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Judge deems planned HCA Fla. hospital low-cost solution vs. public plan

March 20, 2017

Jackson Health System’s plan to build a hospital in Doral received a serious blow, while HCA Corp.’s hospital proposal was bolstered, after a ruling by a state judge.

The public health system for Miami-Dade County is competing with HCA (NYSE: HCA) in the state’s certificate of need (CON) process to build a hospital in fast-growing Doral. In 2015, the Florida Agency for Health Care Administration granted preliminary approval to JHS’ plan for the 100-bed Jackson West and preliminary denial for HCA’s 8-bed Doral Medical Center. The decisions were appealed by HCA, plus several local hospitals that wanted both applications denied.

On March 16, Florida Administrative Law Judge Robert S. Cohen recommended that the state deny JHS’ application and approve HCA’s application. The final decision remains with the state health care agency, but the judge issued a firm recommendation for HCA in an 80-page ruling.

“We respect the judge’s review but disagree with the conclusion,” JHS President and CEO Carlos A. Migoya wrote in a letter to county officials. “The Agency for Health Care Administration’s initial approval agreed with the hundreds of doctors, patients, and community leaders in and around Doral who said Jackson is far better positioned than any out-of-state, for-profit corporation when it comes to delivering world-class care and serving families equally. The decision now rests with AHCA, and we are hopeful our plans for building a 100-bed hospital at Jackson West will be allowed to continue.”

With county commission approval, JHS paid $38.5 million in 2015 for the 27.3-acre site at 7800 N.W. 29th Street. In October, JHS held a ground breaking ceremony for the health campus, which was slated to include the hospital, a pediatric ambulatory care pavilion, and an outpatient treatment center.

In his ruling, Judge Cohen said JHS hasn’t really started building on its Doral campus.

Migoya said that regardless of the decision on the hospital, its Jackson West campus would have outpatient care, a pediatric pavilion and a free-standing emergency room. These services do not require CON approval.

East Florida – DMC, a subsidiary of HCA, plans to build its hospital on on the northwest corner of Northwest 41st Street and Northwest 109th Avenue. It acquired the 17.55-acre site for $24 million in April 2016 and is currently seeking city approval for a free-standing emergency room there.

Officials from HCA couldn’t immediately be reached for comment. Its site is closer to Florida’s Turnpike, while JHS’s site is near the Palmetto Expressway.

AHCA’s preliminary approval of the Jackson Health application was mostly based on the public hospital serving more Medicaid patients, but Judge Cohen did not agree with that logic. He noted that, because of JHS’ status as a safety-net hospital, it receives a higher Medicaid reimbursement rate than HCA’s South Florida hospital.

“Jackson West’s overall argument for need is not compelling,” Judge Cohen ruled. “The fact that it will serve Medicaid and indigent patients is of relatively little value considering Doral Medical Center projects to serve essentially the same number of Medicaid and indigent patients, and at a much lower cost to the Medicaid program. Further, while JHS already generates some discharges from the Doral area, the number of discharges is not significant. Other providers, particularly KRMC [HCA’s Kendall Regional Medical Center], have historically provided a much higher level of service to Medicaid patients within the service area.”

JHS relies on taxpayers to fund its operating losses, which reached nearly $270 million in 2015, while HCA is a tax-paying hospital with little taxpayer support, Cohen said. He noted that JHS operates its two community hospitals, Jackson South and Jackson North, at a loss before tax collections.

“The evidence at final hearing demonstrated that, contrary to Jackson West’s statement in the application, the addition of Jackson West to JHS will actually further diminish, rather than enhance, the financial viability of JHS,” Judge Cohen ruled. “If Jackson West is poorly utilized, like JHS’ other community hospitals, it will likely increase JHS’ systemwide operating loss.”

While JHS touted its partnership with the University of Miami and Florida International University doctors in its application, Judge Cohen noted that none of those academic doctors officially agreed to work at Jackson West. He also questioned whether JHS could recruit enough community doctors to staff its hospital.

“JHS has never developed a new hospital, much less a community hospital, whereas HCA has successfully developed many affiliated community hospitals,” Judge Cohen ruled.

In contrast, Cohen said HCA should have a relatively easy time recruiting doctors from its Kendall Regional Medical Center to work at Doral Medical Center. The Kendall hospital operates at 75 percent occupancy, and is often near full capacity in the busy winter months.

Judge Cohen said Doral Medical Center would be in a “superior” location to Jackson West. The JHS hospital would be in an industrial warehouse district and its service area would overlap with existing hospitals. Cohen questioned the accuracy of JHS’s patient intake projections. Doral Medical Center would be in more of a residential area with higher projected population growth rates, the judge said.

“Doral Medical Center clearly established a need for its hospital based on Doral’s growing population and relative isolation from area providers,” Judge Cohen ruled. “Doral Medical Center is needed to decompress [the Kendall hospital] so it can focus on its growing tertiary services.”

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