The Issue Whether the Agency for Health Care Administration (“AHCA” or “the Agency”) should approve Continuum Care of Sarasota, LLC’s (“Continuum of Sarasota”), application for a Certificate of Need (“CON”) to provide hospice services in Sarasota County, Florida.
Findings Of Fact Based on the evidence adduced at the final hearing, the record as a whole, and matters subject to official recognition, the following Findings of Fact are made: The Parties AHCA is the state agency responsible for evaluating and rendering final determinations on CON applications. See § 408.034(1), Fla. Stat. In order to establish a hospice program in Florida, one must apply for and receive a certificate of need from the Agency. See § 408.036(1), Fla. Stat. Tidewell is a not-for-profit corporation that is the sole hospice provider in Service Area 8D, which consists of Sarasota County. Tidewell has been providing hospice services in Sarasota County since 1980. Tidewell is also the sole hospice provider in: (a) Service Area 6C, which consists of Manatee County; and (b) Service Area 8A, which consists of Charlotte and DeSoto Counties. Manatee, Charlotte, and DeSoto Counties are all contiguous to Sarasota County, and there is no other Florida hospice that is the sole provider in three adjacent service areas. Continuum of Sarasota is a for-profit development stage corporation formed for providing hospice services in Sarasota County. When Continuum of Sarasota filed the CON application at issue in the instant case, it was affiliated with six other hospices in California, Massachusetts, New Hampshire, Washington, and Rhode Island. At that time, all of the aforementioned hospices were owned by Samuel Stern. After the application at issue was filed and prior to the final hearing, Mr. Stern sold his ownership interest in the California, Massachusetts, and New Hampshire hospices. Now that he has been awarded a CON to operate a hospice in Broward County, Florida, Mr. Stern intends to focus his energies on the Washington and Florida hospices.4 Overview of Hospice Services In Florida, hospice programs must provide a continuum of palliative and supportive care for terminally ill patients and their families. Under Medicare, a terminally ill patient is eligible for the Medicare Hospice benefit if his or her life expectancy is six months or less. “Palliative care” refers to services or interventions that are not curative, but are provided in order to reduce pain and suffering. 4 The Continuum organization as a whole will be referred to herein as “Continuum.” There are four levels of hospice services: routine home care; continuous care; general inpatient care (“GIP”); and respite care. Routine home care is provided where patients reside and describes a situation in which the patient is not receiving continuous care. Routine home care accounts for the vast majority of hospice admissions and patient days. Continuous care is provided wherever the patient resides for short durations when symptoms become so severe that around-the-clock care is necessary for pain and symptom management. GIP care is provided in either a hospital setting, a skilled nursing unit, or in a freestanding hospice inpatient unit. GIP care occurs for short durations when symptoms become so severe that they cannot be managed in the patient’s home. Respite care is intended for caregiver relief. It allows patients to stay in facilities for brief periods. Hospice services are provided pursuant to an individualized plan of care developed by an interdisciplinary team consisting of physicians, nurses, home health aides, social workers, bereavement counselors, spiritual care counselors, chaplains, and others. As a condition of participation in Medicare, there is a baseline of care that hospices must provide, but hospices can differentiate themselves by using different staffing levels, offering different programs, and utilizing different approaches to pain management and nonessential medication. Sarasota County – Service Area 8D Sarasota County has 417,442 residents, and 34.4 percent of those residents are 65 and older. Sarasota County’s three-year average death rate is among the highest in Florida and is 43 percent higher than the State’s three-year average death rate. Sarasota County’s population is expected to grow, and it is anticipated that people 65 and older will make up at least 39.3 percent of the County’s population by 2030. Sarasota County’s substantial elderly population is significant to the instant case because the elderly are the most frequent users of hospice services. Sarasota County has six hospitals with 1,542 licensed beds, 29 skilled nursing facilities with 3,058 beds, 86 assisted living facilities with 4,858 beds, and 68 home health agencies. With only one hospice provider, Service Area 8D ranks fourth in the State in terms of population per hospice program. Comparing deaths to the number of hospice programs shows that Service Area 8D had 5,873 deaths in 2018 and 5,986 deaths in 2019. As a result, Service Area 8D has the third highest ratio of deaths per hospice program in Florida, and that is two times the State average. With regard to deaths of residents 65 and older, Service Area 8D has the second highest number of elderly deaths to hospice programs. IV. The Fixed Need Pool Calculation and AHCA’s Justification for Granting Continuum of Sarasota’s Application AHCA determines the need for a new hospice program in a service area by utilizing a formula set forth in Florida Administrative Code Rule 59C-1.0355(4). The formula applies a three-year historical death rate to a service area’s forecasted population to project the number of deaths for a future “planning horizon.” Then, the formula determines the statewide hospice-use penetration rate (i.e., the number of hospice admissions divided by current total deaths for four categories: cancer over age 65; cancer under age 65; non-cancer over age 65; and non-cancer under age 65). By multiplying the statewide penetration rates by the projected number of service area deaths in each of the four categories, the formula derives the service area’s projected hospice admissions in each category. The service area’s most recent published actual admissions are then subtracted from the projected admissions to determine the number of unserved patients for a future planning horizon. If the number of unserved patients equals or exceeds 350, then a new hospice program is needed. AHCA determined in October of 2019 that there would be 4,311 hospice patients in Service Area 8D during the course of 2021. Because Tidewell had recently served 4,410 patients on an annual basis, AHCA calculated that there was a negative net need of 99 for Service Area 8D, and the Agency announced on October 4, 2019, that there was a fixed need pool of zero for new hospice programs in Service Area 8D for the January 2021 planning horizon. The aforementioned fixed need pool calculation was not timely challenged by any party. As a result, the lack of numeric need for a new hospice program in Sarasota County for the January 2021 planning horizon and the underlying date used to make that determination could not be challenged during any subsequent CON cases for the relevant batching cycle. See Fla. Admin. Code R. 59C-1.008(2)(a)2. (providing that “[a]ny person who identifies an error in the Fixed Need Pool numbers must advise the Agency of the error within 10 days of the date the Fixed Need Pool was published in the Florida Administrative Register. If the Agency concurs in the error, the Fixed Need Pool number will be adjusted and re-published in the first available edition of the Florida Administrative Register. Failure to notify the Agency of the error during this time period will result in no adjustment to the Fixed Need Pool number for that batching cycle.”). AHCA’s determination results in the creation of a rebuttable presumption that a new hospice program is not needed in Sarasota County for the January 2021 planning horizon. See Fla. Admin. Code R. 59C- 1.0355(3)(b)(providing that “[a] Certificate of Need for the establishment of a new Hospice program or construction of a freestanding inpatient Hospice facility shall not be approved unless the applicant meets the applicable review criteria in Sections 408.035 and 408.043(2), F.S., and the standards and need determination criteria set forth in this rule. Applications to establish a new Hospice program shall not be approved in the absence of a numeric need indicated by the formula in paragraph (4)(a) of this rule, unless other criteria in this rule and in Sections 408.035 and 408.043(2), F.S., outweigh the lack of numeric need.”). Despite the lack of a fixed need for Service Area 8D, Continuum of Sarasota filed an application to provide hospice services in Sarasota County premised on the following circumstances that Continuum of Sarasota characterized as being “not normal and special circumstances”: (a) Tidewell operates a regional monopoly that includes Service Area 8D and two other contiguous hospice subdistricts; (b) Tidewell’s hospice house model of care breaks a patient’s continuity of care; (c) admissions and readmissions to Tidewell have resulted in an artificial suppression of fixed need; (d) Florida’s Medicaid managed care statute requires “hospice choice” to maintain network adequacy and health plans have the right to terminate hospice providers based on quality metrics; and (e) the local community wants choice and competition among its hospice providers. Continuum of Sarasota’s application was buttressed by three letters of support from hospitals, seven from skilled nursing facilities, 14 from assisted living facilities, 15 from other healthcare organizations, and five from community/business leaders. Those letters asserted that the residents of Sarasota County should have more than one hospice provider. James McLemore, the manager of AHCA’s CON unit, presented the following testimony as to why the Agency approved Continuum of Sarasota’s CON application: Q: And overall, in the weighing and balancing, just tell me in your own words, when you are weighing and balancing all the factors, what do you come down to and say this is how we weigh and balance this as an agency, weighing towards approval as set forth in the state agency action report? A: Basically we found that there is a regional monopoly here, and that we felt like and do feel like that there was a possibility that the hospice [house] model of care does indeed break the continuity of care between the ALF patients and the nursing home patients. Again, there was evidence or statements from these people saying that it did. We also agreed that admissions and readmissions could, could result in an artificial suppressing of fixed need. That’s why I keep getting back to [hospice admissions for] cancer 65 and older and 64 and under, because the situation is you’ve got more admissions than you’ve got deaths. We also took into account that Florida’s Medicaid managed program indicates that the Medicaid recipient should have a choice of hospice providers, and in this instance, you can’t, they have to get a waiver to meet that criteria. And we did take into account that there is a lack of competition, and the community voiced a need for such competition and at least an alternative provider. And that’s pretty much how – we basically, on those factors, felt like that that was [sufficient] reason to approve this application, that and [the] care that they proposed. Q: The factor of promoting competition and discouraging regional monopoly, was that a factor that you gave more weight to than some of the other factors? A: I presented all of the information to the deputy secretary, who discussed the recommendations that I made with the Secretary. So, you know, I – a regional monopoly is a very important factor in this, of course, especially in light of the DCA ruling[5]. But the other factors all factored in. AHCA’s approval was premised on Continuum of Sarasota satisfying the following conditions: (a) implementing virtual reality, music therapy, and equine therapy programs at the onset of its hospice services; (b) becoming accredited by the Community Health Accreditation Partner; (c) assuring that each patient has five to seven home health aide visits per week and at least two registered nurse visits per week, provided that is acceptable to the interdisciplinary team, patient, and family; (d) responding to all referrals within one hour, initiating the assessment process within two hours, and expediting admission subject to having a physician order and the patient/family selecting the hospice option; (e) implementing a palliative resources program within six months of receiving Medicare certification; (f) not building or operating any freestanding hospice houses in Sarasota County; and (g) implementing a Veterans outreach program. The Statutory and Rule Review Criteria As will be discussed in more detail in the Conclusions of Law, the evaluation of Continuum of Sarasota’s application is based on the criteria set 5 Mr. McLemore was referring to Compassionate Care Hospice of the Gulf Coast, Inc. v. State of Florida, Agency for Health Care Administration, 247 So. 3d 99 (Fla. 1st DCA 2018). As will be discussed in the Conclusions of Law below, the Compassionate Care case also involved Service Area 8D and is substantially similar to the instant case. In affirming AHCA’s decision to deny a CON to Compassionate Care Hospice, the First District Court of Appeal held that “[i]n this case, Tidewell likes the balance that AHCA has struck, supporting Tidewell’s continued regional monopoly in Sarasota County. But AHCA could alter course policy-wise and give greater weight to eliminating regional monopolies and increasing competition by allowing more entry into Hospice Service Area 8D; that change of policy would alter the dynamics of the hospice marketplace, potentially putting Tidewell in the position of explaining why the issuance of a certificate of need to CCH or another competition was improper.” forth in section 408.035, Florida Statutes, and rule 59C-1.0355. The relevant criteria are discussed below.6 Section 408.035(1)(a) – The Need for the Healthcare Facilities and Health Services being Proposed and the Existence of Special and/or “Not Normal” Circumstances in Service Area 8D. As noted above, AHCA determined that there was no need for an additional hospice in Service Area 8D for the January 2021 planning horizon, and no one timely challenged that determination. Nevertheless, Continuum of Sarasota devoted a substantial amount of time at the final hearing attempting to discredit the data used to determine that there is no need for an additional hospice in Sarasota County. Patricia Greenberg, Continuum of Sarasota’s health planning expert, opined that AHCA’s fixed need pool determination should be given little weight because AHCA allows a patient transferred from one service area to another to be counted as two admissions. Tidewell’s status as the only hospice provider in the contiguous counties of Sarasota, Manatee, Charlotte, and DeSoto leads to a distortion in the data used to calculate the fixed need for hospice services in Sarasota County. Ms. Greenberg reviewed hospice admission data reported to AHCA (which includes double counts of admissions) and compared it to hospice admission data reported to the Florida Department of Elder Affairs (“DEA”) (which does not include double counts of admissions). Ms. Greenberg found a substantial number of double counted admissions in the AHCA reports for Sarasota County, which she described as “noise” or “distortion” in the data, and that caused her to doubt the accuracy of AHCA’s fixed need calculation. 6 With regard to the criteria set forth in section 408.035, the following subsections were not at issue in the instant case: subsection (8) pertaining to the “costs and methods of the proposed construction, including the costs and methods of energy provision and the availability of alternative, less costly, or more effective methods of construction”; and subsection (10) pertaining to “[t]he applicant’s designation as a Gold Seal Program nursing facility pursuant to s. 400.235, when the applicant is requesting additional nursing home beds at that facility.” Ms. Greenberg examined the statewide data and found that the existence and degree of double counting of admissions was unique and far more prevalent in Sarasota County when compared to all other counties in Florida. Overall, the data showed that other than the service areas where Tidewell operates, there were no other areas in Florida where there was a material difference between the data reported to AHCA (with double counts) and the data reported to DEA (without double counts). Ms. Greenberg concluded that this anomaly resulted from the fact that Tidewell is a monopoly provider in three adjoining service areas and transfers patients back and forth. According to Ms. Greenberg, no other hospice in Florida has a comparable ability to transfer patients back and forth between contiguous service areas. In sum, Ms. Greenberg asserts that Service Area 8D is less well-served than AHCA’s fixed need pool would indicate. The double counting described by Ms. Greenberg is not an attempt by Tidewell to manipulate the fixed need pool calculation. Tidewell reports its admission data in the manner required by AHCA. In addition, Armand Balsano, Tidewell’s health planning expert, explained that there are legitimate reasons why a single hospice patient could be counted as two admissions: Q: Mr. Balsano, are you aware of multiple different scenarios where under AHCA’s methodology for counting admissions, the same person may be counted more than one time as an admission? A: Yes. Q: And what are some of those scenarios? A: A patient is in a hospice program in the county, rebounds and goes off hospice. And then at some point in the future, because unfortunately we are all mortal, they realize either the condition or some other condition has reoccurred and they reenter the hospice program. So that admission is appropriately counted twice. If a patient is in a hospice program and transfers to another subdistrict, that admission is counted twice. If a patient goes to a hospice house outside their district, and I am not speaking specifically of Tidewell here, that admission is counted twice. So, there’s a variety of very legitimate reasons which the State has established and has a long- term establishment as to how we count admissions. To whatever extent that Continuum of Sarasota is attempting to undermine AHCA’s determination that there is zero fixed need for additional hospice services in Sarasota County, that argument is rejected as an untimely challenge to the fixed need pool. Accordingly, Continuum of Sarasota must overcome the rebuttable presumption described in rule 59C- 1.0355(3)(b) by demonstrating that “not normal” or special circumstances justify granting its CON application. However, Continuum of Sarasota’s evidence about a distortion in the admission data for Service Area 8D will be considered when considering the accessibility and utilization of hospice services in Sarasota County under section 408.035(2). Rule 59C-1.0355(4)(d) sets forth special circumstances that can override the lack of numeric need, and the special circumstance applicable to the instant case pertains to whether a specific terminally ill population is not being served. Continuum of Sarasota argues that African-Americans needing hospice care are a specific terminally ill population that is not being served. In support thereof, Continuum of Sarasota notes that Tidewell’s penetration rate among Caucasians rose from 61.5 percent in 2015 to 68.65 in 2019. In contrast, Tidewell’s penetration rate among African-Americans rose from 35.2 percent in 2015 to 42.4 percent in 2019. Because a Continuum affiliate had success in California with a minority outreach program, Continuum of Sarasota argues that it can increase the number of African-Americans utilizing hospice services in Sarasota County. However, Mr. Balsano explained that the disparity between the Caucasian and African-American penetration rates is not unique to Sarasota County or Florida: Q: Mr. Balsano, do you have an opinion as to whether this exhibit demonstrates the existence of a specifically terminally ill population that is not being served within the meaning of paragraph of (4)(d)? A: It’s my opinion that this exhibit does not, nor the supporting testimony indicate a not-normal circumstance. And why do I say that? Well, if you look at the penetration rates, you can see that for Caucasians, it was roughly 62 percent to 68 percent. And then when you look at the penetration rates for the identified minorities, it’s a high of 49 percent for Asian, high of 45 percent for African-Americans, and for Hispanic, about 41 percent. So clearly the exhibit shows that Caucasians access hospice are to a higher degree, and by that I mean a greater percentage of the population accesses it compared to minorities. Higher penetration rate in Caucasians compared to minorities. What the exhibit – what it fails to recognize or fails to deal with is any identification that somehow this is indicative of a unique situation or not reflective of a broader comparison. In other words – well, let me simplify it for you, Mr. Frehn. Anyone who does hospice work in planning or in operations knows that black and Hispanic patients for cultural or other reasons access hospice to a lesser extent. Much has been written about this in the literature. So this is what’s happening here. There’s no basis of comparison, given this general recognition that minority access to hospice is lower than Caucasian access to hospice. I would also point out this [Continuum of Sarasota Exhibit #95] is looking at the penetration rate by race and ethnicity for all three of the hospice markets that Tidewell serves, all three of the service areas, so it’s not specific to Sarasota. So looking at about half of the numbers that are reflected here, a little bit more than half the numbers that are reflected here are residents and deaths that are occurring outside of Sarasota County. Just to put a finer point on it, I think what is missing here is some recognition that there’s unmet access, indicative of a problem. Q: Now, what evidence did you see or did you hear through the testimony as to why the disparity exists between the usage or the access by minorities versus the white population? A: I didn’t hear any explanation on that and, again, my recognition is that is just a reality in the district. So what was missing, what would have perhaps provided some quantifiable support to that was if there was a comparison to the state of Florida, for example, that says within the state of Florida, we know there is an overall penetration rate of about 60, 66 percent, but for the Hispanic community that number is 50%, and yet Tidewell is only at 42. I mean, something that was a frame of reference beyond just the absolute numbers here. The greater weight of the evidence demonstrates that the disparity in Tidewell’s penetration rates between Caucasians and minority groups is common in the hospice industry, and there is no evidence that Tidewell denies hospice services to any minority group.7 In addition to African-Americans, Continuum of Sarasota identifies the following groups as terminally-ill populations who are not being served: (a) people who had a bad experience with Tidewell; (b) healthcare providers who will not refer patients to Tidewell based on a prior bad experience; and (c) patients who desire the opportunity to select a hospice provider that offers a different model of care. As was the case with African-Americans, there is no evidence that Tidewell denies hospice services to anyone. Also, Continuum of Sarasota’s arguments on this point pertain more to Tidewell’s quality of care than its failure to serve a specific terminally-ill population. While not set forth as a special circumstance that could rebut the lack of numeric need, Continuum of Sarasota cites multiple “not normal” circumstances supposedly demonstrating the need for another hospice provider in Sarasota County.8 Specifically, Continuum of Sarasota cites Tidewell’s alleged status as a “regional monopoly” provider in Sarasota County and two other contiguous subdistricts; an outmigration rate of 35.8 percent that disrupts continuity of care; the readmission data that results in an artificially reduced fixed need pool calculation for Service Area 8D; the fact that Medicaid requires that there be at least two hospice providers; and 7 Tidewell asserts that Continuum of Sarasota is attempting to impermissibly amend its CON application by asserting that African-Americans are not being served. See Fla. Admin. Code R. 59C-1.010(4)(e)(stating that “[s]ubsequent to an application being deemed complete by the Agency, no further application information or amendment will be accepted by the Agency, unless a statutorily required item was omitted and the Agency failed to clearly request the specific item in its omission request.”). Because Continuum of Sarasota’s argument on this point has no factual support, the undersigned considers the question as to whether it amounts to an application amendment to be moot. 8 Wellington Regional Medical Center, Inc. v. Agency for Health Care Administration, Case No. 03-2701(Fla. DOAH Sept. 29, 2004), rejected in part, Case No. 2003004778 (Fla. AHCA Mar. 7, 2005) instructs that “[t]here is not a list of enumerated ‘not normal’ circumstances; however, ‘not normal’ circumstances traditionally involve ‘issues related to financial, geographic, or programmatic access to the proposed service by potential patients, and not facility specific concerns.” the desire within Sarasota County for competition and choice among hospice providers. Continuum of Sarasota’s argument regarding Tidewell’s regional monopoly status is summarized in the following excerpt from its proposed recommended order: Tidewell is the sole hospice provider in three adjoining hospice Service Areas encompassing Sarasota County (Service Area 8D), Charlotte and Desoto Counties (Service Area 8A), and Manatee County (Service Area 6C). This situation is unique in the state. There are only 6 subdistricts [consisting of nine counties] Florida with a sole hospice provider. Tidewell is the sole hospice provider in three of those subdistricts, which are all contiguous. The other three sole hospice provider subdistricts are operated by three different providers who do not operate hospices in adjoining subdistricts. Thus, there is no other part of the state consisting of multiple contiguous hospice Service Areas with only a single hospice provider. In fact, there is no other part of the state where there are even two adjoining Service Areas with a single hospice provider. The four counties that comprise the three hospice Service Areas where Tidewell is the sole hospice provider are recognized as a “region” by the U.S. Bureau of the Census and the Office of Management and Budget. These four counties constitute a recognized combined statistical area (“CSA”) used for federal planning and budgeting decisions. It was found in a prior CON case, Compassionate Care Hospice of the Gulf Coast v. AHCA, DOAH Case No. 15-2005 CON (2016), that Tidewell’s sole hospice provider status in these three contiguous Service Areas was a regional monopoly. The evidence presented in this case consistently demonstrated that five years after the filing of the Compassionate Care CON Application, Tidwell continues to have a regional monopoly in the three adjoining service areas. Regardless of whether Tidewell is a monopoly or a regional monopoly, its status as the only provider of hospice services in a county is not typical in Florida. Of Florida’s 67 counties, only nine are served by a single hospice provider, and three of those nine are served by Tidewell. Therefore, Tidewell’s status as the only provider of hospice services in Sarasota County is a “not normal” circumstance. With regard to the assertion that Tidewell has an excessively high outmigration rate of 35.8, Continuum of Sarasota argues that patients should be treated in their homes and transferring them to hospice houses outside Service Area 8D disrupts the continuity of the patients’ care. This argument will be addressed below when the factors determining whether all of the relevant criteria justify approving or denying Continuum of Sarasota’s application. As for the fact that Medicaid requires that there be at least two hospice providers, AHCA has transitioned its Medicaid program to a managed care delivery model and was thus required to develop “adequate network” standards for healthcare services offered to Medicaid patients, including hospice services. The model contracts developed by AHCA for managed care plans include “adequate network” standards for hospices and mandates that there must be at least two hospice providers per county. This circumstance will be addressed below in the analysis of the factors determining whether all of the relevant criteria justify approving or denying Continuum of Sarasota’s application. Continuum of Sarasota also argues that another “not normal” circumstance includes the strong support among the community in Sarasota County for having a choice in hospice providers. Continuum of Sarasota also cites residents who have had a bad experience with Tidewell and want the ability to choose a different provider if they need to utilize hospice services in the future. The letters of support and the deposition testimony of community members who support the application overwhelmingly cite a generalized need for there to be a choice among hospice providers in Sarasota County. The depositions also cite a belief that the presence of competition motivates providers to stay diligent in their provision of care. In general, the letters of support and the depositions do not claim that Tidewell is a bad provider, but there are descriptions of instances in which Tidewell staff could have been more responsive or acted more quickly. Given that Tidewell serves well over 4,000 patients a year, it is not surprising that there are individual instances when Tidewell could have provided better service. To the extent that Tidewell’s program could be improved, it is reasonable to expect that the presence of a competitor in Sarasota County would encourage Tidewell to be as diligent as possible with ensuring that it provides good service. The undersigned reviewed the Yelp reviews submitted by Continuum of Sarasota. As described above, they were given little weight, but they corroborated the depositions’ recurring theme that there have been individual instances during which Tidewell could have been more responsive to client needs. Section 435.035(2), Florida Statutes – the availability, quality of care, accessibility, and extent of utilization of existing healthcare facilities and health services in the service district of the applicant. Sarasota County has a robust healthcare delivery system with 6 acute care hospitals, 29 skilled nursing facilities, 86 assisted living facilities, 68 home health agencies, and 1,606 physicians serving a population of over 400,000 people. However, Tidewell is the only hospice in Sarasota County. Continuum of Sarasota’s application included letters from 30 percent of all nursing home operators and 15 to 20 percent of all assisted living facility (“ALF”) operators in Sarasota County supporting the idea that residents should have a choice in hospice providers. Tidewell’s model of care is substantially based on providing services via hospice houses. Tidewell’s hospice houses are designed and furnished to be home-like settings so that the patient and family feel like they are in the comfort of their own home rather than in an institution. All of the rooms are private and spacious. The hospice houses also have kitchenettes and living- room-like spaces where families can congregate. Hospice houses are costly to operate partially because of the significant staffing that is required to provide GIP care. Each of Tidewell’s hospice houses is staffed with persons from a variety of disciplines who are available to address the needs of patients. The hospice house staffing includes a medical director trained in hospice care, as well as a registered nurse (“RN”), certified nursing assistant (“CNA”), licensed practical nurse (“LPN”), social worker, grief specialist, dietary aide, nurse practitioners, chaplains, and volunteers. The RNs and CNAs remain on site at each hospice house 24 hours a day, seven days a week. Patients also receive complementary service visits by pet therapists, music therapists, and horticulturists. Despite the high cost associated with hospice house care, Tidewell made the decision to establish hospice houses as one part of a comprehensive continuum of hospice services. As expressed by Tidewell’s CEO: [I]f our goal is to make money and drive the bottom line, we would not have hospice houses. This is not . . . about money. This is about giving people the most comfortable, caring and compassionate end-of-life experience that they can have. * * * We were built as a hospice that was committed to serving all of the various levels of hospice services needed across the continuum of the benefit. That certainly includes GIP. . . . We are committed to providing every single component of service necessary to provide the comprehensive hospice benefit so that patients can come in and out of that continuum throughout their end-of-life experience. * * * So this is not about the bottom line, as a not-for- profit community rooted organization. We have invested millions and millions of dollars in these hospice houses because of our mutual commitment to the community. They donate to us so that we can provide the service back to the community for their loved ones at the end of life. I will say it a second time. If our goal was to make money, we would not have hospice houses, which is the way most for- profit hospices are operated. The two hospice houses Tidewell operates in Sarasota County have a total of 18 inpatient beds. Two other Tidewell hospice houses are located in close proximity to Sarasota County and were established to serve communities that include portions of Sarasota County. Any shortage in hospice house availability is about to be corrected by new capacity within Sarasota County. Tidewell opened a new 7-bed inpatient unit in January of 2020, and anticipated opening an 8-bed inpatient unit at a skilled nursing facility in October of 2020. Tidewell has also developed multiple programs that are ancillary to basic hospice care. Examples include a We Honor Veterans program; a grief education and support program intended for families who suffer a loss due to suicide, car accident, or other tragedy; the Blue Butterfly center, which specializes in helping children through grief; a nurse residency program for training new nursing graduates on how to be hospice nurses; the transitions program, which helps pre-hospice patients or those who lose hospice eligibility; and the Partners in Care program, which provides palliative care services to children not in hospice. Complementary services provided by Tidewell include massage therapy, music therapy, a bedside music program, a certified music and memory program, pet therapy, a horticulture program, a humor program, a Reiki9 program, and an expressive arts program. These programs are referred to as “complimentary services” because they are nonpharmacological services that complement traditional medical care and help distract patients from pain. Some of the complimentary services are staffed with volunteers; however, that is only the case for services such as pet therapy and expressive arts that are not licensed or certified therapies. As to complementary services that are volunteer-based, each volunteer receives a comprehensive orientation and training, is subject to ongoing supervision, and receives annual competency and performance evaluations. Many of Tidewell’s special programs and services, which are not part of the Medicare benefit, required a substantial initial capital investment and have ongoing operating costs, which are also substantial and generally must be funded through donations. Tidewell receives high scores from surveys intended to assess a healthcare provider’s quality. One such survey is the Consumer Assessment of Healthcare Provides and Systems (“CAHPS”) developed by the Centers for Medicare and Medicaid Services (“CMS”) to provide consumers with a means of objectively comparing healthcare providers. CAHPS presents a series of 47 questions to the individual most knowledgeable about a patient’s care, and that individual responds to each question by selecting from answers such as definitely, probably, always, sometimes, or never. Respondents can also give ratings from 1 to 10. 9 Reiki is a form of alternative therapy commonly referred to as energy healing. See Reiki, Wikipedia, http://en.wikipedia.org/wiki/Reiki (last visited January 6, 2021). Using CAHPS data from August of 2020, Mr. Balsano reported that 82 percent of respondents rated Tidewell a 9 or 10, and 89 percent of respondents gave Tidewell a 9 or 10 with regard to whether they would be willing to recommend Tidewell. Both of the aforementioned scores exceeded like scores for the national average, the Florida average, and the scores for Continuum hospices based in California and Rhode Island. Mr. Balsano also reported that Tidewell’s CAHPS scores have increased in recent years with regard to the following categories: communication with family; getting timely help; treating the patient with respect; providing emotional and spiritual support; helping with pain and symptoms; training family members to care for the patient; and willingness to recommend this hospice. Mr. Balsano testified that 89 percent of respondents indicated they would definitely recommend Tidewell and 7 percent said they would probably recommended Tidewell. Only 4 percent said they would not recommend Tidewell. Mr. Balsano’s CAHPS data also includes ratings from caregivers in which 82 percent of caregivers rated Tidewell a 9 or 10, and 13 percent rated Tidewell a 7 or 8. A rating of 6 or lower is considered to be a poor rating. Continuum of Sarasota is critical of Tidewell’s hospice house-based model of care. Continuum of Sarasota notes that between 23 and 27 percent of Tidewell patients die in hospice houses each year, and over 32 percent of patients spend a portion of their time on hospice in a hospice home. According to Continuum of Sarasota, that is an unusually high percentage of patients to die in a setting that is not their home.10 In addition, Continuum of Sarasota asserts that Tidewell’s hospice house-based model of care is responsible for outmigration and a resulting 10 As will be discussed in more detail in a subsequent section, Continuum’s model of care is substantially based on keeping patients in their homes. disruption in continuity of care for patients residing in ALFs and skilled nursing facilities. As explained by Ms. Greenberg: Tidewell reports that [ ] about 33 percent of their patients are served in hospice houses. That means that they are relocated from their home to a licensed hospice facility, whether they are sending them for general inpatient care or even routine care. They have routine patients in there, they would be called residential or routine patients. So they are relocating them out of their homes to a different facility, and many of those facilities are outside of Sarasota County, so they are actually outmigrating them to the other – their other hospice houses in Charlotte, DeSoto, and Manatee Counties. Another criticism leveled by Continuum of Sarasota is that nearly 40 percent of Tidewell patients die while on GIP, which is far in excess of the national average of 8.6 percent. This is significant because the GIP level of care is only appropriate for those patients whose pain and other symptoms cannot be managed at home. While the parties appear to agree that hospice care is best when it is provided in a patient’s home, there is no indication that patients are dissatisfied with receiving care in a hospice house or that any disruption to continuity of care is a significant problem. According to a survey from Healthcare First conducted between October of 2017 and March of 2020, 91.9 percent of residents in Tidewell’s Sarasota Hospice House and 94.2 percent of residents in Tidewell’s Venice Hospice House rated their patient care as a 9 or 10. That compares to a national average of 85.4 percent. As for being willing to recommend a hospice, 93.2 percent of residents of Tidewell’s Sarasota hospice house residents and 96.6 percent of residents in Tidewell’s Venice hospice house gave a rating of a 9 or 10. That compared to a national average of 86.6 percent. As for Continuum of Sarasota’s criticism about Tidewell not providing care in patients’ homes, Mr. Balsano provided data indicating that 45 percent of Tidewell’s patient care in 2019 was provided in a patient’s home as opposed to a nursing home, ALF, hospice facility, or inpatient hospital. In contrast, 37 percent of Continuum Care Hospice, LLC’s (located in California), and 24 percent of Continuum of Rhode Island, LLC’s, care was provided in a patient’s home. With regard to Tidewell patients spending an inordinate amount of time on GIP, Mr. Balsano noted that not all providers offer GIP care. Mr. Balsano also noted that Tidewell receives about half of its patients directly from hospitals, and patients discharged directly from hospitals tend to be more acutely ill and thus more likely to require GIP care. The depositions and letters of support submitted by Continuum of Sarasota indicate there may be areas of Tidewell’s program that could be improved. However, the greater weight of the evidence demonstrates that Tidewell is a quality provider of hospice services. Any problem with availability/accessibility is likely to be resolved by Tidewell’s addition of two new hospice houses. Section 435.035(3) – the applicant’s ability to provide quality of care and the applicant’s record of providing quality of care Continuum of Sarasota has no operational history because it is a development stage corporation formed for the purpose of initiating hospice services in Sarasota County. However, inferences about the future performance of a Continuum hospice in Sarasota County can be drawn from the past performance of the other hospices founded by Mr. Stern. Since 2015, Mr. Stern has founded six hospice programs located in five states: California, Rhode Island, Massachusetts, New Hampshire, and Washington. One common characteristic among all of the Continuum hospices is their service intensity model that was described as follows in Continuum of Sarasota’s application: There are several characteristics of Continuum Care Hospice Programs that distinguish [them] from the other hospice programs. But most significant, Continuum Care Hospice prides itself on its service intensity, which far surpasses NHPCO minimum requirements for staffing. If approved to establish services in Sarasota County, Continuum Care of Sarasota will introduce a level of service that extends beyond what is currently available in [the Sarasota County] market. First, every new patient at Continuum Care of Sarasota will be seen within two hours of referral, seven days a week. The two hour turnaround time is a testament to Continuum Care’s dedication to serving the needs of any and all hospice appropriate patients. Most hospice organizations will tell a caller on a Saturday that someone will be out to see the patient first thing Monday. Continuum Care will see that patient within two hours. Second, Continuum Sarasota patients will be visited by a certified nursing assistant (CNA) 5 to 7 days per week which will enable Continuum Care to recognize changes in the patient ahead of the curve and be proactive rather than reactive. This will assist in providing more comfortable outcomes for the patient and dually prevent unnecessary hospitalizations. The 5 to 7 visits weekly are an enormous benefit not only for the patient but for facilities in which the patients reside as it helps with their staffing levels. A third service intensity feature that will be employed by the Applicant is that a registered nurse will visit every patient at least two times weekly, and daily if the patient is actively passing to provide symptom management and proper planning. Lastly, Continuum Care of Sarasota will provide a social worker and chaplain (if the patient and family want a chaplain visit) at least weekly, which helps to keep families and loved ones well supported. The support can be a preventative measure so as to not have a crisis at the end of life resulting in a hospitalization or the patient being moved to an inpatient unit. The social worker and chaplain work vigorously to support the family so they are adequately prepared. Indicative of its commitment to providing a service intense hospice program, Continuum of Sarasota has conditioned its CON application on providing minimum core staffing: The Applicant will assure each patient has 5 to 7 Home Health Aide visits per week, provided this is acceptable to the [interdisciplinary team], patient and family. This will be measured by a signed declaratory statement submitted by the Applicant to AHCA The Applicant will assure each patient has a minimum of 2 RN visits per week, provided this is acceptable to the [interdisciplinary team], patient and family. This will be measured by a signed declaratory statement submitted by the Applicant to AHCA. The Applicant will seek to respond to all of its referrals within one hour, initiate the assessment process within two hours, and expedite admission to the hospice subject to having a physician order in hand and the patient/family selecting the hospice option. This will be measured by a signed declaratory statement submitted by the Applicant to AHCA. In the second year following licensure, Continuum of Sarasota’s proposed staffing model will exceed the guidelines set forth by the National Hospice and Palliative Care Organization (“NHPCO”), a national trade group of hospices. While the NHPCO calls for one nurse manager for every 11.2 patients, a social services employee for every 24.3 patients, one hospice aide for every 10.8 patients, and one chaplain for every 31.4 patients, Continuum of Sarasota expects to have one nurse case manager for every 10.0 patients, one social services employee for every 22.6 patients, one hospice aide for every 6.1 patients, and one chaplain for every 22.6 patients. Nevertheless, Continuum of Sarasota agrees that the amount of care provided to a particular patient will ultimately depend on that patient’s care plan and an individualized assessment of that patient’s needs. As discussed above, Continuum of Sarasota is critical of Tidewell’s percentage of GIP care, and Ms. Greenberg explained how Continuum of Sarasota promises to use high cost GIP care to a much lesser extent: A: With respect to competition, these exhibits relate to GIP and death in a hospice house. And death on GIP is – the national average is eight and a half percent, and Continuum – Tidewell is nearly 40 percent. So that’s five times the ratio. Continuum’s experience has only been between 2 and 3 percent of the patients actually pass while they are on GIP. And GIP means they are not in their own home, and it also means that you have an inability to control their acute pain and manage their symptoms in their own home. And Continuum has been successful in accomplishing that and having basically 1 out of 50 – 1 out of 40 to 50 patients only be on GIP, . . . ; so it’s significant. So again, I would suggest that the people in – the program and the model of care takes people out of their home and puts them on GIP. Because to have 4 in 10 uncontrollable acute symptoms seems unusual when there is only eight and a half percent nationally. And, of course, Continuum is much less than the national average. So disrupting them and taking them out of their home and relocating them as a place to die is the Tidewell model of care, but it seems to be an unfortunate model of care. And Continuum is going to give the population in that market the option to die at home. Q: Is the reimbursement rate under Medicare higher for GIP level of service? A: Yes, significantly higher. Within the market itself, within Sarasota County, the actual – the GIP reimbursement is almost a thousand dollars, $978, versus the routine reimbursement, depending on how long the person is on service, ranges between $147 and 185. So an average of about 160 compared to 978. Continuum hospices have a history of offering unique and innovative hospice programming to improve quality of care. A virtual reality program offered at each of the Affiliates allows patients and their families to experience “bucket list trips,” engage virtually in treasured activities or life experiences, or re-live precious memories such as visits to a family home or favorite vacation spot. A Continuum hospice was the first hospice in the country to implement virtual reality technology for the benefit of hospice patients. Another innovative program offered by Continuum hospices is equine assisted healing or equine therapy. Continuum of Sarasota has already contracted with a horse stable in Sarasota so that it can offer this program upon licensure. Many hospices offer music therapy programs staffed with volunteers. Continuum of Sarasota will have a certified music therapist. Continuum of Sarasota’s application is conditioned on providing virtual reality, music therapy, and equine therapy programs: The Applicant will implement its Virtual Reality Program at the onset of its program. It will be made available to all eligible Continuum Sarasota patients. This will be measured by a signed declaratory statement submitted by the Applicant to AHCA The Applicant will implement its Music Therapy Program at the onset of its program. It will staff a minimum of one Board Certified Music Therapist. It will be made available to all eligible Continuum Sarasota patients. This will be measured by a signed declaratory statement submitted by the Applicant to AHCA The Applicant will implement its Equine Therapy Program at the onset of its program. It will be made available to all eligible Continuum Sarasota patients who are physically able to make the trip to the stable partner. This will be measured by a signed declaratory statement submitted by the Applicant to AHCA. Continuum of Sarasota seeks accreditation from the Community Health Accreditation Program (“CHAP”) for each of its hospices and has conditioned the instant application on obtaining CHAP accreditation. An independent, not-for-profit accrediting body for home health and hospices awards this credential. An examination of the Medicare database for Continuum hospices in California and Rhode Island indicates that Continuum typically exceeds the national average for the following quality of care indicators: (a) percentage of patients getting at least one visit from an RN, a physician, a nurse practitioner, or a physician assistant in the last 3 days of life; (b) patients who got an assessment of all seven Hospice Item Set (“HIS”) quality measures at the beginning of hospice care to meet the HIS Comprehensive Assessment Measure requirements; (c) patients or caregivers who were asked about treatment preferences at the beginning of hospice-care; (d) patients or caregivers who were asked about their beliefs and values at the beginning of hospice care; (e) patients who were checked for pain at the beginning of hospice care; (f) patients who got a timely and thorough pain assessment when pain was identified as a problem; (g) patients who were checked for shortness of breath at the beginning of hospice care; (h) patients who got timely treatment for shortness of breath; and (i) patients taking opioid medication who were offered care for constipation. Tidewell offered critiques of Continuum’s operations. For example, the Continuum hospice programs provide a greater proportion of hospice services to patients residing in ALFs and nursing homes than the norm. In 2019, 63 percent of patient care days provided by Continuum’s California hospice were to patients residing in either an ALF or nursing home. ALFs accounted for 44 percent of that hospice’s total patient care days. Another Continuum hospice provided an even higher percentage of its patient care days to patients in one of these settings, with ALFs and nursing homes accounting for a combined 76 percent of the total days. Continuum hospices’ level of service to ALFs and nursing homes greatly exceeds the national average. Nationally, ALFs only account for 19.74 percent of the total patient days while nursing homes account for 17.27 percent. Continuum’s focus on serving patients in ALFs and nursing homes has resulted in an above average and steadily increasing average length of service (“ALOS”) at its hospices. The ALOS at Continuum’s first hospice, which opened in 2015, increased from 86.2 days in 2018 to 126.4 days in 2019, a 47 percent increase substantially above the 89.6-day national average. A newer Continuum hospice, which had its first full year in 2018, saw a similarly dramatic jump in its ALOS from 60.1 days in its first year to 87.7 days in its second year, which represents a 46 percent increase. For the sake of comparison, the ALOS for all hospices only increased 1.3 percent between 2016 and 2017, and only 1.7 percent between 2017 and 2018. As explained by Mr. Balsano, one critique concerned Continuum’s propensity to focus on residents of ALFs and nursing homes: Q: And can you describe what you view as Continuum’s business model? A: Well, their business model is a very successful one. They have strong operating margins and they seem to focus on the patient population that [resides] within ALFs and nursing homes. Within the Sarasota application they talk about these sources of potential referrals and indeed their letters of support largely come from ALFs and nursing homes. These locations, not specific to Continuum, but these locations tend to produce longer lengths of stay and higher profitability compared to other locations. Q: What is the connection between the length of stay and higher profitability? A: Well, it’s twofold. If you are a longer length of stay, then the whole admission process, initial evaluation, all those upfront activities that need to be on a patient that stays 10 days or [ ] zero days, is the same. So by elongating the length of stay, those kind of upfront activities get distributed over a longer stay at lower cost. And then secondly, given that long length of stay patients reside in nursing homes and ALFs, not exclusively but that’s a big part of it, there is just a very pragmatic consideration. If a hospice program has multiple patients in a nursing home or multiple patients in an ALF, then that part of the nurse or social worker or home health aid activity that is normally spent from going from patient A to patient B to patient C, you don’t have to get in the car to go there if you are simply going down the hall or a different floor. So it adds to the efficiency aspect of care delivery if you have patients concentrated in an inpatient setting like a nursing home or an ALF. Q: And how does the intensity of visits for a hospice patient compare at the beginning and end of a patient’s stay in a hospice as compared to the middle portion of the patient’s stay? A: If I understand your question, I alluded to the fact that there’s a greater cost in the beginning, there’s also greater cost at the end. So the longer the middle part, the more profitable the stay, as a general consideration. Tidewell also points out that Continuum’s provision of care is heavily skewed toward home health aides and away from more expensive care such as skilled nursing. In 2019, Tidewell provided an average of 188 home care minutes a week in skilled nursing and 64 minutes a week of home health aides. In contrast, Continuum Care Hospice, LLC, located in California, provided 136 minutes per week of skilled nursing and 175 minutes a week of home health aides. Likewise, Continuum Care of Rhode Island, LLC, provided 113 minutes of skilled nursing and 225 minutes of home health aides. Tidewell also points out that several of the people responsible for Continuum’s operations are no longer affiliated with the company. Specifically, Continuum of Sarasota’s application relied to a great extent on the experience of its six affiliated Continuum hospice programs and their key employees. This included three key employees (excluding the owner Sam Stern) who were expressly identified in the “Managerial Resources” section of the application: Christi Keith, Continuum’s Chief Operations Officer; Ariel Joudai, Continuum’s Chief Financial Officer; and Patricia Putzbach, Continuum’s Chief Compliance Officer. However, just prior to the final hearing, Mr. Stern sold his interest in all but one of his six hospices. As a result, Ms. Keith no longer works for Mr. Stern, and Ms. Putzbach is waiting for an offer from another hospice provider. Although identified by name in the application, Continuum’s National Clinical Director is now working on a temporary basis for Continuum and another hospice provider as a “shared” employee with her future with Continuum undetermined. Mr. Balsano summarized the impact of a talent drain on Continuum as follows: When you look at the application as a whole, there’s multiple references. It’s very clear the applicant is proud of the job that it’s done in these markets and says we would plan on operating the proposed Sarasota facility in a similar fashion. And also the resources that were part of Continuum Care, folks in administration, clinical, patient care, et cetera, at kind of the corporate or oversight level, it calls into question two things. Could they really commit to operating a hospice in Sarasota County when, in fact, all of the other models that they’ve developed have been successfully sold. And secondly, from [that resource] standpoint, just [to] put it bluntly, who’s left when these hospices were entered into the transaction. Again, my understanding that people were still waiting to figure out what was happening, but a lot of them expected that they would be going to the acquired – the acquiring organization, which I think was Hospice Care was the name of the organization. So, as we sit here today, I am not sure who is still left in the clinical and senior leadership positions at Continuum. The greater weight of the evidence demonstrates that Continuum has a substantial record of being a high-quality provider of hospice services. The greater weight of the evidence also demonstrates that Continuum of Sarasota will be a high-quality provider of hospice services if its CON application is granted. Section 408.035(4) – The Availability of Resources, Including Health Personnel, Management Personnel, and Funds for Capital and Operating Expenditures, for Project Accomplishment and Operation Continuum of Sarasota has the resources for project accomplishment and operation, and Mr. Stern has a demonstrated history of successful start- up hospice operations. In terms of health personnel, Schedule 6A of the CON Application provides the proposed staffing plan in terms of full-time employees (“FTEs”) and salaries. The undisputed testimony is that the staffing and salaries are reasonable for the proposed operations. Included specifically within the Schedule are sufficient staff to implement the proposed intensive staffing model for increased hospice visit frequency, as well as specific proposed service programs such as dedicated FTEs for music therapy. The intensive service model is an enforceable condition of the CON Application. With respect to funds for capital and operating expenses, Schedule 1 shows the total project costs of $324,650.00, and Schedule 3 showed $500,000.00 in cash in the operating account, more than sufficient to cover start-up costs. Additionally, Mr. Stern presented evidence of additional financial resources in excess of $4.5 million and his commitment to fund and support the project. At the time of the final hearing, he had made an additional capital contribution of $2 million, with the current cash balance in the operating account of $2.5 million. The greater weight of the evidence demonstrates that Continuum of Sarasota has the resources to be a successful hospice provider in Sarasota County. Section 408.035(5) – The Extent to Which the Proposed Services Will Enhance Access to Healthcare for Residents of the Service Area As discussed above, the opening of two new hospice houses in Sarasota County should eliminate any problems with accessing hospice services. Section 408.035(6) – The Immediate and Long-Term Financial Feasibility of the Proposal The parties stipulated that the proposed project will be profitable and financially feasible in the long term. Section 408.035(7) – The Extent to Which the Proposal Will Foster Competition that Promotes Quality and Cost-Effectiveness Ms. Greenberg is of the opinion that granting Continuum of Sarasota’s application will lead to increases in the quality of hospice services and in the utilization of hospice services in Service Area 8D. As a result of the latter, Continuum of Sarasota and Tidewell will be competing in a growing, as opposed to a static, market of hospice patients. Ms. Greenberg’s opinion is based on an examination of three service areas in Florida in which competitors had entered service areas in the last five years that had previously been served by only one provider. The service areas in question were Lake and Sumter Counties in Service Area 3E, Hillsborough County in Service Area 6A, and Pinellas County in Service Area 5B. Ms. Greenberg examined the HIS scores for the existing providers during the year before the new competition entered the service area and for the two years following the competitors’ entry. Ms. Greenberg also examined the market utilization before and after the competitors’ entry. In Service Area 3E, quarterly hospice admissions averaged 732 during the four quarters of 2014 and then peaked at 976 just when Compassionate Care Hospice of Lake and Sumter Counties initiated services in the first quarter of 2015. While hospice admissions declined during the rest of 2015, they rose to 996 during the first quarter of 2016 and remained above 900 for the remainder of 2016. In Service Area 5B, hospice admissions in Pinellas County were 1,692 during the second quarter of 2018 when Seasons Hospice and Palliative Care entered the market. Hospice admissions increased to 1,755 the next quarter and reached 2,099 by the fourth quarter of 2019. In comparing the incumbent hospice’s HIS scores for quality measures such as treatment preferences, addressing beliefs and values, pain screening, pain assessment, dyspnea screening, dyspnea treatment, and treatment with opioids for the year before and after the competitor entered the market, Ms. Greenberg observed that there was “an uptick in overall quality in just about every measurement ” In Service Area 6A, hospice admissions in Hillsborough County were 1,559 when Seasons Hospice and Palliative Care of Tampa entered the market. Admissions climbed to 1,741 by the first quarter of 2018 and were 1,787 during the first quarter of 2019. In comparing the incumbent provider’s HIS scores during the years before and after the competitor’s entry, Ms. Greenberg observed that nearly all of the scores increased marginally, and a few increased substantially. Ms. Greenberg is of the opinion that Continuum of Sarasota’s service intensity will lead to an across the board increase in Tidewell’s quality. Q: So if Continuum goes forward with the proposed project and meets the conditions that it has set forth in the application and agreed to be conditioned with respect to service intensity, your opinion as a health planner, will that promote competition that fosters quality? A: Absolutely. Because providing that level -- an intensive level of service will have a ripple effect on the community. The existing provider is going to start upping its game, admitting quicker, providing a higher level of service or service intensity. I mean, having an average of less then ten minutes a day on average or 70 minutes a week of nurse’s aides is minimal compared to what’s being proposed and offered by Continuum. As for whether granting Continuum of Sarasota’s CON application will lead to hospice patients in Service Area 8D having a greater variety of programs, Ms. Greenberg testified that Tidewell has already taken actions to address Continuum of Sarasota’s potential entry into the market by duplicating some of the unique services Continuum of Sarasota proposes to offer: Exhibit 110 is entitled Competition at Work, and this relates to criteria that foster competition that promotes quality and cost effectiveness. And specifically, relative to the need for the additional competition, if you will, what we have seen in that market is historically when you actually see more competition enter the market, the existing provider will up its game, and I showed how some of those things happen with quality in some prior exhibits. But what I found in the Sarasota market is, in response to Continuum [of Sarasota]’s proposal and discussions in the community, is that Tidewell was already attempting to up its game. Tidewell earlier this year announced it was having a virtual reality program. And again, Continuum had been in the Sarasota market since mid last summer, and so then that appears to be a . . . reaction to the Continuum [of Sarasota] virtual reality program, which Continuum conditioned its application on. Similarly, music therapy, that was a new program that was added at the end of 2019, and historically, the music therapy provided by Tidewell was limited to . . . volunteers, not therapists . . . So the upping game has already started. They recently announced they are going to do equine therapy, and lastly, they’ve just produced a policy that involves a two-hour admission process for patients that are high acuity or are in the hospital. Historically, that’s where the high acuity patients would be. So my conclusion is, even the threat of competition is already demonstrating that Continuum is upping its game in certain areas. As for cost effectiveness, Ms. Greenberg discussed how nearly 40 percent of Tidewell’s patients die while on GIP care. In contrast, the national average is 8.5 percent and between 2 and 3 percent of Continuum’s patients die while on GIP. Therefore, with the daily per diem Medicare reimbursement for GIP care being $978.00 as opposed to $160.00 for routine care, Ms. Greenberg is of the opinion that granting Continuum of Sarasota’s application will increase cost effectiveness. Overall, the greater weight of the evidence demonstrates that granting Continuum of Sarasota’s application is likely to lead to marginal increases in Tidewell’s service quality and to an increase in the utilization of hospice services in Service Area 8D, especially in light of Continuum’s prior experience with minority outreach.11 The parties offered a great deal of evidence regarding what impact granting Continuum of Sarasota’s application would have on Tidewell’s financial condition.12 In order to understand the potential impact on Tidewell, it is necessary to discuss the creation of Stratum Health Services (“Stratum”). Stratum was established in 2016 to act as a parent/management company for Tidewell. Tidewell’s senior management works under the 11 The fixed need pool calculation and the supporting data suggested that hospice utilization in Sarasota County is close to 100 percent. However, Continuum of Sarasota persuasively demonstrated that the counting of readmissions caused the fixed need pool calculation to be skewed. While that information does not excuse Continuum of Sarasota from demonstrating that special and/or not normal circumstances in Sarasota County justify granting the CON application, it is relevant for demonstrating that utilization of hospice services in Service Area 8D can rise. 12 The statutory and rule-based criteria by which hospice CON applications are judged do not expressly call for an evaluation of how granting the application will impact a current provider’s financial situation. Nevertheless, consideration of the impact on the existing provider is customarily considered in CON cases. See Hospice of Naples, Inc. v. Ag. For Health Care Admin, Case No. 07-1264CON (Fla. DOAH Mar. 3, 2008), rejected in part, Case No. 2007002739 (Fla. AHCA, Apr. 3, 2008)(discussing in paragraphs 251 through 262 and 270 the impact on the existing provider). Stratum umbrella and several of Tidewell’s essential administrative functions are performed by Stratum. In order to reimburse Stratum for those services, Tidewell typically transfers at least $12 million a year to Stratum. When asked why it was appropriate to consider Stratum and Tidewell together when evaluating the impact on Tidewell of granting Continuum of Sarasota’s CON application, Ms. Greenberg testified as follows: A: You have to look at them as a combined entity because the parent – there [are] only two tax returns filed for that combined entity, one is Tidewell and one is the parent. And the parent’s primary business is managing Tidewell. And all of the senior executives and the chief medical officer and chief nursing officer and chief clinical officer, if you look at the tax returns, are identical between the two, and they are identified on both tax returns with the same salaries and same benefits but they’re sitting in Stratum. So it’s not akin to a company that manages a hundred facilities and there’s a CEO at every facility and you have actually support services at the corporate level. This is – it was just a shifting of the whole management team to the parent. And there are a few other small operating businesses, but on a comparative basis, Tidewell is the one that’s $90 million a year in revenues, and these other small businesses are about $5 million in revenues now. So it really – you have to look at it as a combined entity, it’s just a shifting of assets and income that were once Tidewell’s as a corporation. Q: Just so we are clear on that, does Tidewell own the parent company? They gave them $135 million in assets. Do they own it? A: No, they don’t. The parent owns them, or the parent is the sole member. It’s a nonprofit corporation, so the parent is the only stockholder. If you were a for-profit, but it’s the sole member of the corporation. The combined entities of Tidewell and Stratum are very strong from a financial perspective. For the 12 months ending on June 30, 2012, Tidewell had net assets of $113,152,959. For the 12 months ending September 30, 2019, Tidewell and Stratum had combined net assets of $196,940,081. That represents a 74 percent increase and an average annual dollar increase of $13.4 million. Prior to the formation of Stratum, Tidewell’s net income was $12,128,594 for the 12 months ending June 30, 2015. For the 12 months ending September 30, 2018, Stratum and Tidewell’s combined net income was $14,034,322. The impact incurred by the combined entities of Stratum and Tidewell is evaluated via a contribution margin analysis. In the instant case, one forecasts how many patients Tidewell will lose in the second year of hospice operations by Continuum of Sarasota. The next step is to calculate the ALOS for each patient Tidewell will lose to Continuum of Sarasota. Multiplying the number of lost patients by the ALOS results in the number of lost patient days. The next step in the contribution analysis is to determine Tidewell’s variable cost per patient day. This figure is Tidewell’s decrease in daily costs for every patient that it loses to Continuum of Sarasota. With Tidewell’s variable cost per patient day in hand, one calculates Tidewell’s contribution margin per patient day by subtracting the variable cost per patient day from the revenue per patient day. Ms. Greenberg determined that Tidewell could expect its net income to be lower by $565,436.00 by year two of Continuum of Sarasota’s hospice operations. However, her analysis is flawed. First, she assumed that all, or a substantial portion of, the management fee paid from Tidewell to Stratum is 100 percent variable. That assumption is not credible because Tidewell will incur a certain amount of expenses for accounting, budgeting, human resources, and management regardless of its patient volume. It is unreasonable to assume that the aforementioned expenses would decrease in perfect lockstep with a decrease in patient volume. Ms. Greenberg’s analysis is also undermined by basing the calculation on Tidewell’s average length of stay rather than Continuum of Sarasota’s anticipated average length of stay. As discussed above, Continuum has a history of focusing on patients from ALFs and nursing homes who tend to have longer lengths of stay in hospice care. Thus, it is reasonable to assume that the patients that Continuum of Sarasota takes from Tidewell will tend to be those with longer lengths of stay than Tidewell’s average. Mr. Balsano calculated that Tidewell and Stratum’s combined net income would be reduced by an amount ranging between $1,426,763 and $2,539,347 by year two of hospice operations by Continuum of Sarasota. Mr. Balsano’s calculation was more reasonable than Ms. Greenberg’s. Given that Stratum and Tidewell’s combined net income was $14,034,322 for the 12 months ending September 30, 2018, the greater weight of the evidence demonstrates that Tidewell will still be able to operate as the dominant provider of hospice services in Sarasota County even if AHCA grants Continuum of Sarasota’s CON application.13 13 Tidewell makes the following assertion in its proposed recommended order: “But based on 2019 financial results, which is the last complete year, a contribution margin loss of only $1.4 million, which is on the low end of the possible range, would reduce Tidewell’s operating income to only $2.7 million (which, again, includes $3.3 million in charitable contributions) and reduces its operating margin to only 2.9 percent. Essentially, without the charitable contributions, Tidewell’s hospice business would be on the verge of breaking even or, perhaps, even losing money. As a result, Tidewell might be forced to use nonoperating income to fund the basic core Medicaid benefits Tidewell is required to provide in addition to the complementary services and programs that are outside the Medicare benefit.” This statement does not seem to account for the possibility that the Sarasota County market is growing and that any patient volume lost to Continuum of Sarasota is likely to be regained in the near future through market growth. In addition, this statement from Tidewell is based on the premise that a financial analysis should only focus on Tidewell and ignore the reality that Tidewell and Stratum are essential components of the same enterprise rather than separate operations. Finally, given that Tidewell’s charitable receipts are likely a product of Ultimate Findings If Continuum of Sarasota was not required by rule 59C-1.0355(4)(d) to demonstrate that a specific terminally ill population was not being served, then the undersigned would conclude that the statutory criteria in section 408.035 and “not normal” circumstances justify granting the CON application. Tidewell’s status as a monopoly provider and the resulting lack of choice for residents of Sarasota County are “not normal” circumstances that weigh heavily in favor of granting the application. As for the statutory criteria, the greater weight of the evidence demonstrates that Continuum of Sarasota will be a quality provider of hospice services and will enable residents to choose between two different models of care. Moreover, even if Tidewell and Stratum’s combined net income would be reduced by an amount ranging between $1,426,763 and $2,539,347 by year two of hospice operations by Continuum of Sarasota, the greater weight of the evidence demonstrates that Tidewell will still be able to operate as the dominant provider of hospice services in Sarasota County. However and as discussed in more detail in the Conclusions of Law, the undersigned’s assessment of the present state of the law indicates that Continuum of Sarasota is required by rule 59C-1.0355(4)(d) to demonstrate that a specific terminally ill population was not being served. Because Continuum of Sarasota was unable to carry its burden of proof on that point, the CON application must be denied.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration deny Continuum Care of Sarasota, LLC’s, application for a Certificate of Need to provide hospice services in Sarasota County, Florida. DONE AND ENTERED this 13th day of January, 2021, in Tallahassee, Leon County, Florida. S G. W. CHISENHALL Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 Fax Filing (850) 921-6847 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 13th day of January, 2021. COPIES FURNISHED: Jeffrey L. Frehn, Esquire Radey Law Firm, P.A. 301 South Bronough Street, Suite 200 Tallahassee, Florida 32301 (eServed) Julia Elizabeth Smith, Esquire Julia E. Smith, P.A. 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 (eServed) Geoffrey D. Smith, Esquire Smith & Associates 3301 Thomasville Road, Suite 201 Tallahassee, Florida 32308 (eServed) Susan Crystal Smith, Esquire Smith & Associates 3301 Thomasville Road, Suite 201 Tallahassee, Florida 32308 (eServed) Sabrina B. Dieguez, Esquire Smith & Associates 709 South Harbor City Boulevard, Suite 540 Melbourne, Florida 32901 (eServed) Laura M. Dennis, Esquire Radey Law Firm 301 South Bronough Street, Suite 200 Tallahassee, Florida 32301 (eServed) Christopher Brian Lunny, Esquire Radey Thomas Yon & Clark 301 South Bronough Street, Suite 200 Tallahassee, Florida 32301 (eServed) Angela D. Miles, Esquire Radey Thomas Yon & Clark, P.A. 301 South Bronough Street, Suite 200 Tallahassee, Florida 32301 (eServed) D. Carlton Enfinger, Esquire Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 7 Tallahassee, Florida 32308 (eServed) Maurice Thomas Boetger, Esquire Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 (eServed) Richard J. Shoop, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 (eServed) Shevaun L. Harris, Acting Secretary Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 1 Tallahassee, Florida 32308 (eServed) Bill Roberts, Acting General Counsel Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 (eServed) Shena L. Grantham, Esquire Agency for Health Care Administration Building 3, Room 3407B 2727 Mahan Drive Tallahassee, Florida 32308 (eServed) Thomas M. Hoeler, Esquire Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 (eServed)
The Issue The issue is whether Respondent properly determined that there is a numeric need for one additional hospice program in health planning Service Area 2B for the January 2003 planning horizon pursuant to a revised fixed need pool projection.
Findings Of Fact AHCA is the state agency that is responsible for administering the CON program and laws in Florida. In conjunction with these duties, AHCA determines, on a semi-annual basis, the net numeric need for new hospice programs pursuant to Rule 59C-1.0355(4), Florida Administrative Code (the Rule). AHCA then publishes such need in the Florida Administrative Weekly. Community volunteers began organizing BBH in 1981. After its incorporation in 1983 as a not-for-profit community organization, BBH commenced operation under a license that authorized it to provide hospice services only in SA 2B, consisting of the following eight counties: Franklin, Gadsden, Jefferson, Leon, Liberty, Madison, Taylor, and Wakulla. On average, BBH serves 162 patients per day. Its main office is located in Tallahassee, Florida, but it operates the following branch offices and/or community centers: Franklin County at Carrabelle, Florida; Gadsden County at Quincy, Florida; Jefferson County at Monticello, Florida; Madison County at Madison, Florida; and Taylor County at Perry, Florida. BBH also operates a twelve-bed inpatient facility, The Hospice House, located in Tallahassee, Florida. Covenant, formerly known as Hospice of Northwest Florida, is a not-for-profit community organization that was founded by a committee in 1982. Covenant began treating its first patients in 1984 and is currently licensed to provide hospice services in SA 1 and SA 2A. The following counties are located in SA 1: Escambia, Santa Rosa, Okaloosa, and Walton. The following counties are located in SA 2A: Holmes, Washington, Jackson, Calhoun, Bay and Gulf. Covenant also is licensed to provide hospice services in 26 southern Alabama counties. On average, Covenant serves 429 Florida hospice patients per day. Its main office and its eight-bed inpatient facility are located in Pensacola, Florida. Covenant operates the following Florida branch offices: Okaloosa County at Niceville, Florida; Jackson County at Marianna, Florida, and Bay County at Panama City, Florida. Covenant operates Florida community centers in Okaloosa County at Crestview, Florida, and in Walton County at Destin, Florida. The Hospice CON Rule and Need Methodology The Rule establishes criteria and standards for assessing the need for new hospice programs. The Rule includes a numeric need formula for determining whether a new hospice is needed in a particular SA. In this case, AHCA used the following data sources to produce need projections: (a) population projections from the Executive Office of the Governor; (b) mortality data as reported in the applicable Florida Vital Statistics Annual Report from the Department of Health's Office of Vital Statistics; and (c) utilization data based on the number of hospice patients served by all licensed hospice programs in the SA as reported by licensed hospice programs. Under the Rule, numeric need is demonstrated if the projected number of unserved patients who would elect a hospice program is 350 or greater. The Rule targets 350 as the minimum number of patients that should be admitted to a hospice program in a 12-month period. Pursuant to the Rule, AHCA calculates need for additional facilities and services every six months or twice annually. The numeric need formula contained in the Rule is a conditional formula, which works as follows: If HPH minus HP is equal to or greater than 350, then a net numeric need exists. HPH is the projected number of patients who will elect hospice services in a particular SA during the 12-month period beginning in the planning horizon. Specifically, HPH is the sum of (U65C X P1) + (65C X P2) + (U65NC X P3) + (65NC X P4). U65C is the projected number of SA resident cancer deaths under age 65. U65C is calculated by dividing the current annual number of cancer deaths under age 65 by the current annual total of resident deaths, and multiplying the result by the SA's projected annual total of resident deaths at the planning horizon. P1 is the projected proportion of U65C who will be hospice patients. P1 is calculated by dividing the current 12-month statewide total of hospice admissions under age 65 with cancer by the current statewide total of deaths under age 65 from cancer. 65C is the projected number of SA resident cancer deaths age 65 and over. 65C is calculated by dividing the current annual number of cancer deaths age 65 and over by the current annual total of resident deaths, and multiplying the result by the SA's projected annual total of resident deaths at the planning horizon. P2 is the projected proportion of 65C who will be hospice patients. P2 is calculated by dividing the current 12-month statewide total of hospice admissions age 65 and over with cancer by the current statewide total of deaths age 65 and over from cancer. U65NC is the projected number of SA resident deaths under age 65 from all causes except cancer. U65NC is calculated by dividing the current annual number of deaths under age 65 from all causes except cancer by the current annual total of resident deaths, and multiplying the result by the SA's projected annual total of resident deaths at the planning horizon. P3 is the projected proportion of U65NC who will be hospice patients. P3 is calculated by dividing the current 12-month total of hospice admissions under age 65 with diagnoses other than cancer by the current statewide total of deaths under age 65 from causes other than cancer. 65NC is the projected number of SA resident deaths age 65 and over from all causes except cancer. 65NC is calculated by dividing the current annual number of deaths age 65 and over from all causes except cancer by the current annual total of resident deaths, and multiplying the result by the SA's projected annual total of resident deaths at the planning horizon. P4 is the projected proportion of 65NC who will be hospice patients. P4 is calculated by dividing the current 12-month statewide total of hospice admissions age 65 and over with diagnoses other than cancer by the current statewide total of deaths age 65 and over from causes other than cancer. In other words, HPH is a projection of the number of persons who will elect hospice care in a particular SA, irrespective of their normal place of residence. It is a compilation of projected hospice usage for four age and diagnostic classes. Thus, the need methodology and need projection is specific to the particular demographics and diagnostic experiences of a SA. HP represents the number of admissions to hospice programs serving a SA during the most recent 12-month period ending on June 30 or December 31. The number is derived from reports on standardized forms submitted to AHCA by licensed hospice programs every six months. The Rule uses a statewide use rate as a normative standard for each age and diagnostic category. The use rate is a ratio of the hospice admissions in a particular age and diagnostic class to deaths in the same age and diagnostic class for the state as a whole. When applied to any particular hospice SA, the use rate projects what the hospice admissions should be in that SA, based upon the performance of the state as a whole, rather than the actual historical penetration rate in the SA. The need methodology thus provides that the hospice penetration rate in a SA should equal the state average penetration rate. The need methodology does not assume that the level of hospice services being provided in a particular area is sufficient to meet the needs of the area. This is appropriate because hospice is a fast-growing and relatively new service that has been widely available only since the early 1980s. Not only has there been a rapid increase in hospice penetration rates but also there is a wide variation in hospice penetration from SA to SA. The numeric need formula set forth in the Rule provides a reasonable and appropriate methodology to project need for additional hospice services. In this case, AHCA's procedures for collecting and analyzing data and for calculating numeric need were consistent with the Rule. Publication of the Fixed Need Pools AHCA initially published the "Florida Need Projections for Hospice Programs: Background for Use in Conjunction with the July 2001 Batching Cycle for the January 2003 Hospice Planning Horizon." The initial publication resulted a numeric need in SA 2B of 340. In other words, there was no net numeric need for an additional hospice program in SA 2B. AHCA subsequently published a revision to the fixed need pool after it was notified of some errors in the data used in the numeric need calculation. The errors principally involved AHCA's failure to update the population data from a previous batching cycle. The necessity of a revised publication created an opportunity for hospices to submit revised admissions data, which was then incorporated into the second computations of the need methodology. Several hospices took advantage of this opportunity. Using the revised data, AHCA determined that the projected number of hospice admissions in SA 2B would be 1209 patients (HPH = 1209). AHCA also determined that the number of patients served by SA 2B's licensed provider, BBH, for the relevant period was 858 patients (HP = 858). The difference between these calculations was 351, indicating a need for an additional hospice program in SA 2B. AHCA published the revised fixed need pool determination on August 17, 2001. Counting Admissions At issue here is the definition and use of the term "admissions" on AHCA's semiannual utilization report form (report form). Item 1 on the report form indicates that hospice providers should show the "[n]umber of patients admitted to your program (unduplicated) for the following categories " The reporting block also indicates that the data to be included are "New Patients Admitted." The term "unduplicated" means admissions in the reporting period, exclusive of those from a prior reporting period. In other words, the same admission is not counted and reported twice. For example, a patient initially admitted in one reporting period, subsequently discharged, and readmitted in the following reporting period should be reported as an admission in the prior reporting period and as an admission in the following reporting period. Likewise, a patient who initially is admitted, discharged, and subsequently readmitted in the same reporting period is counted as two admissions. This is true whether the second admission occurs in the same SA or in a different SA and whether the second admission is to the same or a different hospice provider. The second admission relates to the same patient but is counted as a "new patient admitted" each time the patient is admitted as long as the same admission is not counted twice on a report form. The counting of unduplicated admissions is consistent with the language of the Rule, which requires hospice providers to "indicate the number of new patients admitted during the six- month period . . . ." It also is consistent with the language of the Rule that requires the report form to show "[t]he number of admissions during each of the six months covered by the report by service area of residence." The "service area of residence" is not defined by the Rule. AHCA interprets the term to mean the location of patients when they are admitted regardless of the place that they consider their permanent residence. AHCA's interpretation of the term "service area of residence" is reasonable and appropriate. The fact that admissions are counted for each SA regardless of a patient's normal place of residence, while resident death data is derived from information contained in death certificates showing the deceased person's permanent residence (no matter where the death occurred) does not change this result or improperly skew the hospice use rates. In the course of treatment, a hospice patient may account for two or more admissions to the same or another hospice, in the same or another service area, during a period of time that covers two reporting periods. This could happen for a number of reasons, including but not limited to the following: (a) a patient may temporarily decide that he or she no longer desires hospice services resulting in an admission, a discharge, and second admission to the same or another hospice in the same or another SA; (b) a patient may decide to relocate and receive services in another SA with the same or another hospice resulting in separate admissions in both SAs; and (c) a patient may elect to transfer from one hospice to another hospice in the same SA resulting in a separate admission for each hospice. All Florida hospices, including BBH, count a patient as having generated two admissions when the patient is admitted, discharged, and readmitted to the same hospice in the same SA. They also count a patient as having generated a second admission when the patient transfers or relocates to their hospice from another hospice in the same or another SA. AHCA's report form requires hospices that serve multiple SAs to separate their admissions by SA to enhance the verisimilitude of the counts. Twelve hospice providers, including Covenant, serve multiple SAs in Florida. Under the Rule, multiple SA providers, like Covenant and unlike BBH, count admissions when a patient transfers from the provider's program in one SA to the same provider's program in another SA. The ability to count an admission in both SAs when a patient transfers from one SA to another SA but continues to receive services from the same hospice, does not result in impermissible "double counting" or give multiple SA providers a competitive edge. To the contrary, it is consistent with AHCA's interpretation of an unduplicated admission. More importantly, AHCA's methodology of counting of such admissions is consistent with the method that Medicare uses to count admissions and with the way AHCA counts admissions in determining numeric need for nursing homes, hospitals, and open-heart programs. For the reporting period at issue here, Covenant reported zero admissions based on transfers of its patients between SA 1 and SA 2A. Moreover, there is no persuasive evidence that allowing any multiple SA provider to count transfers of its patients from one of its SAs to another of its SAs as two separate admissions has adversely impacted the fixed need pool determination in this case. Covenant is not the only hospice provider in SA 1 and SA 2A. No doubt, some patients in one of Covenant's SAs transferred to and from Covenant and the alternate providers in SA 1 and SA 2A or other Florida SAs with no corresponding death being recorded in one of Covenant's SAs. Covenant surely served some Alabama patients who sought hospice care in Florida but whose deaths were not counted as resident deaths in any Florida SA. At least for the calendar years 1999 and 2000, Covenant experienced a net in-migration of patients while BBH experienced a net out-migration of patients for the same periods. Even so, there is no persuasive evidence that in- migration and out-migration of patients has affected the validity of the numeric need at issue in this proceeding. AHCA consistently has counted admissions in this manner since the Rule was adopted and implemented. Counting admissions by "service area of residence" as interpreted by AHCA ensures that all patients served are counted, even those who are homeless or have a permanent residence in another state. AHCA's interpretation of an admission based on "service area of residence" also is consistent with Section 400.601(6), Florida Statutes, which provides that hospice services may be provided in "a place of temporary or permanent residence used as the patient's home . . . ." Thus, a patient's residence could be a private home, an assisted living facility, a nursing home, or a hospital regardless of the location of the patient's legal or permanent residence. The State of Florida has an interest in knowing how much hospice care is provided in each SA. The application of the Rule promotes that interest because HPH projects the number of patients in a particular SA who will choose hospice care in the applicable time frame. HP is the number of patients admitted to hospice programs during the most recent 12-month period. HPH and HP measure the utilization of hospice care in a SA and not the number of residents of an SA who will elect hospice care or who are admitted to hospice care. In calculating the numeric need in this case, the number of admissions was based on data for the year ending June 2001. The resident deaths were based on data for the period ending December 2000. The time periods do not match because the Rule requires AHCA to use the most recent mortality data from the Department of Health's Office of Vital Statistics. The time periods are never the same and can differ from six months to one year. Thus, there is no intent under the Rule to have a one-to-one correspondence between the deaths that are used in determining the P factors and the admissions that are multiplied by the factors. Every SA in the state is treated consistently. No SA is disadvantaged by this characteristic of the Rule's need methodology. The batching cycle at issue here is the only one since the Rule was implemented that showed a fixed need for another hospice program in SA 2B. Until now, AHCA has never preliminarily approved any applicant where the net numeric need was only 351. The numeric need projection made in April 2002 showed no fixed need in SA 2B for another hospice program. None of these facts serve to undermine the validity of AHCA's determination of numeric need in this case. The Revised Fixed Need Pool Determination The initial fixed need pool projection published by AHCA did not indicate that there was a numeric need for an additional hospice in SA 2B. However, the initial publication was based on incorrect population projections. AHCA published a revised fixed need pool projection based, in part, on the updated and most current population data. That revision alone would have resulted in a numeric need for an additional hospice program in SA 2B, i.e. HPH - HP equaled 350. However, other corrections also were made based on revisions to semiannual utilization reports of several hospices. BBH's revised report form increased its HP number by four. Another hospice, Hospice of Southwest Florida, reported a substantial revision. The total revisions resulted in a numeric need for one additional hospice program in SA 2B because HPH - HP equaled 351. The revised fixed need pool determination was correctly calculated in accordance with AHCA's application and interpretation of all rules relating to fixed need pool determination. AHCA's interpretation and application of the rules is reasonable and appropriate. Therefore, the fixed need pool projection at issue here is valid and correct. As discussed below, there is no persuasive evidence that BBH over-reported its admissions. BBH's Reported Admissions An admission consists of several components: (a) a physician's diagnosis and prognosis of a terminal illness; (b) a patient's expressed request for hospice care; (c) the informed consent of the patient; (d) the provision of information regarding advance directives to the patient; and (e) performance of an initial professional assessment of the patient. At that point, the patient is considered admitted. A patient does not have to sign an election of Medicare benefits form for hospice care prior to being deemed admitted. BBH reported 858 admissions for the July 2000 through June 2001 reporting period. These admissions included patients who had completed the admission process outlined above. For accounting and billing purposes only, BBH separates its admissions into patients who have authorized the election of Medicare benefits and those who have not made that election. For the latter group, BBH uses the acronym WAP as a billing code. BBH provides WAP patients with services but does not bill them for those services because BBH is unable to report them to Medicare for reimbursement. BBH does not bill patients for services that it has no intention of collecting. In fact, BBH's billing department initially logs all patients in as WAPs. BBH's admission policy states that patients who will not be accepting services immediately should be entered as a WAP with reasons and follow-up dates to initiate regular services. The admission specialist at BBH enters a patient as a WAP then gets the attending physician's signature on the interdisciplinary care plan and certification of terminal illness. The admission specialist also requests the patient's medical record and completes the other admission steps. The WAP designation is not removed until the admission process is complete and the patient has elected the Medicare benefit. The WAP patient is not counted as an admission for purposes of reporting to AHCA until the admission process is complete. Occasionally, a WAP patient dies before the admission process is complete. In that case, the patient is not counted as an admission. Sometimes a WAP patient dies after completing the admissions process but before electing the Medicare benefit or receiving any additional hospice services. It is not necessary for a hospice to develop a plan of care in order for a patient to be considered admitted. An admitted patient has a right to choose or refuse additional services. In such a case, the patient is still counted as an admission for purposes of reporting to AHCA. BBH's practice of including WAP patients who have completed the admission process in its count of admissions is consistent with AHCA's interpretation of the Rule. AHCA's interpretation of the Rule is reasonable and appropriate in this regard. The fact that 10 percent of BBH's admissions are WAP patients while Covenant has no such patients does not change this result. BBH's financial department also is responsible for submitting reports to the Department of Elder Affairs (DEA). Therefore, BBH has filed reports with DEA consistent with its Medicare reports and has not included the WAP patients.
Recommendation Based on the foregoing Findings of Facts and Conclusions of Law, it is RECOMMENDED: That AHCA enter a final order determining the fixed need pool for SA 2B for the January 2003 planning horizon to be one. DONE AND ENTERED this 7th day of November, 2002, in Tallahassee, Leon County, Florida. SUZANNE F. HOOD 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 7th day of November, 2002. COPIES FURNISHED: J. Robert Griffin, Esquire J. Robert Griffin, P.A. 2559 Shiloh Way Tallahassee, Florida 32308 Michael O. Mathis, Esquire Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building Three, Suite 3431 Tallahassee, Florida 32308-5403 W. David Watkins, Esquire R. L. Caleen, Jr., Esquire Watkins & Caleen, P.A. 1725 Mahan Drive, Suite 201 Post Office Box 15828 Tallahassee, Florida 32317-5828 Lealand McCharen, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 Valda Clark Christian, General Counsel Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building, Suite 3431 Tallahassee, Florida 32308
The Issue The issues in this case are whether the Agency for Health Care Administration (AHCA) should grant Hospice Integrated’s Certificate of Need (CON) Application No. 8406 to establish a hospice program in AHCA Service Area 7B, CON Application No. 9407 filed by Wuesthoff, both applications, or neither application.
Findings Of Fact Hospice Hospice is a special way of caring for patients who are facing a terminal illness, generally with a prognosis of less than six months. Hospice provides a range of services available to the terminally ill and their families that includes physical, emotional, and spiritual support. Hospice is unique in that it serves both the patient and family as a unit of care, with care available 24 hours a day, seven days a week, for persons who are dying. Hospice provides palliative rather than curative or life- prolonging care. To be eligible for hospice care, a patient must have a prognosis of less than six months to live. When Medicare first recognized hospice care in 1983, more than 90% of hospice cases were oncology patients. At that time, there was more information available to establish a prognosis of six months or less for these patients. Since that time, the National Hospice Organization (“NHO”) has established medical guidelines which determine the prognosis for many non-cancer diseases. This tool may now be used by physicians and hospice staff to better predict which non- cancer patients are eligible for hospice care. There is no substitute for hospice. Nothing else does all that hospice does for the terminally ill patient and the patient’s family. Nothing else can be reimbursed by Medicare or Medicaid for all hospice services. However, hospice must be chosen by the patient, the patient’s family and the patient’s physician. Hospice is not chosen for all hospice-eligible patients. Palliative care may be rejected, at least for a time, in favor of aggressive curative treatment. Even when palliative care is accepted, hospice may be rejected in favor of home health agency or nursing home care, both of which do and get reimbursed for some but not all of what hospice does. Sometimes the choice of a home health agency or nursing home care represents the patient’s choice to continue with the same caregivers instead of switching to a new set of caregivers through a hospice program unrelated to the patient’s current caregivers. There also is evidence that sometimes the patient’s nursing home or home health agency caregivers are reluctant, unfortunately sometimes for financial reasons, to facilitate the initiation of hospice services provided by a program unrelated to the patient’s current caregivers. Existing Hospice in Service Area 7B There are two existing hospice providers in Service Area 7B, which covers Orange County and Osceola County: Vitas Healthcare Corporation of Central Florida (Vitas); and Hospice of the Comforter (Comforter). Vitas Vitas began providing services in Service Area 7B when it acquired substantially all of the assets of Hospice of Central Florida (HCF). HCF was founded in 1976 as a not-for-profit organization and became Medicare-certified in 1983. It remained not-for-profit until the acquisition by Vitas. In a prior batching cycle, HCF submitted an application for a CON for an additional hospice program in Service Area 7B under the name Tricare. While HCF also had other reasons for filing, the Tricare application recognized the desirability, if not need, to package hospice care for and make it more palatable and accessible to AIDS patients, the homeless and prisoners with AIDS. HCF later withdrew the Tricare application, but it continued to see the need to better address the needs of AIDS patients in Service Area 7B. In 1994, HCF began looking for a “partner” to help position it for future success. The process led to Vitas. Vitas is the largest provider of hospice in the United States. Nationwide, it serves approximately 4500 patients a day in 28 different locations. Vitas is a for-profit corporation. Under a statute grandfathering for-profit hospices in existence on or before July 1, 1978, Vitas is the only for-profit corporation authorized to provide hospice care in Florida. See Section 400.602(5), Fla. Stat. (1995). HCF evaluated Vitas for compatibility with HCF’s mission to provide quality hospice services to medically appropriate patients regardless of payor status, age, gender, national origin, religious affiliation, diagnosis or sexual orientation. Acquisition by Vitas also would benefit the community in ways desired by HCF. Acquisition by Vitas did not result in changes in policy or procedure that limit or delay access to hospice care. Vitas was able to implement staffing adjustments already contemplated by HCF to promote efficiencies while maintaining quality. Both HCF and Vitas have consistently received 97% satisfaction ratings from patients’ families, and 97% good-to- excellent ratings from physicians. Initially, Vitas’ volunteer relations were worse than the excellent volunteer relations that prevailed at HCF. Many volunteers were disappointed that Vitas was a for-profit organization, protested the proposed Vitas acquisition, and quit after the acquisition. Most of those who quit were not involved in direct patient care, and some have returned after seeing how Vitas operates. Vitas had approximately 1183 hospice admissions in Service Area 7B in 1994, and 1392 in 1995. Total admissions in Service Areas 7B and 7C (Seminole County) for 1995 were 1788. Comforter Hospice of the Comforter began providing hospice care in 1990. Comforter is not-for-profit. Like Vitas, it admits patients regardless of payor status. Comforter admitted approximately 100 patients from Service Area 7B in 1994, and 164 in 1995. Total admissions in Service Areas 7B and 7C for 1995 were 241. For 1996, Comforter was expected to approach 300 total admissions (in 7B and 7C), and total admissions may reach 350 admissions in the next year or two. As Comforter has grown, it has developed the ability to provide a broader spectrum of services and has improved programs. Comforter provides outreach and community education as actively as possible for a smaller hospice. Comforter does not have the financial strength of Vitas. It maintains only about a two-month fiscal reserve. Fixed Need Pool On February 2, 1996, AHCA published a fixed need pool (FNP) for hospice programs in the July 1997 planning horizon. Using the need methodology for hospice programs in Florida found in F.A.C. Rule 59C-1.0355 (“the FNP rule”), the AHCA determined that there was a net need for one additional hospice program in Service Area 7B. As a result of the dismissal of Vitas’ FNP challenge, there is no dispute as to the validity of the FNP determination. Other Need Considerations Despite the AHCA fixed need determination, Vitas continues to maintain that there is no need for an additional hospice program in Service Area 7B and that the addition of a hospice program would adversely impact the existing providers. Essentially, the FNP rule compares the projected need for hospice services in a district using district use rates with the projected need using statewide utilization rates. Using this rule method, it is expected that there will be a service “gap” of 470 hospice admissions for the applicable planning horizon (July, 1997, through June, 1988). That is, 470 more hospice admissions would be expected in Service Area 7B for the planning horizon using statewide utilization rates. The rule fixes the need for an additional hospice program when the service “gap” is 350 or above. It is not clear why 350 was chosen as the “gap” at which the need for a new hospice program would be fixed. The number was negotiated among AHCA and existing providers. However, the evidence was that 350 is more than enough admissions to allow a hospice program to benefit from the efficiencies of economy of scale enough to finance the provision for enhanced hospice services. These benefits begin to accrue at approximately 200 admissions. Due to population growth and the aging of the population in Service Area 7B, this “gap” is increasing; it already had grown to 624 when the FNP was applied to the next succeeding batching cycle. Vitas’ argument ignores the conservative nature of several aspects of the FNP rule. It uses a static death rate, whereas death rates in Service Area 7B actually are increasing. It also uses a static age mix, whereas the population actually is aging in Florida, especially in the 75+ age category. It does not take into account expected increases in the use of hospice as a result of an environment of increasing managed health care. It uses statewide conversion rates (percentage of dying patients who access hospice care), whereas conversion rates are higher in nearby Service Area 7A. Finally, the statewide conversions rates used in the rule are static, whereas conversion rates actually are increasing statewide. Vitas’ argument also glosses over the applicants’ evidence that the addition of a hospice program, by its mere presence, will increase awareness of the hospice option in 7B (regardless whether the new entrant improves upon the marketing efforts of the existing providers), and that increased awareness will result in higher conversion rates. It is not clear why utilization in Service Area 7B is below statewide utilization. Vitas argued that it shows the opposite of what the rule says it shows—i.e., that there is no need for another hospice program since the existing providers are servicing all patients who are choosing hospice in 7B. Besides being a thinly-veiled (and, in this proceeding, illegal) challenge to the validity of the FNP rule, Vitas’ argument serves to demonstrate the reality that, due to the nature of hospice, existing providers usually will be able to expand their programs as patients increasingly seek hospice so that, if consideration of the ability of existing providers to fill growing need for hospice could be used to overcome the determination of a FNP under the FNP rule, there may never be “need” for an additional program. Opting against such an anti-competitive rule, the Legislature has required and AHCA has crafted a rule that allows for the controlled addition of new entrants into the competitive arena. Vitas’ argument was based in part on the provision of “hospice-like” services by VNA Respite Care, Inc. (VNA), through its home health agency. Vitas argued that Service Area 7B patients who are eligible for hospice are choosing VNA’s Hope and Recovery Program. VNA’s program does not offer a choice from, or alternative to, hospice. Home health agencies do not provide the same services as hospice programs. Hospice care can be offered as the patient’s needs surface. A home health agency must bill on a cost per visit basis. If they exceed a projected number of visits, they must explain that deviation to Medicare. A home health agency, such as VNA, offers no grief or bereavement services to the family of a patient. In addition to direct care of the patient, hospice benefits are meant to extend to the care of the family. Hospice is specifically reimbursed for offering this important care. Hospice also receives reimbursement to provide medications relevant to terminal illnesses and durable medical equipment needed. Home health agencies do not get paid for, and therefore do not offer, these services. It is possible that VNA’s Hope and Recovery Program may be operating as a hospice program without a license. The marketing materials used by VNA inaccurately compare and contrast the medical benefits available for home health agencies to those available under a hospice program. The marketing material of VNA also inappropriately identify which patients are appropriate for hospice care. VNA’s Hope and Recovery Program may help explain lower hospice utilization in Service Area 7B. Indeed, the provision of hospice-like services by a non-hospice licensed provider can indicate an unmet need in Service Area 7B. The rule does not calculate an inventory of non-hospice care offered by non-hospice care providers. Instead, the rule only examines actual hospice care delivered by hospice programs. The fact that patients who would benefit from hospice services are instead receiving home health agency services may demonstrate that existing hospice providers are inadequately educating the public of the advantages of hospice care. Rather than detract from the fixed need pool, VNA’s provision of “hospice-like” services without a hospice license may be an indication that a new hospice provider is needed in Service Area 7B. Although a home-health agency cannot function as a hospice provider, the two can work in conjunction. They may serve as a referral base for one another. This works most effectively when both programs are operated by the same owner who understands the very different services each offers and who has no disincentive to refer a patient once their prognosis is appropriate for hospice. The Hospice Integrated Application Integrated Health Services, Inc. (IHS), was founded in the mid-1980’s to establish an alternative to expensive hospital care. Since that time it has grown to offer more than 200 long term care facilities throughout the country including home health agencies, rehabilitative agencies, pharmacy companies, durable medical equipment companies, respiratory therapy companies and skilled nursing facilities. To complete its continuum of care, IHS began to add hospice to offer appropriate care to patients who no longer have the ability to recover. IHS is committed to offering hospice care in all markets where it already has an established long-term care network. IHS entered the hospice arena by acquiring Samaritan Care, an established program in Illinois, in late 1994. Within a few months, IHS acquired an additional hospice program in Michigan. Each of these hospice programs had a census in the thirties at the time of the final hearing. In May of 1996, IHS acquired Hospice of the Great Lakes. Located in Chicago, this hospice program has a census range from 150 to 180. In combination, IHS served approximately 350 hospice patients in 1995. In Service Area 7B, IHS has three long-term care facilities: Central Park Village; IHS of Winter Park; and IHS of Central Park at Orlando. Together, they have 443 skilled nursing beds. One of these—Central Park Village—has established an HIV spectrum program, one of the only comprehensive HIV care programs in Florida. When the state determined that there was a need for an additional hospice program in Service Area 7B, IHS decided to seek to add hospice care to the nursing home and home health companies it already had in the area. Since Florida Statutes require all new hospice programs in Florida to be established by not-for-profit corporations (with Vitas being the only exception), IHS formed Hospice Integrated Health Services of District VII-B (Hospice Integrated), a not- for-profit corporation, to apply for a hospice certificate of need. IHS would be the management company for the hospice program and charge a 4% management fee to Hospice Integrated, although the industry standard is 6%-7%. Although a for-profit corporation, IHS plans for the 4% fee to just cover the costs of the providing management services. IHS believes that the benefits to its health care delivery system in Service Area 7B will justify not making a profit on the hospice operation. However, the management agreement will be reevaluated and possibly adjusted if costs exceed the management fee. In return for this management fee, IHS would offer Hospice Integrated its policy and procedure manuals, its programs for bereavement, volunteer programs, marketing tools, community and educational tools and record keeping. IHS would also provide accounting, billing, and human resource services. Perhaps the most crucial part of the management fee is the offer of the services of Regional Administrator, Marsha Norman. She oversees IHS’ programs in Illinois and Missouri. Ms. Norman took the hospice program at Hospice of the Great Lakes from a census of 40 to 140. This growth occurred in competition with 70 other hospices in the same marketplace. While at Hospice of the North Shore, Ms. Norman improved census from 12 to 65 in only eight months. Ms. Norman helped the Lincolnwood hospice program grow from start up to a census of 150. Ms. Norman has indicated her willingness and availability to serve in Florida if Hospice Integrated’s proposal is approved. IHS and Ms. Norman are experienced in establishing interdisciplinary teams, quality assurance programs, and on-going education necessary to provide state of the art hospice care. Ms. Norman also has experience establishing specialized programs such as drumming therapy, music therapy for Alzheimer patients and children’s bereavement groups. Ms. Norman has worked in pediatric care and understands the special needs of these patients. Ms. Norman’s previous experience also includes Alzheimer’s care research conducted in conjunction with the University of Chicago regarding the proper time to place an Alzheimer patient in hospice care. Through its skilled nursing facilities in Service Area 7B, IHS has an existing working relationship with a core group of physicians who are expected to refer patients to the proposed Hospice Integrated hospice. Although its skilled nursing homes account for only six percent of the total beds in Service Area 7B, marketing and community outreach efforts are planned to expand the existing referral sources if the application is approved. IHS’ hospices are members of the NHO. They are not accredited by the Joint Commission on the Accreditation of Health Care Organizations (JCAHO). Hospice Integrated would serve pediatric patients. However, IHS’ experience in this area is limited to a pilot program to offer pediatric hospice care in the Dallas/Ft. Worth area, and there is little reason to believe that Hospice Integrated would place a great deal of emphasis on this aspect of hospice care. The Hospice Integrated application proposes to provide required grief support but does not include any details for the provision of grief support groups, resocialization groups, grief support volunteers, or community grief support or education activities. In its application, Hospice Integrated has committed to five percent of its care for HIV patients, 40% for non-cancer patients, ten percent for Medicaid patients, and five percent indigent admissions. These commitments also are reflected in Hospice Integrated’s utilization projections. At the same time, it is only fair to note that IHS does not provide any charity care at any of its Service Area 7B nursing home facilities. The Hospice Integrated application includes provision for all four levels of hospice care—home care (the most common), continuous care, respite care and general inpatient. The latter would be provided in one of the IHS skilled nursing home facilities when possible. It would be necessary to contract with an inpatient facility for acute care inpatient services. The federal government requires that five percent of hospice care in a program be offered by volunteers. With a projected year one census of 30, Hospice Integrated would only require 3-4 volunteers to meet federal requirements, and its year one pro forma reflects this level of use of volunteers. However, Hospice Integrated hopes to exceed federally mandated minimum numbers of volunteers. The IHS hospice programs employ volunteers from all aspects of the community, including family of deceased former hospice patients. Contrary to possible implications in the wording of materials included in the Hospice Integrated application, IHS does not approach the latter potential volunteers until after their bereavement has ended. The Wuesthoff Application Wuesthoff Health Services, Inc. (Wuesthoff) is a not- for profit corporation whose sole corporate member is Wuesthoff Health Systems, Inc. (Wuesthoff Systems). Wuesthoff Systems also is the sole corporate member of Wuesthoff’s two sister corporations, Wuesthoff Memorial Hospital, Inc. (Wuesthoff Hospital) and Wuesthoff Health Systems Foundation, Inc. (Wuesthoff Foundation). Wuesthoff Hospital operates a 303-bed acute care hospital in Brevard County. Brevard County comprises AHCA Service Area 7A, and it is adjacent and to the east of Service Area 7B. Wuesthoff Hospital provides a full range of health care services including open heart surgical services, a Level II neonatal intensive care unit and two Medicare-certified home health agencies, one located in Brevard and the other in Indian River County, the county immediate to the south of Brevard. Wuesthoff Foundation serves as the fundraising entity for Wuesthoff Systems and its components. Wuesthoff currently operates a 114-bed skilled nursing facility which includes both long-term and short-term sub-acute beds, as well as a home medical equipment service. Wuesthoff also operates a hospice program, Brevard Hospice, which has served Brevard County residents since 1984. Over the years, it has grown to serve over 500 patients during 1995. Essentially, Wuesthoff’s application reflects an intention to duplicate its Brevard Hospice operation in Service Area 7B. It would utilize the expertise of seven Brevard Hospice personnel currently involved in the day-to-day provision of hospice services, including its Executive Director, Cynthia Harris Panning, to help establish its proposed new hospice in 7B. Wuesthoff has been a member of the NHO since the inception of its hospice program. It also had its Brevard Hospice accredited by JCAHO in 1987, in 1990 and in March, 1996. As a not-for-profit hospice, Wuesthoff has a tradition of engaging in non-compensated hospice services that benefit the Brevard community. Wuesthoff’s In-Touch Program provides uncompensated emotional support through telephone and in-person contacts for patients with a life-threatening illness who, for whatever reason, are not ready for hospice. (Of course, Wuesthoff is prepared to receive compensation for these patients when and if they choose hospice.) Wuesthoff’s Supportive Care program provides uncompensated nursing and psychosocial services by hospice personnel for patients with life-threatening illnesses with life expectancies of between six months and two years. (These services are rendered in conjunction with home health care, which may be compensated, and Wuesthoff is prepared to receive compensation for the provision of hospice services for these patients when they become eligible for and choose hospice.) Wuesthoff’s Companion Aid benefits hospice patients who lack a primary caregiver and are indigent, Medicaid-eligible or unable to pay privately for additional help in the home. If approved in Service Area 7B, Wuesthoff would hope to duplicate these kinds of outreach programs. For the Supportive Care program, that would require its new hospice program to enter into agreements with home health agencies operating in Service Area 7B. While more difficult an undertaking than the current all-Wuesthoff Supportive Care program, Wuesthoff probably will be able to persuade at least some Service Area 7B home health agencies to cooperate, since there would be benefits to them, too. Wuesthoff proposes to use 38 volunteers during its first year in operation. As a not-for-profit organization, Wuesthoff has had good success recruiting, training, using and retaining volunteers in Brevard County. Its experience and status as a not-for-profit organization will help it meet its goals in Service Area 7B; however, it probably will be more difficult to establish a volunteer base in Service Area 7B than in its home county of Brevard. Wuesthoff’s proposed affiliation with Florida Hospital will improve its chances of success in this area. Key to the overall success of Wuesthoff’s proposed hospice is its vision of an affiliation with Florida Hospital. With no existing presence in Service Area 7B, Wuesthoff has no existing relationship with community physicians and no existing inpatient facilities. Wuesthoff plans to fill these voids through a proposed affiliation with Florida Hospital. In existence and growing for decades, Florida Hospital now is a fully integrated health care system with multiple inpatient sites, including more than 1,450 hospital beds, in Service Area 7B. It provides a full range of pre-acute care through post-acute care services, including primary through tertiary services. Approximately 1,200 physicians are affiliated with Florida Hospital, which has a significant physician-hospital organization. Wuesthoff is relying on these physicians to refer patients to its proposed hospice. Florida Hospital and Wuesthoff have signed a letter of intent. The letter of intent only agreed to a forum for discussions; there was no definite agreement concerning admissions, and Florida Hospital has not committed to sending any particular number of hospice patients to Wuesthoff. However, there is no reason to think that Wuesthoff could not achieve a viable affiliation with Florida Hospital. Wuesthoff has recent experience successfully cooperating with other health care providers. It has entered into cooperative arrangements with Jess Parrish Hospital in Brevard County, with Sebastian River Medical Center in Indian River County, and with St. Joseph’s Hospital in Hillsborough County. Wuesthoff’s existing hospice provides support to children who are patients of its hospice, whose parents are in hospice or whose relatives are in hospice, as well as to other children in the community who are in need of bereavement support services. Wuesthoff employs a full-time experienced children’s specialist. Wuesthoff also provides crisis response services for Brevard County Schools System when there is a death at a school or if a student dies or if there is a death that affects the school community. Camp Hope is a bereavement camp for children which is operated by Wuesthoff annually for approximately 50 Brevard children who have been affected by death. Wuesthoff operates extensive grief support programs as part of its Brevard Hospice. At a minimum, Wuesthoff provides 13 months of grief support services following the death of a patient, and more as needed. It employs an experienced, full- time grief support coordinator to oversee two grief support specialists (each having Masters degree level training), as well as 40 grief support volunteers, who function in Wuesthoff’s many grief support groups. These include: Safe Place, an open grief support group which meets four times a month and usually is the first group attended by a grieving person; Pathways, a closed six-week grief workshop offered twice a year primarily for grieving persons three to four months following a death; Bridges, a group for widows under age 50, which is like Pathways but also includes sessions on helping grieving children and on resocialization; Just Us Guys and Gals, which concentrates on resocialization and is attended by 40 to 80 people a month; Family Night Out, an informal social opportunity for families with children aged six to twelve; Growing Through Grief, a closed six-week children’s grief group offered to the Brevard County School System. Wuesthoff also publishes a newsletter for families of deceased hospice patients for a minimum of 13 months following the death. Wuesthoff also participates in extensive speaking engagements and provides seminars on grief issues featuring nationally renowned speakers. Wuesthoff intends to use the expertise developed in its Brevard Hospice grief support program to establish a similar program in Service Area 7B. The Brevard Hospice coordinator will assist in implementing the Service Area 7B programs. In its utilization projections, Wuesthoff committed to seven percent of hospice patient days provided to indigent/charity patients and seven percent to Medicaid patients. Wuesthoff also committed to provide hospice services to AIDS patients, pediatric patients, patients in long-term care facilities and patients without a primary caregiver; however, no specific percentage committments were made. In its pro formas, Wuesthoff projects four percent hospice services to HIV/AIDS patients and approximately 40% to non-cancer patients. The narrative portions of its application, together with the testimony of its chief executive officer, confirm Wuesthoff’s willingness to condition its CON on those percentages. In recent years, the provision of Medicaid at Brevard Hospice has declined. However, during the same years, charity care provided by Brevard Hospice has increased. In the hospice arena, Medicaid hospice is essentially fully reimbursed. Likewise, the provision of hospice services to AIDS/HIV patients by Brevard Hospice has declined in recent years—from 4.9% in 1993 to 1.4% in 1995. However, this decline was influenced by the migration of many AIDS patients to another county, where a significant number of infectious disease physicians are located, and by the opening of Kashy Ranch, another not-for-profit organization that provides housing and services especially for HIV clients. Financial Feasibility Both applications are financially feasible in the immediate and long term. Immediate Financial Feasibility Free-standing hospice proposals like those of Hospice Integrated and Wuesthoff, which intend to contract for needed inpatient care, require relatively small amounts of capital, and both applications are financially feasible in the immediate term. Hospice Integrated is backed by a $100,000 donation and a commitment from IHS to donate the additional $300,000 needed to open the new hospice. IHS has hundreds of millions of dollars in lines of credit available meet this commitment. Wuesthoff questioned the short-term financial feasibility of the Hospice Integrated proposal in light of recent acquisitions of troubled organizations by IHS. It recently acquired an organization known as Coram at a cost of $655 million. Coram recently incurred heavy losses and was involved in litigation in which $1.5 billion was sought. IHS also recently acquired a home health care organization known as First American, whose founder is currently in prison for the conduct of affairs at First American. But none of these factors seriously jeopardize the short-term financial feasibility of the Hospice Integrated proposal. Wuesthoff also noted that the IHS commitment letter is conditioned on several “approvals” and that there is no written commitment from IHS to enter into a management contract with Hospice Integrated at a four percent fee. But these omissions do not seriously undermine the short-term financial feasibility of the Hospice Integrated proposal. Hospice Integrated, for its part, and AHCA question the short-term financial feasibility of the Wuesthoff proposal, essentially because the application does not include a commitment letter from with Wuesthoff Systems or Wuesthoff Hospital to fund the project costs. The omission of a commitment letter is comparable to the similar omissions from the Hospice Integrated application. It does not undermine the short-term financial feasibility of the proposal. Notwithstanding the absence of a commitment letter, the evidence is clear that the financial strength of Wuesthoff Systems and Wuesthoff Hospital support Wuesthoff’s hospice proposal. This financial strength includes the $38 to $40 million in cash and marketable securities reflected in the September 30, 1995, financial statements of Wuesthoff Systems, in addition to the resources of Wuesthoff Hospital. Hospice Integrated also questions the ability of Wuesthoff Systems to fund the hospice proposal in addition to other planned capital projects. The Wuesthoff application indicates an intention to fund $1.6 million of the needed capital from operations and states that $1.4 million of needed capital in “assured but not in hand.” But some of the projects listed have not and will not go forward. In addition, it is clear from the evidence that Wuesthoff Systems and Wuesthoff Hospital have enough cash on hand to fund all of the capital projects that will go forward, including the $290,000 needed to start up its hospice proposal. Long-Term Financial Feasibility Wuesthoff’s utilization projections are more aggressive than Hospice Integrated’s. Wuesthoff projects 186 admissions in year one and 380 in year two; Hospice Integrated projects 124 admissions in year one and 250 in year two. But both projections are reasonably achievable. Projected patient days, revenue and expenses also are reasonable for both proposals. Both applicants project an excess of revenues over expenses in year two of operation. Vitas criticized Hospice Integrated’s nursing salary expenses, durable medical equipment, continuous and inpatient care expenses, and other patient care expenses as being too low. But Vitas’ criticism was based on misapprehension of the facts. The testimony of Vitas’ expert that nursing salaries were too low was based on the misapprehension that Hospice Integrated’s nursing staffing reflected in the expenses for year two of operation was intended to care for the patient census projected at year end. Instead, it actually reflected the expenses of average staffing for the average patient census for the second year of operation. Vitas’ expert contended that Hospice Integrated’s projected expenses for durable medical equipment for year two of operation were understated by $27,975. But there is approximately enough overallocated in the line items “medical supplies” and “pharmacy” to cover the needs for durable medical equipment. Vitas’ expert contended that Hospice Integrated’s projected expenses for continuous and inpatient care were understated by $23,298. This criticism made the erroneous assumption that Hospice Integrated derived these expenses by taking 75% of its projected gross revenues from continuous and inpatient care. In fact, Hospice Integrated appropriately used 75% of projected collections (after deducting contractual allowances). In addition, as far as inpatient care is concerned, Hospice Integrated has contracts with the IHS nursing homes in Service Area 7B to provide inpatient care for Hospice Integrated’s patients at a cost below that reflected in Hospice Integrated’s Schedule 8A. Vitas’ expert contended that Hospice Integrated’s projected expenses for “other patient care” were understated by $19,250. This criticism assumed that fully half of Hospice Integrated’s patients would reside in nursing homes that would have to be paid room and board by the hospice out of federal reimbursement “passed through” the hospice program. However, most hospices have far fewer than half of their patients residing in nursing homes (only 17% of Comforter’s are nursing home residents), and Hospice Integrated made no such assumption in preparing its Schedule 8A projections. In addition, Hospice Integrated’s projections assumed that five percent of applicants for Medicaid pass-through reimbursement would be rejected and that two percent of total revenue would be lost to bad debt write-offs. Notwithstanding Vitas’ attempts to criticize individual line items of Hospice Integrated’s Schedule 8A projections, Hospice Integrated’s total average costs per patient day were approximately the same as Wuesthoff’s--$19 per patient day. Vitas did not criticize Wuesthoff’s projections. On the revenue side, Hospice Integrated’s projections were conservative in several respects. Projected patients days (6,800 in year one, and 16,368 in year two) were well within service volumes already achieved in hospices IHS recently has started in other states (which themselves exceeded their projections). Medicaid and Medicare reimbursement rates used in Hospice Integrated’s projections were low. Hospice Integrated projects that 85% of its patients will be Medicare patients and that ten percent will be Medicaid. Using more realistic and reasonable reimbursement for these patients would add up to an additional $74,000 to projected excess of revenue over expenses in year two. Wuesthoff also raised its own additional questions regarding the long-term financial feasibility of the Hospice Integrated proposal. Mostly, Wuesthoff questioned the inexperience of the Hospice Integrated entity, as well as IHS’ short track record. It is true that the hospices started by IHS were in operation for only 12-14 months at the time of the final hearing and that, on a consolidated basis, IHS’ hospices lost money in 1995. But financial problems in one hospice inherited when IHS acquired it skewed the aggregate performance of the hospices in 1995. Two of them did have revenues in excess of expenses for the year. In addition, Hospice of the Great Lakes, which was not acquired until 1996, also is making money. On the whole, IHS’ experience in the hospice arena does not undermine the financial feasibility of the Hospice Integrated application. Wuesthoff also questioned Hospice Integrated’s assumption that the average length of stay (ALOS) of its hospice patients will increase from 55 to 65 days from year one to year two of operation. Wuesthoff contended that this assumption is counter to the recent trend of decreasing ALOS’s, and that assuming a flat ALOS would decrease projected revenues by $262,000. But increasing ALOS from year one to year two is consistent with IHS’ recent experience starting up new hospices. In part, it is reasonably explained by the way in which patient census “ramps up” in the start up phase of a new hospice. As a program starts up, often more than average numbers of patients are admitted near the end of the disease process and die before the ALOS; also, as patient census continues to ramp up, often more than average numbers of patients who still are in the program at the end of year one will have been admitted close to the end of the year and will have been in the program for less than the ALOS. Finally, while pointing to possible revenue shortfalls of $262,000, Wuesthoff overlooked the corresponding expense reductions that would result from lower average daily patient census. It is found that both proposals also are financially feasible in the long term. State and Local Plan Preferences Local Health Plan Preference Number One Preference shall be given to applicants which provide a comprehensive assessment of the impact of their proposed new service on existing hospice providers in the proposed service areas. Such assessment shall include but not be limited to: A projection of the number of Medicare/Medicaid patients to be drawn away from existing hospice providers versus the projected number of new patients in the service area. A projection of area hospice costs increases/decreases to occur due to the addition of another hospice provider. A projection of the ratio of administrative expenses to patient care expenses. Identification of sources, private donations, and fund-raising activities and their affect on current providers. Projection of the number of volunteers to be drawn away from the available pool for existing hospice providers. Both applicants provided an assessment of the impact of their proposed new service on existing hospice providers in the proposed service areas (although both applicants could have provided an assessment that better met the intent of the Local Health Plan Preference One.) There was no testimony that, and it is not clear from the evidence that, one assessment is markedly superior to the other. There also was no evidence as to how the assessments are supposed to be used to compare competing applicants. Both applicants essentially stated that they would not have an adverse impact on the existing providers. The basis for this assessment was that there is enough underserved need in Service Area 7B to support an additional hospice with no adverse impact on the existing providers. Vitas disputed the applicants’ assessment. Vitas presented evidence that it and Comforter have been unable, despite diligent marketing efforts, to achieve statewide average hospice use rates in Service Area 7B, especially for non-cancer and under 65 hospice eligible patients, that the existing hospices can meet the needs of the hospice-eligible patients who are choosing hospice, and that other health care alternatives are available to meet the needs of hospice-eligible patients who are not choosing hospice. Vitas also contended that the applicants will not be able to improve much on the marketing and community outreach efforts of the existing providers. In so doing, Vitas glossed over considerable evidence in the record that the addition of a hospice program, by its mere presence, will increase awareness of the hospice option in 7B regardless whether the new entrant improves upon the marketing efforts of the existing providers, and that increased awareness will result in higher conversion rates. Vitas’ counter-assessment also made several other invalid assumptions. First, it is clear from the application of the FNP rule that, regardless of the conversion rate in Service Area 7B, the size of the pool of potential hospice patients clearly is increasing. Second, it is clear that the FNP rule is inherently conservative, at least in some respects. See Finding 24, supra. The Vitas assessment also made the assumption that the existing providers are entitled to their current market share (87% for Vitas and 13% for Comforter) of anticipated increases in hospice use in Service Area 7B and that the impact of a new provider should be measured against this entitlement. But to the extent that anticipated increased hospice use in Service Area 7B accommodates the new entrant, there will be no impact on the current finances or operations of Vitas and Comforter. Finally, in attempting to quantify the alleged financial impact of an additional hospice program, Vitas failed to reduce variable expenses in proportion to the projected reduction in patient census. Since most hospice expenses are variable, this was an error that greatly increased the perceived financial impact on the existing providers. While approval of either hospice program probably will not cause an existing provider to suffer a significant adverse impact, it seems clear that the impact of Wuesthoff’s proposal would be greater than that of Hospice Integrated. Wuesthoff seeks essentially to duplicate its Brevard Hospice operation in Service Area 7B. Wuesthoff projects higher utilization (186 admissions in year one and 380 admissions in year two, as compared to the 124 and 250 projected by Hospice Integrated). In addition, Wuesthoff’s primary referral source for hospice patients—Florida Hospital—also is the primary referral source of Vitas, which gets 38% of its referrals from Florida Hospital. In contrast, while also marketing in competition with the existing providers, Hospice Integrated will rely primarily on the physicians in Orange and Osceola Counties with whom IHS already has working relationships through its home health agencies and skilled nursing facilities. Hospice Integrated’s conservative utilization projections (124 admissions in year one and 250 in year two) will not nearly approach the service gap identified by the rule (407 admissions). In total, Hospice Integrated only projected obtaining 6% of the total market share in year one and 12% in year two, leaving considerable room for continued growth of the existing providers in the district. The hospice industry has estimated that 10% of patients in long-term care facilities are appropriate for hospice care. IHS regularly uses an estimate of five percent. Common ownership of skilled nursing facilities and hospice programs allows better identification of persons with proper prognosis for hospice. These patients would not be drawn away from existing hospice providers. In addition to the difference in overall utilization projections between the applicants, there also is a difference in focus as to the kinds of patients targeted by the two applicants. The Hospice Integrated proposal focuses more on and made a greater commitment to non-cancer admissions. In addition, IHS has a good record of increasing hospice use by non-cancer patients. In contrast, Wuesthoff’s proposal focuses more on cancer admissions (projecting service to more cancer patients than represented by the underserved need for hospice for those patients, according to the FNP rule) and did not commit to a percentage of non-cancer use in its application. For these reasons, Wuesthoff’s proposal would be expected to have a greater impact and be more detrimental to existing providers than Hospice Integrated. Hospice Integrated also is uniquely positioned to increase hospice use by AIDS/HIV patients in Service Area 7B due to its HIV spectrum program at Central Park Village. It focused more on and made a greater commitment to this service in its application that Wuesthoff did it its application. To the extent that Hospice Integrated does a better job of increasing hospice use by AIDS/HIV patients, it is more likely to draw patients from currently underutilized segments of the pool of hospice-eligible patients in Service Area 7B and have less impact on existing providers than Wuesthoff. Vitas makes a better case that its pediatric hospice program will be impacted by the applicants, especially Wuesthoff. Vitas’ census of pediatric hospice patients ranges between seven and 14. A reduction in Vitas’ already small number of pediatric hospice patients could reduce the effectiveness of its pediatric team and impair its viability. Wuesthoff proposes to duplicate the Brevard Hospice pediatric program, creating a pediatric program with a specialized pediatric team and extensive pediatric programs, similar to Vitas’ program. On the other hand, Hospice Integrated proposes a pediatric program but not a specialized team, and it would not be expected to compete as vigorously as Wuesthoff for pediatric hospice patients. The evidence was not clear as to whether area hospice costs would increase or decrease as a result of the addition of either applicant in Service Area 7B. Vitas, in its case-in- chief, provided an analysis of projected impacts from the addition of either hospice provider. As already indicated, Vitas’ analysis incorporated certain invalid assumptions regarding the fixed/variable nature of hospice costs. However, Vitas’ analysis supported the view that Wuesthoff’s impact would be greater. Wuesthoff’s ratio of administrative expenses to patient care expenses (24% to 76% in year one, dropping to 22% to 78% in year two) is lower than Hospice Integrated’s (26% to 71%). Wuesthoff also appears more likely to compete more directly and more vigorously with the existing providers than Hospice Integrated for private donations, in fund-raising activities, and for volunteers. Local Health Plan Preference Number Two Preference shall be given to an applicant who will serve an area where hospice care is not available or where patients must wait more than 48 hours for admission, following physician approval, for a hospice program. Documentation shall include the number of patients who have been identified by providers of medical care and the reasons resulting in their delay of obtaining hospice care. There was no direct evidence of patients who were referred for hospice services but failed to receive them. Local Health Plan Preference Number Three Preference shall be given to an applicant who will serve in addition to the normal hospice population, an additional population not currently serviced by an existing hospice (i.e., pediatrics, AIDS patients, minorities, nursing home residents, and persons without primary caregivers.) State Health Plan Factor Four Preference shall be given to applicants which propose to serve specific populations with unmet needs, such as children. State Health Plan Preference Number Five Preference shall be given to an applicant who proposes a residential component to serve patients with no at- home support. When Medicare first recognized hospice care in 1983, more than 90% of hospice cases were oncology patients. Although use of hospice by non-cancer patients has increased to 40% statewide, it lags behind in Service Area 7B, at only 27%. Both applicants will serve non-cancer patients. But Hospice Integrated has made a formal commitment to 40% non-cancer patient days and has placed greater emphasis on expanding the provision of hospice services for non-cancer patients. The clinical background of employees of IHS and Hospice Integrated can effectively employ NHO guidelines to identify the needs of AIDS patients and other populations. In its other hospice programs, IHS has succeeded in achieving percentages of non-cancer hospice use of 60% and higher. Wuesthoff projects over 40% non-cancer patient days, and is willing to accept a CON condition of 40% non-cancer patient days, but it did not commit to a percentage in its application. In Service Area 7B, there are 1,200 people living with AIDS and 10,000 who are HIV positive. Both applicants would serve AIDS/HIV patients, but Hospice Integrated has demonstrated a greater commitment to this service. Not only does IHS have its HIV spectrum program at Central Park Village, it also has committed to five percent of its care for HIV patients. Wuesthoff has agreed to serve AIDS/HIV patients, projects that about four percent of its patient days will be provided to AIDS/HIV patients, and would be willing to condition its CON on the provision of four percent of its care to AIDS/HIV patients. But Wuesthoff did not commit to a percentage in its application. Both applicants will serve children, but Wuesthoff has demonstrated greater commitment and ability to provide these services. Ironically, Wuesthoff’s advantage in the area of pediatric hospice carries with it the disadvantage of causing a greater impact on Vitas than Hospice Integrated’s proposal. See Findings 101-102, supra. While neither applicant specifically addressed the provision of services to minorities, both made commitments to provide services for Medicaid patients and the indigent. Hospice Integrated’s commitment to Medicaid patients is higher (ten percent as compared to seven percent for Wuesthoff). But the commitment to Medicaid patients is less significant in the hospice arena because Medicaid essentially fully reimburses hospice care. Meanwhile, Wuesthoff committed seven percent to indigent/charity patients, as compared a five percent commitment to the indigent for Hospice Integrated. But there was some question as to whether Wuesthoff was including bad debt in the seven percent. Both applicants will provide care for patients without primary caregivers. Earlier in its short history of providing hospice, IHS required patients to have a primary caregiver. However, that policy has been changed, and IHS now accepts such patients. Wuesthoff has long provided care for patients without primary caregivers. Local Health Plan Preference Number Four Preference shall be given to an applicant who will commit to contracting for existing inpatient acute care beds rather than build a free-standing facility. State Health Plan Preference Number Six Preference shall be given to applicants proposing additional hospice beds in existing facilities rather than the construction of freestanding facilities. Neither applicant plans to build a free-standing facility for the provision of inpatient care. Both plan to contract for needed inpatient acute care beds, to the extent necessary. IHS’ common ownership of existing skilled nursing facilities in Service Area 7B allows Hospice Integrated access to subacute care at any time. However, not all physicians will be willing to admit all hospice patients to skilled nursing facilities for inpatient care, and Hospice Integrated also will have to contract with acute care facilities to cover those instances. Wuesthoff relies on its proposed affiliation with Florida Hospital for needed inpatient care for its proposed Service Area 7B hospice. State Health Plan Preference Number Two Preference shall be given to an applicant who provides assurances in its application that it will adhere to the standards and become a member of the National Hospice Organization or will seek accreditation by the JCAHO. Both applicants meet this preference. Wuesthoff’s Brevard Hospice has JCAHO as well as membership in the National Hospice Organization (NHO). IHS’s hospices are NHO members, and Hospice Integrated’s application states that it will become a member of the NHO. Wuesthoff’s JCAHO accreditation does not give it an advantage under this preference. Other Points of Comparison In addition to the facts directly pertinent to the State and Local Health Plan Preference, other points of comparison are worthy of consideration. General Hospice Experience Wuesthoff went to great lengths to make the case that its experience in the hospice field is superior to that of Hospice Integrated and IHS. Wuesthoff criticized the experience of its opponent as being short in length and allegedly long on failures. It is true that IHS was new to the field of hospice when it acquired its first hospice in December, 1994, and that it has had to deal with difficulties in venturing into a new field and starting up new programs. Immediately after IHS acquired Samaritan Care of Illinois, Martha Nickel assumed the role of Vice-President of Hospice Services for IHS. After several weeks in charge of the new acquisition, and pending the closing of the purchase of Samaritan Care of Michigan from the same owner set for later in 1995, Nickel uncovered billing improprieties not discovered during IHS’ due diligence investigations. As a result, IHS was required to reimburse the Health Care Financing Administration (HCFA) approximately $3.5 million, and the purchase price for Samaritan Care of Michigan was adjusted. After this rocky start, IHS’ hospice operation settled down. Hospice Integrated’s teams have completed five to seven start up operations and understand what it takes to enter a new market, increase community awareness, and achieve hospice market penetration. Personnel who would implement Hospice Integrated’s approved hospice program have significant experience establishing new hospice programs, having them licensed and receiving accreditation. Without question, IHS’ Marsha Norman has the ability to start up a new hospice program. In contrast, Wuesthoff has operated its hospice in Brevard County since 1984. It is true that Wuesthoff’s Brevard Hospice appears to have been highly successful and, compared to the IHS experience, relatively stable in recent years. But, at the same time, Wuesthoff personnel have not had recent experience starting up a new hospice operation in a new market. Policies and Procedures A related point of comparison is the status of the policies and procedures to be followed by the proposed hospices. Wuesthoff essentially proposes to duplicate its Brevard Hospice in Service Area 7B and simply proposes to use the same policies and procedures. In contrast, IHS still is developing its policies and procedures and is adapting them to new regulatory and market settings as it enters new markets. As a result, the policies and procedures included in the Hospice Integrated application serve as guidelines for the new hospice and more of them are subject to modification than Wuesthoff’s. Regulatory Compliance A related point of comparison is compliance with regulations. Wuesthoff contends that it will be better able to comply with Florida’s hospice regulations since it already operates a hospice in Florida. In some respects, IHS’ staffing projections were slightly out of compliance with NHO staffing guidelines. However, Ms. Norman persuasively gave her assurance that Hospice Integrated would be operated so as to meet all NHO guidelines. One of IHS’ hospice programs was found to have deficiencies in a recent Medicare certification survey, but those deficiencies were “paper documentation” problems that were quickly remedied, and the program timely received Medicare certification. In several respects, the policies and procedures included in Hospice Integrated’s application are out of compliance with Florida regulations and will have to be changed. For example, the provision in Hospice Integrated’s policies and procedures for coordination of patient/family care by a social worker will have to be changed since Florida requires a registered nurse to fill this role. Similarly, allowance in the policies and procedures for hiring a lay person in the job of pastoral care professional (said to be there to accommodate the use of shamans or medicine men for Native American patients) is counter to Florida’s requirement that the pastoral care professional hold a bachelor’s degree in pastoral care, counseling or psychology. Likewise, the job description of social worker in the policies and procedures falls below Florida’s standards by requiring only a bachelor’s degree (whereas Florida requires a master’s degree). Although IHS does not yet operate a hospice in Florida, it has three long-term care facilities and two home health agencies in Service Area 7B, as well as 25 other skilled nursing facilities and several other new home health care acquisitions in Florida. Nationwide, IHS has nursing homes in 41 different states, home health care in 31 different states, and approximately 120 different rehabilitation service sites. Through its experiences facing the difficulties of entering the hospice field through acquisitions, IHS well knows federal regulatory requirements and is quite capable of complying with them. IHS also has had experience with the hospice regulations of several other states. There is no reason to think that Hospice Integrated will not comply with all federal and state requirements. Wuesthoff now knows how to operate a hospice in compliance with federal and state regulatory requirements. But, while Wuesthoff’s intent was to simply duplicate its Brevard Hospice in Service Area 7B, that intention leads to the problem that its board of directors does not have the requisite number of residents of Service Area 7B. Measures will have to be taken to insure appropriate composition of its board of directors. 140. On balance, these items of non-compliance are relatively minor and relatively easily cured. There is no reason to think that either applicant will refuse or be unable to comply with regulatory requirements. Not-for-Profit Experience Wuesthoff clearly has more experience as a not-for- profit entity. This includes extensive experience in fund- raising and in activities which benefit the community. It also gives Wuesthoff an edge in the ability to recruit volunteers. See Findings 56-58, supra. Ironically, Wuesthoff’s advantages over Hospice Integrated in these areas probably would increase its impact on the existing providers. See Finding 105, supra. Presence and Linkages in Service Area 7B Presently, Wuesthoff has no presence in Service Area 7B. As one relatively minor but telling indication of this, Wuesthoff’s lack of familiarity with local salary levels caused it to underestimate its Schedule 8A projected salaries for its administrator, patient coordinator, nursing aides and office manager. IHS has an established presence in Service Area 7B. This gives Hospice Integrated an advantage over Wuesthoff. For example, its projected salary levels were accurate. Besides learning from experience, Wuesthoff proposes to counter Hospice Integrated’s advantage through its proposed affiliation with Florida Hospital. While IHS’ presence and linkages in Service Area 7B is not insignificant, it pales in comparison to Florida Hospital’s. To the extent that Wuesthoff can developed the proposed affiliation, Wuesthoff would be able to overcome its disadvantage in this area. Wuesthoff also enjoys a linkage with the Service Area 7B market through its affiliate membership in the Central Florida Health Care Coalition (CFHCC). The CFHCC includes large and small businesses, as well as Central Florida health care providers. Its goal is to promote the provision of quality health care services. Quality Hospice Services Both applicants deliver quality hospice services through their existing hospices and can be expected to do so in their proposed hospices. As an established and larger hospice than most of IHS’ hospices, Brevard Hospice can provide more enhanced services than most of IHS’. On the other hand, IHS has been impressive in its abilty to expand services to non-cancer patients, and it also is in a better position to provide services to AIDS/HIV patients, whereas Wuesthoff is better able to provide quality pediatric services. Wuesthoff attempted to distinguish itself in quality of services through its JCAHO accreditation. Although Hospice Integrated’s application states that it will get JCAHO accreditation, it actually does not intend to seek JCAHO accreditation until problems with the program are overcome and cured. Not a great deal of significance can be attached to JCAHO hospice accreditation. The JCAHO hospice accreditation program was suspended from 1990 until 1996 due to problems with the program. Standards were vague, and it was not clear that they complied with NHO requirements. Most hospices consider NHO membership to be more significant. None of IHS’s new hospices are even eligible for JCAHO accreditation because they have not been in existence long enough. Bereavement Programs Wuesthoff’s bereavement programs appear to be superior to IHS’. Cf. Findings 44, and 63-64, supra. To some extent, Wuesthoff’s apparent superiority in this area (as in some others) may be a function of the size of Brevard Hospice and the 14-year length of its existence. The provisions in the policies and procedures included in the Hospice Integrated application relating to bereavement are cursory and sparse. IHS relies on individual programs to develop their own bereavement policies and procedures. The provisions in the policies and procedures included in the Hospice Integrated application relating to bereavement include a statement that a visit with the patient’s family would be conducted “if desired by the family and as indicated by the needs of the family.” In fact, as Hospice Integrated concedes, such a visit should occur unless the family expresses a desire not to have one. Continuum of Care One of IHS’ purposes in forming Hospice Integrated to apply for a hospice CON is to improve the continuum of care it provides in Service Area 7B. The goal of providing a continuum of care is to enable case managers to learn a patient’s needs and refer them to the appropriate care and services as the patient’s needs change. While IHS already has an integrated delivery system in Service Area 7B, it lacks hospice. Adding hospice will promote the IHS continuum of care. Since it lacks any existing presence in Service Area 7B, granting the Wuesthoff application will not improve on an existing delivery system in the service area. I. Continuous and Respite Care Though small components of the total hospice program, continuous or respite hospice care should be offered by every quality provider of hospice and will be available in IHS’ program. Wuesthoff’s application failed to provide for continuous or respite hospice care. However, Wuesthoff clearly is capable of remedying this omission. Result of Comparison Both applicants have made worthy proposals for hospice in Service Area 7B. Each has advantages over the other. Balancing all of the statutory and rule criteria, and considering the State and Local Health Plan preferences, as well as the other pertinent points of comparison, it is found that the Hospice Integrated application is superior in this case. Primary advantages of the Hospice Integrated proposal include: IHS’ presence in Service Area 7B, especially its HIV spectrum program at Central Park Village; its recent experience and success in starting up new hospice programs; its success in expanding hospice to non-cancer patients elsewhere; Hospice Integrated’s greater commitment to extend services to the underserved non- cancer and AIDS/HIV segments of the hospice-eligible population; and IHS’ ability to complete its continuum of care in Service Area 7B through the addition of hospice. These and other advantages are enough to overcome Wuesthoff’s strengths. Ironically, some of Wuesthoff’s strengths, including its strong pediatric program and its ability (in part by virtue of its not- for-profit status) and intention generally to compete more vigorously with the existing providers on all fronts, do not serve it so well in this case, as they lead to greater impacts on the existing providers.
Recommendation Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the AHCA enter a final order approving CON application number 8406 so that Hospice Integrated may establish a hospice program in the AHCA Service Service Area 7B but denying CON application number 8407 filed by Wuesthoff. RECOMMENDED this 6th day of May, 1997, at Tallahassee, Florida. J. LAWRENCE JOHNSTON Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-1550 (904) 488-9675 SUNCOM 278-9675 Fax FILING (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 6th day of May, 1997. COPIES FURNISHED: J. Robert Griffin, Esquire 2559 Shiloh Way Tallahassee, Florida 32308 Thomas F. Panza, Esquire Seann M. Frazier, Esquire Panza, Maurer, Maynard & Neel, P.A. NationsBank Building, Third Floor 3600 North Federal Highway Fort Lauderdale, Florida 33308 David C. Ashburn, Esquire Gunster, Yoakley, Valdes-Fauli & Stewart, P.A. 215 South Monroe Street, Suite 830 Tallahassee, Florida 32301 Richard Patterson Senior Attorney Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403 Sam Power, Agency Clerk Agency for Health Care Administration Fort Knox Building 3, Suite 3431 2727 Mahan Drive Tallahassee, Florida 32308-5403 Jerome W. Hoffman General Counsel Agency for Health Care Administration 2727 Mahan Drive Tallahassee, Florida 32308-5403
The Issue The issue in the case is whether the Agency for Health Care Administration should approve the application of Hernando-Pasco Hospice, Inc., for Certificate of Need No. 9311 to provide hospice services in Hillsborough County, Florida.
Findings Of Fact Hospice services are intended to provide palliative care for persons who have "terminal" illnesses. The purpose of hospice care is to relieve pain and provide an appropriate quality of life for dying patients. Hospice services include physical, psychological, and spiritual services. Physician-directed medical care, nursing care, social services, and bereavement counseling are core hospice services. Hospice services are primarily funded by Medicare. Hospices can also provide community education outreach services related to terminal illness. Some hospice service providers participate in various research programs. There are various "models" for the provision of hospice services to terminally ill patients. Such models include "community" hospices, "comprehensive" hospices, and "corporate" hospices. The evidence fails to establish that any hospice model provides services more appropriately than does any other hospice model. Hospices have different means of providing similar services. For example, some hospices operate residential facilities to provide for patients without available primary caregivers while other hospices may provide caregiver services within the patient's residence or another location. The evidence fails to establish that the differing methods of service provision correlate to the quality of service provided, or that any method is inherently superior to another. HPH is the sole provider of hospice services in Hernando County (Service Area 3D) and is one of two hospice service providers in Pasco County (Service Area 5A). HPH serves approximately 500 patients on a daily basis with an average length of stay of about 50 days. HPH operates three residential facilities with a total of 23 beds, in addition to 35 beds in units located at nursing homes. HPH provides a range of core hospice services. HPH also provides services beyond core hospice services, including specialized HIV/AIDS outreach program, projects related to persons with chronic obstructive pulmonary disease and congestive heart failure, and children's programs. HPH provides home health services to clients. HPH also is involved with the organization of a model program for hospice services in Thailand. HPH operates a subsidiary providing pharmacy services and durable medical equipment to clients. Lifepath is the sole hospice service provider in Hillsborough County (Service Area 6A). Lifepath also provides hospice services in Polk, Highlands, and Hardee Counties (Service Area 6B) Lifepath serves approximately 1,200 Service Area 6A patients on a daily basis with an average length of stay of approximately 70 days. The longer length of stay by Lifepath patients indicates that on average, Lifepath patients access hospice services at an earlier point in the progression of terminal illness and receive services for more time than do HPH patients. Lifepath is in the process of establishing residential facilities. As with HPH, Lifepath provides a full range of hospice services and other programs. The evidence fails to establish that, as to services and programs commonly provided, either HPH or Lifepath is markedly superior to the other. Hillsborough County has a population in excess of one million residents and is the fourth largest county in Florida. It is the largest hospice Service Area in Florida served by a single licensed hospice. There are five Service Areas with populations in excess of Hillsborough County, all of which are served by more than one hospice. In 2000, there were 8,649 resident deaths and 9,582 recorded deaths in Hillsborough County. The difference between resident deaths and recorded deaths is largely the result of the fact that Tampa General Hospital and the Moffitt Cancer Center are located in Hillsborough County and draw patients from outside the county. A CON for hospice services may be awarded to an appropriate applicant when the fixed need calculation pursuant to Rule 59C-1.0355(4)(a), Florida Administrative Code, indicates that numeric need exists for another provider. The numeric need formula accounts for whether a licensed hospice is achieving an appropriate penetration rate. Penetration rates, both statewide and on a service area basis, are calculated by dividing the number of hospice admissions by the number of resident deaths. The formula is applied to relevant statistical data every six months to generate a report of "numeric need." The application of the numeric need calculation formula accounts for the population of a service area and historical and projected rates of death in a service area. The formula also accounts for gaps between the projected penetration rate and the actual penetration rate. A gap in excess of 350 admissions triggers an automatic determination of numeric need. In this case, the fixed need pool calculation for the applicable batching cycle is zero. There is no numeric need for an additional licensed hospice provider in Service Area 6A. The HPH CON application is based on HPH's assertion that "special circumstances" exist that outweigh the lack of numeric need and therefore the CON should be granted. The special circumstances identified by HPH are that Service Area 6A is the largest single hospice Service Area in the state, and that the location of large medical centers drawing terminally ill patients into the county results in a substantial gap between "resident" deaths (which are reflected in the numeric need calculation) and "recorded" deaths (which are not). HPH asserts that the "failure" of the numeric need formula to consider "recorded" deaths rather than "resident" deaths results in the Service Area 6A penetration rate indicating that a significantly higher level of service is being provided than is actually the case. HPH also asserts that, according to an application by Lifepath of inpatient hospice beds, Lifepath experienced a level of hospice admissions substantially in excess of the projected penetration rate for the time period, and that the increased admissions indicates that the numeric need methodology under- predicted the actual need for hospice services in Service Area 6A. Subsequent data indicates that the gap between projected and actual admissions in Service Area 6A has declined since the HPH application was filed. At the time of the hearing, the most recent data indicated that the penetration rate in Service Area 6A exceeds the state average. Since the HPH application was filed, Lifepath aggressively increased its penetration rate, either in response to the HPH application at issue in this proceeding (as HPH asserts) or accordingly to previously developed (but undisclosed) reorganization and marketing plans (as Lifepath suggests). The fact that just over one-third of terminally ill patients in Florida access hospice services suggests that other hospices could achieve similar increases in penetration rates. In any event, the evidence fails to establish that the increased Lifepath admissions indicate that the numeric need calculation failed to adequately predict the need for hospice services in the Service Area. In the CON application, HPH also asserts that the level of service provided by Lifepath, the sole hospice in Service Area 6A, is lower than it would be were Lifepath faced with a competitor. HPH asserts that under the circumstances, the lack of competition constitutes a "special circumstance" under which HPH should receive the CON. Section 408.043(2), Florida Statutes (1999), provides in part that the "formula on which the certificate of need is based shall discourage regional monopolies and promote competition." The formula referenced in Section 408.043(2), Florida Statutes, is the numeric need calculation set forth in Rule 59C- 1.0355(4)(a), Florida Administrative Code. HPH asserts that Lifepath is a "regional monopoly," that the rule has not functioned properly, and that its CON application should be approved to promote competition. The HPH position essentially constitutes an improper challenge to the Rule 59C-1.0355(4)(a), Florida Administrative Code, and is rejected. Evidence related to the "market power" allegedly exercised by Lifepath in order to block entry of a competing hospice was unpersuasive and is rejected. As previously stated, the general level of service provided by a hospice in a particular Service Area is measured, in part, by calculation of a "penetration rate." Penetration rates are calculated by dividing hospice admissions in a service area by resident deaths in a service area. Penetration rates are a component of the fixed need pool calculation performed by AHCA. AHCA calculates penetration rates to determine a statewide average and also calculates penetration rates for each service area. Lifepath's penetration rate during the period prior to the filing of the HPH application was somewhat less than the state average penetration rate and Lifepath's admissions declined by 66 patients from 1998 levels. The decline in penetration rate was not sufficient to result in numeric need for another hospice provider under the fixed need pool calculation and does not constitute a special circumstance supporting approval of the CON at issue in this case. By statute, in the absence of numeric need, an application for a hospice CON shall not be approved unless other criteria in Rule 59C-1.0355, Florida Administrative Code, and in Sections 408.035 and 408.043(2), Florida Statutes, outweigh the lack of numeric need. Rule 59C-1.0355(4)(d), Florida Administrative Code, provides as follows: Approval Under Special Circumstances. In the absence of numeric need identified in paragraph (4)(a), the applicant must demonstrate that circumstances exist to justify the approval of a new hospice. Evidence submitted by the applicant must document one or more of the following: That a specific terminally ill population is not being served. That a county or counties within the service area of a licensed hospice program are not being served. That there are persons referred to hospice programs who are not being admitted within 48 hours (excluding cases where a later admission date has been requested). The applicant shall indicate the number of such persons. Documentation that a specific terminally ill population is not being served The HPH application fails to document that a specific terminally ill population is not being served. The State Agency Action Report prepared by AHCA prior to the agency's proposed award of the CON to HPH acknowledges the lack of documentation contained within the application. At the hearing, HPH identified allegedly underserved populations. HPH asserts that elderly persons are underserved in Service Area 6A. The numeric need calculation specifically accounts for elderly patients with terminal cancer diagnoses and non-cancer illnesses. The evidence fails to support the assertion. Service Area 6A penetration rates for terminally ill elderly patients, both cancer and non-cancer, are within reasonable ranges to statewide averages. HPH asserts that children are underserved in Service Area 6A. The evidence fails to support the assertion. HPH cited Lifepath's closure of the "Beacon Center" children's bereavement program prior to the filing of the HPH application. There is no evidence that the closing of the center resulted in an underservice to children. The closing was based on a determination that services being provided were unfocused and not directly related to the mission of hospice. Lifepath decentralized their children's services, and the bereavement program was continued under the auspices of Lifepath's psychosocial services unit. Lifepath continues to provide children's services through a variety of programs. HPH asserts that nursing home residents are underserved in Service Area 6A. The evidence fails to support the assertion. Lifepath has contracts with every nursing home in the Service Area. Lifepath actively markets services to nursing homes and provides appropriate services to and admissions of nursing home residents. At the time of the 1999 HPH application, Lifepath nursing home admissions had declined. The decline was based on Lifepath's concern related to apparent Federal regulatory action related to hospice nursing home admissions in an adjacent service area by an unrelated hospice. Lifepath chose to limit admissions pending resolution of the Federal action. The evidence fails to establish that Lifepath's concern was unwarranted or that Lifepath's response to the situation was unreasonable. HPH asserts that AIDS patients are underserved in Service Area 6A. There is no evidence that Lifepath underserves AIDS patients. Lifepath works with AIDS patients and case managers from various service organizations, and provides an appropriate level of hospice services to them. While HPH provides AIDS services and education in a manner different from Lifepath, the evidence does not establish that HPH's AIDS-related services are superior to Lifepath or that the difference reflects a lack of service to AIDS patients in Service Area 6A. HPH asserts that terminally ill patients without primary caregivers are underserved in Service Area 6A. The evidence fails to support the assertion. Lifepath has a caregiver program that provides for funding staff to provide primary caregiver services where such is required. Such services are provided without charge to those patients who have no ability to pay for caregiver services. HPH asserts that the Lifepath's lack of residential facilities at the time the application was filed results in underservice to persons without primary caregivers. The lack of residential facilities does not inhibit service where, as is the case here, funding is available to provide residential care of persons without primary caregivers. Documentation that a county or counties within the service area of a licensed hospice program are not being served The HPH application fails to document that a county or counties are not being served. The evidence establishes that at the time of the HPH application for CON, Lifepath's penetration rate was below the statewide average but not sufficiently below the statewide average to trigger a determination of numeric need. Subsequent to the HPH application, Lifepath's penetration rate has increased and at the time of hearing exceeds the statewide average. Because a statewide average penetration rate is used in the numeric need formula, it is logical to expect that half of the service areas will report penetration rates below the state average. The fact that a service area penetration rate is less than the state average does not establish a special circumstance justifying award of a CON for new hospice service. There is no credible evidence that geographic barriers exist within Hillsborough County which result in a lack of availability of and access to hospice services in any part of the county. HPH proposes to initially serve the northern ten ZIP code areas of Hillsborough County. There is no evidence that terminally ill persons in the northern ten ZIP code areas of Hillsborough County suffer from a lack of availability or access to hospice services. The evidence fails to establish that hospice penetration rates for the northern ten ZIP code areas of Hillsborough County are different from penetration rates throughout the county. The evidence fails to establish that the northern ten ZIP code areas of Hillsborough County is demographically different than the county as a whole. HPH offered to open its initial office within the northern ten ZIP code areas of Hillsborough County. Although Lifepath does not have administrative offices located within the northern ten ZIP code areas of Hillsborough County, there is no credible evidence that the lack of administrative offices results in a lack of availability or access to hospice services. Lifepath provides hospice services at the residence of the patient and/or family. Hospice staff members are geographically assigned to provide direct patient care. Lifepath has staff members residing in northern ZIP code areas of Hillsborough County. Documentation that there are persons referred to hospice programs who are not being admitted within 48 hours (excluding cases where a later admission date has been requested), including identification of the number of such persons The HPH application does not suggest that there are persons referred for hospice services who are not being admitted with the required 48-hour period. Section 408.035, Florida Statutes, sets forth the criteria for review of a CON application. The following findings of fact are directed towards consideration of the review criteria that the parties have stipulated are applicable to this proceeding. The need for the health care facilities and health services being proposed in relation to the applicable district plan, except in emergency circumstances that pose a threat to the public health. Section 408.035(1)(a), Florida Statutes. The local health plan requires that an applicant must document an existing need and identify how the need is not being met. As set forth herein, the HPH application fails to establish that a need exists for the services being proposed. The availability, quality of care, efficiency, appropriateness, accessibility, extent of utilization, and adequacy of like and existing health care facilities and health services in the service district of the applicant. Section 408.035(1)(b), Florida Statutes. The evidence establishes that a full range of hospice services is currently available and accessible in Service Area 6A. Lifepath hospice care addresses the physical, spiritual and psychosocial needs of terminally ill persons. Services are available 24 hours a day seven days a week. Available services include various forms of palliative care including palliative chemotherapy and radiation treatment, intensive care, mechanical ventilation, nutritional services, pharmaceutical services, hydration, and dialysis. Bereavement services are available to families, survivors and caregivers during the terminal process and for up to one year after the death of a patient. Direct physician care is available wherever a patient resides. Outpatient physician care is available via an outpatient clinic which patients may utilize if they desire. Lifepath and the University of South Florida medical school participate in various research efforts that result in Lifepath patients having access to medical school students and physicians. Lifepath also participates with the University in a research program at the "Center for Hospice, Palliative Care, and End-of-Life Studies." Lifepath utilizes various advisory review committees, including medical and spiritual personnel, as well as representatives of specific ethnic populations, to monitor performance and permit improvements in service provision. Lifepath also utilizes volunteers to assist in providing patient care as well as to raise funds and increase awareness of hospice services. There are no barriers interfering with access to hospice services in Service Area 6A. Lifepath provides services to anyone who desires hospice care. Patients may choose the types of services they receive from Lifepath. Such treatment includes radiation and chemotherapies that are palliative in nature. Lifepath provides a substantial amount of unreimbursed care. Hospice services provided by Lifepath are appropriate and adequate. Staffing patterns are acceptable. A newly developed staffing model ("Pathways") will permit increased flexibility in staffing. The evidence establishes that HPH and Lifepath differ in how staff is deployed. The evidence fails to establish that either method of staffing is superior to the other. Utilization as measured by penetration rates is acceptable. As discussed herein, the 1999 Service Area 6A penetration rate lagged the state average by an amount insufficient to trigger a numeric need determination. Significantly, the penetration rate has improved in Service Area 6A for reasons that are, at best, identified as speculative. At the time of the hearing, the penetration rate in Service Area 6A is the ninth highest in the state. The evidence fails to establish that the addition of another hospice provider in Service Area 6A will necessarily result in increased penetration. Hospice services in Service Area 6A are provided efficiently. Ancillary services, including drugs and medical equipment are provided through Lifepath subsidiaries, similar to HPH's operations. New staffing models deployed by Lifepath reduced management staffing requirements and increased available resources for patient care. The ability of the applicant to provide quality of care and the applicant's record of providing quality of care. Section 408.035(1)(c), Florida Statutes. The evidence establishes that HPH has the ability to provide an appropriate quality of care, and has a record of doing so within its licensed Service Areas. Lifepath asserts that the quality of care is superior to HPH. The evidence fails to support the assertion. Evidence related to accreditation of Lifepath by the Joint Commission for the Accreditation of Healthcare Organizations is not relevant to this issue and has not been considered. The availability and adequacy of other health care facilities and health services in the service district of the applicant, such as outpatient care and ambulatory or home care services, which may serve as alternatives for the health care facilities and health services to be provided by the applicant. Section 408.035(1)(d), Florida Statutes. Hospice services are currently available and adequate in Service Area 6A. In addition to Lifepath services, other end-of-life care identified herein is available to terminally ill persons residing in the county. Probable economies and improvements in service which may be derived from operation of joint, cooperative, or shared health care resources. Section 408.035(1)(e), Florida Statutes. There are no economies or efficiencies proposed from the operation of joint, cooperative or shared health care resources. The availability of resources, including health personnel, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation; the effects the project will have on clinical needs of health professional training programs in the service district; the extent to which the services will be accessible to schools for health professions in the service district for training purposes if such services are available in a limited number of facilities; the availability of alternative uses of such resources for the provision of other health services; and the extent to which the proposed services will be accessible to all residents of the service district. Section 408.035(1)(h), Florida Statutes. The evidence fails to establish that health personnel will be available to staff the proposed HPH program. The labor pool for home health and nursing personnel in the Service Area is limited, as it is elsewhere in the nation. Staffing shortages are expected to increase. HPH proposed salaries are significantly beneath those required to employ qualified staff in the Hillsborough County, and the proposed recruitment budget for initial staffing is inadequate. HPH also lacks sufficient budgeted funds for continued recruitment and training. The evidence establishes that HPH's proposal will not provide access to patients who require palliative radiation or chemotherapy. Palliative radiation or chemotherapy is used to provide pain relief, such as to shrink a pain-causing tumor. HPH provides little chemotherapy services to patients and rarely, if ever, pays for the treatment. Lifepath provides such services and funds them. Approximately five percent of Lifepath patients receive palliative radiation or intravenous chemotherapy services. An additional five percent receive oral chemotherapy services. The evidence also establishes that HPH's proposal will not provide access to patients who have a prognosis of more than six months but less than one year to live. HPH does not admit patients with life expectancies of greater than six months. Lifepath admits patients with life expectancies of up to one year. The immediate and long-term financial feasibility of the proposal. Section 408.035(1)(i), Florida Statutes. The HPH proposal is not financially feasible. HPH projects admissions of 230 by the end of year one and 455 by the end of year two. The HPH projections exceed the experience of any other Florida licensed hospice provider, including those expanding into neighboring counties as is proposed here. Based on a reasonable projection of market share, HPH will likely experience an admission level of 130 patients in year one and 245 patients in year two. HPH projected salaries are low by approximately $263,000 in year two. Nursing salaries are insufficient by approximately 20 percent, based on actual Lifepath salaries, which are accepted as reasonable. Correction of the underestimated expenses indicates that HPH will not generate a surplus of revenue over expenses. Further, the HPH pro forma fails to account for costs related to proposed special services including services to AIDS patients, children and persons without caregivers. HPH asserts that such programs are extensions of existing programs and will not generate additional costs. The assertion is not supported by credible evidence. The needs and circumstances of those entities that provide a substantial portion of their services or resources, or both, to individuals not residing in the service district in which the entities are located or in adjacent service districts. Such entities may include medical and other health professions, schools, multidisciplinary clinics, and specialty services such as open-heart surgery, radiation therapy, and renal transplantation. Section 408.035(1)(k), Florida Statutes. Approval of the HPH application will permit HPH to provide hospice services to terminally ill Hernando and Pasco residents who travel into Hillsborough County to seek care. The probable impact of the proposed project on the costs of providing health services proposed by the applicant, upon consideration of factors including, but not limited to, the effects of competition on the supply of health services being proposed and the improvements or innovations in the financing and delivery of health services which foster competition and service to promote quality assurance and cost- effectiveness. Section 408.035(1)(l), Florida Statutes. HPH asserts that increased competition in Service Area 6A will result in increased penetration rates. The evidence establishes that competition for end-of-life services currently exists in the Service Area. The addition of a second hospice provider will not necessarily result in increased penetration. Terminally ill patients in Hillsborough County have access to end-of-life care though a variety of health care resources. Home health agencies and nursing homes (through the "Evercare" program) provide end-of-life care. In addition, several hospitals in the county have palliative care programs for terminally ill patients. There is no evidence that persons seeking end-of-life care in Service Area 6A are unable to obtain it. Lifepath asserts that the type of services provided by HPH and Lifepath differ so significantly as to foster confusion in the hospice market. While there are differences in levels of service provided, the evidence fails to establish that potential hospice patients would be unable to determine which services met their individual needs. Lifepath fears that as differences in treatment options become apparent to the medical community, persons seeking more intensive and higher cost care (including radiation and chemotherapy) will be directed towards Lifepath, leaving other, lower-cost patients to HPH. Lifepath asserts that it could be forced to reduce currently provided services to the allegedly lower level of services provided by HPH. Lifepath suggests that programs funded from surplus revenues could be cut as it dealt with a drain of lower-cost patients to HPH. Given that most hospice service is Medicare-funded, price competition is not an issue. Competition on the basis of level of service would potentially reward the hospice offering more comprehensive services, such as those Lifepath claims to offer; accordingly, the assertion is rejected. Lifepath asserts that approval of the HPH application would result in reduced charitable contributions and reduced volunteers as both hospices sought donors and volunteers from the same "pool." The evidence fails to establish that the availability of charitable contributions and volunteers in Service Area 6A is, or has been, exhausted. Lifepath asserts that approval of the HPH application will have an adverse impact on its ability to recruit staff. Given that the HPH projected salary levels are significantly below those being offered by Lifepath, it is unlikely that such an adverse impact would result from HPH operations in the county. The applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent. Section 408.035(1)(n), Florida Statutes. HPH proposes to provide less Medicaid and indigent care in Hillsborough County than it has provided historically. As of 2001, 13.2 percent of HPH patients were Medicaid patients, yet HPH proposes to provide only 5 percent Medicaid care in Hillsborough County. Likewise, the HPH projection of indigent care provision in Hillsborough County is less than currently provided. The applicant's past and proposed provision of services that promote a continuum of care in a multilevel health care system, which may include, but are not limited to, acute care, skilled nursing care, home health care, and assisted living facilities. Section 408.035(1)(o), Florida Statutes. HPH has a history of integrating its services into the local continuum of care in the counties where it is currently licensed and would likely do the same in Hillsborough County. Section 408.043(2), Florida Statutes (1999), provides that "[w]hen an application is made for a certificate of need to establish or to expand a hospice, the need for such hospice shall be determined on the basis of the need for and availability of hospice services in the community." The evidence establishes that hospice services are appropriately available in Hillsborough County and that there is currently no need for licensure of an additional hospice. The section further provides that "[t]he formula on which the certificate of need is based shall discourage regional monopolies and promote competition." Issues related to competition are addressed elsewhere herein. The issue of whether Lifepath constitutes a regional monopoly is related to DOAH Case No. 02-2703RU and is addressed by separate order. Rule 59C-1.0355, Florida Administrative Code, sets forth "preferences" given to an applicant meeting certain specified criteria. None of the preferences outweigh the lack of numeric need in this case. The HPH application fails to meet the preference given to an applicant who has a commitment to serve populations with unmet needs. The evidence fails to establish that such populations exist in Service Area 6A. The HPH application meets the preference to provide inpatient care through contractual arrangements with existing healthcare providers. HPH has previously utilized such contracts where it is licensed to operate and would enter into arrangements with Hillsborough County providers. The HPH application fails to meet the preference given to an applicant committed to serve patients without primary caregivers, homeless patients, and patients with AIDS. The HPH application does not set forth budgeted funds to provide such services. The evidence fails to establish that such patients are currently underserved in the Service Area. The HPH application fails to meet the preference given to applicants proposing to provide services which are not specifically covered by private insurance, Medicaid or Medicare because HPH does not provide for palliative radiation or chemotherapy treatments. Rule 59C-1.0355(5), Florida Administrative Code, requires that letters of support be included with the application. HPH submitted approximately 180 letters of support less that half of which were from Hillsborough County and many of which are form letters. Rule 59C-1.030, Florida Administrative Code, sets forth additional criteria used in the evaluation of CON applications. Rule 59C-1.030(2)(a), Florida Administrative Code, requires that the review consider the need for the proposed services by underserved populations. The evidence in this case fails to establish that there is an underserved population in Service Area 6A.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is hereby RECOMMENDED that the Agency for Health Care Administration enter a Final Order denying the application of Hernando-Pasco Hospice, Inc., for Certificate of Need No. 9311 to provide hospice services in Service Area 6A. DONE AND ENTERED this 17th day of March, 2003, in Tallahassee, Leon County, Florida. WILLIAM F. QUATTLEBAUM 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 17th day of March, 2003. COPIES FURNISHED: Michael O. Mathis, Esquire Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building Three, Suite 3431 Tallahassee, Florida 32308-5403 Robert D. Newell, Jr., Esquire Newell & Terry, P.A. 817 North Gadsden Street Tallahassee, Florida 32303-6313 Frank P. Rainer, Esquire Sternstein, Rainer & Clarke, P.A. 101 North Gadsden Street Tallahassee, Florida 32301-7606 H. Darrell White, Esquire McFarlain & Cassedy, P.A. 305 South Gadsden Street Post Office Box 2174 Tallahassee, Florida 32316-2174 Lealand McCharen, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 Valda Clark Christian, General Counsel Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building, Suite 3431 Tallahassee, Florida 32308 Rhonda M. Medows, M.D., Secretary Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building, Suite 3116 Tallahassee, Florida 32308
The Issue In the first batching cycle of 2006, Hospice of the Palm Coast, Inc. ("Palm Coast") and Catholic Hospice, Inc. ("Catholic Hospice"), applied to the Agency for Health Care Administration ("AHCA" or the "Agency") for a certificate of need to establish a new hospice program in Broward County. Palm Coast's application number is CON 9931; Catholic Hospice's is CON 9928. The issues in this case are whether either, both or neither of the applications should be approved.
Findings Of Fact The Parties AHCA "[D]esignated as the state health planning agency for purposes of federal law," Section 408.034(1), Florida Statutes, AHCA is responsible for the administration of the CON program and laws in Florida. See § 408.031, Fla. Stat., et seq. As such, it is also designated as "the single state agency to issue, revoke, or deny certificates of need . . . in accordance with present and future federal and state statutes." § 408.034(1), Fla. Stat. Catholic Hospice Catholic Hospice, Inc., has been a licensed provider of hospice services in Miami-Dade and Monroe Counties (Hospice Service Area 11 which adjoins Service Area 10 along the Broward/Miami-Dade County line) since 1988. It is faith-based and mission-driven; in keeping with its nature as such, it is a section 501(c)(3) not-for-profit corporation. Catholic Hospice has two corporate members: the Archdiocese of Miami and Mercy Hospital, a part of Catholic Health East. Neither of its two members provide it with funding. Catholic Hospice is governed by a board of directors with autonomous authority to govern its activities. The members of its board live and work in the local community. Palm Coast Palm Coast is a not-for-profit Florida corporation currently licensed to operate hospice programs in Hospice Service Area 4B and, like Catholic Hospice, in Hospice Service Area 11 (Miami-Dade and Monroe Counties). Palm Coast's provision of hospice services in Service Area 11 is new relative to Catholic Hospice's service for nearly 20 years in the service area. Palm Coast has been licensed as a hospice in Service Area 11 since March 2006. Palm Coast is a wholly-owned subsidiary of a its management affiliate and parent organization, Odyssey HealthCare, Inc. ("Odyssey"), which is a for-profit national chain of hospices. The sole member of Palm Coast is Odyssey HealthCare Holding Company, Inc., a wholly-owned subsidiary of Odyssey. Palm Coast's Board of Directors are managers of Odyssey all of whom live and work in or near Dallas, Texas. Numeric Need for a Service Area 10 Hospice Program Hospice Service Area 10 Hospice Service Area 10 consists of Broward County. Referred interchangeably by the parties at hearing as either Service Area 10 or Broward County, Hospice Service Area 10 will also be referred to in this Order as either Service Area 10 or Broward County. AHCA's Determination of Numeric Need To determine need in Service Area 10 in the "Other Beds and Programs" First Batching Cycle 2006, AHCA employed the numeric need methodology found in Florida Administrative Code Rule 59C-1.0355 (the "Hospice Programs Rule"). The Agency's methodology calculates need using a number of factors. Among the factors are four categories of deaths in the service area: U65C, 65C, U65NC, and 65NC, described by the rule as follows: (a) Numeric Need for a New Hospice Program * * * U65C is the projected number of service are resident cancer deaths under 65 . . . 65C is the projected number of service area resident cancer deaths age 65 and over . . . U65NC is the projected number of service area resident deaths under age 65 from all causes except cancer . . . 65NC is the projected number of service area resident deaths age 65 and over from all causes except cancer . . . Fla. Admin. Code R. 59C-1.0355(4). (Consistent with these four factors, data was introduced at hearing that is discussed further in this order that relates to four categories of patients grouped by diagnosis and age in much the same way: "65 and Over Cancer," "65 and Over Non-cancer," "Under 65 Cancer," and "Under 65 Non-cancer." See paragraph 16, below.) According to the Hospice Programs Rule, "[n]umeric need for an additional hospice program is demonstrated if the projected number of unserved patients who would elect a hospice program is 350 or greater." Id. Application of the Agency's methodology to the factors relative to Service Area 10 yielded more than 400 projected unserved patients who would elect a hospice program ("Net Need"). Palm Coast presented a hybrid methodology that yielded a Net Need of 1,340. In Palm Coast's view, the Net Need produced by its hybrid methodology demonstrated need for at least two new hospice programs. The Agency, however, interprets the Hospice Programs Rule to allow only one new hospice program to be added in any one batching cycle no matter what number is yielded by its methodology. True to its calculation of numeric need and its interpretation of the rule, the Agency duly published its fixed need pool of one. The fixed need pool was not challenged. In response to the published need, Catholic Hospice and Palm Coast submitted timely applications for approval of a new hospice in Broward County. In its State Agency Action Report ("SAAR"), AHCA approved Catholic Hospice's application and denied Palm Coast's. Overview and Approaches of the Applications The applications of Catholic Hospice and Palm Coast comply with the application content and review requirements in statute and rule. Both applications include information related to "special circumstances" that would justify approval of a hospice program in the absence of numeric need. Catholic Hospice, however, did not attempt to demonstrate the existence of "special circumstances" at hearing. Palm Coast, on the other hand, attempted to show that more than one new hospice program could be approved in Broward County. Palm Coast's case for approval of more than one hospice program has two bases. The first is justification under the Special Circumstances provisions art of the Hospice Programs Rule found in Subsection (4)(d) of the rule. The special circumstances advanced by Palm Coast are discussed below in paragraphs 138 to 140. The second base is the "hybrid need methodology" discussed above and developed by its expert health planner. Palm Coast's Hybrid Need Methodology Palm Coast's hybrid methodology follows the assumptions of AHCA's methodology in three categories based on age and diagnosis: "Under 65 Cancer," "Under 65 Non-cancer," and "65 and Older Cancer." It differs from AHCA's methodology in that it assumes that penetration in the "65 and Older Non- cancer" population will remain stable. Palm Coast's "hybrid" need methodology suggests that the need in Service Area 10 is greater than the need forecast by AHCA's approved methodology. The hybrid methodology yields a net need of 1,320 admissions rather than the 441 projected by the Agency's methodology. Stipulated Facts Prior to hearing, the parties filed a joint pre- hearing stipulation.1 In Section E.,2 of the document, entitled "Statement of Facts Which Require No Proof," the parties stipulated to following facts: [a.] Section 408.035, Florida Statutes (2005) sets forth the statutory CON review criteria at issue in these proceedings. The parties agree that the following subparagraphs of Section 408.035, Florida Statutes (2005) are either not applicable or not at issue to consideration of the application: (8) and (10); [b.] The Parties agree that the CON review criteria and standards applicable in this proceeding are set forth in Section 408.035, Florida Statutes (2005), and Rules 59C- 1.0355 and 59C-1.030, Florida Administrative Code. The parties agree that the following criteria in Rule 59C-1.0355, Florida Administrative Code, are either not applicable or not at issue to consideration of the application: (7), (8), (9), and (10); [c.] The parties agree that CATHOLIC HOSPICE and PALM COAST's Letter of Intent (hereinafter referred to as "LOI") and CON applications were timely filed with the Agency. [d.] The CON Applications filed by CATHOLIC HOSPICE and PALM COAST comply with the Application content and review process requirements of Sections 408.037 and 408.039, Florida Statutes (2005) and Rule 59C-1.0355, Florida Administrative Code, and the Agency's review of the Application complied with the review process requirements of the above-referenced Statutes and Rule. [e.] A FNP of one (1) was projected and published for Hospice Service Area 10 for the 2006 - 1st Batching Cycle in the Florida Administrative Weekly, Volume 32, No. 14. [f.] The FNP publication of one (1) was not challenged. [g.] The parties agree that Schedules 1 through 10, contained in each of the two CON applications (Nos. 9928 and 9931), may be admitted into evidence as reasonable projections without a sponsoring witness. [h.] The parties agree that the audited financial statements of the two applicants and parent entities, presented in the CON applications are true and accurate copies of the respective entity's audited financial statements and may be admitted into evidence without a sponsoring witness. [i.] As to Schedule 5, the parties agree that the figures presented by both Applicants are reasonable, and each applicant is likely to meet their respective utilization projections presented in Schedule 5. * * * [j.] As to Schedule 6, the parties agree that each applicant can provide hospice services with the staffing positions and volumes presented in Schedule 6, and that the staffing and salaries proposed are reasonable for the services proposed by each applicant. [k.] The stipulations, referenced in paragraphs 8 through 11 above, shall not preclude the parties from presenting comparative evidence about any aspect of the information presented or assumptions contained in Schedules 1 through 10 of either of the two remaining applications. [l.] Section 408.035(1), Florida Statutes (2005) provides in pertinent part as follows: "The need for the healthcare facilities and health services being proposed." Pursuant to AHCA's Florida Need Projections for the hospice program, background information for use in conjunction with the April 2006 Batching Cycle for the July 2007 Hospice Planning Horizon, a need was identified for one (1) additional hospice program in AHCA Service Area 10. Thus, CATHOLIC HOSPICE, PALM COAST, and the Agency agree there is a need for one (1) program. * * * [m.] Section 408.035(3) provides in pertinent part as follows: "The ability of the applicant to provide quality of care and the applicant's record of providing quality of care." Section 408.035 is not at issue with respect to either CATHOLIC HOSPICE or PALM COAST's compliance with the above-referenced statutory criteria. The parties agree that both of the proposed programs can provide quality care and satisfy the criterion in Section 408.035(3), Florida Statutes. [n.] Section 408.035(4) provides in pertinent part as follows: "The availability of resources, including health personnel, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation." [o.] Section 408.035(5), Florida Statutes (2005) provides in pertinent part as follows: "The extent to which the proposed services will enhance access to healthcare for residents of the service district." The parties agree, that to the extent there is a published need, approval of either CATHOLIC HOSPICE or PALM COAST would enhance access to healthcare for residents of the Service Area. Notwithstanding the fact that both CATHOLIC HOSPICE and PALM COAST believe that approval of either program will enhance access to healthcare for residents of the Service Area, nothing herein shall preclude the parties from presenting comparative evidence as to which program would provide better access. [p.] Section 408.035(6) provides in pertinent part as follows: "The immediate and long-term financial feasibility of the proposal." Section 408.035(6) is not at issue in these proceedings. The parties agree that both proposed hospice programs are financially feasible in the short- and long-term, and satisfy the criteria in Section 408.035(6), Florida Statutes. [q.] Section 408.035(8), Florida Statutes (2005), provides in pertinent part as follows: "The costs and methods of the proposed construction, including the costs and methods of energy provision and the availability of alternative, less costly, or more effective methods of construction." Section 408.035(8) is not at issue with respect to a review of the CON applications filed by CATHOLIC HOSPICE or PALM COAST. [r.] AHCA is the state agency responsible for issuance of licenses to hospice providers, and is the sole state agency authorized to make Certificate of Need ("CON") determinations. [s.] North Broward Hospital District is a special hospital taxing district created by Special Act of the Florida Legislature, chapter 27438, Laws of Florida (1951), and operates in the northern geographical area of Broward County. GOLD COAST is an operating unit of North Broward Hospital District. [t.] CATHOLIC HOSPICE is a not-for-profit Florida corporation and existing provider of hospice services in Florida. [u.] PALM COAST is a not-for-profit Florida corporation and existing provider of hospice services in Florida. [v.] CATHOLIC HOSPICE and PALM COAST are each currently providing services through licensed hospice programs in Hospice Service Area 11 (Miami - Dade and Monroe Counties). [w.] Hospice Service Area 10 is Broward County, Florida. [x.] The current hospice providers in Hospice Service Area 10 are VITAS Healthcare Corporation of Florida, Hospice By the Sea, Inc., HospiceCare of Southeast Florida, Inc., and GOLD COAST. Joint Prehearing Stipulation, filed May 9, 2007. The Applicants in Other Service Areas; Existing Providers in Service Area 10 Catholic Hospice is currently licensed and operating in Service Area 11, Dade and Monroe Counties. Palm Coast has programs that are currently licensed and operating in Service Area 4B, comprising of Flagler and Volusia Counties and, like Catholic Hospice, in Service Area 11. Service Area 10 has four existing providers of hospice services. Vitas Healthcare Corporation of Florida (Vitas) is a for-profit hospice. The other three, Hospice By the Sea, Inc., HospiceCare of Southeast Florida, Inc., and Gold Coast, are all community-based not-for-profit hospices. Of the four existing providers, Vitas is by far the dominant provider of hospice services in the service area. Affiliations and Sponsors Palm Coast Affiliation with Odyssey Palm Coast is affiliated with Odyssey Healthcare, Inc., a for-profit corporation. Despite the affiliation, Palm Coast is a distinct entity in accordance with Florida law. It has its own Articles of Incorporation and By-Laws, its own audited financial statements and its own local governing board. It complies, moreover, with all state and federal requirements for AHCA and Medicare licensure and certification. Additionally, each of the individual Palm Coast programs has its own bank account into which all of its revenues are deposited and out of which all of its expenses are paid. If the proposed Palm Coast hospice program in Broward County exhibits a positive cash flow from its operations, those fund will remain with the program to be used for patient care and operations. This is the practice followed by Palm Coast at its existing programs in Service Areas 4B and 11. The Palm Coast model, therefore, which Palm Coast will follow should it be approved in Broward County, will be to act and operate as a community-based hospice. While it will "act locally," it will also benefit from its affiliation with Odyssey. It will be able to take advantage of Odyssey's resources, experience and successful management tactics. These benefits include economies of scale based on Odyssey's buying power and operation of 80 programs in 26 states, Odyssey's experience with a multitude of startup programs, identification and treatment of minority population and non-cancer patients, treatment of cancer patients (traditionally served by hospices), extensive educational tools developed over 10 years of operation, continuing education for all staff members, accessibility to a large clinical database, and access to centralized services such as billing and foundation funds. Through its affiliation with Odyssey and with the assistance Odyssey is reasonably expected to provide, Palm Coast possesses the necessary management and clinical experience, operational systems and corporate resources to efficiently, effectively and successfully implement a new hospice program in Service Area 10. Indeed, the benefit of combining local resources and knowledge with Odyssey's nationwide experience, assets, buying power and success has been demonstrated with the successful establishment of Palm Coast programs in Service Area 4B and Service Area 11, the service area in which Palm Coast's rival in this proceeding gathers its own support and sponsorship. b. Catholic Hospice's Corporate Sponsors in Service Area 11 Catholic Hospice has two corporate sponsors in Service Area 11: the Archdiocese of Miami and Mercy Hospital. The Archdiocese consists of Broward, Dade and Monroe Counties. It places a priority on health care as a large part of its mission. The Archdiocese is the sole corporate sponsor of a substantial network of post-acute health care facilities in Dade and Broward Counties, including rehabilitation hospitals, nursing homes, assisted living facilities, HUD elderly housing facilities and cemeteries. This health care network is managed from its headquarters in Broward County by Catholic Health Services (“CHS”), and extends throughout the geographic boundaries of the Archdiocese. Founded in 1988, Catholic Hospice is the realization of the aspirations of the Archdiocese's Monsignor Walsh. At the time, the hope was for Catholic Hospice to serve the entire geographic area of the Archdiocese; a CON, however, could only be secured for Service Area 11. Hospice services in Broward County is missing from the continuum of care in which the Archdiocese is engaged. There will be a benefit to the patients in the CHS network of care because continuum of care increases continuity of care and is better for patients. The gap in the Archdiocese's continuum of care is therefore significant to the patients it serves. Mercy Hospital, the second corporate sponsor of Catholic Hospice in Dade County, is an acute care hospital managed by Catholic Health East. Catholic Health East is a Catholic network of over 35 acute care hospitals that extends along the east coast of the United States from Maine to Florida. The network includes Holy Cross Hospital in Broward County. Support for Catholic Hospice by Catholic Health and Elder Care Entities The Archdiocese of Miami, Mercy Hospital, Holy Cross Hospital in Broward County and Catholic Health East all share a common identity as faith-based, not-for-profit organizations with the mission of demonstrating reverence for the human body and spirit by bringing the healing and comfort of the Lord to those in need throughout their respective communities. The common mission and identity that Catholic Hospice and the related Catholic health care entities share naturally cultivates collaboration among them. These collaborations within an extended network of health and elder care services are significant. They will allow Catholic Hospice to expand into Broward County quickly and efficiently. Palm Coast's Benefits from Affiliation with Odyssey Palm Coast has available to it through its management agreement with Odyssey, all the resources of the two existing Palm Coast programs as well as the nationwide resources of Odyssey. Due to its experience with new market development, Odyssey has the ability to enter the market rapidly; programs, policies, and operations are already in place, and the strong support resources provide the wherewithal for Hospice Palm Coast to do their job of rapidly, efficiently, and appropriately upon entering the Broward County marketplace. Odyssey has started over thirty hospice programs since 1995, with five new programs established in the 2006 calendar year, evidence of experience in development of new hospice programs, in addition to their experience with hospice acquisitions. The proof of likely success in Broward County as the result of Palm Coast's affiliation with Odyssey can be seen, moreover, in the success of Palm Coast's programs in District 4A and 11, implemented under the guidance and direction of Odyssey. In the marketplaces where Odyssey and Palm Coast have historically initiated new hospice programs, they have become proficient at determining the traditional or existing core of business for the existing providers, and utilized their experience and success to come in and fill the gaps, otherwise known as providing "Hospice Services Beyond the Traditional Model." The addition of Hospice of the Palm Coast in Broward County will allow for the expansion of the Odyssey way of life, through its not-for-profit affiliate, utilizing its successful operational philosophy and Fourteen Service Standards. Odyssey has a dedicated start-up team that, upon CON approval, plans to work with the local providers and other individuals or entities within the local market, to guide the Palm Coast's Broward program from the CON approval, up through Medicare certification. Operationally, based on its size in terms of programs and economies of scale, there are significant benefits to Palm Coast's proposed program in Broward; the ability to contract on a national level for corporate wide benefits including a variety of medical equipment, medical supplies, and pharmacy supplies, due to the operation of over 80 hospice programs nationwide, which yields significant economies of scale. The Odyssey Support Center provides the Palm Coast start-up programs with policies and procedures, forms, educational materials, and training, in addition to centralized services efficiently operated for all the Odyssey programs from the Dallas corporate headquarters. Specifically, Odyssey supports each individual hospice location by providing coordination, centralized resources, and corporate services, including, but not limited to: Financial accounting systems, including billing, accounts receivable, accounts payable, and payroll; Information and telecommunications systems; Clinical support services; Human resource administration; Regulatory compliance and quality assurance; Marketing and educational materials; Training and development; and Start-up licensure and certification. In return for these services provided by Odyssey, the Palm Coast programs pay a management fee, which is calculated as seven percent of the local hospice's net revenue. The same arrangement will be implemented upon Palm Coast's approval for the CON in Broward. These resources allow each local office to focus on Odyssey's primary mission to provide responsive, quality care to patients and their families. Once the Palm Coast entities, including the proposed Broward program, become "cash positive," a separate and distinct bank account will be opened to ensure the funds of the not-for- profit Palm Coast entities are not co-mingled with that of its management affiliate Odyssey. Broward County Diversity and Need The population of Broward County is becoming increasingly diverse. The population that is dying is also becoming more diverse. For example, from 1996 to 2004, Hispanic deaths in Broward County increased by 50 percent whereas deaths of the non-Hispanic population declined. At the same time, African-Americans and non-Caucasians had significant increases in deaths while Caucasian deaths declined. Since 2000, existing providers have not met the needs of all of the age and diagnosis groups in the District. "[P]art of the reason for that is that the underlying nature of the service area has been changing, becoming more diverse … [and] younger, with a growing ethnic population." Tr. 620. While Service Area 10 has been changing, the existing providers have not been able to adapt to the changes in the population. Catholic Hospice's History of Dealing with Diversity For almost 20 years, Catholic Hospice has refined its expertise in ascertaining and meeting the needs of the diverse, multi-cultural population within Dade County, including Hispanics, Haitians, Caribbeans, Jamaicans and African Americans. This history demonstrates Catholic Hospice's ability to ascertain and meet the needs of the diverse population in Broward County if approved. One of the strengths of Catholic Hospice is its culturally and ethnically diverse staff, many of whom are bilingual. Having bilingual staff is significant. For example, Catholic Hospice’s Medical Director, Dr. Kiedrowski speaks Spanish fluently and has seen only one patient whose primary language was English in the year and a half he has been on staff. In fact, seventy to eighty percent of Catholic Hospice’s patients in Service Area 11 are Hispanic. Catholic Hospice is particularly sensitive and responsive to the needs of the Hispanic community – the majority of which identify themselves as Catholic. Palm Coast's History of Dealing with Diversity Palm Coast does not have Catholic Hospice's multi- decade experience of dealing with diversity in Service Area 11 that will be of such benefit in Service Area 10. In contrast to Catholic Hospice in Service Area 11, Palm Coast is a start up that has only been in existence for about a year. Palm Coast is not lacking in the ability to deal with diverse populations, however, because of its affiliation with Odyssey and experience in Service Areas 4B and 11. This ability is demonstrated by Palm Coast's practice while its programs have been in a start-up phase in these service areas. Upon entering a new community, Palm Coast hires caregivers and administrative personnel for the hospice office from the community. These new employees reflect different local cultures, whether Hispanic, African American or other. In Service Area 11, for example, Palm Coast's new employees include Haitian employees to reflect the Haitian component of the diverse local culture in the area. In addition to diversity in hiring practices, cultural diversity training is offered to Palm Coast employees by Odyssey. The training involves education with regard to local cultures, religions, and customs unique to the area. Palm Coast's intent, therefore, is to hire and train a diverse group of individual from the same locale as the patients in order to facilitate the service to patients and increase the patients' comfort levels. Palm Coast makes an effort to recruit a staff that mirrors the racial and ethnic make-up of the community it serves. The effort and experience that Palm Coast has had in Service Area 11 in particular will serve Palm Coast well in Service Area 10 should its application be approved. But Catholic Hospice’s long history with serving the multicultural needs in Dade County is predictive of better capability to deal with Broward County's diversity than Palm Coast's one-year experience in the County and its intent to follow in the footsteps of that experience in Broward County should its application be approved. Hospice Services and Programs Hospice is both a philosophy and method of care for terminally ill patients, their families and loved ones. Hospice services provide palliative care for pain and management of symptoms of a terminal disease process or processes, as well as supportive care to ease the psychological and social strains of a patient and his or her family confronting mortality. Palliative medicine focuses on relieving suffering and symptoms, not curing a patient. Usually provided in the home, hospice services are required to be capable of being tailored based on individual need and are required to be available twenty-four hours a day, seven days a week, including holidays. Catholic Hospice meets these requirements. Palm Coast meets the requirements as well. Palm Coast's Program Palm Coast's program is reflective of a spirit and idea of caring that emphasizes comfort and dignity for the dying, making it possible for them to remain independent for as long as possible and in familiar surroundings. Palm Coast utilizes an interdisciplinary team approach of physicians, nurses, social workers, and others to provide services including palliative care in the home, short-term inpatient services, mobilization and coordination of ancillary services and bereavement support. The patient's plan of care is developed and regularly modified by the interdisciplinary team: a physician, nurse, social worker, chaplain, and bereavement coordinator. The team may include a volunteer coordinator, volunteers, nursing assistants and home health aides. The Palm Coast interdisciplinary team meets on a specific timetable. Paula Toole, an Odyssey Healthcare regional vice president who covers Odyssey's south region described the timetable at hearing and the content of the meetings: "Generally its every two weeks. If [the patient] is on a higher level of care, it may be every week or . . . day." Tr. 962. The interdisciplinary team discusses the patient and the family to determine what services are being provided and whether they are appropriate to provide the patient and the family with the best hospice care. Catholic Hospice’s Continuum of Quality Services There are four levels of hospice care: continuous care, general inpatient care, routine home care, and inpatient respite care. Continuous care and general inpatient care are considered “intensive” services as they involve the most complex, medically unstable patients and a higher level of services. Continuous care is often used when a patient is in crisis and requires more frequent physician visits. A key factor that has improved availability of hospice care is the Medicare Hospice benefit. To be eligible for the Medicare hospice benefit, a patient must be certified by two physicians to have a life expectancy of less than six months if the patient’s disease process runs its normal course. Statutory standards require that a hospice implement home care within three months after licensure and inpatient care within twelve months. Catholic Hospice will be able to make routine and continuous home care visits immediately upon licensure in Broward County. Catholic Hospice can manage operations from its existing office in Miami Lakes and a new office to be almost immediately established in Lauderdale Lakes through a lease with CHS. Catholic Hospice reasonably expects to enter contracts for the provision of inpatient hospice care with existing hospitals and nursing homes immediately upon licensure –- making inpatient hospice immediately available. In addition, Broward residents may choose to access a freestanding inpatient hospice unit in northwest Dade County for which Catholic Hospice has been approved and plans to open in 2008. Upon approval and licensure of Catholic Hospice’s proposed Broward County program, CHS will contract with Catholic Hospice to provide hospice services to persons in its Broward facilities as it does currently for its Dade County facilities. The plans for Broward County will not be the first collaboration between Catholic Hospice and CHS. Catholic Hospice has an approved CON for a 13-bed free-standing inpatient hospice facility in Dade County. The inpatient hospice facility will be on the third floor of a building that will also house a rehabilitation hospital for CHS. That facility is located so that it will be accessible to persons in southern Broward County that require an inpatient level of care, or lack a caregiver or are homeless and require residential care. Catholic Hospice will employ existing policies and procedures to administer its offices and direct patient care. Hospice services are typically provided through the use of an interdisciplinary team that provides, at a minimum, core services, including physician services, nursing services, nutrition services, social services, pastoral care or chaplain services, volunteer services, and bereavement services. In addition, services such as physical therapy, occupational therapy, speech therapy, home health aide services, infusion therapy, medical supplies and equipment, and homemaker services should be provided as needed. Catholic Hospice complies and provides core services as well as additional services such as radiation therapy and chemotherapy as each patient requires. Catholic Hospice has divided its current service area into four sections and provides a full spectrum of hospice services through four interdisciplinary teams that provide high quality care. Each team is responsible for one section of the county. The number of visits a patient receives from members of the interdisciplinary team is determined by the plan of care. Once a patient enters the program, they are admitted by an admissions nurse who collaborates with the physician and family to develop the plan of care. As a patient’s health declines, the patient will receive visits by the interdisciplinary team members, including nurses and physicians as needed. Catholic Hospice has no limitation or hard rules on the number of visits -– it is based on patient need. The interdisciplinary teams have regular meetings to re-evaluate patients’ plans of care. Physician Services Physician services are a strength of Catholic Hospice -– ensuring that any patient that needs to see a physician does, and promptly. Catholic Hospice has four staff physicians who work in the community making house calls and seeing patients at nursing homes and assisted living facilities. In addition, Catholic hospice has contracted physicians at hospitals within its service area to cover patients in its contract hospitals. Patient care and particularly physician services at Catholic Hospice are overseen by Dr. Brian Kiedrowski, a Certified Medical Director, board-certified in geriatric medicine and a diplomat of the American Board of Hospice and Palliative Medicine. Catholic Hospice has policies for the credentialing of its physicians to verify education and experience, ensuring the continued quality of Catholic Hospices’ physician services. A physician is assigned to each interdisciplinary team at Catholic Hospice, including Dr. Kiedrowski, the Medical Director. This has added to his credibility with the facilities in Service Area 11 and improved collaboration with community providers. At a minimum, each Catholic Hospice patient is seen by a physician within three days of coming into the program because hospice is urgent. Following that, patients are seen at least once a month, but it depends on the needs of the patient and may be more often. Nothing substitutes for a physician’s presence with the patient while performing an examination to determine appropriate treatment. For example, if a patient is short of breath, the physician needs to see the patient to determine what is happening and appropriate treatment. Catholic Hospice also has protocols for the communication among its physicians and between its physicians and attending physicians, should an attending physician want to continue to follow the patient. This improves quality of care by increasing communication and ensuring that patients are not in limbo if an attending physician cannot be reached at a time of crisis. Physicians, like other Catholic Hospice employees, participate in orientation which facilitates team-building and increases physicians’ sensitivity to the various cultures and religions in South Florida. In addition, Dr. Kiedrowski will go into the field with nurses or other staff physicians to exchange training and provide monitoring or proctoring of clinical skills. In contrast, most of Palm Coast’s clinical education is performed through standardized self-directed online training modules through its parent corporation in Dallas, Texas. Nursing Services Catholic Hospice provides high quality nursing services and has policies in place to ensure that quality continues, including such clinical details as the care of central venous access (“CVA”) devices and subcutaneous infusions. Catholic Hospice can immediately implement its comprehensive nursing policies in Broward County upon approval. Nutrition Services Catholic Hospice provides nutrition services to its patients through two pooled dieticians, one for the northern part of Service Area 11 and one for the southern portion. The dieticians perform nutritional risk assessments on all non- cancer patients and patients under eighteen who are having total parenteral nutrition -- meaning they are being fed intravenously. The dieticians are a great asset and comfort to patients and families. Catholic Hospice cares about nutrition for its patients eating. It provides patients and their families with nutrition education and prepares them for what to expect as the patient’s disease progresses. Nutrition, as with many areas within hospice services, requires particular sensitivity to cultures, including Hispanics and others. Catholic Hospice has successfully accommodated the nutritional needs of the various cultures it serves. Catholic Hospice will implement these same policies for providing nutrition services in Broward County upon approval. Social Services Social Services at Catholic Hospice are provided by a group of graduate level social workers which is a requirement of Catholic Hospice. The services are broad in scope, including everything from family counseling to coordinating for caregivers and facilitating the securing of other resource needs of the patient and family. Catholic Hospice has policies in place for the provision of these services that can be immediately implemented in Broward County. Catholic Hospice has written and received a caregiver grant in the amount of one hundred thousand dollars that is renewed annually and administered locally through Dade County. The grant targets individuals and families that are facing the choice of having to place a loved one in a nursing home to be able to hold a job or attend appointments because they cannot financially afford a private caregiver and, in part counteracts caregiver fatigue. Volunteers can provide respite for caregivers as well. Catholic Hospice will seek similar opportunities in Broward County if approved. State and local regulations require hospices have emergency management plans. These plans are submitted to the Agency and local government. The plans are required to have certain elements to ensure that patients and families will not experience interruptions in hospice service in the event of a natural disaster or other emergency. Catholic Hospice is capable of successfully developing and implementing a similarly comprehensive plan in Broward County if approved. Serving All Faiths -- Pastoral Care or Chaplain Services Catholic Hospice serves persons regardless of religion or lack thereof. Patients include those who are Catholics (as expected), Buddhists, Seventh-day Adventists, Santerians, Jewish, Baptists, and Pentecostals. The staff of Catholic Hospice reflects a diversity of religious beliefs as well. Ms. Murray, for example, the Vice President for Nursing Services is of the Jewish faith. All of the staff are comfortable, however, with the Catholic identity and mission of Catholic hospice as a faith-based organization. Catholic Hospice has six chaplains who take care of persons of all faiths or no faith according to each patient’s needs and desires. In fact, the very first patient ever cared for by Catholic Hospice was Jewish. The chaplains are not all Roman Catholic. Chaplains are required to complete Clinical Pastoral Education (“CPE”) training, which is chaplaincy training. CPE training assists clergy with providing spiritual direction to persons of all faiths, independent of that clergy member’s own religious identity or affiliation. It helps them view spirituality from a universal standpoint to provide pastoral care and spiritual direction. At Catholic Hospice, chaplains also provide a connection to patients’ own faith communities -– mobilizing those relationships for the benefit of the patient and family. Additionally, each orientation includes a component of general spiritual care training to enable employees to reach out and connect with patients and families whatever their religious beliefs may be. One of Catholic Hospice’s chaplains is a Rabbi who provides particular assistance with Catholic Hospice’s L’Chaim program. The L’Chaim Program is a Jewish Hospice program emphasizing sensitivity to Jewish beliefs, customs and holiday traditions. Developed in response to community need, the L’Chaim program has its own mission statement and brochures geared to persons of the Jewish faith. Catholic Hospice’s orientation similarly includes a segment on L’Chaim. Catholic Hospice can successfully implement its current chaplain services policies upon approval of its proposed Broward program. Volunteer Services Catholic Hospice has a comprehensive program for the recruitment and training of volunteers. Volunteers provide respite services within the home setting –- often allowing a caregiver the opportunity to go to appointments and uphold other obligations they otherwise could not do. Catholic Hospice also has an “Angel Program” of volunteers that accompany patients during their final hours of life. These volunteers provide companionship to patients without family, and comfort to patients and families who are together in those final hours. Volunteers undergo comprehensive training similar to an employee orientation. Training is 16 hours long and is provided over two consecutive Saturdays. The training provides an overview of the organizational structure, the culture of Catholic Hospice and provides a breakdown of each volunteer’s role in the interdisciplinary team to ensure a complete understanding of the volunteer’s function and the limits that each works within. Catholic Hospice has developed training manuals for volunteers and because Catholic Hospice has volunteers fluent in both English and Spanish, training can be presented in either language, including the training manuals. Catholic Hospice has volunteers in its Dade program that are residents of Broward County. A condition of participation in the Medicare program for hospices requires that volunteer service match at least five percent of the overall care hours provided by hospice employees. Catholic Hospice surpassed that last fiscal year as ten percent of direct care hours were matched by volunteer hours. Catholic Hospice can adopt the same strategy and policies to successfully implement its volunteer program in Broward County. Bereavement Services Medicare guidelines require that some form of contact be maintained with families of hospice patients for up to 13 months following the death of their loved one. Catholic Hospice far surpasses that minimum. Catholic Hospice has a corps of graduate level clinicians specializing in grief work and each is assigned to a team. All of Catholic Hospice’s bereavement counselors are affiliated with the Association of Death Education and Counseling. Bereavement counselors preside over all bereavement activities and all family members are invited to establish a clinical relationship with that counselor to address his or her grief. Many hospice families experience what is called “complicated grief” -- grief that is particularly emotionally or spiritually complex due to the relationship with the patient, and much of the counseling work addresses those issues so that a survivor is not carrying regrets or guilt. Often a family member experiencing complicated grief will continue to work with the clinician over the course of several months. Catholic Hospice also provides bereavement services and support groups to the community. Such support groups are in parishes, nursing homes, and various community and institutional settings. The groups are open to members of the community as well as family members of patients and meet for a set period of time, usually 10 to 12 weeks. This allows Catholic Hospice to spread its resources throughout the community for maximum accessibility and responsiveness. On other occasions, bereavement counselors have visited local schools following student suicide. There the counselors not only intervened with the children trying to understand that loss, but provided education to school staff on responding to the children’s needs. A memorable example involved a group of accountants at the Loews Hotel in Miami Beach who were attending a workshop during the 911 attacks and lost many of their colleagues. Counselors were rotated to provide blocks of time over a two-day period to help those accountants with their grief. Catholic Hospice has conditioned its CON on providing community bereavement support groups at senior housing facilities in Broward county and is prepared to successfully provide those programs. CHS and Holy Cross have already volunteered its facilities for such programs. Catholic Hospice provides “Camp Hope” an annual bereavement camp for children who have experienced the loss of a family member, usually a parent. Camp Hope is volunteer-driven and provided free of charge to children throughout the community, not just children of hospice patients. The camp receives many referrals through the Dade County School system. The children are taken to a local camping facility and are provided a variety of therapeutic activities and recreation –- all presided over by professionals in their respective specialization. In the past, people from Broward have participated in the camp as a result of requests from within the community. Catholic Hospice has bereavement services policies that can be implemented in Broward County upon approval. Education Education is a strength of Catholic Hospice, including education of its own employees, its contract facilities, physicians and other health care providers, as well as the community at large. Catholic Hospice has a full-time nurse educator who is certified in hospice and palliative care nursing. Each employee participates in a week-long orientation familiarizing himself or herself with Catholic Hospice and the diverse ethnic and religious community he or she is about to serve. Clinical staff may be oriented for an additional week or more. Following orientation, there is a new employee follow-up and periodic additional training. As part of the orientation process and thereafter in continuing education presentations, the employees demonstrate competency with various skills. The competency packet also contains a post-test and, if an individual has a particularly low post-test score, a copy is sent to that person’s supervisor for follow-up. The goal is for employees to feel comfortable training patients and families about hospice. During the orientation, employees are trained on how to perform a cultural assessment for any patient who chooses Catholic Hospice’s Services. This includes general information on tendencies within certain ethnic groups and leaving one’s assumptions and beliefs “at the door” so that each individual patient may express his or her beliefs. The goal of Catholic Hospice is for each employee to be able to engage in active listening to help differentiate the needs of individuals within the Hispanic population or any other population. The education manager is also responsible for two hours of continuing education for the interdisciplinary staff every month. The education manager holds a provider number issued through the Board of Health, Division of Medical Quality Assurance for providing education for nurses, social workers and mental health workers; accordingly, all presentations at Catholic Hospice are geared toward allowing professional staff to accumulate medical education credit. Medical education is likewise offered to contract and non-contract facilities in the community for their staff. The nurse educator oversees university students who come to Catholic Hospice as part of their medical education training. Catholic Hospice has enjoyed long-standing relationships with various universities, including the University of Miami, Florida International University, and Barry University. Catholic Hospice has contracts with each university for nursing students and other health and counseling program interns for rotations with Catholic Hospice as part of the students’ community experience and training in end-of-life care. Working with the students provides Catholic Hospice valuable information on how it is perceived within the community it serves. Outreach Catholic Hospice recognizes that cultural factors can prevent access to hospice care and is organizationally sensitive to those factors providing employee education to counteract them -– such as the cultural assessments described earlier, through facility education with its contracted facilities and insurance providers, and through community outreach to the general population. Catholic Hospice’s goal is to reduce barriers to hospice care overall. For example, Catholic Hospice is part of a pilot program, “Partners in Care,” to provide palliative care services for children with life-limiting illnesses. Catholic Hospice has two community liaisons who conduct community outreach with hospitals, nursing homes, physicians and various civic organizations to provide presentations on hospice. As a condition to its CON, Catholic Hospice has agreed to provide outreach to Hispanics and persons under 65 and to provide bereavement support groups and has a proven ability to do so. Much of Catholic Hospice’s outreach includes persons under 65 years old and Hispanics. The composition of participants in facility education, insurance provider in- services, caregiver education initiatives, support groups, community health fairs, parish and community bereavement groups are attended by persons under 65. Catholic Hospice has also provided care outreach and training for lay ministers within the parishes to increase sensitivity to specific needs of patients facing illness. Brochures and other materials are available in English and Spanish. Providing outreach in existing community facilities increases Catholic Hospice’s visibility in the community. Most of Catholic Hospice’s patients are Hispanic and the majority of those persons are Roman Catholic. As an organization of the Archdiocese, the individual parishes throughout Dade County have been opened for Catholic Hospice to visit Mass or smaller groups to provide education on end of life care and hospice. Catholic Hospice has a radio show on Radio Paz, the Archdiocese’ radio station. Called “Caminando Contigo” or “Walking with You,” the show is presented in Spanish each Monday from 2:30 p.m. to 3:00 p.m. The program is an educational presentation on hospice services broadcast throughout Miami-Dade and Broward County into West Palm Beach. In addition, Catholic Hospice’s community relations manager regularly appears on public television shows to speak about hospice services. Catholic Hospice engages in modest fundraising to supplement its mission of caring for all those in need. Catholic Hospice’s two main fundraisers are an annual golf tournament and the Tree of Hope where people contribute by purchasing or sponsoring memorial holiday ornaments. Catholic Hospice can successfully duplicate its outreach and fundraising programs in Broward County upon approval. Different Orientations Catholic Hospice's organization is "faith based." “Faith based” is not just providing chaplain services. All hospices are required to do so. Rather, "faith based" is the spirit of mission that drives every decision at Catholic Hospice from the top of the organization down. Catholic Hospice’s stakeholders are the community it serves and its employees. Palm Coast's affiliation with Odyssey gives it different orientation from Catholic Hospice's. A for-profit company such as Odyssey Health Care has a fiduciary duty to increase profits for its shareholders and will be motivated by that fiduciary duty or “mission” of profitability. Although organized as a not-for-profit, Palm Coast nevertheless shares that mission of profitability acting like a for-profit company. For example, Palm Coast offers stock options to its employees. Palm Coast’s billing and banking are done at the Dallas headquarters, consolidated with the ledger for Odyssey Healthcare. Palm Coast pays a management fee to Odyssey because that is the only way for the cash to flow upstream under Florida law and Palm Coast’s assets, along with those of other Odyssey programs, secures a 20-million dollar line of credit for Odyssey. Odyssey assesses a management fee of seven percent of net revenue monthly therefore the higher net revenue to Palm Coast the greater the contribution to Odyssey's profitability. Currently, the profits from Palm Coast are used to develop additional hospices in Florida. In contrast, Catholic Hospice is likely to spend more on patient care and provide the choice of faith-based hospice services that currently do not exist in Service Area 10. Palm Coast's Community and Employee Education When entering a community, Palm Coast hires a team of community education representatives ("CERs"), along with the program's general manager, their function is to primarily provide day-to-day education to the community at large. It is not unusual to find people in the community who are completely unfamiliar with hospice and its benefits. The CERs concentrate on educating referral sources, not just on the availability of hospice services, but also patient eligibility and provide information not only on cancer but the numerous non-cancer terminal diseases for which hospice care is potentially appropriate. The Palm Coast CERs seek to educate the members of the medical profession at hospitals, nursing homes, and assisted living facilities, doctors offices, professional buildings, as well as educating those within the community, by speaking at churches, community organizations, Kiwanis clubs, rotary clubs, Chambers of Commerce and other community activities. The CERs utilize any opportunity to educate about hospice in general (not necessarily regarding Odyssey or Palm Coast), because as evidenced by the increasing number of patients accessing hospice care and current penetration rates, the service is still underutilized and to some degree misunderstood. Palm Coast - Broward plans to initially hire a minimum of three CERs to concentrate its efforts on community education in Broward before it serves its first patient. The CERs travel throughout the community and evaluate the areas in which the existing providers are providing sufficient hospice education, and where they may be lacking, seeking to find the holes in the system or gaps in the network, in which to offer their services. Palm Coast provides education to employees of nursing homes, hospitals, and assisted living those facilities, many of whom require bereavement counseling following the death of patients. The CERs have also proven to be a resource to grief stricken individuals seeking hospice care; if a patient or family calls and inquiries, the CERs help walk them through the process of how one is admitted to hospice care. The Palm Coast educational team is comprised of an array of individuals, including the receptionist, nurse, social worker, chaplain, home health aides, and volunteers, along with the CERs; everybody involved talks about hospice and educates those in the community. With respect to Palm Coast's interdisciplinary team members, there is ongoing follow-up training in each office by the Quality Improvement Manager, in addition to monthly educational sessions company-wide. As one educational tool, Odyssey and Palm Coast have developed pocket-sized "Slim Jims," which are clinical indicators or educational reference material that detail various disease processes and the criteria that would make an individual hospice appropriate. The front of each individual "Slim Jim" details the clinical indicators for each terminal disease, and the flip slide illustrates the benefits hospice care through Odyssey or Palm Coast could provide. These clinical indicators, incorporating CMS guidelines, have been successful in determining when hospice is appropriate for patients. The clinical indicators are regularly updated, along with any new guidelines published through CMS. Palm Coast in Miami has used the "Slip Jims" in helping to educate families on disease progression, what to expect, and the general characteristics of hospice care. In order to meet the cultural needs of the community, the laminated cards are currently being translated into Spanish, for use with Hispanic patients and families in Miami-Dade, Broward, and any other Palm Coast or Odyssey location with a significant Hispanic population. All hospice disciplines, including the members of the interdisciplinary team and the CERs utilize the "Slim Jims" to educate the community on various levels. As an educational tool to assist in the orientation and continual education of its employees, Palm Coast has access to "Odyssey University," as online program created by Odyssey that allows employees to participate in various educational courses and nursing modules, specifically tailored to each individual hospice professional (i.e., nursing manager, chaplain, social worker, etc.). There are a multitude of different modules, spanning the realm of topics from clinical to management. Palm Coast's Affiliation with Nova Southeastern University Palm Coast has executed a memorandum of understanding with Nova Southeastern University ("NSU"), by which it will be a partner with NSU's college of osteopathic medicine, geriatric program, dental program, and law program. The purpose of the partnership will be to develop ways for NSU's students to rotate through or to work with Palm Coast's patients and families. As the largest independent institution of higher education in Florida, and the seventh largest nationally, NSU educates its students using non-traditional methods, including, but not limited to utilizing external clinical settings to supplement what is taught in the classroom with real life settings and situations. The affiliation will create clinical settings for NSU's students that will afford benefits to Palm Coast, NSU, and the community at large. The program will offer the College of Osteopathic Medicine student clinical rotations with Palm Coast's patients; it will offer a Mental Health Counseling Program with NSU's Center for Psychological Studies; it will provide College of Pharmacy students experience with elderly patients; it will provide College of Dental Medicine with the opportunity to ease oral pain of a patient exacerbated by tooth decay, gum disease, or other "ortho-ailments;" and it will allow the Shepard Broad Law Center student to work with Palm Coast patients, reviewing forms and policies for legal sufficiency and accuracy. Patient benefits from the affiliation between Palm Coast and NSU include, but are not limited to: relief of symptom distress, understanding of the plan of care, assistance in coordination and control of care options, simultaneous palliation of suffering along with continued disease modifying treatments, ease of transition to hospice, and providing practical and emotional support for exhausted family caregivers. Odyssey, and specifically Ms. Toole, Odyssey Regional Vice President of the Southeastern Region, has established similar beneficial relationships with universities such as University of Alabama Birmingham, working together and involving them in certain aspects of the patient's care; a similar arrangement will be developed in Broward County upon approval. Ms. Toole, the expert witness in the fields of hospice operations and hospice administration, has observed a significant benefit to not just the hospice program, but to the students as well, providing an experience of dealing with patients with terminal illness and dying in the hospice setting. Odyssey and Palm Coast Charity Funds and Foundations As hospice staff cares for their patients, non- hospice needs are frequently identified; Odyssey has established the "Special Needs Fund" to assist their patients or families with extraordinary requests and needs. As an affiliate of Odyssey, Palm Coast has access to Odyssey's Special Needs Fund, from which it can request money for use to benefit patients in each local program. The fund is designed to provide assistance situations, for example, when it is cold and a patient is unable to pay his/her heating bill, or when the patient has no money available to purchase groceries. In those situations, Palm Coast request funds from the company, along with the justification, and that money will be provided, as needed. In 2005, over $60,000 in Special Needs Funding was use to meet the needs of 278 families. Palm Coast Bereavement Groups The Palm Coast team continues to care for the family even after the patient's death. In actuality, this program begins with an assessment upon admission of the patients into hospice. During the initial assessment, the registered nurse assess the grief of the family, and provides anticipatory "pre- bereavement" services based on need. Palm Coast seeks to identify people early on who are likely going to have a more difficult time in grieving the inevitable loss, so a plan for the family unit is initiated and included in the patient's plan of care. A bereavement plan of care is initiated within 72 hours of a patient's death. The bereavement coordinators offer support groups and memorial services for those who have had a loss, regardless of whether their loved ones were on hospice with Palm Coast, or never admitted to hospice at all. Support groups and memorial services offered by Palm Coast are held in nursing homes and ALFs, both for the facility as a whole and anyone who has had a loss, including staff members or residents, regardless of whether they were on hospice; it is not only those involved in hospice but for people in the community as a whole who may benefit from bereavement. Odyssey operates, "SKY Camp," a weekend camp in Amarillo for children who have experienced a loss, and is open to families of all Odyssey patients, as well as any other individuals who may inquire. Funded by the Odyssey Healthcare Foundation, SKY Camp is a free weekend camp for children ages seven to seventeen grieving the death of a loved one. The camp provides the children an opportunity to feel safe, nurtured, and most importantly, not alone, as many do in their time of grieving. Three Offices vs. One CHS will contract with Catholic Hospice for office space in Broward County at a fair market rate allowing Catholic Hospice to rapidly and efficiently establish an office centrally located within Broward County. This contrasts with Palm Coast’s plans for three offices. "[H]ospice care is primarily a home-based service, so the number of offices is not of particular importance[;] . . . [the number of] offices can be as many or as few as the provider would like . . . as long as they have at least one." Tr. 1409. The number of offices may play a part in rural areas in a multi- county service area. But Broward County is densely populated making more than one office an insignificant factor. Furthermore, because hospice services are provided in the home and hospice education can occur in any community facility, additional offices are not only not necessarily beneficial, they may be inefficient. For example, Palm Coast proposes to spend substantially more on rent and administrative costs than on patient care, whereas Catholic hospice spends on patient care and has low rent and administrative costs –- providing more benefit to the community consistent with its mission. Access: A Difference in Emphasis Catholic Hospice fulfills its mission to all patients regardless of age, sex, ethnicity, religious belief or lack of belief, ability to pay or level of need for care. While Catholic Hospice has an undeniable appeal to the Hispanic population that is predominantly Roman Catholic and an appeal to other Roman Catholics eligible for hospice services in Service Area 10, on the bases of age and diagnosis, Catholic Hospice does not emphasize service to "65 and over non-cancer" patients as does Palm Coast. In contrast to Palm Coast, Catholic Hospice outreach efforts are directed at persons under 65 and Hispanics. Consistent with conditions of Medicare participation that require hospice providers to accept all patients who meet eligibility requirements regardless of disease or ability to pay, Palm Coast also treats all patients. But Palm Coast emphasizes serving non-cancer patients 65 and older and seeks to emphasize penetration of the market segment represented by the population seeing it as underserved. Many non-cancer patients 65 and older in need of hospice service are recipients of care in long-term care settings such as assisted living facilities, supportive housing type programs and nursing homes. Odyssey has had great success in developing these programs. Such development as a goal for Palm Coast is consistent with Palm Coast's belief that non- cancer patients 65 and older are underserved. Yet, patients in Broward who are non-cancer patients 65 and older appear to be served as well as patients in other hospice-typical groups based on age and diagnosis. It is apparent that Vitas Healthcare-Broward, an existing hospice provider in Broward County, for example, already places an emphasis on serving the "65 and over non-cancer" patient that Palm Coast targets as underserved. Furthermore, Vitas has had greater success in serving this population relative to other hospice-typical groups than the three other existing providers in Broward County. This is illustrated by the chart at page 37 (Bate-stamped 00038) of Catholic's application proved up by the testimony at hearing of Mr. Cushman. The 2005 data on the chart shows Vitas Healthcare- Broward, a for-profit hospice organization like Palm Coast's parent, to be the dominant hospice provider in Service Area 10. Its market share for calendar year 2005 is 74 percent, dwarfing the market shares of the three other providers led by Hospice by the Sea at 13 percent with less than one-fifth of total market share enjoyed by Vitas. Dividing market share by age ("Under 65" and "65 and Over") and diagnosis (Cancer and Non-cancer), as is done by the Hospice Programs Rule, the highest market share for Vitas is in the "Non-cancer 65 and Over" category" at 77 percent. As Mr. Cushman explained: [Market share]'s nine percentage points less for those who have diagnoses other than cancer who are under 65; it's seven percentage points less for cancer diagnosis for elderly patients; and again, nine percentage points less for the patients with cancer under 65. . . . [T]he significance … is that the patients who are … the least costly to care for are the noncancer patients who are elderly. And that is the area where the for-profit program in Broward County [Vitas] Tr. 647. has sought and obtained the highest market share. Palm Coast's Claim of Special Circumstances Palm Coast claims that the "65 and Over Non-cancer" population in Service Area 10 is underserved. With regard to Special Circumstances to support approval of hospices, AHCA's rule provides: (4) Criteria for Determination of Need for a New Hospice Program. * * * (d) Approval Under Special Circumstances. In the absences of numeric need identified in paragraph (4)(a), the applicant must demonstrate that circumstances exist to justify approval of a new hospice. Evidence submitted by the applicant must document one or more of the following: 1. That a specific terminally ill population is not being served. Fla. Admin. Code R. 59C-1.0355. Palm Coast did not demonstrate that the "65 and Over Non-cancer" population in Service Area 10 is not being served. To the contrary, Catholic Hospice showed that it is being served by existing providers. Palm Coast's Affiliation with a For-profit Parent Palm Coast's emphasis on the "65 and Over Non-cancer" population in Broward County is consistent with the nature of its affiliation with its for-profit parent, Odyssey. If a hospice can spend less per patient day on patient care, it can be more profitable. Non-cancer patients tend to be less costly. Further, hospice care is generally more expensive at the beginning of care -– when the patient is being set up on a plan of care including medications, equipment and the like, and at the end of care when the patient and family may require additional visits and medications. Therefore, a hospice can increase its profits by increasing the number of patients with longer lengths of stay. Non-cancer patients over 65 tend to have longer lengths of stay. Thus, by heavily marketing to non-cancer patients over 65, Palm Coast can maximize its profitability. It will do so, however, to the detriment of other providers in its service area at the same time that the dominant provider in the service area is already doing so. Since Medicare reimbursement for hospice services is based on the assumption that all hospices will accept all patients, hospice programs will be able to redistribute costs from costly patients by having a balance between the more costly and less costly patients. When a hospice takes a disproportionate number of profitable patients, however, it leaves only the more costly patients for other providers who are not able to distribute costs over a full spectrum of expensive and less expensive patients. The effect is magnified because for-profits tend to be larger than not for profits. Indeed, Palm Coast’s new Dade program has ramped up quickly and doubled its budget projections. Palm Coast’s focus on profitability will negatively impact existing providers within the service areas it operates. Catholic Hospice, on the other hand, is likely to serve populations in the four categories of "under 65 non- cancer," "under 65 cancer," "65 and over non-cancer," and "65 and over cancer" without an emphasis on the more profitable "65 and over non-cancer" population segment, the group that Palm Coast will emphasize serving in order to maximize profits for its parent, a for-profit organization. Community Support for Catholic Hospice Letters of support demonstrates deep support for Catholic Hospice' application. One hundred twenty-five of them were received, a "high number . . . for a hospice program." Tr. 1406. Five were from physicians who indicated a willingness to refer patients to Catholic Hospice; two were from hospitals and one from a skilled nursing facility. In addition, Vitas recommended that if an additional hospice program for Broward County were to be approved that it should be Catholic Hospice, an "unusual" letter of support in Mr. Gregg's view. See id. CHS, itself, has received numerous requests for Catholic Hospice in its Broward facilities and has had to make other arrangements for those in its nursing homes, ALFs, and other facilities in Broward County since Catholic Hospice is not available in Broward County. Due to this recognized need, CHS has openly supported Catholic Hospice’s application and, through administrators of its various Broward health and elder care facilities, has provided letters of support, including letters from the administrator of St. John’s Nursing Center, the administrator of St. Joseph’s Residence, an ALF, the administrator of St. Anthony’s Rehabilitation Hospital, and an administrator at the HUD elderly housing facilities for CHS, including the five in Broward County. Similarly, Holy Cross Hospital is highly supportive of Catholic Hospice’s application and the need for a faith-based option for hospice in Broward County. Like CHS, Holy Cross intends to contract with Catholic hospice for inpatient hospice beds if Catholic Hospice’s Broward program is approved. Holy Cross has the capacity to provide more hospice inpatient beds without having to disrupt contracts and relationships it currently has for hospice beds; thus, relationships with existing providers will not be impacted. Physicians at Holy Cross support Catholic Hospice’s application, noting in particular Catholic Hospice’s sensitivity to the needs of Hispanic patients,--a growing segment of the population in Broward County-- and will refer patients to Catholic Hospice if it is approved. Memorial Healthcare System, a group of five hospitals that comprise the South Broward Hospital District, supports Catholic Hospice’s application noting that it will provide patients with a choice for a faith-based provider and emphasizing Catholic Hospice’s sensitivity to the needs of the Hispanic community and the growing Hispanic population in southern Broward County. Of the existing hospice providers in Broward County, one supports Catholic Hospice’s application and two others prefer Catholic Hospice if a new program is approved. In sum, Catholic Hospice is a diverse, long-term provider with a proven record of quality services and community responsiveness that fits within a continuum of care offered through the Archdiocese. Accordingly, Catholic Hospice can quickly move into Broward County with outstanding community support and improve the situation for residents of Service Area 10 with minimal impact to existing providers.
Recommendation Based on the foregoing Findings of Fact and Conclusion of Law it is RECOMMENDED that the Agency for Health Care Administration issue a final order that approves Catholic Hospice's CON application for a new hospice program in Service Area 10 and denies Palm Coast's CON application for a new hospice program in Service Area 10. DONE AND ENTERED this 26th day of October, 2007, in Tallahassee, Leon County, Florida. S DAVID M. MALONEY 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 26th day of October, 2007.
The Issue The issue is whether the Agency for Health Care Administration should approve Petitioner’s application for a Certificate of Need to establish a new hospice program in Service Area 8A.
Findings Of Fact Parties (1) Hope Hope is a not-for-profit corporation and the applicant for the CON at issue in this proceeding, CON 9692. Hope has operated a hospice program in SA 8C since 1981. It is the sole provider of hospice services in SA 8C. SA 8C consists of Lee, Glades, and Hendry Counties. Hope’s SA 8C program is one of the largest hospices in Florida. It had more than 3,200 admissions in calendar year 2003. Hope’s penetration rate in SA 8C has consistently been among the highest rates in Florida. In calendar year 2002, its penetration rate was 54.7 percent, which was the second-highest rate in Florida and well above the statewide average of 43.8 percent. Hope’s penetration rate increased to 58.5 percent over the 12-month period ending June 30, 2004, which was again the second-highest rate in the state and was still well above the statewide average of 49.9 percent. Hope has its main office and several branch offices in Lee County. It also has branch offices in Hendry County (opened in 1996) and in Glades County (opened in 2001). Hope has three “hospice houses” in Lee County in which it provides inpatient and respite care. It has a total of 56 inpatient beds and 20 residential beds in those “hospice houses.” Hope also has contracts for inpatient care at Lehigh Medical Center (in eastern Lee County near the border of Glades and Hendry Counties) and at Hendry Regional Medical Center (in Clewiston). Hope’s SA 8C program is certified by Medicare and Medicaid, and it is accredited by the Community Health Accreditation Program (CHAP). The CHAP accreditation, which runs through 2006, includes citations for excellence in staff education and clinical services. Hope adheres to the guidelines and the standards of practice issued by the National Hospice and Palliative Care Organization (NHPCO), which is the national trade association of hospices. The NHPCO guidelines and standards of practice are not incorporated into any federal or state regulation. Hospices are not required to comply with the guidelines or the standards of practice, and not all do. The NHPCO guidelines advocate the “open access” philosophy by stating that “[h]ospices should structure admission policies that are inclusive and make hospice services available to all who meet eligibility requirements.” The goal of “open access” is to remove or minimize all barriers to accessing hospice care, including barriers associated with the availability of treatments such as palliative chemotherapy and palliative radiation (hereafter "palliative chemo/radiation"). The “open access” philosophy is not yet the standard of practice in the hospice industry. It is an expectation or benchmark that the industry is moving towards. Hope has won several national awards, including the Circle of Life Citation of Honor (2003) and Circle of Life Award (2004) from the American Hospital Association and NHPCO for its “open access” policies and its “innovative program that improves the care of individuals at the end of life and its strategy to make services available to anyone who needs hospice care.” Hope admits all hospice-eligible patients without regard to their ability to pay or their payer status. Hope actively engages in outreach and education activities in SA 8C, both to referral sources and to the community at large. It distributes brochures and newsletters in the community, and its staff members are involved in and make presentations to various community organizations. Hope provides services in SA 8C in addition to the hospice services that it provides to its patients. For example, Hope provides grief counseling to members of the community who have suffered sudden loss, such as the death of a family member in an automobile accident; it provides counseling and support to crime victims; and it operates a camp for terminally-ill children and children who have lost a family member, whether or not the family member was in hospice. A portion of the funding for the community and victim counseling services provided by Hope comes from grants and donations. The remainder of the funding, which is “about $2 million” annually, comes from Hope. Hope is a financially-sound organization. The audited financial statements included in Hope’s CON application reflect that, as of September 30, 2002, Hope had current assets of $13.2 million, including almost $9.65 million in cash and unrestricted investments. As of September 30, 2004, Hope’s current assets had increased to $17 million, but its cash and unrestricted investments had declined to $6.16 million. Hope is a profitable organization. The audited financial statements in Hope’s CON application reflect that it had operating income of $4.65 million in fiscal year 2001 and $3.45 million fiscal year 2002. Its “excess of revenues over expenses” (i.e., net income) was $4.28 million in fiscal year 2001 and $3.13 million in fiscal year 2002. Hope is a successful fundraising organization. The audited financial statements in Hope’s CON application report “cash received from donors” in the amount of $2.7 million in fiscal year 2001 and $2.87 million in fiscal year 2002. Hope’s operating margin has declined every year since 2002, which means that Hope is having to rely more heavily on contributions to subsidize its operations. In fiscal years 2003 and 2004, Hope’s contributions exceeded its operating income, which means that it had negative operating margins in those years. Nevertheless, Hope still had net income of approximately $2.8 million in fiscal year 2004. Hope is aggressively seeking to expand its service area. If its expansion efforts are successful, Hope will more than double the geographic size of its service area and it will triple the number of counties that it serves. Starting in the April 2003 batching cycle (in which CON 9692 was filed), Hope filed CON applications in four successive batching cycles seeking to establish a hospice program in SA 8A. In the same batching cycles, Hope filed successive CON applications seeking to establish a hospice program in SA 8B (Collier County). In the April 2005 batching cycle, Hope filed an application to establish a new hospice program in SA 6B (Polk, Hardee, and Highlands Counties) in response to a published need for one new program in that service area. Hope’s first SA 8B application, CON 9695, was the subject of DOAH Case No. 03-4067CON (hereafter “Hope 8B-I”). The Agency’s final order denying that application is on appeal in Case No. 1D05-2876. Hope’s “follow up” applications in SA 8A and SA 8B were all preliminarily denied by the Agency, and Hope’s challenges to the denial of those applications are pending at DOAH. The record does not reflect the Agency’s action on Hope’s SA 6B application, but Hope states in its PRO (at page 61) that the application was preliminarily approved by the Agency. (2) HSWF HSWF is a not-for-profit corporation established in 1980. HSWF provides hospice services in SA 8A (Charlotte and DeSoto Counties), SA 8D (Sarasota County), and SA 6C (Manatee County), under a single license issued by the Agency. It is the sole provider of hospice services in each of those service areas. HSWF has over 450 employees and 1,800 volunteers. HSWF had a total of 4,552 admissions in its three service areas in calendar year 2002, with 967 (or 21.2 percent) of those admissions coming from SA 8A. HSWF’s average daily census (ADC) was approximately 800 patients as of the time of the final hearing. HSWF has had the authority to provide hospice services in SA 8A since at least October 1993, and it has been the sole provider of hospice services in SA 8A since 1998 when it acquired the competing SA 8A hospice program operated by the Bon Secours organization.1 HSWF has its main office and several branch offices in Sarasota County. It also has branch offices in the other counties that it serves, including Charlotte and DeSoto Counties. In Manatee County, HSWF has a total of 12 hospice inpatient beds in two “hospice houses.” It has CON approval for an additional eight beds at its Bradenton “hospice house.” In Sarasota County, HSWF has a total of 18 hospice inpatient beds in two “hospice houses.” The Venice “hospice house,” which has six hospice inpatient beds is approximately 17 miles from Port Charlotte. In Charlotte County, HSWF has an administrative office and a “hospice house.” At the time of the final hearing, the “hospice house” was a six-bed residential facility, but HSWF had recently received CON approval to expand it to a 12-bed hospice inpatient facility. HSWF is also in the process of constructing a seven-bed residential facility and administrative office in the Charlotte County portion of the city of Englewood. In DeSoto County, HSWF leases office space in Arcadia. It recently purchased land in Arcadia on which it intends to construct an administrative office and an 8-bed “hospice house.” HSWF is certified by Medicare and Medicaid. It is seeking CHAP accreditation. HSWF complies with the staff-to-patient ratios set forth in the NHPCO guidelines. It has begun to embrace the "open access" philosophy, albeit not to the same extent as Hope. HSWF accepts all hospice-eligible patients without regard to their ability to pay or their payer status. HSWF provides services to the community in addition to the hospice services that it provides to its patients. For example, it offers bereavement support groups for members of the community in need of such services; it provides grief counseling to the local schools, when needed; and like Hope, HSWF operates a camp for children who have lost a family member, whether or not the family member was in hospice. HSWF is a financially-sound organization. Its audited financial statements reflect that, as of June 30, 2004, it had current assets of $40.5 million, including approximately $33 million in cash, cash equivalents, and investments. HSWF is a profitable organization. Its audited financial statements reflect that it had operating income of approximately $4.25 million in fiscal year 2002, $3.85 million in fiscal year 2003, and $3.1 million in fiscal year 2004. HSWF was expected to have its first operating loss ever in fiscal year 2005 as a result of the hurricanes that hit southwest Florida in the summer of 2004 and disrupted HSWF’s operations for several months. Hope is a successful fundraising organization. Its audited financial statements reflect that it received “total support” -- i.e., contributions and donations, memorials, and donated facility usage –- of approximately $4.12 million in fiscal year 2002, $4 million in fiscal year 2003, and $3.95 million in fiscal year 2004. HSWF funds the construction of its “hospice houses” and other capital projects through the significant reserve of cash and investments that it has built-up with donations from the community. Its reserves also enable it to absorb operating losses, such as those caused by the recent hurricanes. (3) Agency The Agency is the state agency that administers the CON program. It also licenses and regulates hospices. The Agency’s duties under the CON program include the calculation and publication of a FNP, which identifies the need (or not) for new hospice programs in each Hospice Service Area in the state. The duties also include reviewing and taking final agency action on CON applications for new hospice programs. Application Submittal and Review and Preliminary Agency Action The FNP published by the Agency for the April 2003 batching cycle identified a need for zero new hospice programs in SA 8A. Hope challenged FNP calculations, but it withdrew the challenge at the outset of the final hearing. Hope timely filed a letter of intent and a CON application in the April 2003 batching cycle. Hope’s application, CON 9692, seeks to establish a new hospice program in SA 8A. Hope’s letter of intent and CON application complied with the technical submittal requirements in the applicable statutes and Agency rules. The application was properly accepted for review by the Agency. The Agency comparatively reviewed Hope’s CON 9692 with the CON application filed by Heartland (CON 9693), which also sought to establish a new hospice program in SA 8A. The applications filed by Hope and Heartland were simultaneously, but not comparatively, reviewed with the CON application filed by HSWF (CON 9694) to establish a 12-bed freestanding hospice inpatient facility in SA 8A. The Agency’s review of the CON applications complied with all of the applicable statutes and Agency rules. The Agency’s review culminated in the issuance of a State Agency Action Report (SAAR), which recommended denial of the applications filed by Hope and Heartland and approval of the application filed by HSWF. The Agency published formal notice of its decisions on the CON applications in the September 12, 2003, volume of the Florida Administrative Weekly as required by the statutes and the Agency's rules. Hope and Heartland timely challenged the denial of their respective applications. Hope also challenged the approval of HSWF’s application. Heartland withdrew its challenge to the denial of its application prior to the final hearing, and it did not participate in the hearing in any way. Jurisdiction over Hope’s challenge to the approval of HSWF’s application was relinquished to the Agency through an Order issued in this case on January 4, 2005. The Agency issued CON 9694 to HSWF through a final order dated June 3, 2005. The final order was not appealed. The Agency reaffirmed its opposition to Hope’s application at the final hearing through the testimony of Jeffrey Gregg, the Bureau Chief of the Agency’s CON program. Hospice Care, Generally Hospice care is provided to patients who are at or near the end of their lives. To be eligible for hospice care, the patient must have been diagnosed with a terminal illness from which the patient is expected to die within six months if the disease runs its normal course. Hospice care is considered palliative care rather than curative care. The purpose of palliative care is to provide comfort to the patient rather than to cure the patient. Curative care is inconsistent with the hospice eligibility requirement that the patient's illness be terminal. Hospice care includes a comprehensive range of services provided by physicians, nurses, social workers, chaplains, therapists, and volunteers, to address the psychosocial and spiritual needs of the patient in addition to the physical pain associated with the dying process. Hospice care also includes services provided to the patient’s family, including grief counseling during the dying process and after the patient’s death. Hospice care is collaboratively provided through care teams, or interdisciplinary teams (IDTs), which are composed of individuals in the various disciplines identified above as well as the patient and his or her family. The IDT is responsible for developing and implementing the plan of care for the patient. There are four general types or “levels” of hospice care: routine home care, continuous care, inpatient care, and respite care. More than 80 percent of all hospice care is routine home care, which is provided to the patient where he or she resides (e.g., home, long-term care facility, etc.). Medicare pays a per diem rate to the hospice based upon the level of care being provided. The hospice receives the per diem rate for each patient, whether or not services are provided to the patient on a given day. Medicare-certified providers, such as Hope and HSWF, are required to comply with the Conditions of Participation in the Medicare regulations, 42 CFR Part 418, in order to receive reimbursement from Medicare for the hospice services that they provide to their patients. Hope and HSWF are also required to comply with the state licensure requirements in Part IV of Chapter 400, Florida Statutes, and Florida Administrative Code Rule 58A-2. The Medicare regulations require hospice providers to directly provide certain “core” services, including nursing, social work, and counseling. Other services, such as physician services, therapies, and medications, may be provided through third-parties pursuant to a contract with the hospice. The Medicare regulations make the hospice responsible for all medically necessary care and services related to the patient’s terminal illness once the patient elects the Medicare hospice benefit. Hospices are required to admit hospice-eligible patients without regard to the patient’s ability to pay, and, as stated above, Hope and HSWF each do so. Hospice Service Area 8A Demographics and Penetration Rates There are similarities between SA 8A, served by HSWF, and SA 8C, served by Hope. However, there are also material differences between the two service areas that undercut Hope’s contention that the differences in the penetration rates in the service areas are solely attributable to differences in the management and operation of HSWF and Hope. For example, the population of SA 8A (182,190) is significantly smaller than the population of SA 8C (519,395); SA 8A has a lower projected five-year growth rate (11.3 percent) than does SA 8C (14.4 percent); SA 8A is less densely populated (125 persons per square mile) than is SA 8C (170 persons per square mile), even though SA 8A has considerably less land area (1,457 square miles) than does SA 8C (3,046 square miles); and resident deaths increased at a considerably slower rate in SA 8A (four percent) between 1996 and 2001 than they did in SA 8C (15 percent). These demographic differences explain, at least in part, the lower penetration rates in SA 8A as compared to SA 8C. In 2002, which is the period reflected in the applicable FNP calculations, the overall penetration rate in SA 8A was 40.5 percent. That rate was slightly lower than the statewide average of 43.8 percent, and was significantly lower than Hope’s 54.7 percent penetration rate in SA 8C. The overall penetration rate in SA 8A increased to 47.68 percent in 2003, which was almost the same as the 47.75 percent statewide average, but was still lower Hope’s 55.86 percent penetration rate in SA 8C. The overall penetration rate in SA 8A has continued to increase. For the 12-month period ending June 30, 2004, the overall penetration rate in SA 8A was 53.6 percent, which was higher than the statewide average of 49.9 percent and was only slightly below Hope’s 58.5 percent penetration rate in SA 8C. The number of resident deaths in SA 8A is projected to increase to 2,645 for the 12-month period ending June 30, 2005, which is the planning horizon applicable to this case. That is a 10.7 percent increase over calendar year 2001, when there was a total of 2,389 resident deaths in SA 8A. HSWF’s Existing SA 8A Program HSWF's efforts to develop the SA 8A market began in earnest in July 2000 when HSWF hired its current president and chief executive officer, Marge Maisto. Under Ms. Maisto’s leadership, HSWF implemented a number of initiatives designed to enhance the services provided by HSWF, particularly in SA 8A. First, HSWF undertook efforts to strengthen its medical staff. It hired a Vice President of Medical Affairs to work with the clinical medical director, and it began hiring full-time associate medical directors instead of contracting with physicians on a part-time basis. HSWF now employs eight full-time physicians who are board certified in hospice and palliative care and other specialties. The physicians are members of the IDTs and they participate in the care planning for patients. They also make patient visits, which some of the part-time contract physicians did not do. Three of the physicians -- Drs. Martin, Ray, and Gutherie –- are assigned to SA 8A. They were hired in June 2003. Second, HSWF formed dedicated IDTs to serve patients residing in long-term care (LTC) facilities. The LTC teams began serving patients in August 2003. The planning for the dedicated LTC teams began as early as November 2000, and the decision to form the teams was made in March 2003. HSWF hired a physician, Dr. Tuck, to serve as the “medical director” for the LTC teams in June 2003. HSWF has three dedicated LTC teams, including a team that serves the LTC facilities in Charlotte and DeSoto Counties. The team includes Dr. Tuck, nurses, social workers, certified nurse assistants, chaplains, a volunteer coordinator, and others. The LTC team serving Charlotte and DeSoto Counties had a census of approximately 50 patients at the time of the final hearing. There are approximately 10 LTC facilities in SA 8A, but some of the facilities are still closed as a result of damage caused by the 2004 hurricanes. Third, HSWF implemented an outreach and education program designed to strengthen its relationships with local physicians since they are the primary referral source of hospice patients. The program included the hiring of “physician liaisons,” who are responsible for networking with local physicians. The liaisons’ responsibilities initially included “learning about the physician offices, what their barriers were to referrals and how [HSWF] could better serve them,” but the responsibilities evolved into “provid[ing] education to physicians and their office staff regarding [HSWF’s] scope of services, as well as a better understanding of the hospice concept and mission.” HSWF hired a physician liaison in March 2002 to cover Venice and Port Charlotte. It hired another liaison in November 2002 to cover Charlotte and DeSoto Counties. Fourth, HSWF created Community Advisory Councils in each of the counties that it serves (including Charlotte and DeSoto Counties) to “get closer with the community and receive feedback and guidance from [the community] on how better to serve them, how better to educate the community at large about hospice services . . . .” The creation of the Councils was an element of HSWF’s 2001-04 Strategic Plan, which was prepared in May 2001. Fifth, HSWF developed admission guidelines to memorialize its policies regarding the admission of patients on palliative chemo/radiation or other therapies that, although developed to be curative, can be use to palliate symptoms and improve the patient’s quality of life. Sixth, HSWF sought and received a CON to convert and expand the "hospice house" in Port Charlotte from six-bed residential facility to a 12-bed hospice inpatient facility. The CON application was filed in the same batching cycle as Hope's CON 9692, and the CON was issued in June 2005. Although these initiatives address several of the issues that were identified as “special circumstances” in Hope’s CON application, filed in July 2003, the evidence was not persuasive that the initiatives were undertaken in response to Hope’s application as Hope contends. To the contrary, the evidence establishes that these initiatives were at least in the planning stages prior to the time that Hope filed its CON application for a new SA 8A hospice program, and that the implementation of the initiatives was ongoing at the time Hope filed its application. The implementation of these initiatives contributed to the significant growth in admissions experienced by HSWF in SA 8A between 2000 (when it had 793 admission) and 2003 (when it had 1,172 admissions). Over that period, HSWF’s admissions grew by 5.93 percent between 2000 and 2001, by 15.1 percent between 2001 and 2002, and by 21.2 percent between 2002 and 2003. HSWF provides the full continuum of hospice care in SA 8A, including routine home care, continuous care, inpatient care, and respite care. HSWF has contracts with all of the hospitals in Charlotte and DeSoto Counties, which allow HSWF to provide hospice inpatient services in those hospitals. Its “hospice house” in Venice, which is approximately 17 miles from Port Charlotte, is also available for SA 8A patients in need of hospice inpatient services and, as noted above, HSWF will soon have a 12-bed inpatient facility in Port Charlotte. HSWF offers a full range of ancillary or expressive “therapies” to its patients through its Creative Caring and Connections program. The services include touch, art, music, horticulture, aroma, and pet “therapies.” HSWF also has a training program for clowns. It is the only hospice-affiliated clown program in the country. The clowns visit and entertain hospice patients and their families under the premise that, sometimes, laughter can be the best medicine. HSWF’s clown program is recognized by the world’s largest clowning organization but, unlike massage, art, and music therapies, clown “therapy” is not formally recognized as an expressive therapy by any accrediting body. The expressive “therapies” offered by HSWF are provided to patients in order to reduce anxiety or palliate symptoms. They are delivered as part of the patient’s care plan, typically upon the recommendation of the social worker on the IDT. The “therapies” offered by HSWF are provided by trained volunteers from the community, not certified therapists employed by HSWF. Massage therapy, which is one type of touch therapy offered by HSWF, is provided by licensed massage therapists who are volunteers, not employees of HSWF. HSWF relies heavily on “local clergy” to deliver spiritual care to its patients. It does so because it has found that patients are often more comfortable with their own spiritual advisor with whom they are familiar and have a longstanding relationship. HSWF hired a full-time director of spiritual care in October 2002. It has since hired two additional full-time chaplains and has another who provides services on a contract basis. The chaplain who serves SA 8A was hired in March 2003. The staff chaplains coordinate the spiritual care of the patient and are available to patients 24 hours a day, seven days a week. They visit patients, they perform memorial services, and they coordinate the services provided by the “local clergy.” The hiring of staff chaplains by HSWF predated Hope’s application and, as acknowledged by a former HSWF employee who testified on behalf of Hope at the final hearing, it had nothing to do with the filing of Hope’s application. In “late 2004” or early 2005, HSWF implemented a formal training program for “local clergy” regarding the manner in which end-of-life issues are dealt with by hospice staff. The program had been in the planning stages since October 2002 when HSWF hired a full-time director of spiritual care, but it was not considered to be a priority because clergy are generally familiar with the unique needs of dying patients and their families by virtue of their training in divinity school and/or their experience with their own parishioners. Patient admissions at HSWF are handled by a clinician who is part of a centralized admissions team, rather than by a clinician who is part of the IDT serving the geographic region where the patient is located. This streamlines the admissions process and allows the IDT members to focus on the delivery of patient care. HSWF actively engages in outreach and education efforts to the community at large. It distributes newsletters and other publications throughout Charlotte and DeSoto Counties, it participates in community events in those counties, and its staff members speak to community groups and are involved in community activities. Hope’s Proposed SA 8A Program (1) Generally Hope’s proposed SA 8A hospice program is essentially an expansion of the service area of its existing program into the adjacent SA 8C. The policies and procedures that Hope utilizes in its existing program will be implemented in its proposed SA 8A program. The policies include Hope’s commitment to serving patients and families without regard to caregiver status, homelessness, or HIV/AIDS status, and without regard to their ability to pay. The policies also include Hope’s commitment to “open access,” particularly with respect to patients on palliative chemo/radiation. There have been no changes to Hope’s polices related to palliative chemo/radiation since the time of the final hearing in Hope 8B-I. Hope's procedures include protocols used by its nurses to help them manage the most common pain symptoms found in hospice patients, including anxiety, fatigue, and depression, as well as Hope's detailed protocols for pediatric hospice patients. The protocols are used by Hope's nurses as a guide in the assessment of the patient; the identification of treatment options; the administration of medications, when indicated and pre-authorized by the physician; and the facilitation of the nurse’s communications with the physician and pharmacist about the patient’s condition and course of treatment. At Hope, admissions are handled by a member of the clinical staff who will be caring for the patient, rather than a dedicated admission team. This promotes continuity of care. Hope intends to establish an office in Arcadia to serve DeSoto County and an office in Port Charlotte to serve Charlotte County. The offices will be located in leased space. No new construction is proposed. Hope’s existing offices in Cape Coral and Boca Grande will also be used to provide services in Charlotte County. Those offices are in northern Lee County, close to the southern border of Charlotte County. Hope is not proposing any inpatient hospice beds as part of its proposed SA 8A program. It intends to provide inpatient and respite care through contractual arrangements with existing nursing homes and hospitals in SA 8A and/or through the use of the inpatient beds at its "hospice houses" in Lee County. Hope’s proposed SA 8A hospice program will provide a comprehensive range of hospice services, including physician services, nursing services, home health aide services, social services, chaplain services, and all other services required by the state and federal hospice regulations. Hope provides chaplain services to its patients through its staff of 14 full-time chaplains. It also offers training to “local clergy” regarding bereavement and end-of-life issues. Hope recognizes the importance of the patient’s own spiritual advisor being involved in the patient's plan of care, but it does not rely on "local clergy" as heavily as does HSWF. Hope intends to provide services that are not reimbursed by Medicare or other insurance, such as bereavement services and massage, music, art, and pet therapies. Hope provides those services in its existing SA 8C hospice program. The ancillary or expressive therapies provided by Hope (e.g., art, massage, music, pet) are provided by certified therapists employed by Hope rather than community volunteers. The therapists are members of the IDTs. Hope expects to receive the vast majority of its referrals to its proposed SA 8A hospice program from physicians, which is consistent with its experience in SA 8C. Hope projected in its CON application that approximately 83 percent of the patient days at its proposed SA 8A hospice program will be attributable to Medicare patients, approximately six percent of the patient days will be attributable to Medicaid patients, and approximately two percent of the patient days will be attributable to charity patients. The application states that these figures are based upon Hope’s experience in the adjacent SA 8C, and they are reasonable in light of the demographics of SA 8A. Hope projected in its CON application that the total project costs for its proposed SA 8A hospice program will be $148,450. The largest line-item cost -- $56,941 –- is for “preoperational staffing, recruiting and training.” The projected costs are reasonable. Hope intends to fund the costs of its proposed SA 8A hospice program with cash “on hand and/or from operations." Hope has sufficient financial resources to fund the costs of its proposed SA 8A hospice program along with its other ongoing capital projects and proposed service area expansions. Hope projected in its CON application that it will need 12.17 full-time equivalents (FTEs) to staff its proposed SA 8A hospice program in its first year of operation, and that it will need an additional 7.83 FTEs (for a total of 20 FTEs) in its second year of operation. It was stipulated that the projected staffing levels are reasonable and that Hope will be able to recruit the necessary FTEs at the salaries projected in its CON application. In addition to the FTEs projected in the application, Hope will utilize volunteers to “provide both administrative support and patient support functions.” Hope projects that its proposed SA 8A hospice program will have approximately one volunteer per patient, which equates to approximately 30 volunteers in the first year of operation and 45 volunteers in the second year of operation. Hope has been successful in recruiting and retaining volunteers in SA 8C, and it is reasonable to expect that Hope will be able to recruit and retain sufficient volunteers for its proposed SA 8A hospice program. The payer mix and revenues projected in Schedule 7A of Hope's CON application are reasonable, as are the expenses projected in Schedule 8A of the application. Hope projected that its proposed SA 8A hospice program will generate a net loss from operations of $6,303 in its first year, and that it will generate a net profit from operations of $30,688 in its second year. These projections are reasonable. Hope projected that it will have non-operating revenue of $50,642 and $72,111 in the first and second years of operation, respectively. Those amounts include “donations/memorials and bequests” that Hope expects to receive as well as a net of $10,000 from fundraising. These projections are reasonable. The bottom-line “net profit” projected on Schedule 8A of Hope’s application, which includes the net profit from operations and the non-operating revenues, is $38,959 in the program’s first year of operation and $97,799 in its second year of operation. Those amounts are reasonable. (2) Projected Admissions Hope projected that its proposed SA 8A hospice program will have 167, 238, and 280 admissions in its first three years of operation. By the seventh year of operation, Hope projected that its proposed SA 8A hospice program will have 481 admissions. Those figures represent 15 percent (year 1), 20 percent (year 2), 22 percent (year 3), and 30 percent (year 7) of the projected hospice admissions in SA 8A. Those market shares are at the high end of the range of the market shares achieved by other recent start-up hospice programs that entered into single-provider markets. However, under the circumstances of this case, the market shares projected by Hope are likely somewhat understated. In projecting the total number of hospice admissions in SA 8A, Hope assumed that the overall penetration rate in the service area will increase each year based on its presence in the market. The assumption of an increasing penetration rate is reasonable, but attributing that increase to Hope’s presence in the market is not. Indeed, the evidence reflects that penetration rate in SA 8A has been steadily increasing over the past several years to levels consistent with the rates projected by Hope in its application. Hope’s projected admissions translate into ADCs of 30 patients (year 1), 47.2 patients (year 2), 56.8 patients (year 3), and 97.5 patients (year 7). The ADC figures are based upon a 65.7-day average length of stay (ALOS) in year one, which increases to 74-day ALOS in year seven. The ALOSs and ADCs projected by Hope are consistent with Hope’s experience in SA 8C and are reasonable in light of Hope’s “open access” policies. The methodology used to calculate the projected admissions and the ADCs is reasonable, and Hope will be able to achieve its projected utilization levels. Indeed, as more fully discussed in Part F below, the projected admissions are likely somewhat understated because a component of the market share assumptions made by Hope is too low. Impact on HSWF The number of admissions projected for Hope’s proposed SA 8A hospice program –- 167 (year one), 238 (year two), and 280 (year 3) -- also represent the number of “lost admissions” projected for HSWF because HSWF is currently the sole provider of hospice services in SA 8A. The “lost admissions” projected in Hope’s CON application are likely understated because they were based upon the assumption that Hope will get an equal percentage of the cancer and non-cancer patients that would have otherwise been served by HSWF. Specifically, Hope projected that it will get 15 percent of SA 8A’s cancer patients and 15 percent of the service area’s non-cancer patients in the first year of its program’s operation; 20 percent of each category’s patients in its second year of operation; and 22 percent of each category’s patients in its third year of operation. The assumption that Hope will take an equal number of cancer and non-cancer patients from HSWF each year is not consistent with the evidence regarding Hope’s “open access” philosophy towards palliative chemo/radiation or the testimony of oncologists in SA 8A regarding their intent to refer their patients to Hope rather than HSWF if Hope’s application is approved. Indeed, based upon that evidence and testimony, it is reasonable to expect that Hope will, over a relatively short period of time, have a significantly larger percentage of the cancer patients in SA 8A than will HSWF. On the issue of the percentage of cancer patients that Hope will take from HSWF, the projections of HSWF’s health planner are more reasonable than the projections of Hope’s health planner.2 Specifically, it is not unreasonable to expect that Hope will get 25 percent, 50 percent, and 75 percent of the cancer patients in SA 8A in its first three years of operation. The effect of Hope getting a larger percentage of SA 8A's cancer patients is that its total admissions and, hence, HSWF’s “lost admissions” will more likely be 217, 396, and 545 in Hope’s first three years of operation in SA 8A.3 Those admissions translate into projected market shares for Hope of 19.5 percent, 33.2 percent, and 42.8 percent in its first three years of operation, based upon the total number of admissions projected by Hope’s health planner for SA 8A over that period. Those market shares are reasonable and attainable, even after taking into account HSWF’s status as the incumbent hospice provider with considerable community support. The financial impact of the “lost admissions” on HSWF will be significant, both in terms of the lost patient revenues from the admissions and the lost donations and bequests that HSWF would likely have otherwise received from those patients. The financial impact on HSWF is a factor weighing against approval of Hope’s CON application, but the impact is not so significant that it is an independent basis for denying the application. The financial impact of the admissions that HSWF will “lose” to Hope if Hope’s CON application is approved will be largely offset by the annual savings that HSWF expects to realize from the establishment or expansion of hospice inpatient facilities in SA 8A and its other service areas. Moreover, HSWF has sufficient current assets to absorb the financial impact of Hope’s proposed 8A program while continuing its existing operations in SA 8A at their current levels if it chose to do so. Even though HSWF has the financial strength to continue its existing operations in SA 8A at their current levels notwithstanding Hope’s entry into the SA 8A market, it is unlikely to do so. Indeed, HSWF's chief executive officer testified that HSWF would likely eliminate or scale back certain aspects of its SA 8A program as a result of the patient volume that it would “lose” to Hope. Alleged Special Circumstances Hope identified seven “special circumstances” in its CON application, which, in its view, support the approval of its proposed SA 8A hospice program. Disproportionately High “Unmet Needs” The first special circumstance alleged by Hope in its application is that the “unmet need” in SA 8A, as reflected in the FNP calculation, is disproportionately high. The justification offered by Hope for this special circumstance was statistical data. There was no testimony from physicians or community witnesses related to this special circumstance. Under the hospice CON rule, Florida Administrative Code Rule 59C-1.0355, need for a new hospice program is determined through a FNP calculation in which the hospice admissions from the most recent calendar year (here, 2002) are subtracted from the projected number of hospice admissions over the planning horizon (here, July 2004 through June 2005). The result of that calculation, according to paragraph (4)(a) of the hospice CON rule, is “the projected number of unserved patients who would elect a hospice program.” Hope refers to the result of the calculation as “unmet need.” If the projected number of unserved patients is greater than 350, then the FNP shows a need for a new hospice program. If the projected number of unserved patients is less than 350, then the FNP shows that a new hospice program is not needed. The FNP calculation for the April 2003 batching cycle showed 238 projected unserved patients in SA 8A. Because that figure is less than 350, the end-result of the FNP calculation is a need for zero new hospice programs in SA 8A. The ratio of the projected unserved patients (238) to the actual admissions in SA 8A (967) is 24.6 percent, which is the fourth highest rate of all of the service areas in the state, and, according to Hope, that ratio reflects a disproportionately high level of “unmet need” in SA 8A. This is not a special circumstance. The FNP calculations necessarily include a threshold below which need is presumed not to exist, no matter how close the number of projected unserved patients is to the threshold or how “disproportionate” that number may seem. Hope's contention on this issue is essentially a criticism of the threshold in the FNP calculation because, according to Hope, the “comparatively small size [of SA 8A] has prevented the need formula from calculating an unmet need sufficient to trigger the [350 threshold necessary for a] determination of a numeric need.” The reasonableness of the threshold (in general or for smaller service areas) is not properly at issue in this proceeding and, moreover, the “unmet need” identified by Hope is something that is specifically taken into account in the FNP calculations. Inadequate Lengths of Stay The second special circumstance alleged by Hope in its CON application is that lengths of stay at HSWF are inadequate for quality of care. The critical assumption underlying this contention is that longer lengths of stay are necessarily better than shorter lengths of stay from a quality of care perspective. Longer lengths of stay can be an indicator of the accessibility of hospice care because they tend to reflect that patients are being referred to, and admitted into, hospice earlier in the dying process. Longer lengths of stay are not, however, a reliable indicator of hospice quality of care, which depends more upon the services that the patient is receiving from the hospice than the length of time that the patient is enrolled in hospice. Nursing costs per-patient-day (PPD) is a better indicator of the level of direct patient care being provided by the hospice than is the hospice's ALOS, and, on this point, it is noteworthy that the nursing costs PPD at HSWF exceed the national average for hospices with more than 350 annual admissions whereas the nursing costs PPD at Hope are less than the “national average.”. Another reason that longer lengths of stay are not necessarily a reliable indicator of quality of care is that hospices have a financial incentive to increase length of stay because hospice patients typically require less services in the “middle” portion (i.e., the period between 15 days after admission and 15 days before death) of their stay. The "middle" portion of the patient's stay is more profitable for the hospice because even though it is providing less services to the patient (and, hence, incurring less cost), the per diem rate paid by Medicare remains constant. The ALOS at Hope is among the highest in the state and the nation. Its ALOS was 74 days in 2002, and it is trending upward. The statewide average ALOS in 2002 was 63 days. The ALOS at HSWF in 2002 was 39 days, which is among the lowest in the state. This figure includes all of the counties served by HSWF. The ALOS for the patients served by HSWF in Charlotte was 34.5 days in 2002, and the ALOS for its DeSoto County patients was 35.2 days in 2002. The ALOS for patients served by HSWF in Charlotte in DeSoto Counties has increased. In 2004, the ALOS for patients in Charlotte County was 44.1 days and the ALOS for patients in DeSoto County was 42.1 days. The evidence was not persuasive that the quality of care provided at HSWF in SA 8A was inadequate in 2002 despite its relatively low ALOS, nor was the evidence persuasive that the quality of care provided at HSWF was inadequate in 2004 even though its ALOS at that time was still lower than the ALOS at Hope. To the contrary, the evidence establishes that HSWF provides high quality hospice care. The second special circumstance alleged by Hope was not proven. Inadequate Service to Patients in Need of Palliative Chemo/Radiation The third special circumstance alleged by Hope in its CON application is that patients in SA 8A who are need of palliative chemo/radiation are not being adequately served by HSWF. Palliative chemo/radiation are medical treatments whose goal is symptom reduction and improved quality of life during the dying process. Palliative chemo/radiation is commonly used to reduce the size of the patient’s malignant tumors, which, in turn, relieves pressure exerted by the tumors on other organs and reduces the associated pain. Palliative chemo/radiation is distinguishable from curative chemotherapy and radiation, whose goal is to cure the patient’s cancer and to allow the patient to have a normal life expectancy. As noted above, curative treatments are not appropriate for hospice patients because eligibility for hospice is premised upon the patient having a terminal illness. Palliative chemo/radiation is typically administered by an oncologist, who is a physician who specializes in the treatment of cancer. The treatments are typically administered in the oncologist’s office. The benefits of the treatment (e.g., symptom relief) have to be weighed against the burdens of the treatment (e.g., fatigue, nausea, etc.) for each patient on an ongoing basis over the course of the treatment. Palliative chemo/radiation is expensive, and hospices have a financial incentive not to provide it to their patients because the hospice is not reimbursed for a large part of the high costs associated with the treatment. Patients receiving palliative chemo/radiation constitute only a small percentage of hospice patients. At Hope, for example, the percentage of oncology patients receiving palliative chemo/radiation at the time of their admission was approximately seven percent, and by the seventh week after admission, the percentage of oncology patients receiving palliative chemo/radiation was approximately two percent. HSWF does not, and has never, categorically denied palliative chemo/radiation to its patients. Until October 2003, HSWF did not have a written set of guidelines relating to palliative chemo/radiation. It began the process of developing such guidelines in early 2002 in order to address concerns raised by oncologists in SA 8A. The guidelines, which were “rolled out” in October 2003, describe HSWF’s policies relating to the admission and ongoing evaluation of patients on palliative chemo/radiation and other therapies. Among other things, the guidelines require the treating physician to provide data to the IDT regarding the prognosis, results, and goals of the treatment so that the IDT, in collaboration with the treating physician and the patient, can evaluate the benefits and burdens of the treatment at least every two weeks. HSWF’s guidelines on palliative chemo/radiation are reasonable and appropriate, particularly with respect to the ongoing collaboration they require between the oncologist and the IDT regarding the benefits and burdens of the treatment. Prior to the implementation of the guidelines, there was a perception by some of the oncologists in SA 8A that HSWF would not allow patients to continue to receive palliative chemo/radiation once they were admitted into hospice. As a result of that perception, the oncologists delayed the referral of patients on palliative chemo/radiation to HSWF until the patient’s course of treatment was complete. Since the implementation of the guidelines, that perception has changed. The oncologists who previously delayed referrals of patients on palliative chemo/radiation now find HSWF to be more receptive to admitting those patients, and they testified that they are generally satisfied with the level of collaboration between themselves and HSWF about the patient’s course of treatment. Nevertheless, those oncologists testified that they would likely refer their patients to Hope if its SA 8A program was approved because of the relationship and positive experiences that the Lee County oncologists in their practice group have had with Hope. The level of palliative chemo/radiation provided by HSWF is not insignificant. In fiscal year 2002, for example, HSWF had total expenditures of $124,396 on chemotherapy and total expenditures of $77,026 on radiation. By fiscal year 2004, its total expenditures had increased to $267,871 on chemotherapy and $137,921 on radiation. HSWF spends considerably less on chemotherapy and radiation than does Hope, but that does not mean that HSWF is providing an inadequate level of palliative chemo/radiation in SA 8A. On this point, it is noteworthy that the level of chemotherapy and radiation provided by HSWF is greater than, but not materially out of line with, the national average for hospices with more than 350 annual admissions on both a cost per patient ($/patient) basis and a cost per-patient-day basis ($/PPD). In fiscal year 2002, for example, HSWF spent $26.01/patient (or $0.76/PPD) on chemotherapy and $16.11/patient (or $0.47/PPD) on radiation, and the “national average” was $10.12/patient (or $0.18/PPD) for chemotherapy and $7.27/patient (or $0.14/PPD) for radiation. By contrast, the level of chemotherapy and radiation provided by Hope is materially out of line with the “national average.” In fiscal year 2002, for example, Hope spent $332.33/patient, or $5.32/PPD, on chemotherapy (as compared to the “national average” of $10.12/patient or 0.18/PPD), and $126.06/patient, or $2.02/PPD, on radiation (as compared to the "national average" of $7.27/patient or $0.14/PPD). The total expenditures on chemotherapy and radiation at Hope continues to increase even though, as noted above, patients receiving palliative chemo/radiation are only a small percentage of Hope's patients. Its expenditures in fiscal year 2004 ($3.15 million) were almost three times higher than they were in fiscal year 2001 ($1.19 million). Hope’s “open access” philosophy contributes to its extraordinary level of expenditures on chemotherapy and radiation. Another contributing factor is Hope’s practice of deferring to the oncologist (who has a financial incentive to continue the treatment as long as possible) regarding the benefit/burden evaluation and the decision to continue or not the course of treatment, coupled with the, at best, limited utilization review by Hope of the treatment rendered by the oncologist. In sum, the evidence fails to establish that the level of service provided by HSWF to patients in need of palliative chemo/radiation was inadequate, either at the time of the hearing or at the time Hope filed its application. Moreover, the evidence fails to establish that the model that Hope intends to replicate in SA 8A is appropriate with respect to palliative chemo/radiation and, indeed, the evidence suggests that Hope’s model results in overutilization of such services. The third special circumstance alleged by Hope was not proven, and, even if it had been proven, it would not justify the approval of Hope's application. Inadequate Service to African-Americans The fourth special circumstance alleged by Hope in its CON application is that African-American patients in SA 8A are not being adequately served by HSWF. The justification offered by Hope for this special circumstance was statistical data. There was no testimony from community witnesses related to this special circumstance. African-Americans typically utilize hospice services at a lower rate than the general population and, as a result, it is not unusual for the African-American penetration rate in a service area to be lower than the overall penetration rate in the service area. It is important for hospices to have outreach programs directed to the African-American community. Hope has such programs in SA 8C, as does HSWF in SA 8A. The African American population in SA 8A is relatively small. Only 6.1 percent of the service area’s population was African-American in 2002. In 2001, the penetration rate for African-Americans in SA 8A was 25 percent, which was less than the 32 percent statewide penetration rate for African-Americans and less than the 41 percent penetration rate for African-Americans in Hope’s SA 8C. The lower African-American penetration rate in SA 8A in 2001 is explained, at least in part, by the fact that HSWF did not consistently capture ethnicity in its patient database prior to 2004. Its failure to do so had the effect of understating the penetration rates for African-Americans and other ethnicities. In 2004, the penetration rate for African-Americans in SA 8A was 38.4 percent, which is a more reliable figure and reflects adequate service of African-Americans by HSWF. There is no credible evidence that the increase in the African-American penetration rate is the result of increased outreach efforts by HSWF in response to Hope’s CON application. In sum, the evidence was not persuasive that African- Americans in SA 8A were being inadequately served by HSWF, either at the time Hope filed its application or at the time of the final hearing. The fourth special circumstance alleged by Hope was not proven. Inadequate Service to Elderly Non-cancer Patients The fifth special circumstance alleged by Hope in its CON application is that elderly non-cancer patients in SA 8A are not being adequately served by HSWF. To address this special circumstance, Hope committed in its CON application to "engage in a special Non-Cancer Outreach Program to educate the medical community in [SA] 8A about the effectiveness of hospice care for non-cancer diagnoses." The limited discussion in the CON application (at page 48) relating to this “special circumstance” referred to the “unmet need” shown in the FNP calculations -– i.e., the difference between the projected number of non-cancer patients in the 65+ age cohort (636) and the actual number of patients in that age/disease cohort admitted at HSWF (483) -- and the comparatively low penetration rate for that age/disease cohort in SA 8A (36 percent) as compared to SA 8C (48 percent). The level and/or variance in the penetration rate for non-cancer patients in the 65+ age cohort is not, in and of itself, a special circumstance. Indeed, it is not unusual for hospices to have different penetration rates in each of the age/disease cohorts nor is it unusual for to the penetration rates in an age/disease cohort to differ between service areas. Moreover, it is noteworthy that the statewide penetration rate for non-cancer patients in the 65+ age cohort, as reflected in the “P4” factor in the FNP calculation, was 38.1 percent, which was only slightly above HSWF's 36 percent penetration rate in SA 8A. At the final hearing and in its PRO (at pages 61-71), Hope’s discussion on this “special circumstance” focused primarily on the allegedly inadequate level of service provided by HSWF to its patients in LTC facilities. The LTC facility is required to provide, and is reimbursed by the hospice for providing, “room and board” to hospice patients living in the facility. The hospice is required to provide the nursing and other care related to the patient’s terminal illness, but that does not excuse the LTC facility from providing nursing and other care to the patient to the extent that the care is unrelated to the patient’s terminal illness. HSWF provides "hands-on" nursing care and other required services to its patients in LTC facilities. The "hands-on" care provided by HSWF is less extensive than that provided by Hope to its patients in LTC facilities but, contrary to Hope's contention, the level of care provided by HSWF to its patients in LTC facilities is not inadequate. The care provided by HSWF to its patients in LTC facilities complements the routine care provided by the staff of the LTC facility. It does not duplicate that care. The level of care provided by HSWF to its patients in LTC facilities was enhanced through the establishment of the dedicated LTC teams, which began serving patients in August 2003. Indeed, the LTC facility staff who testified at the hearing regarding perceived deficiencies in the care provided by HSWF acknowledged the improvement in the services provided by HSWF as a result of the dedicated LTC teams. The fifth special circumstance alleged by Hope was not proven. Inadequate Service to Patients in Need of Intensive Hospice Care The sixth special circumstance alleged by Hope in its CON application is that patients in SA 8A who are need of “intensive hospice care” -– i.e., continuous home care and general inpatient care -- are not being adequately served by HSWF. The justification offered by Hope for this special circumstance was statistical data. There was no testimony from physicians or community witnesses related to this special circumstance. The statistics relied on by Hope reflect that, in 2001, only 3.7 percent of the patient days at HSWF’s SA 8A program were attributable to “intensive hospice care,” as compared to 7.5 percent at Hope and “about 6 percent” statewide. The statistics also indicate that only 30 percent of HSWF’s patients in SA 8A received “intensive hospice care” at some point during their stay, as compared to 46 percent of Hope’s patients and 47 percent of hospice patients statewide. Based upon these statistics, Hope asserted in its CON application that “[t]he quality of care received by residents of Service Area 8A is not adequate.” No evidence was presented by Hope regarding patients in need of “intensive hospice care” who were not provided such care by HSWF. Indeed, the more persuasive evidence establishes that “intensive hospice care” is (and has been) available to residents of SA 8A, as needed. Hope’s proposed approach to providing “intensive hospice care” in SA 8A -– i.e., contracting with area hospital and nursing homes and utilizing its “hospice house” in Cape Coral -- is essentially the same as the approach used by HSWF. As a result, approval of Hope's application will not materially enhance access to "intensive hospice care" in SA 8A. Moreover, HSWF recently received a CON to convert its “hospice house” in Port Charlotte to a 12-bed inpatient facility, which will enhance its ability to provide “intensive hospice care” to residents of SA 8A and will further enhance access to “intensive hospice care" in SA 8A. The sixth special circumstance alleged by Hope was not proven. Inadequate Service to DeSoto County The seventh special circumstance alleged by Hope in its CON application is that patients in DeSoto County are not being adequately served by HSWF. DeSoto County is a rural, sparsely populated county. The county’s population was only 35,233 in 2002, and it had only 55 residents per square mile. DeSoto County is an economically disadvantaged county. The median household income, income per capita, percentage of owner-occupied housing, and percentage of college- educated residents in DeSoto County were all lower than the statewide averages in 2002. DeSoto County is racially diverse. The population is 12.7 percent African-American, 26.6 percent Hispanic, and 5.6 percent Native American. DeSoto County is demographically similar to Hendry and Glades Counties, which are rural counties in SA 8C served by Hope. Hospice penetration rates in rural, economically disadvantaged counties (such as DeSoto, Hendry, and Glades Counties) are typically lower than penetration rates in more urban counties. In 2001, HSWF’s penetration rate in DeSoto County was 26.73 percent, which, as expected, is considerably lower than the overall penetration rate in SA 8A. That penetration rate was also lower than the 39.28 percent penetration rate achieved by Hope in Hendry County in 2001. HSWF’s penetration rate in DeSoto County fell to 20.13 percent in 2002, but it increased in 2003 (to 23.59 percent) and 2004 (to 44.74 percent). HSWF’s 23.59 percent penetration rate in DeSoto County in 2003 was slightly higher than Hope’s 22.12 percent penetration rate that year in Glades County, but it was lower than Hope’s 37.29 percent penetration rate that year in Hendry County. The difference in penetration rates achieved by HSWF and Hope in the rural counties of their respective service areas is not material and does not, in and of itself, justify the approval of Hope’s application, particularly since the evidence establishes that HSWF is adequately serving DeSoto County. HSWF had an office in DeSoto County prior to the filing of Hope’s CON application for its proposed SA 8A hospice program, but the office was not staffed until after the application was filed. Before the time that the office was staffed, it was used to store supplies used by staff serving patients in the county. The decision to staff the office was intended by HSWF to “increase visibility in [the DeSoto County] community to counteract the lack of visibility cited in [Hope’s] application.” HSWF established a Community Advisory Council in DeSoto County in June 2002. In the fall of 2003, Hope established a program known as Shepard’s Watch in DeSoto County. The program trains volunteers from the various churches in the county about hospice (and HSWF) so that they are in a position to provide information to persons in the church who are diagnosed with a terminal illness and may be in need of hospice services. The Shepard’s Watch program was recommended by the Community Advisory Council in DeSoto County as a means to educate residents of the county about hospice because it is a faith-based community, and the churches are the “focal point of information sharing” in the community. The program was under development since “the spring of 2003,” prior to the filing of Hope’s CON application. HSWF’s staff and volunteers were active in DeSoto County prior to the filing of Hope’s CON application, but their level of activity increased after the filing of the application. HSWF had an outreach and education program directed to physicians in DeSoto County since at least November 2002. There was not a separate IDT team serving DeSoto until some point in 2003. Prior to that time, DeSoto County was served by an IDT team based in Port Charlotte that also served patients in Charlotte County. The decision to create a separate IDT team for DeSoto County was based upon the increasing census in the area, not the filing of Hope’s CON application. Hope followed a similar approach in serving the rural counties in its service area. Prior to the time that it opened offices in Hendry County (1996) and Glades County (2001), it served those areas with IDT teams based in eastern Lee County. Hope committed in its CON application to "open a branch hospice office in DeSoto County within two years of licensure in [SA] 8A." The office would be in leased space. The physical presence that Hope has proposed for DeSoto County is essentially the same as that which HSWF currently has in the county, and it is less than that which HSWF will likely have in the near future because, as noted above, HSWF recently purchased land for a "hospice house" in Arcadia. In sum, the evidence was not persuasive that patients in DeSoto County were being inadequately served by HSWF at the time that Hope filed its application and, in any event, the evidence establishes that the county is currently being adequately served by HSWF. The seventh special circumstance alleged by Hope was not proven. Statutory and Rule Criteria (1) Statutory Criteria (a) § 408.035(1), (2), and (5), Fla Stat., and § 408.043(2), Fla. Stat. Subsections (1), (2), and (5) of Section 408.035, Florida Statutes, are interrelated and require an evaluation of the “need” for the proposed new hospice program, the availability and accessibility of the existing hospice program, and the extent to which the proposed new program will “enhance access” to hospice care for residents of the service area. Similarly, Section 408.043(2), Florida Statutes, requires consideration of the “need for and availability of hospice services in the community.” There is a presumption that there is no need for a new hospice program in SA 8A based upon the FNP published by the Agency for the April 2003 batching cycle, which identified the need for zero new hospice programs in SA 8A. The hospice services provided by HSWF in SA 8A are available and accessible. HSWF actively engages in education and outreach activities in SA 8A directed to referral sources (e.g., local physicians) and the community at large. HSWF’s penetration rate in SA 8A is a measure of the availability and accessibility of its services. The penetration rate has consistently increased over the past several years, and it now exceeds the statewide average. The ALOS at HSWF in SA 8A, which is another measure of the program's accessibility, has also increased over the past several years. The evidence was not persuasive that that Hope’s proposed SA 8A program would materially “enhance access” to hospice services. Indeed, the initiatives that Hope intends to implement in SA 8A to serve the “unmet need” identified in its application (e.g., establishing a physical presence in DeSoto County, extending its “open access” policy towards palliative chemo/radiation to SA 8A) are, for the most part, already in effect at HSWF. In sum, the evidence fails to establish that there is a “need” for hospice services in SA 8A that is not being met by HSWF so as to warrant the approval of a new hospice program in the service area. As a result, the criteria in Subsections (1), (2), and (5) of Section 408.035, Florida Statutes, and Section 408.043(2), Florida Statutes, weigh against approval of Hope’s CON application. (b) § 408.035(3), Fla. Stat. Section 408.035(3), Florida Statutes, requires consideration of the applicant’s ability to, and record of, providing quality of care. Hope provides high quality hospice care in its CHAP- accredited program in SA 8C, and it is reasonable to expect that its proposed SA 8A hospice program will also provide high quality of care since it is effectively an expansion of Hope's existing program. HSWF provides high quality hospice care at its existing SA 8A program, and the evidence was not persuasive that the quality of care at Hope’s proposed SA 8A hospice program will be materially higher than that currently provided by HSWF. Hope satisfies the criteria in Section 408.035(3), Florida Statutes, but that criteria is given minimal weight because HSWF is (and has been) providing high quality hospice care in SA 8A. (c) § 408.035(4), Fla. Stat. Section 408.035(4), Florida Statutes, requires consideration of the availability of staff, funds, and other resources necessary to establish and operate the proposed hospice program. It was stipulated that the staffing proposed in Hope’s CON application was adequate and that Hope will be able to recruit and retain the staff and volunteers necessary to operate its proposed SA 8A hospice program. Hope has the financial and other resources necessary to expand its current hospice program into SA 8A, and to operate the program as proposed in the CON application. Hope satisfies the criteria in Section 408.035(4), Florida Statutes. (d) § 408.035(6), Fla. Stat. Section 408.035(6), Florida Statutes, requires consideration of the short-term and long-term financial feasibility of the proposed project. Hope’s SA 8A hospice program is financially feasible in the short term. Hope has sufficient financial resources to fund the cost of its proposed SA 8A program along with its other ongoing and proposed projects even though its operating margin has declined over the past several years. Hope’s proposed SA 8A hospice program is financially feasible in the long term. The projections in Hope’s CON application, which are reasonable and attainable, reflect that Hope’s SA 8A program will generate a net profit from operations of $30,688 and a bottom-line net profit of $97,799 in its second year of operation. Hope satisfies the criteria in Section 408.035(6), Florida Statutes. (e) § 408.035(7), Fla. Stat. Section 408.035(7), Florida Statutes, requires consideration of “[t]he extent to which the proposal will foster competition that promotes quality and cost effectiveness.” Hope cites the recent initiatives implemented by HSWF to address the alleged deficiencies in its existing program as evidence that the approval of Hope’s proposed program would foster competition in SA 8A. Those initiatives, according to Hope, are the direct result of the “competitive pressure” exerted on HSWF by the filing of Hope’s CON application. The evidence fails to support that claim. Indeed, as discussed in Part D(2) above, the more persuasive evidence establishes that the initiatives were in the planning stages and/or being implemented prior to the filing of Hope’s application and, therefore, were not a competitive response to Hope’s application. Nevertheless, the establishment of a new hospice in SA 8A will necessarily increase competition for hospice care in the service area because there is currently only one hospice, HSWF, serving the area. The evidence is not persuasive that the competition that would result from the approval of Hope’s application will promote quality or cost effectiveness. Indeed, to the contrary, Hope’s entry into SA 8A will likely result in a dramatic increase in the utilization of costly palliative chemo/radiation services in SA 8A. In any event, fostering competition is not a consideration that is given significant weight in the hospice context. First, hospice care does not lend itself to competition in the traditional sense because its “consumers” are terminally-ill patients and their families. Second, the relative lack of competition among hospices in Florida has allowed the hospices to grow, which, in turn, allows them to provide more unreimbursed services to their patients. The criteria in Section 408.035(7), Florida Statutes, do not materially weigh in favor of the approval of Hope’s application. (f) § 408.035(8), Fla. Stat. Section 408.035(8), Florida Statutes, which requires consideration of the costs and methods of the construction proposed in the CON application, is not applicable because Hope is not proposing any construction as part of its proposed SA 8A hospice program. (g) § 408.035(9), Fla. Stat., and Fla. Admin. Code R. 59C-1.030(2) Section 408.035(9), Florida Statutes, requires consideration of the applicant’s past and proposed commitment to Medicaid patients and the medically indigent. The statutory reference to “the medically indigent” encompasses what are typically referred to as charity patients. Similarly, Florida Administrative Code Rule 59C- 1.030(2) requires consideration of the effect of the proposed project on the ability of low-income persons and other medically underserved groups to access care. Hope did not condition the approval of its CON application on the provision of a minimum level of patient days to Medicaid and/or charity patients. The financial projections in Hope’s CON application assume that six percent of the patient days at its proposed SA 8A hospice program will be attributable to Medicaid patients and that two percent of the patient days will be attributable to charity patients. Those percentages were, according to the CON application, based upon “the experience of the applicant and the proposed service area.” HSWF did not contest that contention, nor did it challenge the sufficiency of Hope’s past or proposed commitments to Medicaid and charity patients. Hope has a history of providing free services for the benefit of the community at-large above and beyond the hospice services provided to its Medicaid and charity patients. Hope satisfies the criteria in Section 408.035(9), Florida Statutes. HSWF provides a significant level of charity care in SA 8A. Over the three-year period of 2002 through 2004, HSWF provided an average of approximately $775,000 (or 2.2 percent of its total revenues) annually in charity care. That figure does not include the value of room and board provided at its residential facilities, which is not reimbursed by Medicare and which amounted to approximately $1.4 million in 2004. HSWF also provides free services to the SA 8A community at-large above and beyond the hospice services that it provides to its Medicaid and charity patients. The evidence was not persuasive that Hope’s proposed SA 8A hospice program is necessary to, or specifically designed to, address deficiencies in the provision of hospice services to the medically indigent in SA 8A by HSWF. As a result, and because hospices are required by law to serve all hospice-eligible patients who request hospice services regardless of their ability to pay, the criteria in Section 408.035(9), Florida Statutes, is given minimal weight. (h) § 408.035(10), Fla. Stat. Section 408.035(10), Florida Statutes, which requires consideration of the applicant’s designation as a Gold Seal Program nursing facility, is not applicable because Hope is not proposing to add nursing home beds. (2) Rule Criteria Fla. Admin. Code R. 59C-1.0355(4)(e) The preferences in Florida Administrative Code Rule 59C-1.0355(4)(e) are primarily used by the Agency in the comparative review of multiple CON applications filed in the same batching cycle for new hospice programs in the same service area. The preferences are less significant where, as here, there is only one application at issue. Florida Administrative Code Rule 59C-1.0355(4)(e)1. gives preference to an applicant who commits to serve “populations with unmet needs.” Hope formally committed on Schedule C of its CON application to open a branch office in DeSoto County and to engage in outreach program to the medical community regarding the effectiveness of hospice care for non-cancer diagnoses. Those commitments were directed to two of the population groups in SA 8A that, according to Hope, have “unmet needs.” Hope contends that the approval of its application will also address the “unmet needs” of African-American patients, patients in need of palliative chemo/radiation, and patients in need of intensive hospice care, through the programs and policies that Hope will bring to SA 8A from SA 8C. Those programs and policies will, according to Hope, increase the utilization of hospice services by those patient groups by as much as 300 percent. As discussed in Part G above, the evidence fails to establish that the needs of those population groups are not being met by HSWF. Accordingly, Hope’s commitment to serve the “unmet needs” of those population groups is given no weight. Florida Administrative Code Rule 59C-1.0355(4)(e)2. gives preference to an applicant who proposes to provide the inpatient component of care through contractual relationships with existing health care facilities unless the applicant demonstrates a more cost-effective alternative. Hope satisfies this preference. It plans to provide inpatient care through contracts with local hospitals, and it will also make its “hospice house” in Cape Coral, which is in northern Lee County less than 10 miles south of Charlotte County, available to patients from SA 8A in need of inpatient or respite care. This preference is given minimal weight because HSWF currently provides inpatient care in a similar manner –- i.e., through contracts with hospitals in Charlotte and DeSoto Counties or in its “hospice house” in Venice -- and it will soon be able to provide inpatient care in its “hospice house” in Port Charlotte, which is in northern Charlotte County in SA 8A. Florida Administrative Code Rule 59C-1.0355(4)(e)3. gives preference to an applicant who commits to serve patients without primary caregivers, the homeless, and patients with AIDS. Hope satisfies this preference. It plans to serve these patients groups in its proposed SA 8A program, as it does in its current SA 8C program. The evidence does not reflect what, if any, special programs HSWF has for these patient groups, but it is noteworthy that Hope did not contend that those groups are not being adequately served by HSWF. Florida Administrative Code Rule 59C-1.0355(4)(e)4. gives preference to an applicant who commits to establish a physical presence in an underserved county within a three-county service area. This preference is not applicable because SA 8A consists of only two counties. Florida Administrative Code Rule 59C-1.0355(4)(e)5. gives preference to an applicant who proposes to provide services not covered by private insurance, Medicaid, or Medicare. Hope satisfies this preference. It plans to provide unreimbursed services (e.g., massage, pet, music, and art therapies; bereavement services to the community at large) as part of its proposed SA 8A program, as it does in its current SA 8C program. HSWF provides similar unreimbursed services as part of its existing SA 8A program, and the evidence was not persuasive that the ancillary or expressive therapies provided by Hope are materially superior to those provided by HSWF even though Hope provides the therapies through certified therapists whereas HSWF provides the therapies through trained volunteers. In sum, Hope’s proposed SA 8A hospice program satisfies the preferences in Florida Administrative Code 59C- 1.0355(4)(e)2., 3., and 5., but the preferences in those subparagraphs are given minimal weight in evaluating whether Hope’s application should be approved because the evidence establishes that HSWF’s existing program is adequately serving SA 8A and already provides essentially the same services as proposed by Hope in its CON application. Fla. Admin. Code R. 59C-1.0355(5) Florida Administrative Code Rule 59C-1.0355(5) requires the applicant to demonstrate that its proposed program is “consistent with the needs of the community” and the criteria in the local health plan. The rule also requires the CON application to include letters of support from “health organizations, social services organizations, and other entities within the proposed service area” that support the applicant’s proposed hospice program. Hope satisfied the criteria in this rule. The parties stipulated that the local health plan preferences are no longer in effect and need not be considered as a result of the 2004 amendments to the CON law, which deleted reference to the local health plan in Section 408.035(1), Florida Statutes. Hope’s proposed program is consistent with the “needs of the community” in that it will offer a comprehensive range of hospice services, but as discussed above, the “needs of the community” are currently being met by HSWF. Hope’s CON application includes letters of support from a number of physicians, nursing homes, social service agencies, religious organizations, and individuals in SA 8A. The application also includes letters of support from individuals and organizations in Hope’s current service area, SA 8C, attesting to quality of care provided by Hope. Fla. Admin. Code R. 59C-1.0355(6) Florida Administrative Code Rule 59C-1.0355(6) requires an applicant for a new hospice program to “provide a detailed program description” in its CON application, which includes the following elements: Proposed staffing, including use of volunteers. Expected sources of patient referrals. Projected number of admissions, by payer type, including Medicare, Medicaid, private insurance, self-pay, and indigent care patients for the first 2 years of operation. Projected number of admissions, by type of terminal illness, for the first 2 years of operation. Projected number of admissions by two age groups, under 65 and 65 or older, for the first 2 years of operation. Identification of the services that will be provided directly by hospice staff and volunteers and those that will be provided through contractual arrangements. Proposed arrangements for providing inpatient care (e.g., construction of a freestanding inpatient hospice facility; contractual arrangements for dedicated or renovated space in hospitals or nursing homes). Proposed number of inpatient beds that will be located in a freestanding inpatient hospice facility, in hospitals, and in nursing homes. Circumstances under which a patient would be admitted to an inpatient bed. Provisions for serving persons without primary caregivers at home. Arrangements for the provision of bereavement services. Proposed community education activities concerning hospice programs. Fundraising activities. Hope’s CON application included a detailed description of its proposed SA 8A program, which addressed each of the elements in Florida Administrative Code Rule 59C- 1.0355(6). Thus, Hope satisfied the criteria in that rule.
Recommendation Based upon the foregoing findings of fact and conclusions of law, it is RECOMMENDED that the Agency issue a final order denying Hope’s application to establish a new hospice program in SA 8A, CON 9692. DONE AND ENTERED this 28th day of December, 2005, in Tallahassee, Leon County, Florida. S T. KENT WETHERELL, II 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 28th day of December, 2005.
The Issue Vitas Healthcare Corporation of Florida, Inc., and Heartland Services of Florida, Inc., each filed applications with the Agency for Health Care Administration to establish a new hospice program in Duval County, Hospice Service Area 4A, in the second batching cycle of 2004. The issue in these consolidated cases is whether either, both or neither of the applications should be approved.
Findings Of Fact The Parties AHCA The Agency for Health Care Administration is designated by Section 408.034(1), Florida Statutes, "as the single state agency to issue . . . or deny certificates of need . . . in accordance with present and future federal and state statutes." Accordingly, it is the state agency responsible for issuing or denying the applications for certificates of need sought by Heartland and VITAS in this proceeding. Heartland Heartland is a subsidiary of Manor Care, Inc. ("Manor Care"), a company traded on the New York Stock Exchange. Manor Care through various subsidiaries operates approximately 279 nursing homes, 65 assisted living facilities, 89 rehabilitation clinics, and 94 home health agencies and hospices. To the extent these operations require buildings, Manor Care owns the majority of them. While many companies offer one service or another of those offered by Manor Care, the company's ability to offer the variety of health care services in its portfolio enables it to provide continuum of care to its patients. In Florida, Manor Care, through its subsidiaries, operates "just under 30 nursing homes, three . . . in the Jacksonville market." Tr. 31. It operates 11 assisted living facilities in Florida, 29 rehabilitation facilities (14 of which are in the Jacksonville area), and six home health operations. Neither Heartland nor any of the healthcare companies with which it is affiliated through Manor Care operates a hospice program in Florida. But Manor Care operates 86 licensed hospice programs in the United States, the greatest number of any company operating hospices in the country. It commenced hospice operations in 1995 with approximately 58 patients; its hospice census at the time of hearing exceeded 5,600 patients. Heartland's proposed hospice program will be similar to Manor Care's programs in other states, and Heartland will use Manor Care's considerable hospice experience outside of Florida to assist Heartland in operating the proposed hospice if its CON application is approved. Heartland's proposal to provide hospice services in the Jacksonville area, moreover, will offer the opportunity to enhance continuum of care for patients in the area who decide to choose Heartland for hospice in addition to home health care, rehabilitation services or nursing home services. VITAS VITAS Healthcare Corporation of Florida, Inc., ("VITAS" or "VITAS the Applicant"), and the Petitioner in DOAH Case No. 04-3856CON, is a wholly-owned subsidiary of Vitas Healthcare Corporation ("VITAS the Parent.") VITAS the Parent operates 39 hospice programs nationwide and provides services to more hospice patients than any other hospice provider in the country. In 2004, VITAS the Parent merged with Comfort Care Holding, a subsidiary of Chemed Corporation (Chemed). As a result of the merger, VITAS the Parent became a wholly owned subsidiary of Chemed. Chemed is a for-profit corporation that operates under the trade name Roto-Rooter and describes itself as North America's largest provider of plumbing and drain cleaning services. The acquisition of VITAS the Parent by Chemed was made to allow Chemed shareholders to realize 100% of the revenue and earnings of VITAS the Parent. The Chemed acquisition was preceded by significant contributions of VITAS the Parent and its affiliates to the hospice movement in this country. A pioneer in the hospice movement, VITAS the Parent offered hospice services in Florida more than 28 years ago. One of the first hospice programs in the country was a Miami-Dade program affiliated with VITAS the Parent. The program was organized by Huge Westbrook and Esther Colliflower, a Methodist minister and a nurse with an oncology background, respectively, who were both professors at Miami-Dade Community College teaching courses on death and dying issues. VITAS the Parent was also instrumental in the development of hospice licensure standards in Florida and the establishment of the federal Medicare benefit for hospital services. Over this three-decade stretch of time, VITAS the Parent has also been a leader in hospice research and development and has created pain management tools and hospice care manuals that are widely used by other hospice providers across the nation. For example, it developed the Missoula-VITAS quality of life index, licensed and used by over 150 hospices nationwide. The publication 20 Common Problems in End of Life Care was authored by employees of VITAS the Parent and is used as a textbook for delivery of hospice care. In recent years, VITAS the Parent has provided hospice services to more hospice patients than any other hospice provider in the country. In 2004, VITAS programs admitted over 46,000 patients with an average daily census of 9,000. In 2005, VITAS national admissions increased more than 8% to over 50,000 patients with an average daily census of over 10,000. Provision of hospice services through VITAS the Parent's affiliates has expanded recently. In the past three years alone, 15 operational hospices affiliated with VITAS the Parent have been added. In the hospices operated around the country, all Medicare-certified, VITAS earned over $531 million in 2004, growing to over $600 million in 2005. In Florida, affiliates of VITAS the Parent currently operate a number of licensed hospices. These include programs located in Miami-Dade County (Service Area 11), Broward County (Service Area 10), Palm Beach County (Service Area 9C), Orange, Osceola and Seminole Counties (Service Areas 7B and 7C), Brevard County (Service Area 7A), and Volusia and Flagler Counties (Service Area 4B). Of licensed hospices operated in Florida by subsidiaries of VITAS the Parent, three are operated by VITAS the Applicant: one each in Dade, Broward, and Palm Beach County. VITAS the Applicant considers itself to be Florida’s largest hospice and the dominant existing licensed hospice provider in Florida. Whether all parties would agree with that characterization, there is no question about VITAS the Applicant's place among the subsidiaries of VITAS the Parent. VITAS the Applicant is the “major contributor of revenue to Vitas Healthcare Corporation on a consolidated basis.” Tr. 946. Described by the controller of VITAS the Parent as a “cash cow,” VITAS the Applicant “makes VITAS [the Parent] as a whole a very healthy organization [financially].” Id. In 2004, the hospice programs in Florida affiliated with VITAS the Parent collectively admitted more than 16,000 hospice patients. The average daily census for these programs was 3,500 with earnings of over $210 million. All of the hospice programs affiliated with VITAS the Parent are in full compliance with Medicare conditions of participation and none have exceeded Medicare cost caps. Community Community Hospice of Northeast Florida ("Community" or "CHNF"), the Petitioner in DOAH Case No. 04-3886CON, is a not- for-profit Florida corporation, licensed by the State of Florida to operate Northeast Florida Community Hospice in Service Area 4A, serving Baker, Clay, Duval, Nassau and St. Johns Counties. Community was established by a group of volunteers in 1978. Its mission is to improve the quality of life for hospice patients and families and to be the compassionate guide for end- of-life care in the community it serves. It has history of high quality of care, the breadth of which was demonstrated in multiple areas that included community education, bereavement, outreach, and pediatric hospice care. Community also operates a separately licensed pharmacy and a durable medical equipment provider service. Among the issues pled by CHNF's petition in DOAH Case No. 04-3886CON are the following: Material issues of disputed fact to be resolved at hearing include, but are not limited to: * * * b. Whether Heartland's Application, and whether the CON Applications of any co- batched Applicant who files a Petitioner [VITAS], complies with the applicable criteria in Chapter 408, Fla. Stat., and Rules 59C-1.008, 59C-1.030 and 59C-1.0355, F.A.C. * * * Community Hospice alleges that the specific statutes and rules at issue in this case include, but are not limited to, §408.035, §408.037, Fla. Stat., and Rules 59C-1.008, 59C-1.030, and 59C-1.0355, F.A.C. Community Hospice of Northeast Florida, Inc.'s Petition for Formal Administrative Hearing, pp. 4-5. Overview of Hospice Care Hospice care is provided to patients who are terminally ill. As "end of life" care, it is entirely palliative; curative treatment is not a part of the hospice regimen. Hospice admission eligibility criteria require that the patient's condition be certified as terminal by an attending physician or hospice medical director with less than six months to live and, of course, that the patient's wishes include hospice or palliative care services. Hospice care is holistic. It provides physical, emotional, psychological and spiritual comfort and support to a dying patient and considers the patient and the patient's family to be a unit of care. Hospice services are provided by a team of professionals: physicians and nurses who provided skilled nursing care, home health aid services, social worker services, chaplain and religious counseling services and bereavement services for the family left of the patient after death. Hospice care may be provided in location where a patient has lived or is temporarily residing such as a private home, family member's home, assisted living facility (ALF), nursing home, hospital or other institution. There are four basic levels of hospice care: routine home care, general inpatient care, continuous care, and respite care. The majority of hospice patients receive routine home care: care in their own residences whether it be their home, a family member's home, a nursing home, or an ALF. Routine home care comprises the vast majority of hospice patient days. Continuous care is also provided in the patient's home. Unlike routine home care, continuous care is for emergency care or control of acute pain or symptom management. The term "continuous" to describe this type of hospice care is something of a misnomer. Continuous care is typically intermittent but requires a minimum of 8 hours of one-on-one care in a 24-hour period with at least 50% of the care provided by a nurse. The continuous care patient usually has a higher level of acuity than the hospice patient that is receiving general inpatient care. Aside from the difference in acuity level, the continuous care patient is different from the patient receiving general inpatient care because the continuous care patient has made the choice to remain at home, despite the patient's need for emergent care, acute pain relief, or symptom management that is also appropriate in an inpatient setting. As the term indicates, the hospice patient receiving general inpatient care is in an inpatient setting such as a hospital, the sub-acute unit in a nursing home or in a freestanding hospice unit. This type of care provides increased nursing care for patients with symptoms temporarily out of control and in need of round-the-clock nursing, although generally at a lower level of care than the continuous care hospice patient. Respite care is provided to patients in an institutional setting such as a nursing home, ALF or a freestanding hospice unit in order to allow care givers at home, such as family members, a short break or "respite" from the demands of caring for a terminally ill patient. Medicare Reimbursement Medicare provides reimbursement for hospice care and is by far the largest payer for hospice care. Medicare reimburses different rates for hospice based on each of the four basic levels of hospice care. Hospice regulations consider certain hospice services to be "core services": nursing, social work, pastoral or other counseling, dietary counseling, and bereavement services. Referral Sources The main sources of referrals for hospice are hospitals, nursing homes, ALFs, and physician groups. Stipulation The Parties stipulated to the following: AHCA published a fixed, numeric need for one new hospice program in District 4A for the first batching cycle of 2004. No challenges were filed to that published fixed need determination. Vitas and Heartland each timely filed letters of intent, initial applications, and omissions responses proposing to establish a new hospice program in District 4A, in response to AHCA's published fixed need for one new program. AHCA issued its State Agency Action Report preliminarily approving Heartland's CON application 9783, and preliminarily denying Vitas' CON application 9784. Notice of AHCA's decision was published in the September 10, 2004, Florida Administrative Weekly, Vol. 30, No. 37. Community has a history of providing high quality hospice services in District 4A, and has standing in this proceeding. Heartland and Vitas each have the ability to provide high quality hospice services in District 4A, should their respective CON applications be approved. All parties reserve the right to present comparative evidence related to any party's quality of care. All Parties agree that the project costs identified in Schedule 1 of each CON application are reasonable, appropriate, and are not in dispute or at issue in this proceeding. * * * Heartland and Vitas each satisfy the CON review criteria contained in section 408.035(3) pertaining to ability of the applicant to provide quality of care and the applicant's record of providing quality of care. The CON review criteria set forth in subsections 408.035(8)(cost and methods of proposed construction), and (10) (designation as a Gold Seal program nursing facility) are not applicable to this proceeding. Agreed Joint Pre-hearing Stipulation, filed February 20, 2006. Numeric Need in Service Area 4A On April 29, 2004, AHCA published its determination that there is a fixed numeric need for one new hospice in Service Area 4A for the planning horizon at issue in this case. The fixed need pool was calculated by AHCA using a fixed numeric need methodology for hospices. The hospice numeric need methodology is found in Florida Administrative Code Rule 59C-1.0355 (the "Hospice Programs Rule"). Section (4) of the Hospice Programs Rule is entitled, "Criteria for Determination of Need for a New Hospice Program." It has several subsections, the first of which, subsection (a), bears the catch-line, "Numeric Need for a New Hospice Program." Subsection (a) sets out a particular need methodology for determining the numeric need for new hospice programs (the "Hospice Numeric Need Methodology"). The Hospice Numeric Need Methodology Subsection (4)(a) of the Hospice Programs Rule, sets forth the Hospice Numeric Need Methodology. It is, in part, as follows: Criteria for Determination of Need for a New Hospice Program. Numeric Need for a New Hospice Program. Numeric need for an additional hospice program is demonstrated if the projected number of unserved patients who would elect a hospice program is 350 or greater. The net need for a new hospice program in a service area is calculated as follows: (HPH) - (HP) >= 350 where: (HPH) is the projected number of patients electing a hospice program in the service area during the 12 month period beginning at the planning horizon. * * * (HP) is the number of patients admitted to hospice programs serving an area during the most recent 12-month period ending on June 30 or December 31. The number is derived from reports submitted under subsection (9) of this rule. 350 is the targeted minimum 12-month total of patients admitted to a hospice program. Fla. Admin. Code R. 59C-1.0355. Aside from the formula for calculating numeric need, quoted in the previous paragraph, the Hospice Numeric Need Methodology is quite detailed. It requires that a number of different values used by the methodology be determined prior to the calculation required by the numeric need formula. For example, it calls for assessments of the projected number of service area resident deaths in various categories dependent on age and whether the death was due to cancer or not. "Projected deaths" are defined and determined by the Hospice Need Methodology Rule as follows: "Projected" deaths means the number derived by first calculating a 3-year average resident death rate, which is the sum of the service area resident deaths for the three most recent calendar years available from the Department of Health and Rehabilitative Services' Office of Vital Statistics at least 3 months prior to publication of the fixed need pool, divided by the sum of the July 1 estimates of the service area population for the same 3 years. The resulting average death rate is multiplied by projected total population for the service area at the mid-point of the 12- month period which begins with the applicable planning horizon. Population estimates for each year will be the most recent population estimates published by the Office of the Governor at least 3 months prior to publication of the fixed need pool. Fla. Admin. Code R. 59C-1.0355(4)(a) (emphasis supplied.) The underscored language in the Hospice Numeric Need Methodology, quoted above, clearly shows that population data, in the form of estimates and projections of certain populations of the service area, is taken into consideration in the calculation of numeric need. In addition to the Hospice Need Methodology found in paragraph (a), Subsection (4) of the Hospice Programs Rule has several other paragraphs that relate to approval. Their application occurs on alternative bases when there is numeric need or in the absence of numeric need. These paragraphs relate to the effect of "licensed hospice programs," and "approved hospice programs," on determinations of numeric need greater than zero and "approval under special circumstances" in the absence of numeric need. Licensed Programs and Approved Programs Even if the Hospice Needs Methodology yields a numeric need for hospice programs in a hospice service area, "the agency shall not normally approve a new hospice program . . . unless each hospice program serving that area has been licensed and operational for at least 2 years as of 3 weeks prior to publication of the fixed need pool." Fla. Admin. Code R. 59C- 1.0355(4)(b). Likewise, even where the methodology yields numeric need, "the agency shall not normally approve another hospice program for any service area that has an approved hospice program . . . not yet licensed." Fla. Admin. Code R. 59C- 1.0355(4)(c). Subsections (4)(b) and (c) of the Hospice Programs Rule immediately precede subsection (4)(d). Subsection (4)(d) is the converse of (4)(b) and (c). Instead of no approval despite numeric need, it provides for approval when there is no numeric need under special circumstances. Special Circumstances Subsection (4)(d) of the Hospice Program Rule bears the catchline: "Approval Under Special Circumstances." Those circumstances are detailed as follows: In the absence of numeric need identified in paragraph (4)(a), the applicant must demonstrate that circumstances exist to justify the approval of a new hospice. Evidence submitted by the applicant must document one or more of the following: That a specific terminally ill population is not being served. That a county or counties within the service area of a licensed hospice program are not being served. That there are persons referred to hospice programs who are not being admitted within 48 hours (excluding cases where a later admission date has been requested). The applicant shall indicate the number of such persons. Fla. Admin. Code R. 59C-1.0355(4)(d). A conclusion to be drawn from Subsection (4)(d) of the Hospice Programs Rule is that in the absence of a showing of special circumstances, the number of applications granted may not exceed the numeric need yielded by the Hospice Numeric Need Methodology. See Conclusions of Law, below. Existing Providers Service Area 4A is served currently by two hospice programs. Community has provided hospice services since 1978 and Haven Hospital (formerly North Central Florida Hospice based in Gainesville) since 2001. Community has over 700 employees. During fiscal year 2004, Community cared for over 5,000 patients and their families. During the same time period, the average daily census was 844 patients and the average length of stay ("ALOS") was 61.5 days. Forty-two percent of the patients had cancer as their primary diagnosis. The remainder of the patients (58%) had a primary diagnosis that was not cancer. Community provides services to hospice patients and families regardless of age, race, religion, gender, ethnic background, handicap, diagnosis or ability to pay and is certified to serve Medicare and Medicaid patients. Community's roots in Service Area 4A are deep. For example, its CEO and president, Ms. Susan Ponder- Stansel, has lived and worked continuously in Jacksonville and St. Augustine since 1980. She is a member of community organizations that provide an excellent vantage point on the needs of the community, including the Board of the District IV Health Planning Council, the Rural Health Network, and the Advisory Board of the Malone Cancer Institute at Baptist Medical Center. Community is governed by a Board of Directors with 30 members, representatives of a multitude of the communities in Service Area 4A. The Board includes community volunteers, physicians and representatives of each of the major hospital systems. Hospital representatives on CHNF's Board ensure the best collaboration and outreach to hospital patients who are hospice eligible. It allows the formation of partnerships for the development of additional services to fill any gaps between hospice and hospital care. Community encourages and receives input from its St. Augustine/St. Johns Advisory Board and its Clay County Advisory Board, consisting of more than 20 members each. Advisory Board members advise CHNF of additional ways hospice services can be made accessible and available to the residents of those areas. Community has made hospices services accessible and visible throughout the entire service area by strategically establishing offices and facilities to serve each of the metropolitan and the rural communities of the service area. As one might expect from any new hospice program, Heartland and VITAS the Applicant have only committed to office space in Duval County. VITAS proposes to rent such office space and might rent space elsewhere for satellite offices. Heartland proposes to establish its primary initial office in Duval; otherwise, it "will look at the need for satellite offices to ensure that the five-county are is covered." Tr. 274. Community has a history of providing high quality hospice services in Service Area 4A. It provides all levels of hospice care, including respite and continuous care, and has demonstrated the capacity to organize and deliver core hospice and other hospice services in a manner consistent with all regulations and prevailing standards for hospice care. Although most hospice patients prefer to remain in their own homes during the dying process, some symptoms require management with a higher level of 24-hour acute care. Three venues may be provided by a hospice to deliver general inpatient care to a hospice patient. One method is to use beds scattered throughout an acute care hospital or nursing home as they are available ("scatter beds"). Another is to establish a hospital- based inpatient unit specifically dedicated to hospice patients operated in leased space and staffed by hospice employees. The third is to establish a freestanding hospice inpatient facility. Freestanding facilities are generally more home-like than scatter beds or dedicated space in a hospital. Heartland and VITAS propose to contract with nursing homes and hospitals to provide general inpatient care on a scatter bed or single bed basis as needed. Community offers such care in freestanding facilities, hospital-dedicated leased space, and scatter beds so it can allow the patient's needs to determine the venue of choice. Community has two general inpatient facilities. The Hadlow Center of Caring is a 38-bed, freestanding Medicare certified facility centrally located in the service area and easily accessible from I-95, I-295, and US-1. The Morris Center is a 16-bed Medicare-certified dedicated facility located in Shands Hospital in the demographic and geographic center of metropolitan Jacksonville. The Hadlow Center, notwithstanding its medical mission to provide crisis intervention for hospice patients, is designed and operated to create a home-like environment for patients and families enduring end-of-life crisis. It has unlimited visiting hours. Patients can decorate their rooms with their own mementoes. Pets can visit. There are lanais and outdoor areas for patients and families to use. All 38 beds at Hadlow are certified for general inpatient care. Some of the beds are used by CHNF for residential patients -- patients eligible for routine home care, but who either have no caregiver at home, no home, or an unsafe environment at home. Although CHNF is reimbursed for the routine home care, it is not reimbursed by any third party payor for providing residential care. If the patient lacks the ability to pay, CHNF provides the residential bed at Hadlow free of charge. The Morris Center is operationally similar to the Hadlow Center with many of the same amenities, but it is located in a hospital. The Neviaser Educational Institute at Community Hospice of Northeast Florida is a department of the Hospice created in 2003 to provide education to the community and the hospice's employees on end-of-life issues. The Institute has grief and loss, professional education, and a community relations component. Since its inception, the scope and breadth of the professional education provided by the Institute has been significant. In November of 2005, for example, the Institute provided 1,874 hours of education to 1,421 persons (703 staff and 718 community). The hours of education were apportioned 1,448 to unlicensed professionals/students/lay persons, 371 to nurses, 41 to social workers and 13 those seeking continuing medical education (CME) credits. Community is the only hospice in the state authorized by the Florida Medical Association to conduct CME. Although the need for community education can never be fully met by any one provider, and additional education will likely always be needed, CHNF's community education and community grief and loss programs have been thoughtfully designed and delivered. They are efficacious in developing a larger community sense of how to manage grief and loss and in communicating the availability of hospice to deal with those issues. Community PedsCare is an innovative program established by CHNF in collaboration with Wolfson Children's Hospital, Nemours Children's Clinic and the University of Florida. The program provides palliative and hospice services to children (up to 21 years of age) who have been diagnosed with a life-threatening disease, injury, illness or condition, and to the families of these children. Community operates an in-house pharmacy allowing it to dispense prescribed medications to patients in their homes and in CHNF's general inpatient facilities. Community operates its own in-house durable medical equipment department. This enables greater control to ensure prompt delivery when needed and timely pick-up which is not always of concern to for-profit contract vendors of durable medical equipment. The location for CHNF's Gateway Mall Branch Office was specifically chosen to enhance access for African-Americans in the Service Area 4A, the preponderance of whom live proximate to metropolitan and Northwest Jacksonville. The Morris Center for Caring, one of CHNF's general inpatient facilities, was located at Shands Hospital in downtown Jacksonville, specifically because it is in the geographic center of the City, and it is where most of the SA's African- Americans come to receive their healthcare. CHNF has employed a Community Education Manager for the past two and a-half years. She was previously employed by the City of Jacksonville's Human Rights Division for three years to initiate a community dialogue of race relations. For the preceding 20 years she acquired an understanding of the Jacksonville and neighboring counties in Service Area 4A working as manager for a home health agency that, like hospice, primarily delivers healthcare in the patient's home. CHNF's Community Education Manager has had an excellent opportunity to observe how healthcare is, or is not, delivered to African- Americans and minorities and has experience in the difficulties unique to educating African-Americans about the availability of home health and hospice. The community education manager has developed outreach and education programs specifically targeting African-Americans, other ethnic group and Veterans. A significant barrier to higher utilization of healthcare services by African-Americans, which is not unique to Jacksonville, is a historical distrust of healthcare, passed by word of mouth and based on the disparities in treatment African- Americans have experienced. Many physicians are not comfortable, even today, treating African-Americans. As a consequence of disparate treatment, African-Americans are less likely than their Caucasian counterparts to trust or allow a stranger to provide end-of-life care to themselves or a member of their family. To address these barriers, CHNF has recognized that it takes time, persistence, consistency, and commitment to develop a trust in hospice that will overcome years of generalized mistrust of healthcare professionals and the healthcare delivery system. Community management fully supports and historically has implemented diversity training for all of it staff. Community has been very successful in increasing the number of African-American churches and corresponding faith based communities which will allow hospice to make educational presentations. There are a great number of African-American churches in Jacksonville. In FY 2005, CHNF made over 390 visits and made 24 presentations in African-American Churches. Community has focused on African-American women and makes numerous presentations to African-American women's groups because, more often than not, women are the heads of households and are the caregivers to families and friends in the African- American community. Community conducts conferences and workshops with clergy of a variety of denominations to address issues specific to African-American end of life and access to healthcare. If for any reason, including lack of funds, the above programs were pulled back or diminished, it would be like starting over to rebuild trust in the African-American community. Community hired an African-American public relations firm to tailor a number of CHNF brochures specifically to African-Americans. Community has developed effective printed material utilizing testimonials from African-Americans, and succinct wording about topics as varied as how to ask your physician questions, where to get caregiving information and the availability of compassionate care at CHNF for African- Americans. Community places articles and advertising in the Jacksonville First Coast Edition of Black Pages USA, which serves and is distributed to African-American families and businesses in Jacksonville, Orange Park, St. Augustine, Middleburg, Yulee, Callahan, Baldwin, Jacksonville beaches and surrounding areas. Community's outreach to the African-American community in Service Area 4A is having success. In short, CHNF is an available, high quality, full- service hospice. Because of its not-for-profit status and current economies of scale, CHNF is able and willing to fund unique and effective community and professional education, community outreach, and a variety of enhanced services to its patients, their families and the communities in Service Area 4A. Heartland's Application Heartland's hospice care is delivered by an interdisciplinary team. The team consists of a registered nurse, social worker, spiritual care coordinator, volunteer and bereavement coordinators, the attending physician, the hospice medical director, volunteers and therapists. The therapists come from a variety of disciplines: physical, occupational, speech and alternative therapies such as music, art, or massage therapy. Which therapists comprise an individual patient's interdisciplinary team depends on the patient's plan of care. On admission, Heartland patients are provided a hospice client handbook describing available hospice benefits for patients and families. Patients and their families are provided a telephone number to call with any questions or requests for assistance. Foreign language materials are available, as are interpreters and services for the deaf. Heartland's hospice services are available 24 hours a day and seven days a week. Upon hospice admission to Heartland, a plan of care is developed by the interdisciplinary team, including the physicians, in consultation with the patient and family to determine the kinds of care and services needed. Every 14 days the team meets to review each patient's plan of care to ensure the care is evaluated for effectiveness and any changes in services or care that may be needed. Heartland's plan of care for each patient addresses all orders and treatments that are directed by physicians and the needed frequency and types of services and treatments. The plan is implemented by the entire interdisciplinary team, including the attending physician and the medical director. Patients may choose to have the hospice medical director assume patient care or may choose to retain their attending physicians. In the latter case, the attending physician and the hospice medical director work closely together. Each Heartland patient is assigned to a specific interdisciplinary team that oversees all of the patient's care. That team cares for the patient and family throughout the hospice stay irrespective of changes in the level of care needed. Continuity of care is therefore achieved. Bereavement services are provided through the Heartland interdisciplinary team for families and communities up to 13 months post death. Services include one-on-one counseling, community grief support groups, and memorial services. Bereavement needs are anticipated and assessed upon admission and throughout the care, and assessed again after a death to ensure bereavement needs of the family are met. A bereavement plan of care is established with the family and the bereavement coordinator, which may include visits and other forms of contact. Grief support groups meet at locations that are convenient to community and family needs, which may be at a variety of community buildings. Heartland has developed bereavement specialty programs that include spouses and children, including day or weekend childrens' camps throughout Heartland hospices across the country. Heartland has also provided specialty support groups for the spouses of veterans who have lost their lives in war. Heartland programs hold memorial services for all of the patients who have died. One-on-one bereavement counseling is always available. The frequency of counseling depends on the needs of the individual. Heartland's bereavement counselors have extensive experience in grief counseling. Some are also social workers. They are often called upon to conduct crisis intervention. Heartland, therefore, has specific required qualifications for bereavement counselors. New employees, irrespective of their prior grief counseling experience, are trained through the use of an extensive bereavement manual. There is also an extensive training of spiritual care coordinators whose services are sometimes provided in conjunction with bereavement services. Heartland utilizes a customer service training program called Circle of Care for extensive training of every employee. The program focuses on the ability to talk with patients and families and to identify and resolve conflicts in order to provide the best care possible. Heartland provides an extensive volunteer training program with five levels. The training is tied to the nature of the volunteer jobs that will be performed, such as clerical tasks, administrative help or bereavement assistance. There is also training for volunteers who sit with patients when they are dying as part of a vigil program that ensures patients do not die alone. Licensed professionals may volunteer professional services as well. Heartland volunteers are also involved in music therapy or enrichment programs. The volunteer coordinator works closely with activities directors in nursing homes to ensure that any nursing home resident who desires such therapy receives it, whether the resident is a hospice patient or not. The volunteer program seeks to meet patient and family needs of greatly varied kinds. As but one example, the program could see to it that the lawn at the family home is mowed to relieve the patient and family of that responsibility. In addition to gardeners, the volunteers may meet needs such as those addressed by a beautician or a housekeeper. In sum, the program looks at "the whole picture of . . . needs" (tr. 89), of the patient and family. Applicable rules require that hospices provide a minimum of 5% of direct patient care through volunteers. To that end, Heartland's volunteer training programs incorporate all CHAP and NHPCO standards and practice guidelines. Heartland, moreover, believes that every patient who so desires should receive volunteer assistance. During 2005, Heartland hospice programs nationally provided over 178,000 hours of service by volunteers. Heartland also offers a specialized spiritual care program directed by spiritual care coordinators with extensive training in dealing with bioethical issues, and assisting the hospice care teams with crisis intervention and spiritual needs. The focus is on spirituality, values, beliefs and desires, rather than on religion. Heartland spiritual care coordinators and social workers also lead the Heartland suffering program consistent with Heartland's Sincerus Care philosophy. The spiritual care coordinators develop community plans and work with local and family clergy to coordinate the appropriate care for the patient and family. Heartland's chaplains are often called upon to provide funeral services. Heartland employs social workers for the psychosocial needs of patients and families and to identify community resources beyond hospice services when needed. Social workers also assist with funeral plans and with examining financial eligibility for other types of community service that might be available for the patient and family. Social workers provide suffering assessments and advanced care planning and are instrumental in assisting with coping with chronic disease near the end of life. Heartland's Sincerus Program was developed based on three years of extensive research of then available palliative care programs around the country. Some of the programs focused on specific disease categories, such as cardiac or cancer, and many were designed for a hospital-based delivery. A need for stronger programs when patients returned to their homes, however, was identified. In the course of the development of the Sincerus program, Heartland determined that palliative care tools such as pain management, psychological assistance and help with activities of daily living were beneficial for patients with many non-terminal health conditions as well as those who were dying. Heartland developed clinical pathways that could be employed in both the home health care and hospice divisions of the company. Sincerus Care is Heartland Hospice's program for its palliative care and holistic approach to both hospice and health care at home when the patient has not been admitted to hospice. It addresses unmet patient needs in the areas of psychosocial and spiritual support in this time of rapid advances in medical technology. Heartland's research also determined that hospice patients across the country typically received better pain management than non-hospice patients with chronic diseases. For many years up until the present, there have been millions of Americans with chronic disease. Half of those afflicted with chronic disease had two or more chronic diseases. Not all of those suffering from chronic disease, of course, are in a hospice; the majority, in fact, have not been admitted to hospice. Heartland decided to bring the best practices of hospice to all of its patients, including those with chronic disease in home care programs. It did so through Sincerus Care. Heartland has also developed high quality national palliative care intervention processes. In developing the Sincerus Care approach addressing the body, mind and spirit, a need was identified for the development of a suffering assessment and initiative program. Previously, suffering had not been well researched. Heartland was the first national company to fold suffering assessments and initiatives into all of its programs for home care and hospice. Suffering differs from pain. A person may experience pain without suffering or suffer without physical pain. There are three domains of suffering. One is physical suffering, in which a person has been affected by changes in physical abilities. Concern over body image related to surgeries or amputations is a subset of this domain of suffering. A second is personal family suffering. As the most common, it is related to fears that a patient or family may have about the unknown, including whether they may experience uncontrollable pain. Third, is spiritual suffering. A patient may struggle with values and beliefs as they question why they are here, ask what they may have done wrong to deserve their situation or wonder why they do not believe in God. Four typical vital signs are blood pressure, temperature, pulse, and respiration with pain as a fifth. Heartland's programs use suffering as a sixth vital sign. Heartland's spiritual care coordinators and social workers receive specific additional training on suffering assessment and interventions and techniques to minimize, improve or eliminate suffering as much as possible to improve quality of life. Heartland uses a multifaceted approach to pain management because medication alone is not always sufficient to eliminate or alleviate pain. Heartland also finds it necessary to address aspects of suffering. Heartland's medical directors and physicians review the effectiveness of all the modalities for each patient's pain management to ensure that pain and symptoms are managed effectively. All of Heartland's staff receive specialized pain management training and awareness and sensitivity training. Heartland's social workers, spiritual care coordinators, nurses, home health aides, and other staff also receive extensive training to learn how to deal with issues such as oncology emergencies, care of an Alzheimer's patient, and the particular types of care needed during the last hours of life. Heartland offers extensive community education based on assessment of each community's needs so that community outreach programs are developed to meet those specific community needs for end-of-life care. Many outreach programs have been developed by Heartland for underserved populations and ethnic populations. For example, through one of Heartland's Oklahoma offices, Heartland has a partnership with a Native-American tribe because typically Native Americans have not accessed hospice service as fully as other populations. Heartland uses clinical pathways to follow each patient's care from admission through death to continuously assess suffering, psychological and physical needs and track what has occurred over time with the patient and what has been effective and what has not been effective. At the end of the stay, another assessment is preformed with regard to any changes in the patient's quality of life, whether their pain was successfully managed and whether they died in a place of their choosing. Heartland identifies those patients with the most urgent needs or who are in a fragile state of health to ensure that the staff meets those needs. Heartland developed a "referral quick check" to assist nursing homes and assisted living facilities who requested help in identifying patients who might be in need of hospice services. Heartland also provides a variety of information and brochures to patients, families, and the community for education to explain the nature of hospice care. Heartland employs a multi-tiered quality assessment and assurance program. Quality improvement activities and meetings are held at each local hospice. In addition, quality assessment and assurance committees are used at the regional, division, and company-wide levels so that quality effectiveness is evaluated with respect to quality improvement programs throughout the organization to identify trends locally, regionally, divisionally, and company-wide to identify areas of improvement on a continuing basis. In a number of cities, Heartland operates home health and hospice programs together. Home health involves skilled nursing or physical therapy and serves patients who are able to be rehabilitated, either through therapy or training to reach their maximum optimum level. Often patients who are in home care due to problems such as a broken hip, and are undergoing rehabilitation through physical therapy, also develop or have a terminal prognosis. While in Heartland's home care program, they can be assessed, cared for, and visited by a social worker and a chaplain. The Sincerus Care program that addresses patients where they reside is able to transition patients from home care with rehabilitative types of care to the appropriate levels for terminal care. This transition ability is beneficial for patients. Manor Care has over 65,000 employees and provides Heartland hospice programs with access to corporate support for staff recruitment, including a national contract with an advertising agency which allows freedom for local advertising preferences. The company also has a strong human resources department that assists the local programs with training in hiring practices and with extensive background screening processes to ensure the best employees for their programs. Manor Care provides its subsidiaries and affiliates with many services such as consultants, accounting, financial services, and many other areas of support. Those overhead costs or management fees are annually allocated to various operating entities based on their ability to pay, and therefore would never be applied in a manner to financially harm a new hospice program. Heartland's human resources department provides recruiters to assist with recruiting of administrative and director of nursing positions. Manor Care and Heartland also assist in funding the Job Corp program throughout the United States, which program assists people in obtaining skill sets to obtain jobs in areas such as an LPN or a certified nursing assistant position. Despite a recognized national nursing shortage, Heartland has been able to appropriately staff all of its programs to ensure quality care. Heartland hospice program medical directors are hired from the local community, and may be full-time, part-time, or contracted. Heartland requires all of its medical directors to become board-certified, or to be board-certified in their specialty and to have experience with terminally ill patients and to have an affiliation with a Medicare certified hospital. Heartland desires that all its medical directors be palliative care-certified. If a physician is not, then Heartland provides the education and training. Every Heartland hospice program has at least one medical director. Some have more than one medical director, each of whom supervises specific clinical teams. Heartland's employee retention program includes providing scholarship and tuition reimbursement for nurses, LPNs, and social workers going to school or getting their master's degree, as well as home health aides who desire to become LPNs and RNS. This program also includes persons seeking certification in hospice and palliative care and physician certification for palliative care. The Heartland human resources department is active in each local program, with education and training of staff as part of the employee retention program. In addition to Circle of Care training, the Heartland human resources department also provides leadership and management development training through online courses and educational materials. Heartland has a dedicated team utilized for the implementation of new hospice programs. The team's primary responsibility is to set up each new program location, and includes an administrator, nursing supervisor and office staff who prepare manuals and documentation for use, acquire the furniture and leases, hire the local staff, and assist through the Medicare certification process. The implementation team is expected to function in the same manner with the new Service Area 4A program. Heartland has been very successful with its implementation teams in starting new programs. It is reasonable to expect it to be successful in Service Area 4A as well. Heartland management has met with its affiliated Jacksonville nursing home and rehabilitation clinic directors to discuss methods of providing the best pertinent care for those also in need of hospice care. The administrator of Heartland South-Jacksonville, a nursing home, testified to the current contract with Community, which provides the nursing home residents with quality hospice care, and to the willingness to negotiate a similar contract with Heartland hospice. She supports Heartland's hospice proposal and believes it would be beneficial for patients to have another high quality choice for hospice. She would also assist Heartland's implementation of a hospice program through exiting relationships with local physicians and other health care providers. Vitas Application An experienced provider of hospice services, VITAS is capable of providing in Service Area 4A the core services and related specialized services it provides in Dade, Broward and Palm Beach Counties. As an affiliate, moreover, of VITAS Healthcare Corporation, if its application were to be approved, Vitas would benefit from its affiliation with its parent and its parent’s subsidiaries. Prior to submitting its application, VITAS representatives visited Service Area 4A to assess the market and any potential populations and areas of unmet needs. Mr. Ron Fried, a VITAS senior vice president for development, visited 26 of 32 nursing homes in Duval County, and additional nursing homes in other counties. He also visited with community leaders and organizations. Based on his assessments, he determined there was an unmet need in inner city areas, among nursing home residents and in the African-American community. In addition to Mr. Fried’s on-the-ground survey, VITAS representatives also reviewed the published hospice admission and fixed need pool data, as well as data on deaths and causes of death. They determined there was a large unmet need among the non-cancer patient population. Offers of conditions on hospice programs "are typically rejected" (tr. 502) by AHCA. For state licensure purposes and for federal certification purposes, hospices have to treat any patient who is referred to them or who self- presents. Since hospices, in contrast to hospitals or nursing homes, have no choice in whether to take a patient, AHCA normally will make the comment in the SAAR that it is not necessary to condition an application. While the Hospice Program Rule does not require that an application be conditioned in any way, it nonetheless provides for preferences among competing CON applications as a way to distinguish one competing application from another: Preferences for a New Hospice Program. The agency shall give preference to an applicant meeting one or more of the criteria specified in subparagraphs 1. through 5.: Preference shall be given to an applicant who has a commitment to serve populations with unmet needs. Preference shall be given to an applicant who proposes to provide the inpatient care component of the hospice program through contractual arrangements with existing health care facilities, unless the applicant demonstrates a more cost- efficient alternative. Preference shall be given to an applicant who has a commitment to serve patients who do not have primary caregivers at home; the homeless; and patients with AIDS. In the case of proposals for a hospice SA comprised of three or more counties, preference shall be given to an applicant who has a commitment to establish a physical presence in an underserved county or counties. Preference shall be given to an applicant who proposes to provide services that are not specifically covered by private insurance, Medicaid, or Medicare. Fla. Admin. Code R. 59C-1.0355(4)(e). Despite the lack of necessity for conditions in hospice CON applications and the practice of AHCA in reviewing such applications and commenting on them in SAARs, VITAS offered specific conditions in its application. The purpose of the conditions, by and large, was to demonstrate VITAS' commitment to meet the preferences advanced in Subsection (4)(e) of the Hospice Program Rule. For example, having determined that there was a large unmet need in Service District 4A for the non-cancer population, it conditioned approval of its application on support of a commitment to serve those populations. VITAS conditioned approval of its CON on providing at least 67% of its patient days to non-cancer patients, including a condition for at least 10% of total days to be Alzheimer’s patients. VITAS has demonstrated ability to meet the needs of the non-cancer population. Nationally, hospices have provided one average around 43% of service to non-cancer patients according to the most recent data, while VITAS programs provided 57% of care to non-cancer patients. VITAS has focused significant attention and resources in development of clinical criteria to identify appropriate non-cancer admission, and in education of physicians about the benefits of the hospice for the non-cancer population. While the Florida statewide average for hospice providers is 57.6% non-cancer, VITAS’ programs had 67% non- cancer populations. As Patricia Greenberg, VITAS’ health planning consultant explained, VITAS has established a niche in serving non-cancer patients, including its most recent start up programs in Brevard County with a 69% non-cancer population and Palm Beach County with a 76% non-cancer population. Aside from agreeing to condition its CON on providing 67% of care to non-cancer patients, VITAS’ application projects 274 non-cancer admissions in its second year of operations. VITAS Healthcare Corporation and affiliates have a demonstrated history and commitment to serving large ethnic minority populations in metropolitan markets, including funding of full-time community outreach positions, partnership with the Rainbow Coalition/Operation Push organization, and participation in clergy forums and events aimed at the African-American community in the Jacksonville area. VITAS Healthcare Corporation also “partnered with Duke Institute on Care at the End of Life housed at Duke Divinity School to provide in several areas of the country . . . ministers . . . to learn about end- of-life care issues and how . . . together [to] educate the community to assure access particularly for African Americans to hospice care.” Tr. 627. VITAS specifically conditioned its application on providing a minimum of 15% of its services to Medicaid and charity days, including those Medicaid-designated persons residing in nursing homes. As explained by Mr. Fried, this commitment was made to meet the unmet needs of the underserved inner-city, a largely African-American population with substantial unmet needs. VITAS has a corporate policy of social responsibility and provided over $7 million in charity care in 2004, growing to $8 million in 2005. VITAS proposes to provide the inpatient care component of the hospice program through contractual arrangements with existing health care facilities. Its financial pro formas do not include general inpatient care projections. The reason for the lack of these projections was explained at hearing by Ms. Law. The experience of VITAS the Parent through its affiliates is that with startups through the first two years, the projection is less than one- half percent, which rounded down to zero. Put another way, VITAS expected that its average daily census for inpatient care in its first two years would be less than one patient and therefore the application "did not reflect the revenue or the expense" (tr. 661) associated with inpatient care. There is no question, however, that the VITAS' application is clear that it proposes to provide inpatient care through contractual arrangements. The proposal is supported, despite not being reflected in the financial pro formas, by the experience nationally of VITAS the Parent, "one of the nation's leading providers of [hospice] inpatient care . . . run[ning] about 5% of [total] days of care." Tr. 660. VITAS demonstrated a commitment to serve AIDS patients, the homeless, and patients without primary caregivers at home. VITAS conditioned its CON application on providing 2% of its admissions to AIDS/HIV patients or to serve at least 10% of all AIDS/HIV-related deaths in Service Area 4A. VITAS Healthcare Corporation and its affiliates have demonstrated a commitment to serve such patients; VITAS Healthcare Corporation has even sponsored programs to combat AIDS in sub-Saharan Africa. VITAS' application proposes a physical location in Duval County, but it does not definitely propose a physical presence in any other county (whether underserved or not). While the application is viewed by VITAS as allocating funds for multiple offices, at least a main office in Duval County and a satellite office somewhere in Service Area 4A, Mr. Fried testified that the funds so allocated "might" (tr. 877) support a satellite office in Nassau County but that VITAS "hadn't decided on a precise location. And I don't recall whether that included any satellite space elsewhere in the service area." Tr. 878. VITAS proposes to provide services not specifically covered by private insurance, Medicare or Medicaid, for example, pet therapy, community education and outreach to combat AIDS. VITAS conditioned its application on the implementation of an information technology system known as CarePlanIT. A hand-held, bed-side device, CarePlanIT allows caregivers to perform bed-side entry of notes and orders and to have immediate access to the full range of data stored in the company-wide database known as the VITAS Exchange. CON Review Criteria The Agency found in its SAAR (and continues to maintain) that both applicants generally meet all applicable CON review criteria. It approved Heartland's application and denied VITAS after comparative review that convinced AHCA that Heartland's was superior. Heartland concedes that the “Vitas application generally addresses all applicable CON review criteria.” Heartland Services Inc. And Agency for Health Care Administration Joint Proposed Recommended Order, p. 29. It is joined by CHNF in the contention, however, that compliance with certain CON requirements and review criteria is doubtful and the application information is flawed in a number of respects. VITAS' three opponents in this proceeding, moreover, charge that the VITAS' application is flawed in a manner that may be cause for dismissal under the circumstances of this case: that it does not contain an audited financial statement and therefore does not meet minimum application content requirements. The Agency did not dismiss VITAS' petition; Heartland, nonetheless, maintains that it should be dismissed as the result of the evidence in this proceeding for is failure to meet minimum application content requirements. Application Content Requirements Section 408.037, Florida Statutes (the “Application Content” Statute) governs the content of CON applications. It states, in part, (1) An application for a certificate of need must contain: * * * (c) An audited financial statement of the applicant. In an application submitted by a[] . . . hospice, financial condition documentation must include, but not be limited to, a balance sheet and a profit- and-loss statement of the 2 previous fiscal years’ operation. (Emphasis supplied.) Heartland’s CON application satisfies all of the application content requirements. The application of VITAS does not. VITAS’ application contains audited consolidated financial statements for its parent and for the subsidiaries of VITAS the Parent. It does not contain a separate audited statement of VITAS the Applicant. The presence in the application of a consolidated financial statement of the parent and subsidiaries is not a substitute for the required audited financial statement of the applicant. See Fla. Admin. Code R. 59C-1.008(1)(c): “. . . Nor shall the audited financial statements of the applicant’s parent corporation qualify as an audit of the applicant.” In short, the application fails to contain an audited statement of the VITAS the Applicant and therefore fails to meet minimum content requirements. Although the Application Content Statute is phrased in mandatory terminology (“[a]n application . . . must contain”), VITAS’ failure is not necessarily fatal to its application. The failure to strictly comply with the Application Content Statute may be forgiven by Section 408.039(5)(d), Florida Statutes (the “Forgiveness Statute”) under certain circumstances: The applicant’s failure to strictly comply with the requirements of s. 408.037(1) . . . is not cause for dismissal of the application, unless the failure to comply impairs the fairness of the proceeding or affects the correctness of the action taken by the agency. VITAS maintains that the Forgiveness Statute forgives the application’s lack of an audited financial statement of VITAS the Applicant. The Case for Forgiveness VITAS the Parent does not typically obtain separate audited financial statements for each of its subsidiaries. Instead, independent certified public accountants audit the financial statements of VITAS the Parent and its subsidiaries together in a consolidated fashion. After audit, a consolidated audited financial statement is issued by the independent CPAs. If there is ever a need for a separate audited financial statement of any one of the subsidiaries, according to Lawrence Press, at the time of hearing the controller of VITAS the Parent (see tr. 929), then VITAS commissions an audited financial statement of any “separate legal entity” within the group, id., including VITAS the Applicant. Whether the financial information submitted by VITAS supports the conclusion that the lack in the application of an audited financial statement of the applicant may be forgiven depends on an examination and analysis of the information submitted. It begins with one of the documents attached to Schedule 3 in the application, the consolidated financial statements of VITAS the Parent and its subsidiaries (the "Audited Consolidated Financial Statements." The Audited Consolidated Financial Statements The Audited Consolidated Financial Statements cover two years: the year ended September 30, 2003 (the "2003 Consolidated Audit") and the year ended September 30, 2002 (the "2002 Consolidated Audit.") See VITAS’ Certificate of Need Application, Vol. 1 of 4, Tab 3. The Audited Consolidated Financial Statements contain two reports each entitled, “Report of Certified Public Accountants,” one for the 2003 Consolidated Audit, the second for the 2002 Consolidated Audit. The first report is dated November 10, 2003; the second report is dated November 8, 2002. The first report concludes: In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated position of Vitas Healthcare Corporation and Subsidiaries at September 30, 2003 and 2002, and the results of their operations and cash flows for each of the three years in the period ended September 30, 2003, in conformity with accounting principles generally accepted in the United States. VITAS Certificate of Need Application, Vol. 1 of 4, Tab 3, p. 1 of the 2003 Consolidated Audit.2 Following the first report are the consolidated financial statements themselves. These are listed in the Table of Contents as follows: Consolidated Financial Statements; Consolidated Balance Sheets at September 30, 2003 and 2002; Consolidated Statements of Income for the years ended September 30, 2003, 2002 and 2001; Consolidated Statements of Changes in Redeemable Preferred Stock and Stockholders Deficit for the years ended September 30, 2003, 2002, 2001; Consolidated Statements of Cash Flows for the years ended September 30, 2003, 2002 and 2001; and Notes to Consolidated Financial Statements. See VITAS Certificate of Need Application, Vol. 1 of 4, Tab 3, Contents, Consolidated Financial Statements, September 30, 2003. The second report contains an identical opinion, except for a change in dates to reflect that the statements are for the statement year ending in 2002 rather than 2003. The second report also contains a paragraph that does not appear in the first report: Our audits were conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental balance sheets as of September 30, 2002 and 2001, and statements of income for the years then ended which include Vitas Healthcare Corporation, Vitas Healthcare Corporation of Florida, . . . [and a number of other VITAS Healthcare Corporation Subsidiaries] are presented for the purpose of additional analysis and are not a required part of the financial statements of Vitas Healthcare Corporation and Subsidiaries. Such information has been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, are fairly stated in all material respects in relation to the financial statements taken as a whole. VITAS Certificate of Need Application, Vol. 1 of 4, Tab 3, p. 1 of the September 30, 2002, Consolidated Financial Statements. Following the second report are consolidated financial statements of the same type as those following the first report, that is, detailed balance sheets, detailed statements of income, detailed statements of changes in redeemable preferred stock and stockholders deficit, detailed statements of cash flows, and notes. Unlike the information that follows the first report, however, there is other information listed in the Table of Contents for the 2002 Consolidated Audit. It is denominated “Other Financial Information.” The Other Financial Information is described in the Contents page of the Consolidated Financial Statements for September 30, 2002, as “Supplemental Balance Sheets at September 31 [sic], 2002 and 2001” and “Supplemental Statements of Income for the years ended September 31 [sic], 2002 and 2001.” It is this information that is “presented for additional analysis” as reported in the paragraph that appears in the 2002 report that is not present in the 2003 report. This is also the information that is reported in the same paragraph to have been subject to the auditing procedures applied in the Ernst & Young audits and found, in Ernst & Young’s opinion, to be fairly stated. The financial information attached to Schedule 3 in VITAS’ application also contains another set of documents. These documents are not a part of the Audited Consolidated Financial Statements. Nor, accordingly, were they reviewed by Ernst & Young. They consist of three pages. The first page is a letter from Robin Johnson, CPA, that identifies her as vice president and controller of VITAS Healthcare Corporation. The letter is dated June 25, 2004 (the “Johnson Letter.”) Attached to the Johnson Letter are two pages. The first page is entitled, “Vitas Healthcare Corporation and Subsidiaries Consolidated Balance Sheets.” The second page is entitled, “Vitas Healthcare Corporation and Subsidiaries Consolidated Statements of Income.” The Johnson Letter refers to these pages as "[t]he . . . supplemental balance sheets as of September 30, 2003 and 2002 [2003 information] and the statements of income for the years then ended . . . ." Each of these two pages (the “Johnson Supplemental Balance Sheets and Statement of Income” or the "Johnson Supplemental Financial Information") contains 13 columns; the first column devoted to “CONSOLIDATED VITAS,” the next twelve devoted to one of each of twelve subsidiaries. Of the 13 columns on each page, one column is devoted to financial information that pertains solely to “VITAS OF FLORIDA” or VITAS the Applicant. The Johnson Letter and the Johnson Supplemental Financial Information were not audited by Ernst & Young or any other independent certified public accountant. Nonetheless, they appear in the VITAS application within the body of the Audited Consolidated Financial Statements. Mr. Beiseigle described them at hearing: “[T]hat information that’s sandwiched between the 2002 and 2003 audits of VITAS Healthcare Corporation.” Tr. 1701. Mr. Beiseigle’s description was quickly followed by a clarification from CHNF’s counsel, Mr. Newell: “He means physically in the book, not necessarily chronologically.” Id. Mr. Newell's clarifying comment is confirmed by an examination of the application in evidence. Indeed, Mr. Beiseigle's description is accurate; the Johnson Letter and the Johnson Supplemental Financial Information is "sandwiched" between the 2003 Consolidated Audit and the 2002 Consolidated Audit. It appears in the midst of the Audited Consolidated Financial Statements, despite the fact that it is information that was not audited by Ernst & Young and not audited by any other independent certified public accountant. The insertion of the Johnson Letter and Supplemental Balance Sheets and Statements of Income into the VITAS application in the midst of the Audited Consolidated Financial Statements was explained by VITAS through the testimony of Mr. Press, VITAS' controller at the time of hearing, and Ms. Greenberg, the primary author of the application who was responsible for compiling all four volumes of the application in their entirety. See Tr. 996. The Insertion of the Johnson Information VITAS attempted to commission an audited financial statement of VITAS the Applicant standing alone. As Mr. Press testified, such an attempt would be in due course whenever there was a need for a separate audit of any of the individual VITAS subsidiaries. An example of a case of such a need is this one, when a CON application must contain an audited financial statement of the applicant. VITAS representatives, therefore, asked Ernst & Young to audit financial statements of VITAS the Applicant separately from the consolidated review it had conducted. VITAS' request of Ernst & Young followed the audit of the Consolidated Financial Statements and was also made in the wake of ChemEd’s acquisition of VITAS the Parent. After the acquisition, ChemEd informed Ernst & Young that its responsibilities with regard to VITAS the Parent and its subsidiaries would be assumed by ChemEd’s accountants, PriceWaterhouse. Ernst & Young, therefore, declined the request by VITAS for an independent separate audit. There is nothing of record to show that VITAS attempted to obtain either an exception from ChemEd to allow Ernst & Young to proceed with a separate audit or to show that VITAS attempted to obtain an audit of itself from PriceWaterhouse or some other certified public accountant firm besides Ernst & Young. VITAS was aware that its application would lack minimum content without an “audited financial statement of the applicant.” It attempted to cure its non-compliance with the statutory requirement by insertion into the application of the Johnson Letter and Johnson Supplemental Financial Information. VITAS had no illusions that the information would constitute an audited financial statement of the applicant. It knew the information had been generated internally and constituted "managerial accounting" rather than "financial accounting." It knew the information had not been audited externally by an independent certified public accountant. In introduction of the Supplemental Information, the Johnson Letter reads, in part: VITAS Healthcare Corporation audits were conducted for the purpose of forming an opinion on the financial statements of Vitas Healthcare Corporation and Subsidiaries taken as a whole. The enclosed supplemental balance sheets as of September 30, 2003 and 2002, and the statements of income for years then ended which include . . . Vitas Healthcare Corporation of Florida . . . are presented for the purpose of additional analysis and are not a required part of the financial statements of VITAS Healthcare Corporation and Subsidiaries. Such information has been subjected to the auditing procedures applied in the audits of the financial statements and are fairly stated in all material respects in relation to the financial statements of VITAS Healthcare Corporation and Subsidiaries … taken as a whole. VITAS CON Application 9784, Vol. 1 of 4, Tab 3 (no page no., emphasis supplied). The language in the Johnson Letter underscored above makes two claims paraphrased as follows: first, the balance sheets and statements of income have been subjected to the auditing procedures applied by Ernst & Young in the consolidated audit; second, the information in the balance sheets and statements of income is fairly stated in all material respects in relation to the Audited Consolidated Financial Statements. It appears that the language of the letter, quoted above, was selected because it mirrors the language used by Ernst & Young to describe the “Other Financial Information” attached to the Ernst & Young 2002 consolidated audit. Whether that was why the language was selected or not, the inclusion in the letter was the subject of sharp criticism, see tr. 421-423, by Steven Jones, a licensed certified public accountant in Florida and Heartland's expert in accounting and healthcare finance. He found the language contrary to provisions of the American Institute of Certified Public Accountants, provisions of the Florida Statutes and the Florida Administrative Code, and generally accepted auditing standards that address "independence, integrity and objectivity." See Tr. 421-23. Whatever the motivation for including the two claims in the Johnson Letter, Ms. Johnson was not acting as an independent auditor. Nor could she have been so acting. Although a certified public accountant, as the controller of VITAS Healthcare Corporation, Ms. Johnson is quite the opposite of “independent” when it comes to VITAS the Parent and its subsidiaries, including the applicant in this case. Thus the Johnson Letter cannot stand for the claim made within it that Johnson Supplemental Financial Information had been subject to the same auditing procedures as the information subject to the consolidated review. Any light that Ms. Johnson might have shed on the claims in the letter did not materialize. Ms. Johnson did not testify at hearing. The task of proving compliance with the statutory requirement or how lack of strict compliance could be forgiven fell to Mr. Press and Ms. Greenberg. To the credit of both Mr. Press and Ms. Greenberg, neither claimed that the Johnson Letter and Johnson Supplemental Information constituted audited financial statements. As Ms. Greenberg stated in cross- examination by Mr. Newell at hearing: Q. But there is a difference . . . between the Letter that accompanies the . . . audits by Ernst & Young . . . and this letter [Ms. Johnson’s letter] . . . Now Ernst & Young did that in 2002, but based on your request and Ms. Johnson’s willingness, she certified that this time, but she was not one of the independent auditors, was she? A. No, her role was to work with them and provide them with the financial statements, but she was not an independent auditor. * * * Q. Would you agree with me perhaps that one who uses language like that in the bottom of Ms. Johnson’s letter, which is essentially identical to what external auditors used in the 2002 letter, might be the use of language in a manner that is to imply that a CPA is acting as independent certified public accountant in the audit of the attached statements. A. I don’t understand the question. Ms. Johnson is a CPA and controller and she was providing that language. We’ll make sure – she was not an external auditor, was she? A. No, I think I already said that. Tr. 1130, 1132, 1133. Although Ms. Johnson’s letter does not raise the supplemental information to the level of a financial statement audited by an independent certified public accountant, VITAS presented evidence as to why the failure to file an audited financial statement of the applicant does not impair the fairness of the proceeding or would not impair the correctness of approving VITAS’ application should AHCA do so. For example, all of the data on the balance sheets and income statements for subsidiary corporations tie to the consolidated totals for VITAS Healthcare Corporation as a whole. The statements reveal that on a consolidated basis the company had over $13 million in net income in 2003. VITAS Healthcare Corporation of Florida supplies the majority of revenue and net income to VITAS Healthcare Corporation. In fact, it makes up for losses by other subsidiaries. Ms. Greenberg opined that, as a financial analyst, she could determine ability to fund the project from the financial information supplied in the CON application. First, the $200,000 startup cost is minimal. Second, all of the supplemental information ties back to the audited consolidated financial statements. Mr. Press made this point, too. Ms. Greenberg determined, moreover, that VITAS Healthcare Corporation of Florida has available to it $14.3 million in current assets, $14.9 million in total assets, $51 million in retained earnings, and over $29 million in net income. Quite clearly, in her view, there are adequate funds available to fund the program of VITAS the Applicant in Service Area 4A. In addition, Ms. Greenberg noted that the proposed method of funding is from future cash flows and is not based on historic information. The application includes a forecast of financial operations of VITAS Healthcare Corporation with and without approval of the proposed project. Under a conservative scenario, VITAS is expected to net over $26 million in income, an amount more than sufficient to fund a $200,000 project. Ms. Greenberg’s analysis was subject to criticism by Mr. Beiseigel, CHNF’s expert health care financial analyst and forensic financial analyst. His analysis began with appreciation of the import of the lack of an audited financial statement of the applicant. The analysis requires an understanding of the elements of an audited financial statement. Elements and Import of an Audited Financial Statement The elements of an independently audited financial statement include an audit opinion letter, a detailed balance sheet, detailed income statement, detailed statement of changes in owner’s or stockholder’s position, a detailed operating cash flow statement and detailed notes allowing a financial reviewer to determine the existence of contingent liabilities and the materiality of the financial statements. These elements are all present in the Ernst & Young Audited Consolidated Financial Statements. The import of the lack of an audited financial statement of VITAS the Applicant and the presence of the Johnson Letter and Johnson Supplemental Financial Information to cover the year ending September of 2003 in this case is obvious. All of the elements of an independently audited financial statement are not subject to review by financial analysts such as those employed by AHCA and analysts outside AHCA (Mr. Beiseigel, for example) who might have reviewed the independently audited financial statement for purposes of a contested proceeding at DOAH, as is the case here. The Johnson Information that pertains to VITAS the Applicant was criticized in more detail on another basis: it does not contain any cash flow statements. Cash Flow Statements The Johnson Supplemental Financial Information does not include cash flow statements. In the SAAR, the Agency observed that cash flow data were not included in the application when it discussed compliance with Section 408.035(4), Florida Statutes, that is, what funds for capital and operating expenditures are available for project accomplishment and operation. Nonetheless, the SAAR concluded: Although the applicant [VITAS] did not provide historic cash flow data, the applicant showed healthy earnings. Even under the conservative analysis, the applicant has $6 million in working capital. Therefore, funding for this project and all capital projects should be available as needed. Heartland 16, p. 64. As part of its case that the failure to include an audited financial statement of the applicant should be forgiven, and that it was not necessary for it to provide cash flow data, VITAS points to the language that follows the statutory requirement that an application contain an audited financial statement: In an application submitted by a[] hospice, financial documentation must include, but need not be limited to, a balance sheet and a profit-and-loss statement of the previous 2 years’ operation. § 408.037(1)(c), Fla. Stat. VITAS submitted balance sheets and income statements for 2003, albeit not audited. Furthermore, Ms. Greenberg's point that the information provided to AHCA in the application demonstrates that VITAS the Applicant clearly has the financial wherewithal to fund the start-up costs associated with the application, costs that are minimal was adopted, in essence, by AHCA in the SAAR. Nonetheless, at hearing, AHCA supported Heartland and CHNF's argument that the lack of an audited financial statement in VITAS’ application is a material point to be considered in this proceeding when it comes to comparative review. The Agency has never excused the lack of an audited financial statement of an applicant. Furthermore, Mr. Gregg testified that in a comparative review proceeding where one applicant provides an audited financial statement and another does not, to not take into consideration that one application was missing the required audit would impact the fairness of the proceeding: I would say that it impacts the fairness to the extent that it prevents us from comparing apples to apples. A completely audited financial statement is generally more reliable and . . . has been viewed by a CPA who is not typically involved with the organization, and the other [an internally generated management report] is less . . . reliable. Tr. 512. As Mr. Gregg further testified in the context of comparative review, “I would say that there were uncertainties in the financial information that we got from VITAS. And we were more comfortable with the level of certainty of the financial information that we had from Heartland.” Tr. 506. Thus, while AHCA did not dismiss VITAS’ application for failure to meet minimum content requirements, it took into consideration the missing audit as it reviewed Heartland and VITAS’ applications on a comparative basis after determining that the two applicants generally meet the statutory and rule criteria for approving a CON application. CON Review Criteria Heartland demonstrated that it meets the statutory and review criteria for approval. To do so, Heartland had to correct an error in the Heartland application that related to long-term financial feasibility. The application had assumed that continuous care patient days would amount to approximately 7% of total patient days for both Year One and Year Two. The assumption was made after looking at national data in which continuous care is presented in terms of hours while other patient service types are presented in terms of days. The assumption was criticized by VITAS' witnesses. The criticism was discovered before hearing by Heartland. Mr. Jones realized the mistake, and therefore "recast those relative ratios, using a normal range for a continuous day, [so that] the percentage of continuous care produce[d] [is] substantially around 1 percent," tr. 412-13, an accurate percentage of continuous care for hospice programs. Mr. Jones also re-cast the pro formas to assume that continuous care should be reimbursed only at 15 hours per day rather than 24 hours per day (as the application had done) in response to another valid criticism by VITAS. VITAS moved to strike any testimony or evidence that concerned the re-casting on the basis that it is an impermissible amendment to Heartland's application. Ms. Greenberg also opined that Heartland projected salaries for some FTE positions were too low. Mr. Jones testified otherwise: that the salary estimates are generally reasonable. Ms. Greenberg also criticized the Heartland application based on an assertion that the projections did not reflect an additional 5% expense per patient day ("PPD") for dual eligible Medicare/Medicaid patients who reside in nursing homes. For nursing home residents who elect hospice admission, the state no longer pays the nursing home its Medicaid room and board rate, but rather pays a geographic area average rate to the hospice, which on average is about 95% of the rate previously paid to the nursing home. Even though it is negotiable, hospices often pay the nursing home its normal rate, resulting in a hospice expense of about 5% PPD more than the hospice is reimbursed for room and board. Five percent of the average nursing home room and board rate in the Jacksonville area would equal approximately $7.50 PPD. Statewide, about 30% of nursing home patient days for hospice care is delivered to Medicaid dually eligible nursing home residents. In the face of the criticism, Heartland demonstrated at hearing that its proposal is financially feasible in the long term, even if it were assumed: that Ms. Greenberg is correct about the salaries; that continuous care days should be 1% rather than 7% and reimbursed at only 15 hours per day instead of 24 hours per day; and, that the revenue for Medicaid nursing facility residents should be reduced at a rate of 5% PPD. This demonstration was conducted by Mr. Jones in what he described as a "worst case scenario" analysis. The analysis used a model that reduced continuous care revenue and shifted the reduced days to routine care; correspondingly adjusted the staffing levels to the Heartland standard; accounted for the 5% PPD Medicaid nursing home resident differential; and increased salary expenses. The re-casting is reflected in Heartland Exhibit 15, a recast of Schedules 6, 7, and 8 in its CON application. The re-casting results in a projected loss in Year One, but a projected profit in Year Two of $88,596, a demonstration of long term financial feasibility. The adjustments reflected in Heartland Exhibit 15, moreover, do not reflect every adjustment that would have to be made to fully recast the entire financial projections. If other expenses that would be reduced, such as drug costs and medical supplies, by a full recasting were included, the profit projected for Year Two would higher than the $88,596 reflected in the exhibit. In CON application proceedings, short-term financial feasibility is typically considered as the ability to fund the projected costs reflected on Schedule 1 of the application and to provide sufficient working capital for a start-up period. Heartland's application demonstrates short term financial feasibility. Because the applicant is a company in the development stage, it obtained a funding commitment from Manor Care to meet its funding needs. The application contained Manor Care's audited financial statements demonstrating the ability to fund its commitment in addition to an audited financial statement of the applicant as required. Manor Care is committed to providing all necessary funding and working capital requirements to Heartland to establish and operate the proposed hospice. Manor Care has the financial resources to fund the project. If needed, Manor Care also has approximately $230 million of unused debt capacity. It can clearly fund the $294,000 needed for the project. Manor Care, moreover, consistent with its policy with other subsidiaries, will not charge Heartland any interest on funds it provides for capital or operating expenses. If the CON is approved, Manor Care is committed to moving forward with the development of the hospice program. Neither Manor Care nor any of its affiliates has ever received a CON to develop a hospice in any state and not proceeded with development. Testimony at trial bolstered the Agency's conclusion in its SAAR that VITAS, despite the missing audited financial statement of VITAS the Applicant, should be able to fund the hospice program it proposes for Service Area 4A in the short term. The financial information supplied by VITAS, however, because of the lack of an audited financial statement of the applicant, was not as certain as that of Heartland, a matter that was determinative in the Agency's comparative review of the two applications. Comparative Review The financial information in Heartland's application was more certain than the financial information in the application of VITAS. Since Heartland provided an "audited financial statement of the applicant" and VITAS did not, Heartland must be viewed as providing a greater level of certitude about its financial position. The Agency opined that there is a second factor that makes Heartland's application superior. Currently, there are hospice programs operated either by VITAS the Applicant or affiliated with VITAS the Parent in Service Areas 11 (Dade and Monroe Counties), 10 (Broward County), 9C (Palm Beach County), 7A (Brevard County), 7B (Flagler and Volusia Counties), and 7C (Orange County.) Hospice programs affiliated with VITAS the Parent now serve the eastern coast of Florida from Key West to the service area adjacent to Service Area 4A in the northeast corner of the state and inland covering the most populous area of Central Florida. The introduction of Heartland, a nationally recognized quality hospice provider, into Florida will foster competition that, in AHCA's view, will benefit patients and families through providing a choice in hospice care.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is recommended that the Agency for Health Care Administration approve CON Application 9783 filed by Heartland Services of Florida, Inc., and deny CON Application 9784 filed by Vitas Healthcare Corporation of Florida. DONE AND ENTERED this 18th day of October, 2006, in Tallahassee, Leon County, Florida. S DAVID M. MALONEY 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 18th day of October, 2006.
The Issue The issue is whether the Agency for Health Care Administration properly determined that the application of Covenant Hospice, Inc. meets the statutory and rule criteria for a hospice program in Service Area (SA) 2B.
Findings Of Fact Hospice Care Hospice care is a medically coordinated group of services that is designed for people who have a terminal diagnosis with a life expectancy less than six months. Hospice care provides palliative care as opposed to curative care. The patients' and their families' needs are multi-dimensional and include physical, psychological, emotional, spiritual, and financial needs. 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 reimbursed by Medicare, Medicaid, Champus/Tri-Care (for military populations), and some commercial insurance programs. For example, under the Medicare reimbursement system, hospices are reimbursed based on an identifiable flat per diem rate for a bundled package of services. Medicare does not reimburse hospices for bereavement services. The Medicare benefit is based on level of care. Routine home care is the basic level of care. Routine home care is provided as long as a hospice can care for a patient in a home-like environment. The second level of care is continuous care, which provides between eight and 24 hours of nursing care per day. The third level of care is inpatient care, which a hospice can provide in a hospital, a skilled nursing unit of a nursing home, or a freestanding hospice inpatient facility operated by a hospice. The fourth and final level of care is respite care. The primary reimbursement agent for hospice care is Medicare, but it is becoming more common for private insurers and health maintenance organizations to provide the benefit. Hospices also provide care to charity patients who have no source of payment and no or insufficient assets or income. Hospice SA 2B Hospice SA 2B comprises eight counties: Franklin, Gadsden, Jefferson, Leon, Liberty, Madison, Taylor, and Wakulla. SA 2B covers 5500 square miles. It has an average of 67 persons per square mile. While Leon County has 345 persons per square mile, Taylor, Franklin, Liberty, Madison and Jefferson Counties all have less than 30 persons per square mile. Liberty County is the least populated county in the state of Florida. Liberty County has a low-income population but is better off economically than some of the other counties in the SA. Madison County has a population of approximately 17,000, with mostly low-to-middle income families. The majority of residents in Madison County have a high school education or less. Like most rural communities, Madison County is resistant to change or "outside intervention." Only two SAs in Florida have fewer projected deaths than SA 2B. Those are SA 2A and SA 7C. The providers in SA 2A and SA 7C serve multiple SAs. The Parties AHCA AHCA is the state agency that is responsible for administering the CON program and laws in Florida. In conjunction with these duties, AHCA reviews applications for new hospice programs pursuant to Sections 400.601, 400.602, 400.609, 400.6095, 408.034, 408.035, 408.036, and 408.043, Florida Statutes, and Rules 59A-2 and 59C-1.0355, Florida Administrative Code. Covenant Covenant, formerly known as Hospice of Northwest Florida, is a not-for-profit community organization that was founded by a committee in 1982. The committee included community leaders and several hospitals in the Pensacola, Florida, area. Covenant began treating its first patients in 1984 and is currently licensed to provide hospice services in SA 1 and SA 2A. The following counties are located in SA 1: Escambia, Santa Rosa, Okaloosa, and Walton. The following counties are located in SA 2A: Holmes, Washington, Jackson, Calhoun, Bay and Gulf. Covenant obtained its first CON for SA 1 and three counties in SA 2A. Covenant later expanded to cover all of SA 2A. In 1994, Hospice of the Emerald Coast (formerly known as Bay Medical Hospice and hereinafter referred to as Emerald Coast) was the dominant provider in SA 2A, but Covenant became the dominant provider within six years after expanding its coverage. Emerald Coast also has expanded its coverage and is licensed now to provide hospice services in SA 1 and SA 2A. Emerald Coast is now gaining market share in SA 1. Covenant is licensed to provide hospice services in 26 southern Alabama counties. However, Covenant currently provides services in only nine or ten Alabama counties. Covenant currently shares its Alabama SAs with five or six other providers and is considering further expansion in Alabama. On average, Covenant serves 429 Florida hospice patients per day. It admits patients and provides service 24 hours a day, seven days a week, without regard to their ability to pay. Covenant's main office and its eight-bed inpatient/residential facility, the Joyce Goldberg Hospice Inpatient Residence, are located in Pensacola, Florida. The room and board residential component of the inpatient facility is not reimbursed by any government agency and most often provides services on a charitable basis. Covenant built the inpatient facility to provide services to the homeless. However, Covenant does not consider patients who present with subjective signs of imminent death to be appropriate for admission to the facility. Covenant performs a financial assessment of patients at the time of their admission to the inpatient facility. If the patient or his or her representative elect not to provide Covenant with financial data, patients and their families understand that the full rate per day for room and board will be charged on a monthly basis at the beginning of each month, even when there is little or no chance that Covenant will ever collect the amount owed. Patients that have the ability to pay for some or all of their treatment at the facility do so on a sliding scale basis. However, the bottom line is that Covenant admits patients to the inpatient/residential facility without regard to their ability to pay. Covenant historically has provided inpatient care to children in one of the area's children's hospitals, Sacred Heart Hospital. Providing inpatient hospice care to children in a special hospital is appropriate from a quality of care perspective. Covenant operates the following Florida branch offices: Okaloosa County at Niceville, Florida; Jackson County at Marianna, Florida, and Bay County at Panama City, Florida. Covenant operates Florida community support centers in Okaloosa County at Crestview, Florida, and in Walton County at Destin, Florida. Volunteers staff Covenant's community support centers. Among other activities, the centers conduct blood drives and provide space and volunteer training for organizations such as the American Cancer Society and various Alzheimers groups. Covenant provides the centers on a charitable basis. Covenant's growth and expansion has focused on serving persons in underserved areas and populations. Its mission is to provide direct care to dying patients, their families and friends, and to provide education to the community. Covenant is the 30th largest hospice in the United States. It serves the largest geographic area in Florida. Covenant's audited finances demonstrate the corporation's growth. In the past five years, Covenant has nearly tripled its number of patient days. Covenant has purchased management software and systems, with a useful life of five years, to facilitate support for a corporation twice its size. It has secured contracts for services with every hospital, nursing home, and assisted living facility in SA 1 and SA 2A. Covenant's vision is to create and foster a corporate culture of excellence. In order to achieve its goals, Covenant has recruited personnel from the for-profit industrial sector. As incentives for achievement of performance goals, Covenant pays bonuses to its top management. It also has a separate staff bonus pool. Covenant made a profit in 2001 despite paying such bonuses out of its operational funds. Covenant has achieved its growth and expansion, in part, by implementing a continuous quality improvement process in which it constantly looks for ways to improve its operations and services. Expansion into SA 2B will improve Covenant's operations by allowing it to spread its fixed overhead costs. Consistent with its objectives, Covenant chose to pursue accreditation from the Joint Commission on Accreditation of Health Care Organizations (JCAHO) four years ago. Covenant became accredited without outside consultation, using its own staff and resources. Since then, JCAHO has re-accredited Covenant, pursuant to a 98 percent survey report with no Type I recommendations. Covenant provides hospice care in a way that ensures sensitivity to cultural diversity and the hospice patient's cultural values. For example, Covenant has informational brochures and material in various foreign languages, including Vietnamese and Spanish. Covenant's policies and procedures comply with all applicable requirements of the U.S. Department of Health and Human Services related to discrimination in the workplace. They are sufficient to ensure confidentiality for any employee with HIV and to ensure protection of all other employees. Covenant provides substantial "unfunded" and "underfunded" programs to the community. Underfunded programs include palliative chemotherapy and palliative radiation therapy. In addition to unfunded community support centers, Covenant provides unfunded bereavement programs in schools and grief-in-the-workplace seminars. Through its physicians and medical teams, Covenant provides unfunded physician care for non-Medicare patients. In fact, Covenant provided approximately $1.5 to $1.7 million in unreimbursed care in the calendar year 2001, and anticipates that it will provide more such care in 2002. Covenant, like all not-for-profit organizations, must raise funds to pay for non-reimbursed expenditures that support charitable services. Covenant has developed a strategic plan to identify ways to measure its success in meeting the needs of underserved populations. As a part of its ongoing strategic planning process, Covenant determined that there was an unmet need for hospice services in SA 2B, the area currently exclusively served by BBH. After receiving requests from physicians for hospice services in SA 2B, Covenant approached BBH to offer assistance and support. Covenant also consulted with its health planner regarding the need for additional hospice services in SA 2B. After AHCA determined that there was a numeric need for an additional hospice in SA 2B, Covenant's chief executive officer (CEO) toured SA 2B to assess the potential for expansion and to look for potential properties. Eventually, Covenant became convinced that there were compelling reasons to apply for a CON in SA 2B because of an unmet need for hospice services. Covenant has strong reserves of ready cash and equivalents, including $2.9 million in cash and over $1 million in investments, to underwrite the SA 2B expansion. Covenant has approximately six times more working capital than BBH. The $84,000 stated in Covenant's application as required expenditures to develop the new program in SA 2B is insignificant compared to the corporation's ability to provide "unlimited funds" for the project. The fact that Covenant has sizable cash and investment reserves despite having to subsidize it SA 2A offices demonstrates its financial power. BBH Community volunteers began organizing BBH in 1981. After its incorporation in 1983 as a not-for-profit community organization, BBH commenced operation under a license that authorized it to provide hospice services only in SA 2B. On average, BBH serves 162 patients per day. BBH's main office is located in Tallahassee, Florida, but it operates the following branch offices and/or community support centers: Franklin County at Carrabelle, Florida; Gadsden County at Quincy, Florida; Jefferson County at Monticello, Florida; Madison County at Madison, Florida; and Taylor County at Perry, Florida. BBH plans to create additional branch offices/community centers in the following locations: Franklin County at Apalachicola, Florida; Gadsden County at Chattahoochee and Havana, Florida; and Wakulla County at Crawfordville, Florida. BBH also operates a 12-bed inpatient facility. The facility, known as The Hospice House is located in Tallahassee, Florida. It usually operates at 80 percent of its capacity. The Hospice House was built using funds raised in a capital funds campaign and $250,000 in community grants. The facility is designed so that family and friends can spend as much time as they can with their loved ones. The facility provides 24-hour care for various reasons, including pain management, respite care, routine residential care as an alternative to continuous care in a patient's home, transition care after leaving a hospital, and care for patients facing imminent death who for personal reasons do not want to die at home. Occasionally, The Hospice House helps local hospitals manage oncology floor bed shortages. BBH has a policy that requires paying patients to pay in advance on a weekly basis because many times patients do not stay at the facility for longer than a week. The rate charged depends on the patient's ability to pay. Frequently, patients stay at the facility for free due to their low-income status. BBH does not bill patients for services that it does not intend to collect. BBH has a 24-member Board of Directors. The Board is comprised of a broad mix of people with backgrounds in law, business, medicine, education, nursing, and insurance. BBH has one or more community advisory councils (CACs) for each county in SA 2B. The CACs hold public meetings in their respective counties each month. The purpose of the CACs is to support BBH's effort to reach out to civic and church groups and to advise BBH on how to gain acceptance in the SAs diverse communities. Like BBH's Board of Directors, the CACs are comprised of a broad group of people who are racially and ethnically diverse. The CACs include local clergy who assists BBH's outreach to the faith-based community. BBH has a minority advisory council (MAC) that supports BBH's outreach efforts in the African-American community. The MAC hosts lunches and dinners at churches and sponsors gospel sings that include education about hospice care. For example, a gospel sing that was conducted at Florida A&M University was preceded by an hour-long seminar on hospice care on National Public Radio. BBH has had an ethics committee since 1994. The purpose of the committee is to educate BBH's staff and the community about ethical issues. The committee routinely reviews BBH's policies and when necessary, reviews particular patient dilemmas. The ethics committee includes a rabbi, a protestant chaplain, a religion professor, a Muslim pharmacist, a social worker, a nurse, and other interested individuals. BBH is a member of the National Hospice and Palliative Care Organization (NHPCO). BBH is accredited by the Community Health Care Accreditation Program, one of the first accreditation programs. AHCA has approved BBH after every licensure survey with no deficiencies. BBH's mission is to provide care and education to terminally ill patients and their families. BBH's mission includes providing emotional support to anyone dealing with grief from loss of a loved one. BBH serves all individuals who meet the clinical criteria for admission to hospice, regardless of their ability to pay. It provides care to indigent patients without concern for financial reimbursement. BBH responds to patient referrals within 24 to 36 hours. BBH does not discriminate against any group on any basis. BBH delivers hospice services with a minimum of administrative costs. Out of the funds raised by BBH through charitable gifts, 86 cents of every dollar goes directly to patient care. BBH does not spend substantial funds on marketing or advertising. BBH has five interdisciplinary teams (IDTs). Each team has a medical director and staff who live in their IDT area. BBH has nurses who live in every county in the SA except Liberty County. The IDTs have separate back-up on-call nurses to provide coverage 24 hours a day, seven days a week. The on-call nurses can provide care to patients within 30 minutes of a call. BBH has a full-time medical director, four part-time IDT associate medical directors, and a part-time associate medical director for its inpatient facility. The associate medical directors meet with the IDTs weekly to review patient care. They also provide advice and education to other providers and physicians in the community. The IDT medical directors provide emergency consultation should an acute situation arise with a patient. In addition to its core services, BBH provides other services to the community and patients that are not reimbursed from any source. These services include grief counseling to adults and children, crisis intervention in schools after a student's death, and the music therapy program. BBH's music therapy program, which is non-reimbursed, is one of only two such programs in Florida that the National Association of Music Therapists has certified as a music therapy site and as a music therapist training site. BBH has the equivalent of five full-time staff members that provide music therapy through out SA 2B as requested by patients or recommended by an IDT. Over 30 percent of BBH's patients receive music therapy. BBH provided over 1,500 hours of music therapy in the six months prior to the hearing. Part of BBH's outreach efforts includes conducting physician education seminars. About 200 out of 320 local physicians in SA 2B periodically refer patients to BBH. BBH provides palliative chemotherapy and radiation treatment on a case-by-case basis. There is no persuasive evidence that BBH has ever denied a physician's recommendation for such services. At times, BBH has reimbursed a local hospital for palliative radiation services for BBH patients. BBH solicits feedback from patients, their families, and their physicians through surveys that are sent out three weeks after patients begin receiving care and again after patients pass away. BBH's committee for quality improvement reviews the results of the surveys on a monthly basis as part of BBH's continuing quality improvement program. Recent results show a high degree of patient and family satisfaction because they are equal to or higher than national palliative care statistics. Physician survey responses show 90 percent or better satisfaction. BBH follows up on any survey response that is less than "very good" from patients or "average" from physicians. Covenant's Application Covenant's Board of Directors duly authorized the filing of Covenant's letter of intent and application. The Executive Committee of Covenant's Board of Directors authorized the filing of the letter of intent on August 27, 2001. Covenant timely filed the letter of intent with AHCA on August 29, 2001. The Board of Directors authorized the filing of the application on August 30, 2001. Covenant filed the application with AHCA on September 4, 2001. After receiving an omissions letter from AHCA, Covenant timely filed its omissions response and complete application along with the appropriate application fee. AHCA has preliminarily approved Covenant's application to establish a new hospice program in SA 2B. AHCA's preliminary approval is subject to the following conditions: (a) Within the first two years of operation, Covenant must open a branch office in Perry, Taylor County, Florida; and (b) Covenant must establish a special non-cancer outreach program to educate the medical community on the effectiveness of hospice care for patients with non-cancer diagnoses. Fixed Need Pool Rule 59C-1.008, Florida Administrative Code, relates to CON application procedures in general. Rule 59C-1.0355, Florida Administrative Code, relates to specifically to hospice programs. Both rules contain provisions that relate to published fixed need pool projections. In this case, Covenant filed its application in response to a published fixed need for an additional hospice program in SA 2B. BBH has challenged that published need in DOAH Case No. 01-4415 CON. A Recommended Order in that case is being issued concurrently with the instant case. Conformance with District Health Plan Preferences Covenant's application is in conformance with the applicable district health plan as required by Section 408.035(1), Florida Statutes, and Rule 59C-1.030(2)(c), Florida Administrative Code. The applicable local health plan preferences are set forth in the District 2 CON Allocation Report, approved October 2000. With respect to the first local health plan preference, Covenant currently provides and commits to providing district-wide services. Covenant will provide the services 24 hours per day, seven days a week, regardless of a patient's ability to pay. As to the second local health plan preference, Covenant currently contracts with and commits to contracting with existing hospitals and nursing homes for the provision of inpatient care. The proposed program does not require the construction of a new facility or the addition of beds. Conformance with Agency Rule Criteria The application conforms to the requirements of Rule 59C-1.0355(3)(a), Florida Administrative Code, which requires hospice programs to comply with the standards for program licensure described in Chapter 400, Part VI, Florida Statutes, and Chapter 58A-2, Florida Administrative Code. Covenant has demonstrated that it meets these statutory and rule requirements. Some of the requirements, including but not limited to "quality of care," are discussed in detail below. The application is in conformance with the five-rule preferences set out in Rule 59C-1.0355(4)(e), Florida Administrative Code. As to rule preference one, Covenant evidences a commitment to serve populations with unmet needs. One such population includes non-cancer patients as discussed below. With respect to the rule preference two, Covenant proposes to provide the inpatient care component of its proposed program through contractual arrangements with existing health care facilities. Covenant does not propose the development of an inpatient facility. The application conforms to rule preference three. Covenant has demonstrated a commitment to serve the homeless, patients with AIDS and patients who do not have primary caregivers at home. Covenant is entitled to credit for rule preference four. Covenant proposes a project in SA 2B, which has eight counties. It intends to establish its main office in Tallahassee, Leon County, Florida, with a branch office in Perry, Taylor County, Florida. Covenant anticipates opening community support centers in Madison County and in Gadsden County during the third year of operation. Covenant has presented persuasive evidence that Madison and Taylor Counties are underserved as discussed below. The application meets the expectations of rule preference five. Covenant is committed to providing services not specifically covered by private insurance, Medicaid, or Medicare. These services include, but are not limited to, chaplain services, support for seriously ill patients not yet appropriate for hospice services, non-health care items such as hot water heaters and telephones that provide quality of life and allow patients to stay at home, bereavement services, and volunteer services. The application is in conformance with Rule 59C-1.0355(5), Florida Administrative Code. Covenant's proposal is consistent with the needs of the community and other criteria contained in local health council plans and the State Health Plan. Rule 59C-1.0355(5), Florida Administrative Code, specifically requires an applicant to provide letters of support from health care organizations, social services organizations, and other entities within the proposed SA that endorse the applicant's development of a hospice program. In order to comply with this provision, Covenant sent approximately 206 letters to individual and entities in SA 2B requesting support of its application. Even though health care providers in SA 2B have limited knowledge about or experience with Covenant, it received the following letters of support: (a) eight letters of support from physicians who practice in SA 2B; (b) three letters of support from hospitals located in SA 2B; (c) 18 letters of support from nursing homes and assisted living facilities located in SA 2B; and (d) six letters of support from other health care professionals and/or residents who live and work in or adjacent to SA 2B. These letters of support are sufficient to show compliance with Rule 59C-1.0355(5), Florida Administrative Code, despite the fact that AHCA received 160 letters of opposition to the proposed project from various individuals and entities in SA 2B. The application is in conformance with Rule 59C-1.0355(6), Florida Administrative Code, because it provides a detailed description of the proposed program. First, proposed staffing for the project will be 9.54 full-time equivalents (FTEs) in the first year of operation and 18.79 FTEs in the second year of operation. The volunteer staff will number about one per patient and will increase from about 15 in the first year to about 35 in the second year. The record contains competent evidence showing how Covenant will recruit and train its staff and volunteers. Second, Covenant expects to obtain patient referrals from hospitals and doctor's offices. Based on Covenant's prior experience in starting new hospice programs, the expected sources of patient referrals are reasonable and appropriate. Third, the application sets forth the projected number of admissions for the first two years, by payer type, by type of terminal illness, and by age groups. Covenant expects Medicare patients to comprise about 80 percent of the admissions. The majority of Covenant's patients will have diagnoses other than cancer, such as heart disease, emphysema, liver disease, and Lou Gehrig's disease. During the first year, Covenant expects to have 27 patients, under 65, and 82 patients, 65 and older. In the second year, Covenant expects to have 56 patients, under 65, and 184 patients, 65 and older. These projected utilizations are reasonable and achievable. Fourth, Covenant has identified the services to be provided by staff and volunteers and those to be provided through contractual arrangements. Covenant plans to provide direct care in the following areas: physician services, nursing services, home health aide services, dietary counseling, social work services, chaplain services, counseling services, and bereavement services. Physical, speech, and occupational therapy services will be provided through contractual arrangements. Fifth, Covenant will provide inpatient services through contractual arrangements with nursing homes and hospitals. Covenant has gained expertise in providing hospice care in nursing homes in its existing SAs. Sixth, the application sets forth provisions for serving persons without primary caregivers at home. Covenant's plan allows patients to be responsible for their own care as long as they are able to do so. When that is no longer possible, Covenant provides the patients with a list of alternatives. Seventh, Covenant will provide bereavement services to its patients before death and to patients' families and friends after death for at least one year. Covenant also provides grief counseling in schools and in the community. Covenant offers grief support to its staff and volunteers. Covenant uses seminars, workshops, and special programs to train and educate its staff, volunteers, and individuals in the community about particular bereavement topics. Next, Covenant will provide extensive community education activities concerning hospice programs. Some of these are discussed in detail below. As indicated above, Covenant has agreed to provide a special non-cancer outreach program to educate the medical community in SA 2B about the effectiveness of hospice care for non-cancer diagnoses. Finally, Covenant's application includes policies for the receipt, acknowledgement, management and utilization of fundraising activities. Covenant expects fundraising to account for 2-3 percent of net revenue for the proposed program. The application does not include specific proposed methods for fundraising activities in SA 2B. However, during the hearing Covenant provided sufficient evidence about its past experiences to support the conclusion that it will be successful in this regard. 80. Rules 59C-1.0355(6)(h) and 59C-1.0355(6)(i), Florida Administrative Code, do not apply here. Covenant does not intend to establish a freestanding inpatient facility in SA 2B. Covenant's proposals, expectations, and projections are reasonable and appropriate as they relate to the factors set forth in Rule 59C-1.0355(6), Florida Administrative Code. Based upon Covenant's experience, the proposed program as described in the application is conservative and achievable. Conformance with Applicable Statutory Criteria As stated above, the proposed project complies with the standards for licensure described in Chapter 400, Part VI, Florida Statutes. Specifically, the application conforms to the requirements of Section 400.606(1), Florida Statutes, because it provides a plan for the delivery of home, residential, and home-like inpatient hospice services to terminally ill persons and their families. Covenant's plan contains, but is not limited to, the following: (a) the estimated average number of terminally ill persons to be served monthly; (b) the geographic area in which hospices services will be available; (c) a listing of services which will be provided, either directly by the applicant or through contractual arrangements with existing providers; (d) provision for the implementation of hospice home care within three months after licensure; (e) the provision of inpatient care in nursing homes and other health care facilities; (f) the number and disciplines of professional staff to be employed; (g) the name and qualifications of potential contractors; (h) a plan for attracting and training volunteers; (i) the projected annual operating cost of the hospice; and a statement of financial resources and personnel available to the applicant to deliver hospice care. Some of these plans are discussed in detail herein. Rule 59C-1.0355(3)(b), Florida Administrative Code, requires an applicant to be in conformance with Sections 408.035 and 408.043(2), Florida Statutes. Covenant meets the standards sets forth in these statutes as indicated below. Section 408.035(1), Florida Statutes, requires consideration of the need for the proposed project in relation to the applicable district health plan. As discussed above, Covenant meets this criterion. Sections 408.035(2) and 408.035(7), Florida Statutes, relate to the need for the proposed project as evidenced by the availability, quality of care, efficiency, accessibility, and extent of utilization of existing health care facilities and health services in the applicant's SA. Covenant meets these statutory criteria for the following reasons: (a) SA 2B is characterized by lack of hospice competition; (b) The proposed project will ensure access to hospice care in the SA's rural communities; (c) Covenant's special non-cancer outreach program will increase utilization for patients with non-cancer diagnoses; (d) With projected admissions of 109 patients in year one, 240 patients in year two, and 305 patients in year three, the proposed project will achieve a 25 percent market share in the third year; and (e) Covenant is Medicare and Medicaid certified and has a history of providing quality of care. Sections 408.035(2) and 408.035(12), Florida Statutes, relate to the applicant's history of providing quality of care and its demonstrated ability to provide such care. Covenant meets these criteria because it has a quality assurance program that provides a comprehensive, centrally coordinated system by which Covenant can conduct an ongoing evaluation of patient care and family services. Covenant's Performance Improvement Plan (PIP) is discussed in detail below. Section 408.035(4), Florida Statutes, relates to whether the applicant will provide services that are not reasonably and economically accessible in adjacent SAs. It is preferable for hospice services to be delivered in patients' homes or in home-like environments. It is undisputed that residents of rural populations often are reluctant to accept hospice services from a local provider. It follows that rural populations would be even more reluctant to seek hospice services in an adjoining SA. Some SA 2B patients from Liberty and Franklin Counties receive hospice services in SA 2A. Additionally, some residents of Madison and Taylor Counties receive hospice services in SA 3A. However, there is no persuasive evidence that a significant number of the underserved patients in the rural populations of SA 2B ever received services in an adjoining county for any one year. To the contrary, the greatest weight of the evidence indicates that for a substantial number of patients in SA 2B, hospice services are not reasonably or economically accessible in adjoining SAs. Section 408.035(5), Florida Statutes, relates to the needs of research and educational facilities in the SA. This criterion does not apply because Covenant's proposed project is not located in a teaching hospital and does not involve research or formal education and training programs for physicians and other health care professionals. Section 408.035(6), Florida Statutes, relates to the applicant's resources, including health personnel, management personnel, and funds for capital and operating expenditures, that are available for project accomplishment and operation. Section 408.035(8), Florida Statutes, relates to the applicant's immediate and long-term financial feasibility. Covenant meets these criteria because it has demonstrated the short-term and long-term financial feasibility of the proposed project. Section 408.035(9), Florida Statutes, relates to whether the proposed project will foster competition to promote quality and cost-effectiveness. Covenant's proposed project will meet this criterion because it will provide the patients of SA 2B a choice of providers. Benefits accrue from competition among hospice providers because hospice utilization is strongly related to awareness and education. Competition creates an environment in which hospices must do more to educate the community, promoting quality of care. Covenant's proposed project also will increase the hospice penetration rate in SA 2B, thereby resulting cost effectiveness and overall savings to the health care system. This is true even though a large majority of patient care is provided by fixed price government payer sources that are not influenced by competition. Section 408.035(10), Florida Statutes, relates to proposed costs and methods of construction associated with the proposed project. This criterion does not apply because the proposed project does not involve any construction. Section 408.035(11), Florida Statutes, relates to the applicant's history of and commitment to providing health services to Medicaid patients and the medically indigent. In 2000, Covenant provided about 7.8 percent of its patient days to Medicaid patients. That same year, Covenant provided approximately $480,000 in non-billable services. In SA 2B, Covenant proposes to provide 10 percent of its patient days to Medicaid patients and 4 percent to charity. The record is clear that Covenant meets this statutory criterion. Section 408.043(2), Florida Statutes, relates to the need for and availability of hospice services in the community. The application is in conformance with the requirements of this statute because there is a need for additional hospice services in SA 2B, especially for non-cancer patients and in rural populations. Additionally, a new hospice program will promote competition. Need for an Additional Hospice Published Fixed Need Pool and Special Circumstances The hospice penetration rate is defined as the ratio of hospice admissions in a SA divided by the number of resident deaths for that SA. Hospice penetration has grown in Florida and the United States in recent years, due primarily to increased awareness among the lay and health care communities. In Florida, overall hospice penetration is currently about 40 percent. Like the rest of the state, Covenant has increased its utilization in the past few years. The licensing of Emerald Coast in SA 1 created a competitive environment with Covenant and resulted in increased admissions and penetration in SA 1. The same result was achieved in SA 2A when Covenant was licensed to serve all of SA 2A in competition with Emerald Coast. In contrast, BBH has been the sole provider in SA 2B, which has experienced a penetration rate gap that has persisted over a seven-year period. For the batching cycle at issue here, SA 2B has one of the lowest penetration rates (29 percent) in the state, ranking 26th out of 27 SAs. In the instant case, AHCA calculated a net numeric need under Rule 59C-1.0355, Florida Administrative Code, of 351, which exceeds the need threshold of 350, and indicates the need for one additional hospice program in SA 2B. The rule's methodology takes into account the demographic differences between SA 2B and the rest of the state. With a projected need of 1,209 patients for the planning horizon at issue here and only 858 BBH admissions for the relevant historical period, BBH would have needed 41 percent more admissions to close the penetration rate gap regardless of the fact that there is only a difference of one between 350 and 351. It is clear that the net numeric need here correlates to the local reality. Special Circumstances Rule 59C-1.0355(4)(d), Florida Administrative Code, identifies the following special circumstances that may merit approval of a new program even if there is no published need. These special circumstances are as follows: (a) that a specific terminally ill population is not being served; (b) that a county or counties within the SA of a licensed hospice program are not being served; and (c) that there are persons referred to hospice programs who are not being admitted within 48 hours (excluding cases where a later admission date has been requested.) AHCA did not review Covenant's application to determine whether a CON should be awarded based on special circumstances. Instead, AHCA gave preliminary approval to the proposed project based on the publication of need. However, AHCA's State Agency Action Report (SAAR) indicates that the agency considered and did not agree with Covenant that Madison and Taylor Counties were "underserved." AHCA also determined that there was a need for educational outreach to non-cancer patients in SA 2B and conditioned the award of the CON on Covenant's provision of that service. During the hearing, Covenant presented persuasive evidence that underserved non-cancer patients and underserved rural populations in SA 2B constitute special circumstances within the meaning of Rule 59C-1.0355(4)(d), Florida Administrative Code. The special circumstances would have warranted approval of Covenant's application in the absence of numeric need. Non-Cancer Patients Care to non-cancer patients has increased dramatically during the past 20 years. Generally, non-cancer patients comprise more than half of all hospice patients. The SA 2B penetration rate of non-cancer patients, under age 65 and age 65 and over, lags behind the overall state penetration rate. This is especially significant because the non-cancer deaths rates are higher in the panhandle of Florida than for the State as a whole. For the batching cycle applicable to this proceeding, the penetration rate gap in SA 2B was most remarkable for elderly non-cancer patients, who make up 69 percent of the net need of 351 patients. The current overall state penetration rate for non-cancer patients, age 65 and older, is 32 percent. In SA 1 and SA 2A, the current overall state penetration rate for non-cancer patients, age 65 and older, is 27.7 percent and 26.6 percent respectively. In SA 2B, the current penetration rate for non-cancer patients, age 65 and older, is 20.1 percent, indicating a gap of 11.9 percent with respect to the state penetration rate. The lack of availability of hospice services in SA 2B nursing homes is another indication of the underserved need of elderly non-cancer patients. Underserved Rural Populations SA 2B is underserved as a whole relative to the rest of the state. All counties in SA 2B, except Jefferson County, had a penetration rate lower than the state average. Comparing the overall penetration rate for SA 2B to the penetration rate for each county in the SA shows that Madison and Taylor counties are significantly underserved. Based upon the most recent data available from the United States, Health Care Finance Administration, there is a 30 percent penetration rate for SA 2B, but for Madison and Taylor counties, it was about 16 percent. For non-cancer diagnoses, the penetration rate was only 8 percent for Madison and Taylor counties, well behind the SA 2B's averages for non-cancer diagnosis. Covenant Hospice Programs Quality of Care Covenant's application is in conformance with the requirements of Rule 59C-1.0355(3)(a), Florida Administrative Code, which provides that the proposed program shall comply with the quality of care standards described in Chapter 400, Part VI, Florida Statutes, and Rule 58A-2, Florida Administrative Code. The best evidence of Covenant's ability to provide quality of care is the finding of no state or federal deficiencies on the three most recent State of Florida compliance surveys. On a yearly basis, Covenant develops a Performance Improvement Plan (PIP) based on its ongoing continuous quality improvement program. The PIP ensures Covenant's ongoing compliance with all state and federal regulations as well as the standards established by JCAHO and NHPCO. Covenant also reviews and updates its corporate and clinical policies and procedures to ensure on-going quality improvement. These policies and procedures are consistent with all state and federal regulations and professional guidelines. The policies and procedures are reasonable and appropriate for all operations, including medical and nursing care. Medical Direction and Medical Quality of Care Covenant's medical director is qualified to take an examination for certification in hospice palliative care. He has completed the American Medical Association's curriculum in Education for Physicians in End-of-Life Care. He is board-certified in geriatrics. In addition to the medical director, Covenant employs physicians as adjunct medical directors and branch office physicians. These doctors provide direct patient care when they make home and nursing home visits. They serve as consultants to IDTs or patients' attending physicians. Covenant's physicians also serve on its quality improvement committee and review records to ensure quality of care. Covenant provides access to physician care for all hospice patients. Physician coverage is available for all patients, 24 hours per day, seven days a week, as appropriate. Covenant physicians follow its clinical procedures manual, which is in conformance with all state and federal regulations and professional guidelines. Covenant provides high quality pharmaceutical services. The policies and procedures related to these services are appropriate to ensure compliance with all state and federal regulations. Partners in Care Program Covenant developed its PIC program in part to ensure appropriate education of its own staff and the community in general. However, the main purpose of the program is to educate and train the staff of nursing homes and other health facility settings. The PIC program promotes continuity and quality of care for patients in such facilities, which house about 47 percent of Covenant's patients. The PIC program is based on a procedures manual known as "The Grey Book." The procedures manual is a toolbox that facility staff can reference at any time. The manual has been instrumental in making the PIC program so successful in addressing the needs of critical patients in extreme pain and discomfort associated with certain terminal illness. Education and Outreach Covenant has a comprehensive education program. It develops an education calendar on a yearly basis and presents extensive educational programs to all applicable audiences. Covenant's education program includes a clinical education program that is designed to ensure high professional competency for nurses, social workers, home health aides, nursing aides, and other health care providers. For example, Covenant's program for nurses requires them to demonstrate "knowledge based competencies" within the first 30 days of employment and on an on-going basis. The competencies are important in achieving high quality of nursing care. Covenant has produced its own comprehensive educational modules on an array of topics. They are "in-depth" courses, not "Hospice 101" or survey courses. They deal with such issues as advanced pain management, advanced symptom management, physiology of dying, ethical issues in the end-of- life care, just to name a few. Many of the advanced training modules are approved by various professional organizations for continuing education credit, including continuing medical education credits. The use of the modules will facilitate hospice utilization and penetration wherever they are used. Another facet of Covenant's education and outreach program is its Patient and Family Handbook that Covenant gives to patients and their families. The handbook provides extensive resources and guidelines to patients and their caregivers. The handbook is clinically appropriate to ensure high quality of care. Covenant's education program also includes extensive and intensive community education. This part of the program increases hospice utilization or penetration by ensuring that the community knows about the availability of hospice services and understands the benefits of those services. Covenant has specific education materials directed to non-cancer diagnoses to ensure access to hospice patients with non-cancer diseases. The materials assist clinicians in determining when a terminally ill non-cancer patient is appropriate for hospice care. They provide the community with knowledge about the availability of hospice care for non-cancer patients. The use of the materials results in greater non- cancer admissions to hospice. In fact, Covenant provides educational programs for physicians to assist them in caring for all types and ages of hospice patients. Referring physicians routinely receive newsletters, written and edited by Covenant's medical staff. At times, Covenant provides one-on-one education of physicians, in-service training, and other modes of education as appropriate. Covenant maintains medical advisory groups in each area office. These groups meet on a regular basis for education and to provide participants input and feedback to Covenant. Covenant has developed educational materials in Spanish and Vietnamese in order to facilitate access to those minority populations. Covenant uses its community support centers to distribute the materials. In contrast, BBH provides far fewer educational opportunities to the community than Covenant. In some months, BBH only provided four or five programs. In other months, none of BBH's programs were provided by trained clinicians. Most of BBH's programs were introductory, not advanced or continuing education level presentations directed to health care professionals. BBH's education programs are insufficient to create adequate public and professional awareness of hospice services in an eight-county area. It appears that BBH has increased the number of programs it presents on a monthly basis after Covenant submitted its application. Rural populations often have religious or conservative belief systems that cause them to be reluctant to accept hospice services. Such barriers to access for hospice services can be overcome by sufficient and appropriate education and outreach to the community and to physicians or other health care providers. Competition of an additional hospice in SA 2B will stimulate additional education and outreach, resulting in higher levels of hospice utilization and penetration rate. Volunteer Program State and federal regulations require a hospice to involve community volunteers in the delivery of hospice services. Hospices use volunteers for a variety of functions including, reading to patients, transportation, housekeeping, and office administrative support. Covenant has developed a comprehensive and high quality volunteer program based upon excellent recruitment and training of volunteers. In an attempt to encourage more patients to remain at home for hospice care, the Escambia County Council on Aging reimburses Covenant for care-giver training and in-home respite care, charged on an hourly basis. Currently, Covenant has over 850 active, trained volunteers. Between 2/3 and 3/4 of Covenant's volunteers come from patient families and friends. Covenant's volunteer training program and manual comply with all state and federal regulations and professional guidelines. Faith in Action Programs Covenant has a special volunteer program referred to as the Faith in Action Program. Covenant developed the program in conjunction with initial Robert Wood Johnson Foundation grant funding. Currently, Covenant provides the service on an unfunded basis. The program sponsors activities to involve faith communities in the care of terminally ill members. Thus, the program enhances access to hospice care by members of the faith communities. Covenant also has established a Faith in Action AIDS Program. The program focuses on the needs of AIDS patients and their families. The educational component of the Faith in Action AIDS program teaches faith communities about the needs of HIV and terminally ill AIDS patients, including children. The Faith in Action AIDS program provides a high level of community service to the AIDS community. It links persons living with HIV to faith communities. It directly addresses many practical needs of individuals with HIV and AIDS. The program was initially grant-funded but is now supported by Covenant as a charitable service. The Faith in Action AIDS program utilizes approximately 75 trained volunteers. Currently the program is based in Pensacola and Escambia Counties and primarily serves those areas. However, Covenant is expanding the program through its SAs. Covenant also has developed a clinical AIDS program as a dedicated hospice program. Covenant provides excellent care and comprehensive services to hospice patients with AIDS and their loved ones through this special program. Chaplain Services Covenant's chaplains function as core members of the IDTs. They provide spiritual care to patients and their families, 24 hours per day, seven days per week. The chaplains are employees of Covenant who receive comprehensive hospice training. This ensures high quality services and proper professional development. For the most part, Covenant's chaplains are ordained ministers with five years of experience and a masters of divinity degree. Covenant's 14 full-time or part-time chaplains are distributed across Covenant's SAs. The program meets state and federal regulations and professional guidelines. Social Work and Bereavement Services Covenant's social work begins at admission with comprehensive assessments of the patients' and their families' needs. Bereavement services focus on the family and loved ones during the terminal illness and after the death of the patient. Both of these services provide extensive education to patients, their families, and the community. Covenant's social work and bereavement programs provide educational seminars and workshops in the community on an unfunded basis. Social workers and bereavement specialists are required to complete competency-based instruction in hospice social work. Covenant's corporate and clinical policies and procedures related to social work and bereavement ensure high quality of care. They meet or exceed all state and federal regulations and professional guidelines. Covenant's social workers are core members of the IDTs. The social worker networks with other members of the team to plan and implement services. They help the patient set and achieve goals. Children's Services Covenant provides children's services through a program that is dedicated to terminally ill children and their families or to children of terminally ill parents or grandparents. The children's program includes unfunded bereavement services even if the bereavement in not associated with a hospice patient. Covenant has been selected to participate in one of eight demonstration projects for children's hospice services known as Program for All Inclusive Care for Children (PAC). The PAC project is a Medicaid waiver program. It will allow hospices to interact with dying children and their families earlier than would be otherwise allowed for enrollment in hospice based upon Medicaid program requirements. Participation in the project is unfunded. Covenant's children's program is comprehensive and provides high quality of care. It meets or exceeds all state and federal regulations and professional guidelines. Competition and Impact of the Proposed Project on the Existing Provider Covenant's application is in conformance with the requirements of Section 408.035(9), Florida Statutes. The proposed project will foster competition and promote quality and cost-effectiveness. The effect of the competition will have a positive impact in the SA and increase hospice penetration, particularly for elderly patients with non-cancer diagnoses and rural populations, due in part to Covenant's comprehensive community education programs. There is no merit to the argument that SA 2B's penetration rates and population size are not sufficient to support two hospices. BBH's own strategic plan shows that its admissions and census will increase even if Covenant is approved. In fact, since AHCA preliminarily approved Covenant's application, BBH has taken numerous steps to increase its referrals and its community outreach and education. These actions show how the mere threat of competition has improved BBH's services. BBH has set a goal of increasing its referrals by 50 percent. Approval of the application will have an adverse impact on BBH only if it does not appropriately respond to the presence of a new provider in the area. Based upon data presented by BBH, its net assets have increased each year. At historical admissions and census levels below that projected by BBH, it actually made money and had an increase in net assets at the end of each year. There is no persuasive evidence that BBH will lose patients days or that its admissions will decrease if Covenant's application is approved. The most credible data indicates that BBH will have at least 970 admissions in year zero, 1,085 admissions in year one, 1,202 admissions in year two, and 1,219 admissions in year three. Covenant will have 0 admissions in year zero, 109 admissions in year one, 240 admission in year two, and 305 admissions in year three. By year three, BBH will still be the dominant provider in SA 2B with 75 percent of the market share. When AHCA approved Emerald Coast for an additional hospice program in SA 1, Covenant undertook certain actions to strengthen its position in the community and to become an even better and more effective provider of hospice services. As a result of these and other actions, the addition of a competitor in SA 1 did not have an adverse impact on Covenant. To the contrary, Covenant grew, increasing its admissions, referrals, fundraising, and volunteer participation. Competition from Emerald Coast brought heightened community awareness about the benefits of hospice services to SA 1. Because Covenant increased community education concurrent with the development of the new hospice program, there was no resulting confusion over the identities of the two programs. Nor did the approval of Hospice of the Emerald Coast erode the economic base of Covenant because Covenant took steps to strengthen its referral base. Emerald Coast did not have an office in Pensacola, or within sixty miles of Pensacola, until approximately May 2002. The admissions and census of Emerald Coast have grown since establishing that office. The change in the competitive environment in SA 1 resulted in increased admissions and penetration in that SA. Covenant increased its admissions and penetration in SA 2A after Covenant AHCA authorized Covenant to serve all of that SA. The same can be expected in SA 2B if AHCA approves Covenant's application to provide hospice services in SA 2B. With Covenant’s approval for an additional hospice service in SA 2B, BBH can and will be expected to do the same kinds of things that Covenant did in SA 1 to preserve market share. All of the things that Covenant can do to increase penetration or obtain market share, BBH can do to preserve market share. These activities include providing education and outreach, developing a referral base, and developing contacts with physicians, hospitals, nursing homes, and other health care facilities. In performing these activities, BBH has a competitive advantage in SA 2B based upon its experience, history, and reputation in the SA. For example, BBH already has contracts with all hospitals and nursing homes in SA 2B. BBH was financially viable at a service volume of 34,404 patient days in 1997, and at a volume of 35,721 patient days in 1999. Big Bend has been financially viable at substantially lower volumes than it will have in the future, even if Covenant is approved and operational in SA 2B. Approval of Covenant will not have an adverse impact on the ability of BBH to recruit and retain sufficient numbers of volunteers in SA 2B. BBH currently does not have difficulty recruiting and retaining sufficient numbers of volunteers, which evidences a substantial pool of volunteers in the SA. In addition, Covenant will draw its volunteers primarily from persons served by it, families and friends of Covenant patients. Covenant is willing to work with BBH cooperatively to ensure training and recruitment of sufficient numbers of volunteers. Approval of Covenant in SA 2B will not have an adverse impact on the ability of BBH to effectively raise funds. In SA 1 and SA 2A, Covenant has tailored its fundraising activities so that they do not conflict with Emerald Coast's efforts to raise funds. Covenant and Emerald Coast continue to grow their fundraising in both SAs. The fundraising pool in any SA is elastic and can be expanded. Hospice in particular opens up a new pool of potential donors. The additional education and community outreach provided by Covenant will increase hospice penetration, thereby increasing the pool of hospice donors. Both hospices can increase the fundraising base by utilizing grant revenue. Covenant is stronger today than it would have been without competition. As friendly competitors, Covenant and BBH will be able to engage in collaborative activities that benefit both hospices, including education and fundraising. Dale Knee, Covenant's CEO, did not always believe that competition would foster such benefits. In 1996, Emerald Coast, located in Panama City, Florida, applied for and was preliminarily approved for a CON in SA 1, which includes the Pensacola home office of Covenant. Mr. Knee testified extensively that the approval and development of another hospice in SA 1 would adversely impact Covenant and would not increase hospice penetration in SA 1. He now holds the opposite view based upon Covenant’s actual experience in a competitive environment. Approval of Covenant in SA 2B will increase access to hospice services. It will have a positive impact on the quality of care in the SA as utilization increases. This is consistent with the prior experience of Covenant. Further, the approval of Covenant will result in substantial cost savings to the health care system generally. Hospice care is more cost effective and less costly than conventional medical care, such as the pursuit of curative or maintenance treatments provided by hospitals, nursing homes, home health agencies, and other settings. The approval of Covenant will result in an overall savings of approximately $1.6 million by Covenant's third year of operation. This is true even through the large majority of patient care is provided from fixed price government payer sources. The approval of Covenant in SA 2B will make "continuous care" available to hospice patients. Continuous care is a required level of care under the Medicare conditions of participation. Continuous care is nursing care in excess of eight hours per day, sufficient to maintain the patient with critical needs at home. BBH currently does not provide continuous care to its patients. Instead, BBH uses home health aides with nurses in attendance for shorter periods of time that is billed to Medicare as routine home care. When a patient needs continuous care to remain at home, BBH places the patient in a hospital or its in-patient facility. Upon approval and initiation of operations, Covenant will make continuous care available to the hospice patients, improving quality of care and continuity of care in SA 2B. Financial Feasibility and Financial Schedules and Projections Schedule 1, Estimated Project Costs. Schedule 1 depicts the estimated project costs for the proposed project. The total estimated project cost is $82,648. The costs are based substantially on the start up experience of Covenant in its Dothan, Alabama, office. The $20,000 in cost proposed for recruitment and training of staff is reasonable and appropriate. The amount includes advertising for staff positions, start-up salaries, rent, utilities, and such expenses for a month of start-up operations. The projections for recruitment and training are consistent with prior start-up experience of Covenant. Covenant provided sufficient costs to hire an office manager for the Tallahassee office 30 days prior to opening. This is a reasonable planning assumption and would be sufficient to provide training and orientation. But this may not be necessary, because Covenant may transfer a manager from an existing office. Prior to initiation of operation, Covenant would need to hire an office manager, a registered nurse, a home health aide, a social worker, an administrative assistant, and a community educator. A medical director would not be necessary initially for the Tallahassee office prior to start-up. Start-up on the Dothan, Alabama, office entailed a different process than starting up a new office in Florida. In Alabama, the office had to become separately licensed by the State of Alabama. The next step in the process was for the office to apply for Medicare certification, which required Covenant to be admitting and treating Medicare eligible patients. This accounts for the fact that Dothan had a longer pre-opening period that is projected for the Tallahassee office. The initial Dothan staff spent a full week at Covenant in orientation. During the next five weeks the Dothan office manager worked in Covenant's Panama City, Florida, awaiting certification for Dothan. The Dothan start-up provides insight to Covenant’s success in initiating hospice start-up such as that proposed for SA 2B. Covenant began in Dothan by educating the medical community and others, particularly in the rural communities, where Covenant encountered a lack of understanding of hospice and some reluctance to acceptance of hospice services. Covenant's program in Dothan has shown a steady increase in census. This is true even though three other hospices serve the same service area. The census of the other three hospices has continued to increase as well, due to increased public awareness of hospice care generally. The $5,000 in Covenant's proposed costs for moveable equipment is reasonable, appropriate, and adequate. Covenant generally relies on donated equipment to meet such needs. Covenant already has on-hand equipment for use in SA 2B. This is consistent with prior start-up experience of Covenant, including the start-up of the Dothan office. Covenant intended the proposed costs for movable equipment in the application to cover incidental items only. The phone system for the Tallahassee office is already in inventory, and no expenditure would be necessary for a phone system. At the time of the application, Covenant had an extensive inventory of donated furniture and other items that could be used in the Tallahassee office. Covenant made a planning assumption that at the time of implementation, sufficient donated items would be on hand to furnish and equip the Tallahassee office. The expectation and assumption that furniture and other furnishing sufficient for the Tallahassee office would be available was reasonable based on the specific prior experience of Covenant. The line item of $5,000 for moveable equipment was placed in the budget as a contingency for incidental items, as needed. Donated equipment is not included in Schedule 1, Line 23, because it is not required to be included. Overall, the amounts projected on Schedule 1 of the application are reasonable and appropriate. They are conservative estimates and sufficient to cover all anticipated and expected costs. Schedule 2, Listing of Capital Projects. Schedule 2 sets out a complete listing of all projected and proposed capital projects planned by Covenant. The schedule completely and accurately depicts all such projects and expenditures that were planned, approved, or under way when Covenant submitted its application. Covenant's audited financial statements and balance sheets indicate that it has sufficient resources to fund the proposed project without adversely affecting Covenant's ability to fund other projects and expenditures. Schedule 3, Source of Funds. Covenant has available cash and other funding sources sufficient to fund the proposed project. There are no other demands on the applicant’s available cash. The information depicted in Schedule 3 is reasonable and appropriate. Schedule 4, Utilization of Existing Beds. Schedule 4 is not applicable to the application of Covenant. Schedule 5, Projected Utilization. The utilization projections set out in Covenant's Schedule 5 are reasonable and appropriate. The projections of patient days projections are obtainable and achievable. Schedule 6, Staffing. The staffing and FTE’s proposed by Covenant on Schedule 6A of the application for the first year and the second year of operations are reasonable and appropriate. The staffing projections are sufficient to ensure quality of care. The projections are consistent with the prior start- up experience of Covenant. They are based on a reliable computer model used by Covenant to staff its operations and administration. The staffing model generally supports staffing ratios for all disciplines, which meet or exceed guidelines established by the NHPCO. The salaries projected also were developed based on the actual experience and mid-range salaries of Covenant. The salaries are sufficient to recruit and retain sufficient numbers of qualified staff at the salary levels indicated in Schedule 6A. Covenant has been able to recruit and retain sufficient numbers of qualified staff, including registered nurses and licensed nurses, in its existing SAs at the salary levels indicated. The proposed nurse salaries are approximately equivalent to salaries paid in SA 1, SA 2A, and SA 2B, including the salaries paid in hospitals. Covenant's ability to recruit and retain nurses at the proposed salary levels is corroborated by the fact that some of the registered nurse salaries are higher in the Pensacola, Florida, metropolitan service area (MSA) than in the Tallahassee, Florida, MSA. Even with higher average salaries in Pensacola than in Tallahassee, Covenant has been able to recruit and retain sufficient numbers of registered nurses at the proposed salary levels. The ability of an organization to recruit and retain sufficient numbers of qualified staff is a function of several factors, including work environment, reputation of the employing organization, satisfaction and morale level of the staff, opportunity for staff development and growth, flexibility and respect of the organization for its staff and, of course, salary and benefits. Many such factors attract nurses and other staff specifically to Covenant. If approved in SA 2B, Covenant will not have a significant adverse impact on the ability of BBH to recruit and retain sufficient numbers of qualified staff. This is true because Covenant does not require that nurses have hospice experience. However, Covenant will recruit from the same pool of nurses and thus compete in its recruiting with hospitals, home health agencies, doctors' offices, and any other organization that employs nurses, including BBH. Any adverse impact on BBH's ability to recruit and retain nurses will be minimal. Further Covenant will recruit its staff across the entire eight-county area that comprises hospice SA 2B. Covenant will fill approximately 3.5 FTEs by the end of the first year. Those numbers are not sufficient to have an adverse impact on BBH's ability to recruit and retain sufficient numbers of staff, including nurses. Nor will Covenant have an adverse impact on the staffing costs in SA 2B by driving up staffing costs. It is undisputed that there is a shortage of nurses nationwide. Covenant will be able to recruit and retain sufficient numbers of skilled staff, including nurses, in SA 2B, notwithstanding that shortage, in part due to the positive work environment that it will provide. Schedules 7A and 8A, Projected Revenues and Expenses. Schedule 7A of the application depicts projected revenue for the proposed project. The starting point for the revenue projections is the utilization and patient day projections for the first two years of operation, set out in Schedule 5 of the application. The revenue projections are based upon an established rate for levels of care and payer source. They are based on obtainable volumes and payer source projections. Covenant used a reliable computer model in making the revenue projections. Covenant also projected revenues in a manner consistent with its experience. The overall revenue projections in Schedule 7A, the assumptions underlying their calculations, and the methodology used in making the projections are reasonable, appropriate, and conservative. Schedule 8A sets forth the projected income and expenses for the proposed project. Covenant used the same computer model discussed above and its experience to project income and expenses. The bottom line is that the project is expected to have a net operating surplus of $23,695 in the second year of operation. The income and expense projections, their underlying assumptions such as inflation factors, and the methodology used in making the calculations are reasonable, appropriate, and consistent with Covenant's experience. They are conservative in that they underestimate income and overestimate expenses. Of particular note is that the proposed non-operating revenues for year one and year two include grant revenues, donations, and fundraising. Additionally, property expenses include the cost of rent. Regarding health insurance costs, Covenant has experienced substantial increases in health care insurance premiums. However, health insurance premiums are a component of benefits, and Covenant’s overall benefit rates are conservative, sufficient, and reasonable. Finally, the projected general and administrative costs and ancillary costs, including contractual costs, are reasonable, appropriate, and conservative. Immediate or short-term financial feasibility is the ability of the applicant to secure the funds necessary to capitalize and operate the proposed project. Schedules 1, 2, and 3 and the audited financial statements of Covenant demonstrate that it has sufficient funds and cash-on-hand to fund the project. The capital projects listed on Schedule 2 do not adversely affect the ability of Covenant to fund the project, nor does the project adversely affect the ability of Covenant to carry out all projects listed on Schedule 2 of the application. Therefore, the project is financially feasible in the short term. Long-term financial feasibility is the ability of the project to reach a break-even point within a reasonable period of time and at a reasonable achievable point in the future. Based upon a review of the reasonableness of the volume and patient day projections, the staffing and income and expense projections, it was established by competent substantial evidence that the proposed project is financially feasible in the long term. It is important to note that the reasonableness of the income and expense projections depicted on Schedule 8A of the application, which result in a second year net operating surplus, are driven by the admissions and patient day projections. Persuasive evidence indicates that Covenant's admissions and patient day projections are reasonable and achievable. Financial feasibility analysis is different for hospices than for other organizations because hospices are not- for-profit entities. They rely to a great extent on grants, donations, and other non-operating revenue to sustain operations. Covenant has an excellent record in regard to fund- raising. It has strong reserves of ready cash and over $1 million in investments. This project would be financially feasible even if it did not show a net profit in the first two years of operation. Covenant has the ability to support the project, and the commitment to do so, such that the program would continue to operate as a viable operating entity.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED: That AHCA should grant Covenant a CON to establish an additional hospice program in SA 2B. DONE AND ENTERED this 7th day of November, 2002, in Tallahassee, Leon County, Florida. SUZANNE F. HOOD 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 7th day of November, 2002. COPIES FURNISHED: Michael D. Mathis, Esquire Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building, Suite 3431 Tallahassee, Florida 32308-5403 J. Robert Griffin, Esquire J. Robert Griffin, P.A. 2559 Shiloh Way Tallahassee, Florida 32308 W. David Watkins, Esquire R. L. Caleen, Jr., Esquire Watkins & Caleen, P.A. 1725 Mahan Drive, Suite 201 Post Office Box 15828 Tallahassee, Florida 32317-5828 Lealand McCharen, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 Valda Clark Christian, General Counsel Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building, Suite 3431 Tallahassee, Florida 32308
The Issue Whether Florida Administrative Code Rule 59C-1.0355(4)(d)3. is an invalid exercise of delegated legislative authority?
Findings Of Fact Background This is a challenge to the facial validity of the 48-hour rule. It is not a challenge to the 48-hour rule as applied.2 Nonetheless, the following background provides the context that produced the challenge. See also Findings of Fact 14-16. LifePath, Suncoast, and Palm Coast (or related entities), as well as the Agency, are parties in pending proceedings at the Division of Administrative Hearings (DOAH) involving Palm Coast's (or related entities) challenges to the Agency's preliminary determinations to deny CON applications (hospice) filed by Palm Coast (or related entities). These cases have been abated pending the outcome of this proceeding. In each proceeding, Palm Coast (or related entities) contends that a "special circumstance" exists under the 48-hour rule to justify approval of each CON application. Moreover, in support of its position, Palm Coast (or related entities) relies, in part, on data compiled by LifePath and Suncoast. It is the use of this data, in light of the 48-hour rule and interpretation thereof, that caused LifePath and Suncoast to file the rule challenges, notwithstanding that the Agency has not definitively interpreted the 48-hour rule. Parties The Agency administers the CON program for the establishment of hospice services and is also is responsible for the promulgation of rules pertaining to uniform need methodologies, including hospice services. See generally §§ 408.034(3) and (6) and 408.043(2), Fla. Stat.; Ch. 400, Part IV, Fla. Stat. Suncoast is a not-for-profit corporation operating a community-based hospice program providing hospice and other related services in Pinellas County, Florida, Hospice Service Area 5B. Suncoast has provided a broad range of hospice services to residents of Pinellas County since 1977. Suncoast has implemented an electronic medical records system and has developed a proprietary information management software system known as Suncoast Solutions. LifePath is a not-for-profit corporation operating a community-based hospice program providing hospice services in Hillsborough, Polk, Highlands, and Hardee Counties, Hospice Service Areas 6A and 6B. LifePath has provided a broad range of hospice services for the past 25 years. Palm Coast is a not-for-profit corporation currently operating licensed hospice programs in Daytona Beach, Florida, Hospice Service Area 4B and in Dade/Monroe Counties, Hospice Service Area 11. Palm Coast, as well as other related entities such as Odyssey Healthcare of Pinellas County, Inc., e.g., CON application No. 9984 filed in 2007, for Hospice Service Area 5B, has filed several CON applications to provide hospice services. It is also a party in pending proceedings before DOAH, challenging the Agency's preliminary decisions to deny the respective applications. Palm Coast's sole member is Odyssey Healthcare Holding Company, Inc., which is a wholly-owned subsidiary of Odyssey Healthcare, Inc. (Odyssey). (Palm Coast and Odyssey shall be referred to as Palm Coast unless otherwise stated.) Standing Petitioners provide hospice services in Florida and have not applied for a CON to provide hospice services outside their current service areas. In the absence of a numeric need,3 an applicant for a hospice CON is afforded the opportunity to demonstrate a need for a new hospice program by proving "special circumstances." These include circumstances described in the 48-hour rule. The applicant must document that "there are persons referred to hospice programs who are not being admitted within 48 hours (excluding cases where a later admission date has been requested)."4 The parties have cited no law that requires an existing hospice provider to maintain records documenting when a person is referred to a hospice program. Public documents are not available that may otherwise provide information regarding when a person is referred to a hospice program.5 Existing providers do not uniformly maintain data that reflects the length of time between when a person is referred to and later admitted to a hospice program. By rule, existing licensed hospice providers in Florida are required to report admissions data every six months to the Agency. The Agency uses the information to calculate numeric need under the rule methodology. Petitioners keep records indicating, for their record keeping purposes, e.g., when a person contacts the hospice program and when the person is admitted. Petitioners use software to assimilate this type of information. Petitioners also maintain patient records that contain this type of information. However, this information is not specifically gathered and maintained for the purpose of determining when a person is actually "referred" to a hospice program and later "admitted" and whether "persons" are admitted within 48 hours from being referred. During discovery in pending CON proceedings following preliminary agency action, Petitioners produced information, related to this record, to Palm Coast or related entities. Palm Coast or related entities have used this information in their CON applications to justify a "special circumstance" under the 48-hour rule. See generally Pet 6, 17, 17A and PC 75-78. See also T 987-995. It is a fair inference that Palm Coast or related entities have and will use this information in CON application cases pending at DOAH. See generally Palm Coast's February 14, 2008, Request for Judicial Notice, items 1-18. It is the use of the information by Palm Coast or related entities, coupled with Palm Coast's or related entities interpretation of the 48-hour rule that caused Petitioners to file the rule challenges in this proceeding. LifePath and Suncoast are regulated by and subject to the provisions of Rule 59C-1.0355. See generally Pet 30 at 2, item 2. The 48-hour rule is a CON application criterion, a planning standard, that is not implicated unless and until an applicant relies on this provision in its hospice CON application and uses data provided by, e.g., existing providers such as Petitioners. Subject to balancing applicable statutory and rule CON criteria, application of the 48-hour rule may provide an applicant with a ground for approval of its CON application by indicating a need for a new hospice program. This may occur either leading up to the Agency's issuance of its SAAR, see Section 408.039(4)(b), Florida Statutes, stating the Agency's preliminary action to approve a CON application, or ultimately with the entry of a final order following a proceeding conducted pursuant to Section 120.57(1), Florida Statutes. This information may also be considered during a public hearing if the Agency affords one. § 408.039(3)(b), Fla. Stat. Existing hospice providers, such as LifePath and Suncoast, may be substantially affected by the Agency's consideration of this information, especially if the Agency preliminarily concludes (in the SAAR) that a CON application should be approved based in part on application of the 48-hour rule. At that point, existing hospice providers have the right to initiate an administrative hearing upon a showing that its established program will be substantially affected by the issuance of the CON. See § 408.039(5)(c), Fla. Stat. Existing providers may also intervene in ongoing proceedings initiated by a denied applicant. Id. Petitioners have proven that they are substantially affected by the application of the 48-hour rule. Rule 59C-1.035(4) Prior to the Agency's adoption of Rule 59C-1.0355 in 1995, the Agency adopted Rule 59C-1.035, which included, in material part, a numeric need formula. In a prior rule challenge proceeding, it was alleged that Rule 59C-1.035(4) and in particular the numeric need formula was invalid. Paragraph (4)(e) provided: (e) Approval Under Special Circumstances. In the absence of need identified in paragraph (4)(a), the applicant must provide evidence that residents of the proposed service area are being denied access to hospice services. Such evidence must demonstrate that existing hospices are not serving the persons the applicant proposes to serve and are not implementing plans to serve those persons. This evidence shall include at least one of the following: Waiting lists for licensed hospice programs whose service areas include the proposed service area. Evidence that a specifically terminally ill population is not being served. Evidence that a county or counties within the service area of a licensed hospice program are not being served. Rule 59C-1.035(4), including paragraphs (4)(e)1.-3., was determined to be invalid. Catholic Hospice of Broward, Inc. v. Agency for Health Care Administration, Case No. 94-4453RX, 1994 Fla. Div. Admin. Hear. LEXIS 5943 (DOAH Oct. 14, 1994), appeal dismissed, No. 1D94-3742 (Fla. 1st DCA Jan. 26, 1995). However, other than quoting from paragraph (4)(e) because it was included as part of the rule, there was no specific finding or conclusion regarding the validity of paragraphs (4)(e)1.-3. The successor rule, Rule 59C-1.0355(4)(d)1.-3., changed the preface language and substantially retained paragraphs (4)(e)2. and 3., now paragraphs (4)(d)1.-2., but omitted paragraph(4)(e)1. (waiting lists) and added paragraph(4)(d)3. (the 48-hour rule). Rule 59C-1.0355(4)(d)1.-3. Elfie Stamm has been employed by the Agency in different capacities. Material here, Ms. Stamm was the health services and facilities consultant supervisor for CON and budget review from July 1985 through June 1997. Since 1981, Ms. Stamm has had responsibility within the Agency for rule development. In and around 1994 and prior to the former hospice rule being invalidated, a work group was created for the purpose of developing a new hospice rule. Input was requested from the work group. Various hospice providers throughout the state participated in the rule development process. It appears that there was an attempt to replace the waiting list standard in the prior rule with the 48-hour standard. (There had been general objections made to the waiting list standard in this and other Agency rules.) The language for the 48-hour rule apparently came from the work group, rather than from Agency staff, although there is no evidence indicating which person or persons suggested the language. The Agency kept minutes of a meeting conducted on June 30, 1994, to discuss the proposed hospice rule, including the 48-hour rule. The minutes were kept to record any criticisms or comments regarding the proposed hospice rule. The minutes of a rule workshop "only addresses issues where people have concerns and varying opinions." The record does not reveal that any adverse comments were made regarding the 48-hour rule. In 1995, the Agency, adopted Rule 59C-1.0355, including Rule 59C-1.0355(4)(d)1.-3. that provides: (d) Approval Under Special Circumstances. In the absence of numeric need identified in paragraph (4)(a), the applicant must demonstrate that circumstances exist to justify the approval of a new hospice. Evidence submitted by the applicant must document one or more of the following: That a specific terminally ill population is not being served. That a county or counties within the service area of a licensed hospice program are not being served. That there are persons referred to hospice programs who are not being admitted within 48 hours (excluding cases where a later admission date has been requested). The applicant shall indicate the number of such persons.6 The 48-hour rule, in its present iteration at issue in this proceeding, has been a final rule since 1995.7 The Agency's hospice need methodology is set forth in Rule 59C-1.0355(4), which is entitled "Criteria for Determination of Need for a New Hospice Program." Rule 59C-1.0355(4) is comprised of four paragraphs, (4)(a) through (4)(e). Paragraph (4)(a) sets forth the process for the Agency's calculations of a numeric fixed need pool for a new hospice program. Paragraph (4)(b) provides that the calculation of a numeric need under paragraph (4)(a) will not normally result in approval of a new hospice program unless each hospice program in the service area in question has been licensed and operational for at least two years as of three weeks prior to publication of the fixed need pool. Paragraph (4)(c) similarly states that the calculation of a numeric need under paragraph (4)(a) will "not normally" result in approval of a new hospice program for any service area that has an approved but not yet licensed hospice program. Paragraph (4)(d) of the need methodology sets forth the three "special circumstances" quoted above. Paragraph (4)(e) sets forth preferences that may be applicable to a CON application for a new hospice program. The purpose of the 48-hour rule is to establish a standard by which the Agency may determine whether there is a timeliness of access issue that would justify approval of a new hospice program despite a zero fixed need pool calculation. Under the hospice need methodology, "special circumstances" are distinguishable from "not normal" circumstances, in part, because the three "special circumstances" are comprised of three delineated criteria rather than generally referencing what has been characterized as "free form" need arguments. Also, "not normal" circumstances may be presented when the Agency's numeric fixed need pool calculations produces a positive numeric need. Once an applicant demonstrates at least one "special circumstance" in accordance with Rule 59C-1.0355(4)(d)1.-3., the applicant may then raise additional arguments in support of need, which may be generally classified as "not normal" or as additional circumstances. Although the 48-hour rule has existed since 1995, it has rarely been invoked as a basis for demonstrating need by a CON applicant seeking approval of a new hospice program. In this light, the Agency has rarely been called upon to interpret and apply the 48-hour rule. The Agency recently approved a CON application filed in 2003 by Hernando-Pasco Hospice to establish a new hospice program in Citrus County (CON application No. 9678). The application was based, in part, on the 48-hour rule. In its SAAR, the Agency mentions that the applicant presented two letters of support, stating that some admissions to hospice were occurring more than 48 hours after referral. The number of patients was not quantified. There was no challenge to the Agency's preliminary decision. The Agency's decision does not provide any useful guidance with respect to the Agency's interpretation of the 48-hour rule. The Challenges Petitioners allege that the 48-hour rule is an invalid exercise of delegated legislative authority because the terms "referred" and "persons" are impermissibly vague and vest unbridled discretion with the Agency. For example, Petitioners point out that the term "referred" is not defined by statute or rule and contend it is not a term of art within the hospice industry. As a result, Petitioners assert the starting point for the 48-hour period cannot be determined from the face of the rule. Petitioners also contend that the 48-hour rule is arbitrary and capricious because the language, "excluding cases where a later admission date has been requested" (the parenthetical), is the only exception that may be considered when determining whether there has been compliance with the subsection, when, in fact, there are "other facts and circumstances beyond the control of the hospice provider that may result in delay in admission of a hospice patient." Petitioners also contend that the use of a 48-hour time period for assessing the need for a new hospice provider in a service area notwithstanding the Agency calculation of a zero numeric need is arbitrary and capricious. Finally, Petitioners allege that the 48-hour rule contravenes the specific provisions of Section 408.043(2), Florida Statutes, which is one of the laws it implements. Specifically, Petitioners further allege that "[b]ecause of its vagueness, its lack of adequate standards, its vesting of unbridled discretion with the Agency, and its arbitrary and capricious nature [the 48-hour rule] fails to establish any meaningful measure of the 'need for and availability of hospices in the community,' as required by [S]ection 408.043(2), Florida Statutes, and in violation of Section 120.52(8)(c), Florida Statutes (2007)." Joint Prehearing Stipulation at 2-4. The Agency's and Palm Coast's Positions The Agency and Palm Coast contend that Petitioners do not have standing to challenge the 48-hour rule, but otherwise assert that the 48-hour rule is not invalid. In part, Palm Coast and the Agency contend that there is a common and ordinary meaning of the term "referred," which is "that point in time when a specific patient or family member on behalf of a patient or provider contacts a hospice provider seeking to access hospice services. Once a patient, patient family member on behalf of [a] patient, or provider contact [sic] a hospice provider seeking to access services, the 48 hour 'clock' should begin to run." See Joint Prehearing Stipulation at 6; AHCA/Palm Coast PFO at paragraph 79. With respect to the term "persons," Palm Coast and the Agency suggest that whether there are a sufficient number of "persons" that fit within the special circumstance "is a fact-based inquiry, which should be evaluated based on a totality of the circumstances." The Agency and Palm Coast contend that circumstances other than as stated in the parenthetical may be considered. Rule 59C-1.0355(4)(d)3. and Specific Terms Referred The term "referred" is not defined either by AHCA rule, in Chapter 400, Part IV, Florida Statutes, entitled "Hospices," or in Chapter 408, Part I, Florida Statutes, entitled "Health Facility and Services Planning." The terms "referred" or "referral" are not defined in any Agency final order or written policy. No definition of "referred" appears in at least three dictionaries, Webster's New World College Dictionary (4th ed. 2005) at 1203, Webster's II New College Dictionary (1999) at 931, and Webster's Ninth New Collegiate Dictionary (1985) at 989, although "refer" is defined, id. For example, "refer" means, in part "[t]o direct to a source for help or information." Webster's II New College Dictionary (1999) at 931. The term "referral," as a noun, means: "1 a referring or being referred, as for professional service, etc. 2 a person who is referred or directed to another person, an agency, etc." Webster's New World College Dictionary (4th ed. 2005) at 1204. Referral also means: "The practice of sending a patient to another practitioner or specialty program for consultation or service. Such a practice involves a delegation of responsibility for patient care, which should be followed up to ensure satisfactory care." Taber's Cyclopedic Medical Dictionary at 1843 (19th ed.). Pet 18A. Pursuant to the Patient Self-Referral Act of 1992, "'[r]eferral' means any referral of a patient by a health care provider for health care services, including, without limitation: 1. The forwarding of a patient by a health care provider to another health care provider or to an entity which provides or supplies designated health services or any other health care item or service; or 2. The request or establishment of a plan of care by a health care provider, which includes the provision of designated health services or other health care item or service." § 456.053(3)(o)1.-2., Fla. Stat. Essentially, this Act seeks to avoid potential conflicts of interest with respect to referral of patients for health care services. In the absence of any authoritative definition of "referred," it is appropriate to determine whether the word has a definite meaning to the class of persons within the 48-hour rule. It is also appropriate to consider the Agency's interpretation of the 48-hour rule. As noted, hospice services are required to be available to all terminally ill patients and their families. Under the 48-hour rule, a CON applicant has the opportunity to prove that persons are being denied timely access to hospice services after 48 hours elapses from when they have been referred and they have not been admitted, absent some a reasonable justification. The issue is what elements are necessary for a person to be deemed "referred" and are those elements commonly understood well enough to enable the 48-hour rule to withstand a challenge for vagueness. If a person calls a hospice organization and inquires about the availability of hospice services, does this call start the 48-hour period? If the same person calls a hospice organization and states that he or she is the caregiver/surrogate for an elderly parent in need of hospice services, does this call start the 48-hour period? If the same person calls a hospice organization and states that he or she is the caregiver/surrogate of an elderly parent in need of hospice services, that the elderly parent is terminally ill, and further requests hospice services, does this call start the 48-hour period? If the same person calls a hospice organization and states that he or she is the caregiver/surrogate of an elderly parent in need of hospice services, that the elderly parent is terminally ill based on a prognosis by a licensed physician under Chapters 458 or 459, Florida Statutes, and further requests hospice services, does this call start the 48-hour period? Does eligibility for hospice services have a bearing on when a person is referred? If so, what factor(s) constitute eligibility? Petitioners contend the term "referred," as used in the 48-hour rule, can not be defined with any precision; hence the term is vague.8 Petitioners describe "referred" and "referral," for operational purposes, but not with respect to how the term "referred" is used in the 48-hour rule. Agency experts define the term differently, although none suggest the term is vague. Palm Coast offers a definition of "referred" or "referral" as part of its standard of admitting patients within three hours after referral. But, Palm Coast has a more generic and broader definition for the terms when used in the 48-hour rule. It is determined that "referred" can be defined with some precision and is not vague. But, the various positions and thought processes of the parties are described below and help in framing the controversy for resolution. LifePath and Suncoast Over the years, LifePath developed an administrative/operational manual pertaining to policies and procedures. One such policy is the "referral/intake procedure" that is the subject of a two page written policy, PC 55, revised March 2006. LifePath does not have a written definition of the terms inquiry or referral. LifePath does not believe it is reasonable to define referral as the point in time when a patient, a patient family member, or a physician requests hospice services on behalf of a patient. It is too general. In and around March 2006, LifePath considered a referral to occur when a first contact to LifePath was made by a person requesting hospice services. LifePath used the term referred "to anybody requesting services as a referral source." The admissions staff was directed to gather from the referral source, physician, and/or family any information needed to complete the patient record in the Patient Information System, and contact the patient/family on the same day of referral if available to discuss Lifepath hospice services. Sometime after December 2006, and the final hearing that was held in the Marion County hospice case, LifePath began revising its referral and intake procedure. According to LifePath, its process did not change, only its manner of characterizing certain terms, such as referral. At this time, LifePath wanted to track more precisely different occurrences within LifePath's process, including providing a more accurate label for referral as a request for assessment (RFA) rather than a referral. For LifePath, a referral and a RFA are not synonymous. A RFA is the first contact with the hospice program, which enables staff to follow- up with the prospective patient. A referral is a written physician's order for admission. At the same time, it had come to LifePath's attention that hospice providers (Palm Coast) defined referral differently. It became clear to LifePath that "Palm Coast had a very different definition of referral than [LifePath] did at that particular time. [LifePath] wanted to be able to clearly track each event during that time process so that [LifePath] would be able to compare with [Palm Coast's] definition of referral at that time." Stated somewhat differently, LifePath wanted to create a process that would capture several events (e.g., dates and times) consistently and measurable in the intake process rather than comb through paper charts to verify what they were doing. In April 2007, LifePath made several changes and updates to its written policy/procedure manual and software system, including using the term RFA instead of referral. According to the revised April 2007 policy, "Intake means: the initial demographic and patient condition information that is necessary to initiate the process for 'request for assessment.'" PC 56-57. In summary, for LifePath, a RFA for services is different from and precedes a referral. A RFA occurs when a person makes an initial contact with LifePath inquiring about access to hospice services. At this point LifePath has a name and an action to follow up with, and the information is entered into LifePath's system. The intake process begins. A RFA could be made by a physician in the community who orally or in writing requests LifePath to assess a patient for hospice care and/or issues an assess and admit order if appropriate. A call from a physician requesting LifePath to determine whether a person is appropriate for hospice services begins LifePath's RFA process. An RFA could arise when a person calls LifePath and says that their neighbor is really sick and gives LifePath the neighbors name and telephone number. RFA used in the April 2007 policy revision (PC 56) means the same as the term referral as used in the March 2006 policy revision (PC 55), i.e., the same point in time when LifePath received the patient's name and began the intake process and ability to follow up. Again, LifePath's intake process did not change; Lifepath's policies became more specific describing the events that occur during the entire intake process. According to LifePath, LifePath's revised policy of April 2007 is not reflective of LifePath's interpretation of the 48-hour rule. LifePath's revised policy "outlines the process in the organization in which [Lifepath] begin the intake process and how [LifePath follows] up and then certain moments in time within that process that [LifePath tracks] and monitor[s] as an organization." The April 2007 revision was followed by a May 2007 revision. LifePath characterized Palm Coast exhibits 55 through 57 as an "interim pilot process" that has been made permanent without any apparent significant changes. LifePath also perceived Palm Coast as defining referral to mean when a physician issues an admission order. As a result, LifePath began capturing data reflecting that moment in time so that the Agency could compare LifePath's data -- an apples-to-apples approach -- with another provider's data based on a definition that equated referral with a physician's order, but not for the purpose of defining what referred means to LifePath under the 48-hour rule. LifePath now considers a referral to occur when a physician issues an order to admit for the purpose of gathering data that is to be used to compare other providers, not for the purpose of applying the 48-hour rule. An assess and admit order in LifePath's view is not a referral until LifePath assesses the patient, obtains consent of care, determines that the patient is appropriate for hospice services, receives certification, and receives an order to admit the patient at that time. The RFA process is completed when either the patient is admitted to the program or it is determined that the patient cannot be admitted to the program. LifePath will admit a patient in lieu of having an admitting order when LifePath receives a verbal order to admit the patient from a physician. The verbal order for admission is a referral. LifePath admits at least 75 percent of its patients within 48 hours of the RFA. However, LifePath gave several reasons outside of a hospice program's control that would delay admission greater than 48 hours from the RFA. LifePath believes that the Agency's rule is a good rule, but that the language has been taken out of context and used inappropriately. Like LifePath, Suncoast's interest in the 48-hour rule was stimulated when Palm Coast filed two CON applications requesting approval to provide hospice services in Pinellas County and both applications claim a need for an additional hospice program based, in part, on the 48-hour rule. Suncoast was concerned with the manner in which referral was being used by Palm Coast in light of data provided by Suncoast and further believes that the 48-hour rule is being manipulated by Palm Coast. Suncoast uses an elaborate software product that uses terms such as referral. Suncoast does not have a formal policy definition of referral. Suncoast believes that there are differing definitions of referral among hospice programs. Suncoast filed its rule challenge because according to Suncoast the 48-hour rule is nonspecific; because there is no commonly understood definition of referral in the hospice rule or in the Agency that Suncoast and other hospice providers can depend on. Given the lack of a specific definition, Suncoast and others are unable to determine when the 48-hour clock begins. As used in its business and not for the purpose of defining the term in the 48-hour rule, Suncoast defines referral to mean "that first contact with [Suncoast's] program where [Suncoast gets] a name and [Suncoast gets] other information about the client so that [Suncoast] can go see them." This definition is not limited Medicare reimbursed hospice services. Inquiry and referral are the starting points. But, Suncoast states that there is no consistent definition of referral across the hospice industry. Suncoast also views a referral and an admission as "processes," "not really events." Sometimes the process takes a period of weeks to evolve with many variants, e.g., eligibility, consent, etc. Palm Coast In this proceeding, Interrogatories were answered on behalf of Hospice of the Palm Coast - Daytona and by Hospice of the Palm Coast - Waterford at Blue Lagoon with respect to the referral, intake, and admission of patients for hospice services to such facilities. Several terms are defined. "Referral" is an industry term, referring to contact by an individual or entity including but not limited to a patient, family member on behalf of a patient, HCS, POA, guardian, ALF, nursing home, or hospital seeking to access hospice services. "Referred" is an industry term, having a plain and ordinary meaning within the hospice field which generally describes when a patient, patient family member or personal representative, or provider contacts a hospice program seeking to access hospice services. "Intake" [] a general term of art describing the process from referral to admission. Admission is a general term of art describing that point in time when a patient meets all eligibility requirements including clinical requirements for hospice services and is admitted to a hospice program. [Assessment is t]he process by which patients are evaluated regarding clinical appropriateness for hospice services including eligibility requirements as set forth by state regulation, Medicare, Medicaid or other third party payors. [First Contact and initial contact, a]s it relates to referral, intake, and admission of patients, are defined above as referral and referred. For Palm Coast's purposes, a referral occurs when someone, e.g., a physician, discharge planner, family or a friend, contacts the hospice agency seeking hospice services. If the first contact comes from a physician, Palm Coast seeks that physician's approval to admit the patient if the patient is eligible or qualifies for hospice. For Palm Coast, it is typical to obtain a physician's written order for evaluation and admission before the patient is evaluated by the hospice provider. If a physician calls with a referral of a patient, the call goes to the admission coordinator. Calls from patients or family of a hospice patient would be routed into the clinical division. A referral does not include contacting a hospice requesting information where a chemotherapy wig or a hospital bed could be purchased. For Palm Coast, the admissions coordinator determines when an inquiry is an inquiry only or is a referral. The phone call may turn into a referral when the caller is asking for hospice services to be provided or a family member or to a patient who is at their end of life as opposed to a general request for information about hospice services. But, Palm Coast does not have written criteria for use by the admissions coordinator in determining whether a phone call is an inquiry or referral, or when an inquiry becomes a referral. Odyssey also does not have a written definition of referral, although it is a term used in policies and procedures. A referral results when they have a patient's name and a physician's name and someone is calling for hospice services. Ms. Ventre states that order and referral are not interchangeable. A physician's order is not a referral. For the purpose of describing Palm Coast's hospice operations and referring to page four of the "referral process" page within Palm Coast's Admission and Patient/Family Rights Policies, a referral begins when a written physician's order is received by the hospice program. Receipt of a physician's written order and referral are synonymous regarding the three- hour standard. Receipt of a telephone call from a potential patient does not qualify as a referral. It is classified as an inquiry. It is unusual for a patient or a patient's family would make a referral themselves. (Ms. Ventre characterized an inquiry as someone calling for an explanation of hospice services. A phone call could be classified as an inquiry or referral depending on the depth of the call. It may be an inquiry where there is no follow-up.) Palm Coast uses Odysseys service standard providing that all patients are admitted within three hours from a written physician's order to admit -- 24 hours a day, seven days a week. (This three hour standard is one of 14 standards adopted by Palm Coast/Odyssey.) A clinical assessment is performed within this three hour period. For Palm Coast, if it has a written physician's order to admit and if the family is available, Palm Coast believes it can meet the three-hour standard. Palm Coast (and Odyssey) does not track the time between receipt of a physician's order to evaluate and the admission of the patient nor does Odyssey track the time between the receipt of a physician's order to admit and the time the admission of the patient. Palm Coast (and Odyssey) maintains internal mechanisms that are reviewed on a daily basis to evaluate the referral process and if patients are being admitted in a timely fashion. Sometimes the three-hour standard is not met. The most frequent reason is that the patient and/or the family are not available to meet. Another is the time it may take to gather documentation from the referring physician. The Agency Agency experts defined "referred" differently. During the final hearing, Ms. Stamm stated that in order for a person to receive hospice services, the person must be qualified or eligible. Eligibility occurs when a physician certifies that the person has a six months or less (for Medicare) or (pursuant to Florida law) one year or less life expectancy. Ms. Stamm clarified her deposition testimony during the final hearing and stated that a person is referred to a hospice program when a request for hospice services is made to the hospice program by or on behalf of the person, coupled with the physician's written certification. A referral would not occur when, e.g., the person or someone on their behalf simply asks for hospice services without the physician's certification. Ms. Stamm was not aware whether this interpretation reflected the Agency's interpretation. She never thought there was a problem with defining "referred" or that it was an issue, so it was not discussed. Also, Ms. Stamm was not aware of how the Agency has interpreted the 48-hour rule. Mr. Gregg confirmed that there is no written definition of referred, but that it is commonly used in healthcare, i.e., "referral is a mechanism by which a patient is channeled into some specific new or different provider." Having considered his prior deposition testimony, see endnote 9, and in preparation for the final hearing in this proceeding, for Mr. Gregg, the 48 hours starts "[a]t the point of initial contact," "the point when some person representing a potential patient calls a hospice or contacts a hospice and says I believe we have a person who is appropriate for your service." The first contact could be made by a hospital discharge planner or nursing home social worker. Mr. Gregg does not believe that a physician's certification is required to start the 48-hour period or is part of the initial contact.9 Rather, the physician's certification would come at the end of the process, although the "physician is going to be a part of a successful referral." In other words, in order to start the 48-hour period, it would not be necessary for the hospice program to be advised that a patient was terminally ill. The latter determination is required to assess whether "the patient is appropriate and eligible." Generally, Mr. Baehr agrees with Mr. Gregg's view. For Mr. Baehr, there is a transfer of responsibility that occurs when the first contact is made at a point in time when either the patient or a family member or some institution, whether it be an assisted living facility, nursing home, hospital, or a physician, makes a contact with a hospice, and in a sense initiates a process that requires the hospice program to respond and do something so that this process can get underway. Mr. Baehr opines that referral has a common understanding; it is similar to when a patient is provided with a different medical service, whether it be hospice or some other form of healthcare service, from the one they are currently receiving. Mr. Baehr differentiates this scenario from one that occurs when a person merely seeks information about hospice versus someone who is seeking eventual admission to a hospice program. Admitted There is no rule or statute that requires a hospice provider to admit a patient within a certain time period. In Big Bend Hospice, Inc. v. Agency for Health Care Administration, Case No. 01-4415CON, 2002 Fla. Div. Hear. LEXIS 1584 (DOAH Nov. 7, 2002; AHCA April 8, 2003), aff'd, 904 So. 2d 610 (Fla. 1st DCA 2005), a proceeding involving a challenge to a numerical need (under the fixed need pool) for an additional hospice program, it was expressly found: "40. An admission consists of several components: (a) a physician's diagnosis and prognosis of a terminal illness; (b) a patient's expressed request for hospice care; (c) the informed consent of the patient; (d) the provision of information regarding advance directive to the patient; and (e) performance of an initial professional assessment of the patient. At that point, the patient is considered admitted. A patient does not have to sign an election of Medicare benefits form for hospice care prior to being admitted." 2002 Fla. Div. Admin. Hear. LEXIS at *26- 27(emphasis added). See also § 400.6095(2)-(4), Fla. Stat. This finding of fact was adopted by AHCA in its Final Order. A patient cannot be admitted for Medicare reimbursement without a physician's order. In order to be eligible to elect hospice care under Medicare, an individual must be entitled to Part A of Medicare and be certified by their attending physician, if the individual has an attending physician, and the hospice medical director as being terminally ill, i.e., that the individual has a medical prognosis that his or her life expectancy is six months or less if the illness runs its normal course, and consent. 42 C.F.R. §§ 418.3, 418.20(a)- (b), and 418.22(a),(b),(c)(i)-(ii). AHCA has defined the term "admitted" by and through its Final Order in Big Bend Hospice and there is no persuasive evidence in this case to depart from that definition, although the definition of the term was discussed during the hearing. The Agency's definition of "admitted" establishes the outer time limit when the 48-hour period ends for the purpose of the 48-hour rule. Persons The 48-hour rule requires the applicant to indicate the number of persons who are referred but not admitted to hospice within 48 hours of the referral (excluding cases where a later admission is requested). The term "persons" is not defined by AHCA statute or rule. However, the term is generically defined by statute. "The word 'person' includes individuals, children, firms, associations, joint adventures, partnerships, estates, trusts, business trusts, syndicates, fiduciaries, corporations, and all other groups or combinations." § 1.01(3), Fla. Stat. "The singular includes the plural and vice versa." § 1.01(1), Fla. Stat. The term "persons" used in the 48-hour rule is not vague, ambiguous, or capricious. In context, it refers to individuals who are eligible for hospice services within the meaning of the 48-hour rule as discussed herein and who request hospice services. The Agency has not established by rule or otherwise a specific number of persons that can trigger a special circumstance under the 48-hour rule or the specific duration for counting such persons. The numeric need formula does not encompass every health planning consideration. The need formula is based on general assumptions such as population, projected deaths, projected death rates applying statewide averages, and admissions. The special circumstances set forth in Rule 59C- 1.0355(4)(d) compliment other portions of the rule and the statutory review criteria and allows an applicant to identify factors that may be unique to a particular service area, such as a particular provider not providing timely access to persons needing hospice services or a service area that is rural or urban that affects access. One size may not appropriately fit all. Rather, the term is capable of being applied on a case-by-case basis when (hospice) CON applications are reviewed by the Agency prior to the issuance of the SAAR and thereafter, if necessary, in a de novo proceeding, through and including the issuance of a final order. The Agency's exercise of discretion is not unbridled. Excluding cases where a later admission date has been requested10 The 48-hour rule provides in part: "3. That there are persons referred to hospice programs who are not being admitted within 48 hours (excluding cases where a later admission date has been requested). The applicant shall indicate the number of such persons." There is some testimony that the parenthetical may be interpreted broadly by the Agency, although Mr. Gregg suggested that the parenthetical was literally limited to when a specific request is made for a later admission date. There are numerous circumstances beyond the control of a hospice that delay an admission other than when a later admission date is requested under the rule. These circumstances do not necessarily indicate an access problem.11 Petitioners provided examples of situations (other than when a later admission date is requested) that may arise when a person would not be admitted with 48 hours after being referred such as when a patient or family is unresponsive to a contact made by the hospice provider; a patient was out of a hospice program's service area when the initial request for hospice services was made and no immediate plans to transfer to the service area; the patient/family/caregiver chose to stay with another benefit, e.g. skilled nursing facility, versus electing their hospice Medicare benefit; a patient residing in a non-contract hospital, e.g., VA Hospital, when the initial request is made and patient admitted to hospice service when the patient is transferred out of that facility into a contract facility, hospice inpatient setting or home; patient meeting the admission criteria at a later date; a delay in obtaining a physician order for assessment; or when a patient is incompetent at the time the initial request to consent for care or other delays in obtaining consent. There are also factors where a referral does not end in an admission. Persons falling in this category would not be counted under the 48-hour rule. The Agency and Palm Coast suggest that the Agency may consider these non-enumerated factors, whereas LifePath and Suncoast suggest the Agency's discretion is limited. Compare Agency/Palm Coast PFO at paragraphs 90-95, and 141 with LifePath/Suncoast PFO at paragraphs 61-67. The persuasive evidence indicates that the Agency should consider these factors. Nevertheless, the plain language of the parenthetical excludes from consideration legitimate circumstances that would reasonably explain a delay in admission other than the affirmative request for a later admission date and, as a result, is unreasonably restrictive. 48 hours Licensed hospice programs are required to provide hospice services to terminally ill patients, 24 hours a day and seven days a week. It is important that terminally ill persons who request hospice services (or if requested on their behalf), receive access to hospice services in a timely fashion. There is evidence that approximately 30 percent of patients that are admitted to hospice die within seven days or less after admission, i.e., an average length of stay of seven days or less. While the opinions of experts conflict, the 48-hour period is a quantifiable standard assuming that there is a precise and reasonable definition of referred and admission. Ultimate Findings of Fact Having considered the entire record in this proceeding, it is determined that the term "referred" is not impermissibly vague or arbitrary or capricious. A person is "referred" to a hospice program when a terminally ill person and/or their legal guardian or other person acting in a representative capacity, e.g., licensed physician or discharge planner, on their behalf, requests hospice services from a licensed hospice program in Florida. This definition presumes that prior to or contemporaneous with the request for hospice services a determination has been made by a physician licensed pursuant to Chapter 458 or Chapter 459, Florida Statutes, that the person is terminally ill, i.e., "that the patient has a medical prognosis that his or her life expectancy is 1 year or less if the illness runs its course." §§ 400.601(10) and 400.6095(2), Fla. Stat. This determination may be made by, e.g., the hospice's medical director, who presumably would be licensed pursuant to one of these statutes. The Agency and Palm Coast implicitly suggest that a referral (pursuant to the 48-hour rule) does not include a determination by a physician that the person is terminally ill. When it comes to "referral" in the generic, non- emergency physician/patient setting, the patient is examined by a physician; the physician determines that the patient needs a further evaluation by a specialist; and the physician refers the patient to the specialist.12 This is usually followed with a written order. The patient, or his or her authorized representative on the patient's behalf, must consent to and request any further examination for the ensuing service to be provided. The point is that the physician makes the referral. In order to apply the plain and commonly understood meaning of the term "referred" in the context of the 48-hour rule, the physician's determination is a critical component of the referral process, coupled with the patient's request and ultimate consent for services. Access to hospice services and the time it takes to deliver the service is of the essence for the prospective hospice patient. Having a written and dated physician certification of terminal illness would likely make recordkeeping easier and more predictable to assist in determining when the 48-hour period starts, in conjunction with the request for services. However, the potential delay in obtaining a written certification from a physician who has determined the patient is terminally ill should not be required to begin the 48-hour period and the referral in light of the purpose of the 48-hour rule. Thus, while a determination of terminal illness is necessary to start the running of the 48 hours under the 48-hour rule, reduction of that determination to writing is not. This definition, coupled with the 48 hour admission requirement and consideration of other factors affecting an admission, provides a sufficient standard for determining whether a person is receiving hospice services in a timely fashion.13 Whether access has been denied to a sufficient number of "persons" under the rule for the purpose of determining whether a special circumstance may justify approval of a hospice CON application in the absence of numeric need can be determined on a case-by-case basis by the Agency in the SAAR or later, if subject to challenge in a Section 150.57(1), Florida Statutes, proceeding in light of the facts presented. See generally Humhosco, Inc. v. Department of Health and Rehabilitative Services, 476 So. 2d 258, 261 (Fla. 1st DCA 1985). The use of the word "persons" in the rule is not vague or arbitrary or capricious. The time period of "48 hours" is not vague or arbitrary or capricious. Given the plight of terminally ill persons needing hospice services, it is not unreasonable for the Agency to have chosen this time period, in conjunction with "referred" and "admitted" as the beginning and stopping points for determining whether access is being afforded on a timely basis. The parenthetical language "(excluding cases where a later admission date has been requested)" is arbitrary and capricious because it precludes consideration of other factors that reasonably demand consideration given the rule's purpose. There is persuasive evidence that persons may not access hospice services (be admitted within 48 hours after being referred) within the 48-hour period based on circumstances that are outside the control of the hospice provider and arguably outside the parenthetical language. To the extent the parenthetical language is construed to limit consideration to one circumstance, the failure to consider other circumstances could unreasonably skew upward or overstate the number of persons that may fit outside the 48-hour period and indicates a lack of timely access when the contrary may be true, having considered the circumstances. The 48-hour rule can remain intact notwithstanding severance of the parenthetical language. The remaining portions of the rule provide an applicant with a viable avenue to demonstrate a lack of timely access based on a special circumstance. Finally, even if the 48-hour rule was not in existence, under applicable statutory and rule criteria, see, e.g., Subsections 408.035(2), Florida Statutes, an applicant may provide evidence that persons are being denied timely access to hospice services in a service area. However, such evidence would not necessarily be classified as a special circumstance unless the evidence fit within Florida Administrative Code Rule 59C-1.0355(4)(d)1. and 2.
