Findings Of Fact By application dated October 9, 1984, the Palm Beach County Water Utilities Department applied for a permit to construct a temporary septage receiving facility at a location within Palm Beach County known as Sewage Treatment Plant 2S which is adjacent to and immediately north of Petitioner's neighborhood. It was estimated that this facility would receive between 30,000 and 50,000 gallons of septage each day from septic tanks in Palm Beach County. The specific operation procedure to be used at the site begins with access to the site from Forest Hill Boulevard, located to the north, using an unpaved, curved roadway. Septage trucks arriving at the site are faced with a potentially dangerous situation since the roadway is very narrow in parts, and is somewhat elevated and they therefore have to be very cautious to avoid accidents. The arriving trucks back over an asphalt paved area to a transfer box and discharge septage through a four-inch rubber hose into the transfer box. Septage flows through the transfer port and is distributed over a bar screen. Materials collecting on the bar screen are manually raked onto the drainage place, collected and placed into a dumpster for removal to a landfill. Septage then flows from the transfer box through a twelve inch pipe by gravity into a 120-inch wet well, and is diluted. The septage flows through an 8-inch sewer pipe by gravity into an existing pump station wet well on site. Two pumps then pump the septage into a force main system through which it flows to the West Palm Beach Regional Sewage Plant. The facility for which this permit is sought is intended to receive septage formerly deposited at Dyer Boulevard landfill septage facilities which has ceased operation under a Consent Order between Palm Beach County and the Department of Environmental Regulation. This is proposed as a receiving and transporting facility only, and not a treatment facility. Roy Duke, the Southeast District Manager with the Department of Environmental Regulation, who was accepted as an expert in environmental permitting, testified that in his opinion the site in question is the best site available to Palm Beach County for such a receiving facility. Due to the need to find a suitable replacement for the Dyer Boulevard site, the Department of Environmental Regulation requested that the County Water Utilities Department submit this application and supports the issuance of the permit. In accordance with an Operating Agreement between the Palm Beach County Health Department and the Department of Environmental Regulation, the County Health Department has authority to review and issue permits for sewage collection and transmission systems. Upon receipt of this permit application, the County Health Department requested additional information in the review process, which the County Water Utilities Department provided, in order to determine if "reasonable assurances" were being provided that the receiving facility would not discharge, emit, or cause pollution contrary to applicable standards, rules or regulations. According to Umesh Asrani, a Professional Engineer with the County Health Department, who was accepted as an expert in wastewater treatment technology, and the processing and evaluation of wastewater treatment facility permits, "reasonable assurances" have been given in this permit application. Testimony at the final hearing establishes that the proposed site has already been put into operation by the County with the approval of the Department of Environmental Regulation due to the emergency need to find an alternative to the Dyer Boulevard site. A temporary injunction was sought against this operation by residents of the area but it was not granted. The current operation of the facility is not challenged in this proceeding, but Petitioner points out that adverse effects on the neighborhood resulting from this operation are relevant to the issuance of the permit sought in this case. Specifically, Petitioner Kevin Donovan testified that truck traffic and noxious odors have increased since the operation began and would be expected to continue if the permit is granted. He has also seen evidence of spills at the site, and introduced evidence to establish that "sludge" containing commercial wastes and grease was being deposited at the site as well as "septage." Petitioner expressed his concern that hazardous wastes could be deposited at the site. Roy Duke testified that small amounts of hazardous wastes could be disposed of in residential septic tanks and ultimately collected at this site, but that in his opinion this was not a widespread practice, and the amounts would not present a danger to health or the environment. Petitioner also expressed his fear that the surface and ground water could be contaminated from leaks and spills occurring at the site. Expert witnesses testifying on behalf of Respondents stated that no such discharges were reasonably likely to occur. The greater weight of the evidence supports Respondents' position that reasonable assurances have been given that dangerous amounts of hazardous wastes will not be deposited at the site, and that surrounding surface and ground waters will not be contaminated by operation of the site. With the exception of a pH test which is conducted at the site when septage is received to determine its level of acidity, no tests or treatment are performed on the septage at the site. It is simply deposited and transmitted through the sewer system to the West Palm Beach Regional Sewage Plant for testing, treatment, and final disposal. The amount of septage deposited at this site is very small (30,000 to 50,000 gallons per day) in relation to the total amount treated each day at the Regional Sewage Plant (approximately 40 million gallons per day). Based upon bills of lading for deposits at the site since it was placed in operation, the site is used to receive and collect septage, including grease and sludge, from residences, restaurants, construction sites, digesters, and race tracks.
Recommendation Based upon the foregoing, it is recommended that a Final Order be entered issuing the permit sought by the Palm Beach County Water Utilities Department and denying the relief sought by Petitioner. DONE and ENTERED this 2nd day of May, 1985, at Tallahassee, Florida. DONALD D. CONN Hearing Officer Division of Administrative Hearings The Oakland Building 2009 Apalachee Parkway Tallahassee, Florida 32301 (904) 488-9675 Filed with the Clerk of the Division of Administrative Hearings this 2nd day of May, 1985. COPIES FURNISHED: Frank A. Kreidler, Esquire 521 Lake Worth Avenue Suite 3 Lake Worth, Florida 33460 Julia D. Cobb, Esquire Department of Environmental Regulation 2600 Blairstone Road Tallahassee, Florida 32301 Thomas C. McEaddy, Jr., Esquire Post Office Box 1989 West Palm Beach, Florida 33402 Victoria Tschinkel, Secretary Department of Environmental Regulation Twin Towers Office Building 2600 Blairstone Road Tallahassee, Florida 32301
The Issue Whether the Certificate of Need application of Hospice of the Palm Coast to establish a new hospice program (CON Action No. 9798) in AHCA Hospice Service Area 11 (Miami-Dade and Monroe Counties) should be approved.
Findings Of Fact THE PARTIES The Agency for Health Care Administration AHCA is the single state agency responsible for administering the Certificate of Need program, and for licensing hospices and other programs and facilities pursuant to the authority of the Health Facilities and Services Development Act, Sections 408.031 - 408.045, Florida Statutes. In performing these duties, AHCA determines, on a semi- annual basis, the net numeric need for new hospice programs. The Agency publishes such need in the Florida Administrative Weekly. Hospice of the Palm Coast, Inc. Hospice of the Palm Coast, Inc., is a not-for-profit Florida corporation, developed for the purpose of establishing hospice programs in Florida. Palm Coast is a wholly-owned subsidiary of Odyssey Healthcare Corporation (Odyssey"), a for-profit and publicly traded corporation. Odyssey is one of the largest for profit providers of hospice service in the United States, operating 74 hospice programs in 29 states. Odyssey has successfully implemented start-up hospices in other states. While Odyssey currently has no hospice operations in Florida, it is in the process of seeking licensure and certification for a new hospice program in Volusia County. The Volusia County program employed Odyssey's rapid start-up model. Palm Coast complies with all of Florida's not-for- profit corporation laws and filing requirements and meets the definition of a "corporation not for profit" contained in Chapter 617, Florida Statutes. Palm Coast has its own Articles of Incorporation and By-Laws; has its own audited financial statements; and has its own managing board. Palm Coast will have its own bank account into which all of its revenues and out of which all of its expenses will be paid. If Palm Coast has a positive cash flow from its operations, those funds will stay with Palm Coast to be used for patient care and operations. Palm Coast will comply with all Florida not-for-profit laws relating to surplus funds. Odyssey has experienced compliance issues with respect to some of its hospice programs in other states. In five of its programs, Odyssey has exceeded Medicare "cost caps" that limit the total number of eligible days that a hospice program may bill the federal government for reimbursement. In addition, several of Odyssey's programs have been found not to meet certain Medicare "conditions of participation" due to significant operational deficiencies. All of these "conditional level" deficiencies have been corrected. Odyssey has recently received notification from the Department of Justice ("DOJ") of an investigation into the manner in which it provides hospice services. As a result, Odyssey made the required Securities and Exchange Commission ("SEC") filings to notify the public of the pending DOJ investigation as a "significant event." A class action lawsuit is also currently pending against Odyssey by some of its shareholders and investors who allege that the company admitted hospice patients who were not eligible for Medicare, but that claims were submitted that they were so eligible for Medicare. As a result, Odyssey's financial results were materially inflated due to its exceeding Medicare "cost caps." Recent changes have occurred at the senior management level within Odyssey, including the resignation of its Chief Executive Officer in late 2004, and the termination of its Executive Vice President of Marketing in January 2005. Since the announcement of the DOJ investigation and the class action lawsuit, Odyssey's stock value has fallen from about $19.00 a share to $13.00, a decline termed "material" by the company's Chief Financial Officer. VITAS Healthcare Corporation of Florida VITAS Healthcare Corporation, a for-profit entity, is the largest provider, in terms of patient days, in the United States. It is currently in 12 states with 32 licensed programs serving an average daily census of 9,000 nationally. VITAS currently has two for-profit entities operating in Florida: VITAS-Florida and VITAS Healthcare Corporation of Central Florida. Collectively, these two operating entities have five licensed for-profit hospices in Florida. VITAS is the only for profit hospice provider allowed to operate in Florida pursuant to special exemption language contained in Section 406.602(5)-(6), Florida Statutes. VITAS currently operates hospice programs in Districts 11 (Miami-Dade and Monroe Counties), 10 (Broward County) and 9 (Palm Beach County). In addition to the VITAS hospice program in District 11, five other hospice programs are currently licensed in Miami- Dade and Monroe Counties. None of these five programs intervened or participated in these proceedings. All of VITAS' hospice programs are in full compliance with Medicare conditions of participation, and none of its programs have exceeded Medicare "cost caps." The VITAS program has been in Miami-Dade County for 28 years, and was the first VITAS program in the country, having been initiated by Hugh Westbrook, a Methodist Minister, and Ester Colliflower, a nurse with an oncology background. Both were professors at Miami-Dade Community College where they offered courses on death and dying issues, and were early pioneers in the hospice movement. VITAS was instrumental in the development of hospice licensure standards in Florida, and in the establishment of federal Medicare benefits for hospice services. VITAS has been a leader in hospice research and development, and has created pain management tools and hospice care manuals that are widely used among hospice providers around the nation. For example, VITAS developed the Missoula-VITAS quality of life index, which is licensed and used by over 125 hospices nationwide. The publication "20 Common Problems in End of Life Care" was authored by VITAS employees and is considered a standard teaching textbook for delivery of hospice care. HOSPICE CARE Hospice care is a medically coordinated group of services that is designed for patients who are terminally ill, having a life expectancy of less than six months. The patient's and family's needs are multi-dimensional and include physical, emotional, spiritual, financial, and social care. Hospice care includes physician-directed medical care, nursing services, social work services, bereavement counseling, and other ancillary services such as community education. Hospice care is provided by an interdisciplinary team of professionals, including physicians, nurses, social workers, home health aide services, spiritual advisors (chaplain, priest, rabbi, or other), and bereavement counselors. Palm Coast will provide an interdisciplinary team to provide care in its program that is reflective of the Miami-Dade community. A hospice is also required, pursuant to federal and state regulations, to involve community volunteers in the delivery of hospice services. Volunteers may run errands, perform non-medical duties (such as reading or entertainment) or provide companionship to the patients and their families. Volunteers provide an extra level of service to the patient. Palm Coast will hire a full-time volunteer coordinator who will recruit volunteers for its program. Hospice care is both a philosophy of care and a method of care for terminally ill patients, their families, and loved ones. The philosophy behind hospice care is to provide pain and symptom management for those patients who can no longer be cured. A patient must choose hospice in order to receive its services when the goal is no longer to cure a disease, but to live as pain and symptom free as possible. Treatment for pain control is part of the regimen; treatment for cure is not. Hospice is reimbursed by Medicare, Medicaid, CHAMPUS/Tri-Care (for the military), and some commercial insurance programs. Under the Medicare reimbursement system, hospice programs are reimbursed based on one of four identifiable levels of service: routine home care; in-patient care; continuous care; and respite care. Routine home care is the basic level of care, and is provided as long as a hospice can care for a patient in a home- like environment including a nursing home or assisted living setting. Approximately 95 percent of the care provided by Odyssey is routine care. The next level of care is continuous care, which provides between eight and 24 hours of nursing care per day. Continuous care can be provided in a routine home setting, a nursing home, an assisted living setting, or in a hospital. The third level of care is in-patient care, which a hospice can provide in a hospital, a skilled nursing unit, or in a freestanding hospice in-patient facility operated by a hospice. Typically, in-patient care is required when there is a change in the patient's condition which requires hospitalization. It can also be provided at the start of service to help the patient make the transition from a curative method of care to a palliative one. If a hospice program does not have its own in-patient facility, it will contract with a skilled nursing facility or hospital. In such cases, reimbursement is seen as a "pass through" because the amount the hospice receives for providing care is then provided to the in- patient unit of the hospital or other health care facility where the patient is being treated for the acute episode. The final level of hospice care is respite care, which is designed for caregiver relief and is not necessarily indicated based upon a change in the patient's condition, but when the need arises for very temporary caregiver relief. Medicare reimburses the four levels of hospice care at varying rates. Certain services are required by specific hospice patients that are not necessarily covered by Medicare and/or private or commercial insurance. These services will be paid for by Palm Coast as part of its commitment to patient care. Some of these services include music therapy, pet therapy, art therapy, and aromatherapy. In addition, more complicated and expensive non-covered expenses, such as palliative chemotherapy and radiation may be indicated for severe pain and symptom control. The primary reimbursement agent (approximately 90 percent) for hospice is Medicare. As a result, the government fixes the rates to eliminate opportunities to compete on pricing. Hospice cannot discount prices of its services, and rarely do patients and families pay for any services. The services are a prepaid benefit so that any competition in hospice is most simply expressed as the number of providers in a given market providing services on a non-economic basis. With multiple providers in a service area, quality of care and quantity of services rises for the patients and their families. Most major metropolitan areas in the country have several hospice providers. For example, Atlanta has 30-35 providers; Dallas has about 30 hospice programs; and Chicago has 20-30 providers. The average number of providers in a city the size of Miami (approximately two million people) would range from 20 to 30. The largest sources of referrals for hospice care are hospitals, nursing homes, and assisted living facilities, and physician groups. PALM COAST'S APPLICATION Palm Coast proposes to establish a new hospice program to serve persons in Hospice Service Area 11, which is comprised of Miami-Dade and Monroe Counties. Palm Coast filed a timely Letter of Intent on or before April 26, 2004, followed by a timely initial CON application on or before May 26, 2004. Both the LOI and the CON application were accepted by AHCA. Palm Coast filed its omissions response, which was accepted by AHCA, on June 30, 2004. The Agency's preliminary action was to approve Palm Coast's application for CON No. 9798, for the establishment of a hospice program in Hospice Service Area 11. Fixed Need Pool On April 9, 2004, AHCA published a notice in the Florida Administrative Weekly indicating a numeric need for one additional hospice program in Service Area 11. In forecasting need, the Agency first forecasts the expected number of deaths within a Service Area, in four categories: Cancer under age 65, Cancer over age 65, Non-Cancer under age 65, and Non-Cancer over age 65. The Agency next applies a statewide average (called a "conversion rate") to each of the four categories to forecast the expected number of hospice patients for a Service Area. The Agency takes that number and subtracts from it the number of patients who are currently being served by the existing hospice programs in the Service Area to arrive at the "net need" of patients who are expected to need hospice care in the future. If the net need exceeds 350, then numeric need for a new hospice is demonstrated. The forecasted need for hospice patients in Service Area 11 was 2,093 patients, which greatly exceeds the need threshold of 350 identified in the fixed need pool rule. The numeric need for one additional hospice program in Service Area 11 is indicated. In fact, based upon the 350 patient threshold for numeric need, the argument could be made that, based on the numeric need formula alone, the net need for hospice programs in Service Area 11 is five. The hospice fixed need pool rule only permits need for one new program to be published. Moreover, in an attempt to give new providers sufficient time to start up their programs, the net need will be shown as zero if any hospice programs are less than two years old. Currently, Service Area 11 has six hospice providers: The Catholic Hospice, Douglas Gardens Hospice, Hospice Care of Southeast Florida, Hospice Care of South Florida, Hospice of the Florida Keys, and VITAS Healthcare-Dade. None of these entities challenged the fixed need pool. The parties have a marked difference of opinion as to whether a need exists for Palm Coast's proposed hospice program. Palm Coast, through its expert, Mark Richardson, confirmed the Agency's need determination, and also performed other needs analyses to determine the market's overall need. He noted that the Agency uses a statewide average, which includes areas where the conversion ratios are much higher than the average. He states that AHCA uses an expected average of what is occurring statewide rather than an expected cap. His analysis of Service Area 11, especially the unmet need of 2,093 hospice patients, is the largest unmet need ever seen in Florida, and clearly indicates the need for four to five new hospice programs in Service Area 11. Mr. Richardson opines that what drives the large unmet need is the local utilization below the statewide utilization in each of the four categories: Cancer over age 65, Cancer under age 65, Non-cancer over age 65, and Non-Cancer under age 65. This is unlike other service areas where potentially only one or two of the categories show underutilization. Further, according to Mr. Richardson, a look at the continuation of historical trends reveals that significant growth will occur within the marketplace, which will produce enough volume to support Palm Coast's program without adversely affecting the existing providers' programs. The incremental growth alone, he states, indicates the need for another hospice program, and further demonstrates that the existing programs will suffer no adverse affects. VITAS opposes Palm Coast's analysis of numeric need by noting that the "critical factor" in the Agency's determination of a net numeric need for one hospice program in Service Area 11 is the use of the statewide average utilization or "penetration rate" in the numeric need formula. VITAS contends that the use of the local hospice utilization rate and current hospice admissions for Service Area 11 will yield a net numeric need of only 46 patients. VITAS concludes that no numeric need for an additional hospice exists in Service Area 11 first by noting that, while the statewide utilization rate for hospice is 48 percent, the Service Area 11 utilization rate is only 38 percent, a full 10 points below the statewide average. VITAS offers, as proof of why the utilization rate is so much lower in Service Area 11 than in Florida as a whole, that Miami-Dade County is unique due to its multicultural, particularly Hispanic, population. Palm Coast's expert, Deborah Hoffpauir, testified that the addition of more hospice providers to an area, tends to increase the utilization rate within the area. VITAS' expert, Deirdre Lawe, testified that Miami-Dade County has six providers, yet has a utilization rate far lower than the statewide rate. Six of nine Florida Hospice Service Areas with high utilization rates, however, have only one provider. In some states, where CON regulation does not exist, metropolitan areas may have as many as 30 hospice providers. These areas, however, do not experience as high a penetration rate as CON-regulated Florida. The low utilization rate in Service Area 11, according to VITAS, is explained by Miami-Dade County's 57 percent Hispanic population. Nationally, the Hispanic population utilizes hospice at a lower rate than the non-Hispanic population. A study published in 2000, by the National Hospice and Palliative Care Organization shows that Hispanics accounted for 4.5 percent of national deaths, but accounted for only 2 percent of hospice patients. More recent data indicate that that the hospice penetration rate for Hispanics is 26 percent at the national level, significantly less than the penetration rate for Miami-Dade County's Hispanics of 34 percent. The hospice penetration rate in Miami-Dade County in 2003, was 34 percent compared with 45 percent for the non- Hispanic population. Palm Coast's expert, Mark Richardson, conceded that cultural differences can account for variation in the rates at which a population will use a health care service. He did not factor the high percentage of Hispanics in Miami-Dade County into his calculations, but relied upon AHCA's fixed need pool projection of need for one additional hospice program. Patricia Greenberg, VITAS' health planning expert, testified that the fixed need pool overstates the need for hospice care in Miami-Dade County due to the lower utilization rate for hospice services among the Hispanic population. To arrive at this conclusion, she examined the differences between the Hispanic and non-Hispanic populations to determine why the latter utilizes hospice services at a significantly greater rate. Looking at the three adjoining southeast Florida counties (Miami-Dade, Broward, and Palm Beach), Ms. Greenberg found an inverse relationship between the percentage of Hispanic deaths in the county, and the hospice penetration rate: the higher the percentage of Hispanic deaths, the lower the hospice penetration rate. Testimony from additional witnesses at hearing pointed to the reasons that fewer Hispanics seek hospice care than in the non-Hispanic population. A strong sense of family responsibility; religious values of a largely Catholic population; fear of authorities by illegal aliens and their family members; and reluctance to discuss death and dying were identified as cultural norms among the Hispanic population. Ms. Greenberg, in challenging the results of the fixed need pool calculation of need for one additional hospice program, re-calculated the need using the Miami-Dade utilization rate, rather than the statewide rate. This resulted in no need for another hospice program in Service Area 11 since the calculation results in a net number of patients to be served of 46, far below the Agency's standard of 350. In arriving at her net need, however, Ms. Greenberg erred by not utilizing the data for the same period throughout her calculation of need. She used the 2003, number of hospital admissions and the 2003, number of hospice deaths for Service Area 11 in the four hospice categories to determine what the specific Service Area 11 penetration rates for these categories would be. She then applied this Service Area specific penetration rate to the 2005, projected deaths. This calculation provided Ms. Greenberg with the total number of forecasted admissions of 7,733 (versus 9,401 projected patients using the statewide methodology). Then, rather than subtracting the 2003, admissions of 7,308 (used by Ms. Greenberg to determine the applicable penetration rate), she instead substituted a different data set, the 2003-2004, admission number. By using the 2003-2004, admissions rather than the 2003 admissions, the results of the calculation were flawed. Had Ms. Greenberg used the 2003, admissions number in her Service Area 11 specific need calculation, she would have subtracted 7,308 admissions from the total number of 2005, projected admissions of 7,733 to arrive at a projected need of 425 which, using the Agency's baseline of 350 admissions, thus demonstrating the need for a new program. The testimony was unclear as to why Ms. Greenberg used one incorrect set of data to demonstrate no numeric need for an additional hospice program, but the application of the correct data, even using her Service Area specific (not, as sanctioned by the Agency, the statewide methodology) shows numeric need for a new hospice program. Financial Feasibility and Underlying Assumptions Palm Coast performed a detailed evaluation of the proposed project on the cost of other services provided by it and its affiliate, Odyssey HealthCare, Inc. ("Odyssey"). This evaluation considered the magnitude of the proposed project; the expected benefit the project will generate for Palm Coast; and the expected patient charge increase levels anticipated during the first two years after the proposed project comes on line. Although Palm Coast is a newly formed corporation, a review of the financial strength of its management affiliate, Odyssey, clearly demonstrates the financial resources necessary to develop and operate the proposed project. With $39 million in cash and investments, and a $31 million operating income during fiscal year 2003, Odyssey has the resources necessary to ensure that Palm Coast is developed as a strong community provider, and has all the resources necessary to operate as a full service hospice provider in both the short and long term. The proposed project will provide a significant amount of income to Palm Coast by the second year of operations, and will accomplish this with a modest increase in patient charges of 2 percent in the second year of operations. Palm Coast intends to fund the initial capital required of $487,125 from the proceeds of an inter-company loan from Odyssey. Palm Coast shows a strong performance in both the first and second year of operations. The proposed project is financially feasible in both the short and long term. The start-up costs are budgeted at $380,000, which is $250,000 more than what is typically seen in other hospice applications. This additional money provides the foundation for what Palm Coast calls a "rapid start up" of the proposed project. Under a rapid start-up, as proposed by Palm Coast, and employed by Odyssey in other new operations around the country, including Volusia County, Florida, the program will begin to admit patients once licensure is achieved, but even before Medicare certification is attained. This rapid start-up was taken into account by Palm Coast's health care planners in generating the patient days figures used for Palm Coast's financial projections. A rapid start-up program will cost Palm Coast money that it will not be able to recoup from Medicare since it will be for services provided pre-certification. Palm Coast's parent corporation, Odyssey, has agreed to provide the funds necessary for this project. With $179.6 million in assets, $144.7 million in shareholder's equity, $274.3 million in revenues, and $27.6 million in cash flows from operating activities, Odyssey has the strength to provide the necessary funding for this project. Palm Coast's application fully complies with the requirements of Schedules 1 and 3 of the CON application. Schedule 2 sets out a complete listing of all projected and proposed capital projects planned by Palm Coast. This Schedule completely and accurately depicts all capital projects that are approved or underway. Schedule 4 is not applicable to this project. The utilization and patient day projections set out in Schedule 5 are reasonable and appropriate. The staffing forecasts set out in Schedule 6A reflect the staffing necessary for the patient volume and levels of services expected for the proposed program. The projections are consistent with the experience of Palm Coast's management affiliate, Odyssey's prior start-up experience, and is based upon a reliable model used by Odyssey to staff its operations and administration. This staffing model meets the guidelines established by the National Hospice and Palliative Care Organization ("NHPCO"). The salaries depicted in Schedule 6A are reasonable and reflect salary rates commensurate with the local area, and trended forward approximately 3 percent annually. The proposed project is financially feasible in the long term as reflected on Schedules 7A and 8A. In developing the financial portion of the CON application, Palm Coast's expert health care planners began with a baseline template model provided by Odyssey. This template served as the model for the categories of net revenues and expenses that Odyssey expected Palm Coast to experience at its Service Area 11 program. The model was not used for or intended to serve as the basis for any volume projections. The projected volumes needed to project patient days were provided by Mr. Richardson. Since projected revenues are driven by patient days, the projected admissions for Year 1 and Year 2 must be translated into a patient day forecast. Accordingly, the projected admissions for Year 1 and Year 2 were multiplied by a 70-day length of stay. The 70-day length of stay is reasonable when compared with Odyssey's national average length of stay and when comparing it with the average length of stay in Service Area 11. Accordingly, Palm Coast forecasted Year 1 volume of 26,320 patient days and Year 2 volume of 33,250 patient days. Mr. Richardson than provided Year 1 and Year 2 volume forecasts to Palm Coast's financial expert, Rick Knapp, to assign a dollar amount to the volume to include in the CON Application financial schedules. Mr. Knapp then projected the gross and net revenues based upon the projected volumes, and for Year 2 concluded that the program would generate a pre-tax income of $688,000, thereby supporting his conclusion that the project is financially feasible. To confirm the financial feasibility of the project, Mr. Knapp also performed reasonableness tests. First, he determined whether the information provided by Odyssey "offended his sensibilities." He considered the fact that Odyssey is experienced in operating hospices, so it is reasonable to assume that it would not start up a program it did not believe would succeed. This is supported by the fact that Odyssey has not had any of its 29 start-up projects fail. Mr. Knapp then examined the most recent 10K filing by Odyssey with the Securities and Exchange Commission, and noted that the ratio of expenses to net revenues was approximately 81 percent. This compared favorably with the pro forma projections by Palm Coast of 88 percent. Mr. Knapp reviewed the budget provided by Odyssey and found it to be a credible document. He made changes to this document giving effect to Mr. Richardson's final projected volume and final projected patient class mix. This became the basis for Schedule 7A for net revenues and Schedule 8A for projected expenses. VITAS challenged Palm Coast's patient day and patient mix projections, opining that the patient volume projections were overstated by Palm Coast and that the patient mix projections are unreasonable based upon VITAS' experience in Florida and Service Area 11. VITAS believes that the volume projections of Palm Coast are unreasonable based upon the Odyssey model provided to Palm Coast's health care experts and VITAS' experience. VITAS points to a more gradual "ramp up" of patient volume than that projected by Palm Coast. VITAS believes that Palm Coast's projections are far too aggressive for a start-up program. VITAS further points to its own national average length of stay of approximately 50 days and the overall hospice national length of stay of 47 days as more reasonable projections of what Palm Coast should expect, even though Palm Coast's national length of stay averages 75-80 days. Additionally, VITAS opines that the 70-day average length of stay proposed by Palm Coast is unreasonable in light of its proposed patient mix which includes 9 percent of its patient days as being in-patient, which is generally a much shorter, acute length of stay than the other forms of hospice care provided. The level of service mix in a hospice program has a direct impact on projected average length of stay, patient admissions, patient days, staffing requirements, revenues, and expenses. Medicare reimbursement for the different levels of service is significantly different. Medicare reimbursement for in-patient days is projected to be $538.80, while reimbursements for routine home care days is projected at $121.34, for continuous care days is projected at $708.22, and for respite care days is projected at $124.81. In its CON Application, Palm Coast projects the following level of service mix by the percentage of patient days in each category: routine home care--89 percent; in-patient care--9 percent; continuous care--1 percent; and respite care--1 percent. At hearing, Palm Coast's witnesses conceded that the projected level of service mix in the CON Application was a mistake, and is not the level of service mix that is actually expected for the proposed hospice program. The mistake occurred when Mr. Richardson relied upon Odyssey's 10K filings showing the level of service breakdown as a percentage of revenues, but then used these figures to project the percentage of patient days. Mr. Knapp, the Palm Coast financial expert, who prepared the financial pro formas, conceded that, because of the error in level of service mix, the projection of revenues on Schedule 7A of the CON Application is not correct, and that, viewing this financial schedule alone, there is a material difference between the actual expected revenues and the projection of revenues on Schedule 7A. For example, the in- patient component as set forth in the CON Application, accounts for nearly 30 percent of projected revenues, when in reality it is expected that only 9 percent of the revenues would come from this source. Mr. Knapp conceded that the mistake in level of service mix also has a material impact on the projected income and expenses shown on Schedule 8A. Although the errors in service mix have a material affect on the projections contained in Schedules 7A and 8A, Mr. Knapp opined that, since in-patient revenues are essentially a "pass through" since the hospice pays the money received from Medicare directly to the in-patient facility, the effect on the bottom line for the Palm Coast program would not only be immaterial, but it would improve the profitability of the proposed program. Every scenario proposed by Mr. Knapp in redistributing the service mix leads to an enhancement of Palm Coast's bottom line for the project. The most likely redistribution of the patient mix would be 98 percent routine home care; 1 percent continuous care; and 1 percent respite care. John Williamson, the Agency's financial reviewer for the Palm Coast CON Application, testified that he was not aware of the errors in service mix when he reviewed the Palm Coast application. While he opined that he believed the service mix errors would not have an adverse impact on the bottom line of the proposed program since in-patient revenues are essentially a pass through, he could not give a firm opinion without personally "crunching" the new numbers. Ms. Greenberg, VITAS' health planning expert, testified that the change in service mix was critical to understanding the proposed hospice program, and that any material change to the service mix would have to be modeled and reviewed to determine the feasibility of the proposed program. Ms. Greenberg concluded that the error in service mix would result in a significant decrease in revenues ($1.6 million) and result in a smaller payment to Odyssey, the managing affiliate to Palm Coast ($112,000 based upon a 7 percent management fee). This, she states, along with the failure of Palm Coast to accurately reflect all of its expenses in its financial pro formas would result in a deficit to Odyssey and might, she implies, call into question whether this is a worthwhile project for Odyssey. Ms. Greenberg further testified that Palm Coast failed to account for various expense items in its financial pro formas that would significantly reduce, or even eliminate, its projected net profits of $450,167 in Year 1 and $687,560 in Year Specifically, she noted that the missing expense items were: federal income taxes, employee fringe benefits, property taxes, the "unified rate" shortfall for nursing home residents, insurance, and palliative chemotherapy and radiation. Mr. Knapp conceded that the federal income taxes, property taxes, and the unified rate shortfall were not included in the pro formas. With respect to federal income taxes, Mr. Knapp noted that the payment of any income taxes due would never take a project from a profitable status to an unprofitable status since they are paid only on the profit margin. The property taxes not reflected on the pro formas amount to $2,000, which Mr. Knapp deemed immaterial. The unified rate shortfall should have been included on the pro formas, but amounts to only 1 percent of the net revenues of the project, not 2 percent as suggested by Ms. Greenberg. The other expenses that VITAS testified were omitted by Palm Coast were "embedded" in the management fee Palm Coast proposes to pay its affiliate Odyssey. Odyssey's Chief Financial Officer testified that the insurance expense is included within the management fee. Mr. Knapp testified that the fringe benefits of 20 percent were included in the financial schedules as well as within the management fee (9.1 percent was reflected as payroll-related such as Medicare and FICA, the remainder such as health insurance within the fee). Ms. Greenberg's opinion that an additional 17 percent should be added to the fringe benefits category is not in keeping with Odyssey's experience as a national provider of hospice care. Ms. Greenberg noted that the pro formas did not include $107,000 for a satellite office in Monroe County. Since the satellite office was made a condition on the CON by the Agency, Palm Coast could not have anticipated this at the time of its submittal of the CON Application. Although this will have an effect on the expense side of the pro formas, Palm Coast has the ability to fund this condition. Further, the expected revenues of $139,000 from the satellite office will more than offset any start-up costs. Finally, Ms. Greenberg noted that Palm Coast failed to provide for palliative chemotherapy or radiation in its pro formas. Since the number of patients requiring such care cannot be estimated, and since this is a non-reimbursable expense, Palm Coast did not budget for this type of care. Palm Coast is committed to providing this care when necessary. After concluding that Palm Coast understated its expenses and that its service mix was flawed, Ms. Greenberg recast the Palm Coast financials in six possible scenarios. None of the six showed financial feasibility for the proposed hospice program. Ms. Greenberg attempted to achieve her goal of demonstrating the Palm Coast project will not be financially feasible in the short term (her analysis does not extend beyond two years) by not accepting Palm Coasts 70-day average length of stay projections; by not accepting Palm Coast's rapid start-up program because it was not accounted for in the financials; that the overstatement of the in-patient days renders the project not financially feasible; and that the omission of significant expense items significantly reduces or even eliminates the projected profits in the first two years of the project. Palm Coast responded to the six scenarios raised by VITAS' expert by demonstrating that the re-cast financials have significant calculation errors and that conservatism was built into the financial pro formas (e.g., depreciation expenses that were amortized in accordance with GAAP which would have a significant positive effect on the bottom line if not amortized) which VITAS overlooked in analyzing them; VITAS refuses to acknowledge that the rapid start-up program was considered by the Palm Coast Health care planners when developing the CON Application (as evidenced by the higher number of patient days forecasted than is typical for a hospice application); VITAS refuses to acknowledge Odyssey's national average length of stay data; VITAS refuses to accept the inclusion of fringe benefits and other items in the management fee to be paid by Palm Coast to Odyssey; and VITAS refuses to admit that the in-patient days error, when corrected, can only have a positive impact on the bottom line for Palm Coast. Patient Care, Community Education, and Community Support Palm Coast will provide each patient with a "Circle of Care," an interdisciplinary team of Palm Coast employees, volunteers, and the patients' physician dedicated to providing a high level of care and assistance to patients and their families. This interdisciplinary team specializes in end of life care and uses experts in pain and symptom management. The manager of the team is the registered nurse who assesses the needs of the patient and family and develops a specific plan of care with the physician. The case manager (all are registered nurses) coordinates care with others on the team while the patient's physician works with Palm Coast's medical director and other team members to ensure that the symptoms are controlled, the pain is managed, and the patient and family are informed. In addition to the nurse case manager, the patient's attending physician and the medical director, Palm Coast's interdisciplinary team includes: A chaplain who addresses the spiritual concerns of patients and family members within each patient's individual belief system, as well as addressing concerns of a more generalized spiritual nature; A home healthcare aide who is specially trained to work with the terminally ill and who will provide direct patient care; A social worker who helps with a wide variety of psycho-social needs of patients and families ranging from financial considerations to dealing with grief and the loss of a loved one, as well as providing access to community agencies for support programs; Trained volunteers who provide companionship and non-medical services for the patient, respite time for the family, and support at the time of death and during bereavement; A bereavement coordinator who provides support groups, newsletters, and referrals to community services. The bereavement coordinator also provides pre-bereavement assessment and counseling, and can provide individual counseling as well. The bereavement coordinator provides support to family members and significant others for up to 13 months following a patient's death; An on-call nursing team is always available after hours and on weekends for visits and phone consultation. Other specialists, such as nutritionists and physical, speech, or occupational therapists, are part of Odyssey's care services, and are added to a patient's team as needed. Palm Coast's team will continue to care for the family even after the patient's death. Palm Coast will have a variety of options to help families through their difficult time, including the following: one-on-one counseling; grief support groups; written correspondence related to bereavement, loss, and grief; written materials, articles, and resources; bereavement letters; memorial services; holiday bereavement programs; and referral to community agencies as needed. These bereavement services begin with the initial assessment of the patient into the program, even though most do not occur until after the patient's death. A significant component of Palm Coast's proposed hospice program will be its ability to provide community education and outreach to a culturally diverse market like Miami-Dade County. Palm Coast, through its affiliation with Odyssey, will bring a wealth of experience in working in culturally diverse markets with different ethnic groups. Palm Coast currently offers services in numerous locales in culturally diverse areas. Of specific relevance to the large Hispanic population of Miami-Dade County, Odyssey has significant experience in working in Hispanic areas. For example, Odyssey provides services in El Paso, Texas, a 90 percent Hispanic area, and employs staff, 100 percent of whom are bi-lingual, to serve this group. Additionally, Odyssey has programs in other parts of Texas, such as San Antonio, Conroy, Brownsville, and Houston, that have large Hispanic populations. In order to assure that appropriate services are provided in culturally sensitive areas, Odyssey identifies and hires staff that is fluent in the culture's first language, understands the particular culture, and is familiar with the geographic location. Odyssey has dedicated interdisciplinary teams that are comprised of Hispanic medical directors, home health aides, social workers, Catholic priests, ministers, and nurses. Palm Coast will have access to all of Odyssey's resources that have been developed for use in culturally diverse areas, like Miami-Dade, through its management agreement with Odyssey. While the Miami-Dade Hispanic community is predominantly Cuban, not Mexican as in Texas, the techniques and methods developed by Odyssey for entrance into a culturally diverse community are the same, and Palm Coast will employ those techniques in Service Area 11. Referrals are most important to the success of a hospice program. The major sources of referrals for hospice patients are physician groups, nursing homes, assisted living facilities, and hospitals. Prior to submitting its CON Application, Odyssey sent staff to Miami-Dade County to speak with local area health care providers and to solicit letters of support. Although they visited physician groups, nursing homes, assisted living facilities ("ALFs"), and hospitals, Odyssey was unable to secure any letters of support from those organizations. Odyssey did receive four letters of support from Medicaid independent support coordinators which were submitted with its CON Application. VITAS is well entrenched in the local health care community. VITAS has contracts with nearly every hospital provider in Miami-Dade County, and has established hospital in- patient units at four hospitals, including at Hialeah Hospital, located in the midst of the Cuban-American community. Two additional in-patient units are expected to open in the near future, including one at Kendall Regional, considered to be a largely Hispanic hospital. In addition to its contracts with hospitals, VITAS is well-established with contacts among the local physician community, receiving referrals from specialists in numerous areas. VITAS has contracts with over 90 percent of the nursing homes in the county and with multiple ALFs in the community. In addition to VITAS' established relationships in the health care provider community, the other hospice providers, while significantly smaller than VITAS, are well-established. Recently, the Miami Jewish Home and Hospital also established a hospice program in Service Area 11. Many of these other hospice providers in Service Area 11 cater to specific patient populations and referrals such as the Catholic and Jewish communities and individual nursing homes. While it is likely that each of the existing programs can serve more patients than they currently do, none of these other providers participated in the hearing or provided testimony as to why their numbers of patients are not greater. Palm Coast is not the only provider who engages in extensive community education and outreach in those communities it serves. VITAS has invested great resources to develop strong and successful community education resources. Such materials include separate sets of educational materials targeted to hospitals, physician groups, nursing homes, ALFs, and to patients and their families. These materials are available in English, Spanish, Creole, and other languages. One set of multi-lingual materials is known as "WINKS," an acronym for "What I Need to Know," which describes the problems encountered by health care professionals or patient families in working with a dying patient, as well as appropriate responses to common problems. Brian Payne, VITAS' General Manager for the Miami- Dade program, testified about the dedication of 10 full-time community outreach representatives who target hospital discharge planners, physician groups, nursing homes, ALFs, and other community groups for education and outreach programs. VITAS has also partnered with local educational institutions, including Miami-Dade Community College, and the two statutory teaching hospitals (Jackson Memorial and Mount Sinai) to ensure adequate education of the health care professional community. VITAS has also developed a specific program on hospice benefits that is incorporated as a required part of the licensure process for applicants seeking licensure as an administrator of an ALF. In addition to VITAS, other hospices reach out to the community and participate in community education. Although none of these programs testified or offered evidence at hearing, it is fair to assume that they do not provide community education or outreach on a scale approaching VITAS', what Odyssey has done in other communities, or what Palm Coast proposes here. VITAS does not believe that the addition of Palm Coast will have a significant positive impact on community education and outreach concerning hospice services. Palm Coast believes that the more education that can be brought to an area about hospice, the greater the penetration rate of hospice patients will be. CONFORMANCE WITH DISTRICT HEALTH PLAN PREFERENCES Palm Coast's application conforms with the applicable district health plan. The District 11 Allocation Factors Report contains generic preferences relevant to certificates of need for all types of services, including hospice services, and also contains specific preferences related to hospice services. Palm Coast has recruitment and retention programs in place to develop staff. Recruitment efforts focus on the one- to-one nursing that hospice offers, the role of the nurse as the case manager, and the education benefits Palm Coast will offer through its management agreement with Odyssey. Additionally, Palm Coast will offer incentives to staff to attain the next level of professional development within their careers. Palm Coast will reflect the cultural diversity of the area in its staff and will also provide staff with access to translators 24 hours a day, seven days a week. Upon admission, Palm Coast's patients will be assessed as to their needs and the resources available to them with regard to disasters or emergency. A plan for such contingencies will be contained in the patient's admissions documents and covers fire safety, home care safety, and symptom control. When a Palm Coast patient is admitted, staff will assist in the completion of forms and will document the patient's understanding of his or her rights and responsibilities. Palm Coast has the ability to admit patients 24 hours a day, seven days a week, and will ensure that patients are admitted as soon as possible. Palm Coast (or Odyssey) sent representatives to meet with local providers, including facilities staff and Medicaid-independent support coordinators to identify the local characteristics of Service Area 11. These support coordinators provide advocacy services by helping patients find needed services. These support coordinators indicated that service has not always been timely received and they supported the Palm Coast application. While it is true that Palm Coast did not submit a large number of letters of support from the community for its proposed hospice program, since this is a case where numeric need had been demonstrated, letters of support are not as important as in a no need or not normal circumstances case. Palm Coast intends to implement a community education plan utilizing three or more dedicated community education representatives who will establish referral sources and educate medical providers regarding hospice care. VITAS admits that it is not the only hospice provider in the area and that there is nothing to prevent any of the area's health care providers from contracting with Palm Coast. The determining factor in establishing a relationship with a referral source is the ability to provide quality of care. Clergy are included in the interdisciplinary team that will be in place at Palm Coast. These staff will participate in a specific program that encompasses classical and contemporary theories on death, including: Grief; Myths about Grief and Mourning; the Kubler-Ross Stages; and Myths, Death, and Dying. Palm Coast, through its affiliation with Odyssey, will provide educational services to the medical community regarding the benefits of hospice care, especially to those patients with a non-cancer diagnosis since many people believe that hospice is only for cancer sufferers. Palm Coast will also utilize the hospice case studies developed by Odyssey for the physician audience in order to inform/educate referral sources concerning the indicators of hospice appropriateness for specific non-traditional hospice patients' diagnoses. Another tool that Palm Coast will utilize is a "Slim Jim," a quick reference guide with clinical information to educate physicians on when hospice may be appropriate. Palm Coast, through its affiliation with Odyssey, will have access to the extensive educational materials and protocols that Odyssey has developed for each disease process. Conceptually, these materials are similar to those developed and used by VITAS. The information and techniques acquired and applied from different locations around the country allow Odyssey and its affiliates, including Palm Coast, to continuously improve. These improved techniques and protocols, much like those brought to the area by VITAS, will permeate the system and will cause competitors to improve. As a start-up program, Odyssey will provide Palm Coast with a designated clinical team that will provide all the resources and support necessary to initiate the program. This team will provide education and training to the new office to ensure that everything is set up on a clinical basis and that all of the necessary pieces are in place. Palm Coast's affiliate, Odyssey, has a comprehensive volunteer program that will be implemented at this location. All volunteers will receive special training and will be under a staff member who is responsible for the volunteer program. Palm Coast intends to maintain a volunteer program that, at a minimum, equals 5 percent of the total patient care hours of all paid hospice employees and contract staff. CONFORMANCE WITH AGENCY RULE CRITERIA The application submitted by Palm Coast conforms with the preferences set forth in Florida Administrative Code Rule 59C-1.0355(4)(e). Palm Coast evidences a commitment to serve populations with unmet needs and has established the existence of such populations in Service Area 11. This conforms with Preference 1. Palm Coast's application conforms with Preference 2 in that it proposes to provide the in-patient component of its proposed hospice program through contractual arrangements with existing health care facilities. Palm Coast's application conforms with Preference 3 since it has demonstrated a commitment to serve patients who do not have primary caregivers at home, the homeless, and patients with AIDS. Palm Coast's application conforms with Preference 5 since it will provide services not covered by private insurance, Medicaid, or Medicare. These services include pet, music, massage and aroma therapies, dialysis, palliative radiation, and palliative chemotherapy treatments. Palm Coast will provide 2 percent charity care, in addition to serving all patients who present for care, regardless of their ability to pay. Accordingly, Palm Coast's application conforms with Florida Administrative Code Rule 59C-1.3055(5), and the District 11 Health Plan Criteria. Palm Coast's application conforms with Florida Administrative Code Rule 59C-1.0355(6), since its proposal contains a detailed program description including staffing and use of volunteers, expected sources of patient referrals, and projected number of admissions, by payer type, for the first two years of operation. The sources of patient referrals are reasonable and appropriate. The projected utilization for the proposed hospice program, including the number of admissions and payer mix, is reasonable and achievable utilizing Odyssey's rapid startup program. The Palm Coast start-up is reasonable based upon Odyssey's experience in start-up and operation of hospice programs around the country. Based upon the reasonableness of the utilization projections, the projected increase in admissions for Service Area 11, and Odyssey's experience in other start-up and ongoing hospice programs, Palm Coast should achieve a 5 percent market share by the second year of operations. The increase in overall utilization will, in part, be a result of the education and outreach efforts of Palm Coast. Palm Coast's projections are reasonable based upon the national experience, much of which has been in areas with large Hispanic populations, of Odyssey. Much as VITAS has experienced substantial growth over the years based upon its outstanding education and outreach, as well as its excellent standard of care, a sophisticated provider like Palm Coast, working with its management affiliate Odyssey should increase the market penetration of hospice services in Service Area 11. High level competition between providers such as VITAS and Palm Coast will increase utilization for both providers of hospice services. CONFORMANCE WITH APPLICABLE STATUTORY CRITERIA Palm Coast's application conforms with Section 408.035(1),(2), and (7), Florida Statutes. Need for an additional hospice program is evidenced by the availability, accessibility, and extent of utilization of like and existing health care facilities and health services in the service area, as well as the published need for one additional hospice program in Service Area 11. Palm Coast, through its affiliation with Odyssey, will have the necessary resources to fill current service gaps in Service Area 11. In each area where it currently provides service, Odyssey has implemented a community education plan specific to the needs of the area, including those areas with culturally diverse populations. Palm Coast will implement an appropriate program for the community in Service Area 11. While, clearly, VITAS does an excellent job in the community it serves, its own witnesses admitted that more can be done. Even with the 72 percent market share commanded by VITAS, the published fixed need pool projects 2,093 un-served patients. What was left unexplained at hearing is why the other five hospice providers have not picked up the excess of patients. Perhaps it is because these other providers have not devoted as many resources to education and outreach as has VITAS. Perhaps these other providers are seeking to serve only a specialized population of patients. The evidence at hearing did not provide answers to these questions. Further, while VITAS makes a compelling case for why market penetration is suppressed in the Hispanic population, they offered no specific data or studies to prove that the Hispanic (or in this case Cuban-American) population, given the proper education, will not better utilize hospice programs. Odyssey has proven its ability to respond to the needs of the Hispanic community in other parts of the country with large concentrations of Hispanic persons. It is clear that Palm Coast has the resources available and is committed to devoting them to Service Area 11. Palm Coast appears poised to achieve a strong share of the new admissions projected by the Agency. Palm Coast's application conforms with Section 408.035(3) and (12), Florida Statutes. Although Palm Coast does not have a licensure history in Florida, its parent corporation, Odyssey, has a history of providing quality hospice care and is a member of the National Hospice and Palliative Care Organization. At the time Palm Coast filed this application, Odyssey had 69 Medicare certified hospice programs in 29 states. Palm Coast, through its management contract with Odyssey, intends to adhere to all of Odyssey's policies and procedures, including policies related to access to care, admissions, and patient/family rights, patient services, infection control, and continuous quality improvement. Section 408.035(5), Florida Statutes, does not apply since the proposed program will not be located in a research or teaching hospital. The establishment of the program, however, will enhance the clinical needs of health professional training programs due to Odyssey's numerous educational affiliations. Palm Coast's application conforms with Section 408.035(6), Florida Statutes. Palm Coast, through its affiliation with Odyssey, will have the tools to effectively recruit and retain the necessary staff for this program. Odyssey has effective recruitment and retention policies that have allowed it to successfully staff and operate its 69 Medicare-certified hospice programs in 29 states, serving an average of 7,300 patients a day. Odyssey uses all the traditional methods of recruiting staff, such as newsprint and website postings, as well as working with headhunters and providing referral bonuses. The company's transfer policy and internal posting program provides the opportunity for employees to transfer to other Odyssey locations. Odyssey offers competitive pay and benefits, as well as flexible work schedules. It also provides bonuses for its employees who receive certifications from NHPCO. Accordingly, Odyssey and Palm Coast do not anticipate facing recruitment and retention problems since they have faced similar issues in other areas with diverse cultural populations. Palm Coast's application conforms with Section 408.035(9), Florida Statutes, as the project will foster competition and promote quality care and cost effectiveness. Patients are better served when multiple providers exist in a market. Odyssey has operated in similar sized markets with 20- 30 hospice providers, and has achieved strong average lengths of stay, quality of care, and financial performance. A new hospice in the service area does not provide price competition because the rates are primarily fixed by Medicare and Medicaid. The addition of new programs, therefore, allows the providers to compete based upon the types and quality of services they provide. This "non-price" competition raises the bar on the services provided by programs in the service area. A new competitor organization offers physicians and patients a choice. This is especially true for hospice, because hospice utilization is strongly related to awareness and education. Competition creates an environment in which hospices must do more to educate the community. New disease process protocols, admissions within three hours of initial contact, and other benefits will occur when a new competitor enters the market. New incremental patients will utilize the service because of increased awareness in the benefits of hospice. Palm Coast's application conforms with Section 408.035(11), Florida Statutes. Although Palm Coast does not have a licensure history in Florida, its parent corporation, Odyssey, has a history of providing care to all patients without regard to gender, origin, race, creed, sexual orientation, disability, age, place of residence, or ability to pay. Odyssey's policies and procedures, which will be the basis for Palm Coast's policies and procedures, confirm this. IMPACT ON EXISTING PROVIDERS VITAS suggests that the establishment of a new hospice program in Service Area 11 would have an impact on existing providers of hospice services. If Palm Coast's utilization projections are to be believed, opines VITAS, existing providers will experience a substantial adverse impact. The nature of the impact to VITAS, it argues, will be twofold. First, VITAS will experience even greater problems in the recruitment and retention of professional staff than it currently experiences. VITAS currently has difficulty in recruiting a sufficient number of nurses who are both bilingual and willing to work in hospice care. Further, VITAS has lost staff in the past when Odyssey has entered a market where they are providing services. In such cases, VITAS has lost staff to Odyssey, which has had a negative impact on VITAS, because it had paid to recruit and train these employees. VITAS further claims that it will lose market share if Palm Coast's projections of patient days in its pro formas are accurate. VITAS bases its loss of market share on an allocation of 72 percent of Palm Coast's projected patient days coming directly from VITAS. This would equate to a loss of $1.5 million (on revenues of $18,851,604). VITAS' analysis does not take into account the underserved market of 2,093 patients identified by the Agency in its unchallenged fixed need pool methodology. This does not even take into account VITAS' own expert's acknowledgment that at least 425 patients remain underserved based on her calculation of need. VITAS claims that it will be substantially and adversely affected by the addition of the Palm Coast program in terms of both lost revenues and inability to recruit and retain staff, yet VITAS has experienced large growth during the past four years and projects a "rosy" future as described by the Miami program's General Manager and by VITAS' parent company Chemed. None of the five other hospice providers in Service Area 11 intervened in the proceeding, appeared at hearing, or offered evidence of any adverse impact the approval of Palm Coast as a new provider might have on them. VITAS was unable to provide much evidence, other than the fact that some of these providers have experienced low utilization, to demonstrate any adverse impact by the entry of Palm Coast into the Service Area 11 market. HOSPICE MUST BE NOT-FOR-PROFIT CORPORATION Odyssey is a for-profit company, publicly traded on the NASDAQ. Palm Coast is a wholly-owned subsidiary of Odyssey. Palm Coast is registered as a corporation not-for- profit pursuant to Chapter 617, Florida Statutes. Under generally accepted accounting principles ("GAAP"), which apply to health care companies as well as other companies, the income of a wholly-owned subsidiary is reflected as the income of the parent. Here, the income of Palm Coast is the income of Odyssey, according to GAAP.
Recommendation Based upon the Findings of Fact and Conclusions of Law, it is RECOMMENDED that the application of Hospice of the Palm Coast, Inc., for CON No. 9798, be APPROVED. DONE AND ENTERED this 14th day of June, 2005, in Tallahassee, Leon County, Florida. S ROBERT S. COHEN Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 SUNCOM 278-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 14th day of June, 2005. COPIES FURNISHED: Kenneth W. Gieseking, Esquire Agency for Health Care Administration Fort Knox Building, Mail Station 3 2727 Mahan Drive Tallahassee, Florida 32308 Geoffrey D. Smith, Esquire Blank, Meenan & Smith, P.A. 204 South Monroe Street Tallahassee, Florida 32302-3068 Thomas E. Panza, Esquire Deborah S. Platz, Esquire Panza, Maurer & Maynard, P.A. Bank of America Building, 3rd Floor 3600 North Federal Highway Fort Lauderdale, Florida 33308-6225 Richard Shoop, Agency Clerk Agency for Health Care Administration Fort Knox Building, Mail Station 3 2727 Mahan Drive Tallahassee, Florida 32308 William Roberts, Acting General Counsel Agency for Health Care Administration Fort Knox Building, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308 Alan Levine, Secretary Agency for Health Care Administration Fort Knox Building, Suite 3116 2727 Mahan Drive Tallahassee, Florida 32308
Findings Of Fact New findings of fact have only been made in accord with the limited mandate/remand jurisdiction of the appellate court. Otherwise, findings of fact contained in the recommended order of Hearing Officer R. T. Carpenter entered September 18, 1985, have been adopted and incorporated by reference. To the extent the adopted original findings impact on the new findings, they have been adopted, following review of the record and the parties' submissions, for content. Any language from the original recommended order which has not been adopted is rejected in accord with the court's limited remand. Paragraph 1 (including footnote 1) of the original recommended order entered in this cause, copy attached as Exhibit "A", is adopted and incorporated by reference. The "service area" at issue was disputed by the parties. HRS District 9 encompasses Palm Beach, Indian River, Okeechobee, Martin and St. Lucie counties. Paragraph 3 of the original recommended order entered in this cause, copy attached as Exhibit "A", is adopted and incorporated by reference. Only the second and third sentences of paragraph 4 of the original recommended order entered in this cause, copy attached as Exhibit "A", are adopted and incorporated by reference. Paragraph 5 including (footnote 3) of the original recommended order entered in this cause, copy attached as Exhibit "A", is adopted and incorporated by reference. See also new finding of fact 8 infra. The Network 19 representative, who was similarly qualified, calculated a need for five additional stations but his methodology, calculations, and ultimate result is rejected for reasons clear from the remand opinion dealing with application by Mr. Moutsatos of the wrong population data and for use of an incorrect "service area" as set forth in new finding of fact 7 infra. As noted, the geographic location wherein the applicant, West Boca, seeks to locate, is Boca Raton, Palm Beach County, Florida, a county within HRS District 9. Rule 10-5.11(18), Florida Administrative Code, does not define "service area." District 9 has not been subdivided by either the local health council or HRS. The original application filed by West Boca indicated the proposed service area would be Palm Beach County. At the administrative hearing, West Boca, over Boca Raton AKC's and Delray AKC's objections, was permitted to introduce an amended application which designated a sub-area of Palm Beach County as its "service area", and the original recommended order entered herein recognized such an abbreviated area. Contrariwise, the HRS final order ruled that Palm Beach County was the appropriate service area to be used in applying the need methodology contained in the rule. Because this aspect of the final order was affirmed by the First District Court of Appeal, it becomes "law of the case" and Palm Beach County must be used as the service area for applying the methodology to this applicant. State v. Stebile, 443 So.2d 398 (Fla. 4th DCA 1984), Marine Midland Central v. Cote, 384 So.2d 658, (Fla. 5th DCA 1980). However, because the parties' submissions have insinuated this element of "service area" into the remand consideration of this cause, it may be noted that the record is clear that at all times relevant (including but not limited to the date West Boca's application was deemed complete, the date the application was preliminarily reviewed by HRS, and the date of hearing) HRS used Palm Beach County as the appropriate "service area" as contemplated by Rule 10- 5.11(18). West Boca has failed to demonstrate within the evidence received at the prior hearing that a smaller area should be defined for purposes of these proceedings. This determination is made notwithstanding evidence of desirable driving times for end stage renal dialysis (ESRD) patients and superfluous language employed by HRS' expert witness, Ms. Dudek, to the effect that although HRS policy and procedure always utilized Palm Beach County, a sub-area need determination is not an inappropriate measure of need for health planning purposes. These latter elements have been considered but are not persuasive that a smaller sub-area is appropriate in the face of sound health planning reasons for not using smaller than county sub-areas. The present submissions of West Boca on remand also fail to demonstrate any compelling reason to depart from normal HRS policy and procedure. In evaluating an application for a CON for a proposed chronic renal dialysis facility, HRS utilizes the methodology contained in Rule 10-5.11(18), Florida Administrative Code. The First District Court of Appeal has ruled that the need for the West Boca facility must be determined utilizing the "1983-84 population data as received into evidence at the prior hearing" and determining need for the proposed dialysis center one year from the date that the application is deemed complete by HRS. West Boca's application was deemed complete in February of 1983. The 1984 population of the service area (Palm Beach County) was 689,325. The 1984 new patient acquisition rate was 197.29 per million. The 1984 service area mortality rate was 23.8 percent. This data was gathered by the District 9 Health Council and the HRS Office of Community Medical Facilities from ESRD providers for the calendar year 1984. In calculating the need under the ESRD methodology the first variable is "current ESRD patients by census for service area." At the administrative hearing in this case, Elizabeth Dudek, Community Medical Facilities Consultant for HRS concluded that 4 stations were needed. (See original Finding of Fact 5, adopted in new Finding of Fact 5 supra.) However, Ms. Dudek also testified that this "patient census" number was 260. Ms. Dudek obtained this "260" figure from the Florida ESRD Network 19 First Quarter Report 1985. She totaled the in-patient census figures for the Palm Beach County facilities to obtain this figure. However, since that figure represents only in-center patients, from which the second variable ("ESRD patients on home dialysis") is to be subtracted, the patient census number of 260 as given by Ms. Dudek and as contained in HRS exhibit 1 is in error. The correct number for the first variable in the ESRD methodology can only be determined by adding in-center patients and home dialysis patients (260 + 24 284). HRS is required to correct any factual errors within its knowledge. Balsam v. HRS, 486 So.2d 1341 (Fla. 1st DCA 1986). Since the patient census in HRS exhibit 1 is in error, the correct figure should be substituted. Once this is done, the correct procedure for calculating the need for a proposed ESRD facility in Palm Beach County, which application was deemed complete in 1983, is as follows: Current ESRD patients by census for service area (Palm Beach County) 284 Less ESRD patients on home dialysis 24 Plus new ESRD patients per 1 million population for one year [computed using 1984 new patient acquisition rate multiplied by 1984 projected population] 136 Less projected number of ESRD patients to receive home dialysis training 12 Less number of ESRD patients receiving transplant operations for one year 7 Less number of unsuccessful transplants for one year 0 Less ESRD patient mortality for one year [In calculating need under the ESRD methodology, if the "patient census" number is changed, then the variable "ESRD patient mortality for one year" will also change. Therefore, the patient mortality is determined by the following procedure: mortality rate based on experience for service area applied to the subtotal of previous calculations (284-24+136-12-7-0--377; 377 x 23.8 percent 90). See Rule 10-5.11(18)(b)1. Florida Administrative Code and HRS exhibit 1.] 90 Plus 10 percent of current and projected ESRD patients on home dialysis 4 Equals number of patients requiring chronic dialysis services for one year in the service area 291 The Rule also provides that 80 percent of the capacity of four patients per station per week is to be utilized, yielding a factor of 3.2. This is divided into the number of patients requiring chronic dialysis services for one year in the service area (291). The dividend, 91, is the number of stations needed in the service area, less the 84 existing stations, for a net need of seven stations in Palm Beach County in 1984. (Note that where permitted all figures have been "rounded" to the nearest whole number). Petitioners identified some relatively minor errors in input data and calculations. These errors would not, however, significantly change the so- called "hard numbers" stated above in new Finding of Fact 8. The more significant error of Ms. Dudek described therein is purely one of arithmetic and its required correction, in no way does violence to that witness' correct application of the rule methodology. Both the Applicant and Petitioners presented additional expert testimony of health care consultants. Not surprisingly, their conclusions tended to reduce the need on one hand (Petitioners) and increase it on the other (Applicant). Although their testimony is incorporated in those considerations discussed in new Finding of Fact 11 (adopting original recommended order paragraphs 11-24 inclusive), it is rejected as to modification of the data utilized and generated by the HRS witness. 11. Paragraphs 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22 (see also new findings of fact 5-8,) 23, and 24 of the previous recommended order entered in this cause, copy attached as Exhibit "A", are adopted and incorporated by reference.
