all capital projects should be available as needed.

This project appears to be financially feasible.

The potential for provider-based competition will increase; however, price-based competition will likely be limited.

Medicaid/Charity Care:

The applicant proposes to condition approval of CON application #10199 on the provision of 2.8 percent Medicaid and charity care total annual

patient days.

Architectural Analysis: Overall, the proposed project as submitted is designed to be functional

and efficient and does not indicate any major impediments that would prevent the design and construction of a code compliant facility.

The cost estimated for the construction of the new LTCH appears to be reasonable.

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


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G. RECOMMENDATION

Approve CON #10199 to establish a 34-bed long-term acute care

hospital-within-a-hospital in District 4. The total project cost is $7,188,806. The project involves 25,195 GSF of renovation and a total

construction cost of $4,564,087. CONDITIONS:

(1) The proposed facility will be a hospital within a hospital and

located within existing space of Florida Hospital Memorial Medical

Center, Daytona Beach, Florida. (2) Select Specialty Hospital-Daytona Beach, Inc. will provide to area

hospitals case manager education programs on LTCH clinical specialization on no less than a semi-annual basis. This will be measured by submission of an annual report of the education

programs provided and the dates of those programs. (3) Select Specialty Hospital-Daytona Beach, Inc. will provide to area

hospitals physician education programs on LTCH clinical specialization on no less than a semi-annual basis. This will be measured by submission of an annual report of the education

programs provided and the dates of those programs. (4) Select Specialty Hospital-Daytona Beach, Inc. will provide services

to Medicaid, Medicaid HMO, and uncompensated charity care

patients at a combined total of at least 2.8 percent of its patient days annually.

(5) Select Specialty Hospital-Daytona Beach, Inc. will maintain its electronic medical record system and integrated software systems which currently include HMS eMAR, Clinical View and Patient

Care. This will be measured by submission of an annual report by the hospital certifying this system is maintained.


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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:

James B. McLemore Health Services and Facilities Consultant Supervisor Certificate of Need

Jeffrey N. Gregg

Director, Florida Center for Health Information and Policy Analysis

Documents

STATE AGENCY ACTION REPORT ON APPLICATION FOR … · Select Specialty Hospital-Daytona Beach, Inc. will provide services to Medicaid, Medicaid HMO, and uncompensated charity care