The Issue Whether the certificate of need (“CON”) applications filed by Cornerstone Hospice & Palliative Care, Inc. (“Cornerstone”); Suncoast Hospice of Hillsborough, LLC (“Suncoast”); and VITAS Healthcare Corporation of Florida (“VITAS”), for a new hospice program in Agency for Health Care Administration (“AHCA” or the “Agency”) Service Area 6A (Hillsborough County), satisfy the applicable statutory and rule review criteria sufficiently to warrant approval, and, if so, which of the three applications, on balance, best meets the applicable criteria for approval.
Findings Of Fact Based upon the credibility of the witnesses and evidence presented at the final hearing, and on the entire record of this proceeding, the following Findings of Fact are made: The Parties AHCA AHCA is designated as the single state agency for the issuance, denial, and revocation of CONs, including exemptions and exceptions in accordance with present and future federal and state statutes. AHCA is also the state health planning agency. See §§ 408.034(1) and 408.036, Fla. Stat. In addition, AHCA is the agency designated as responsible for licensure and deficient practice surveys for health facilities, including hospices. See ch. 408, Part II and § 400.6005-.611, Fla. Stat. Pursuant to Florida Administrative Code Rule 59C-1.0355(4)(a), the Agency established a numeric formula for determining when an additional hospice program is needed in a service area. The Agency's need formula determined a need for one new hospice program in SA 6A in the application cycle at issue. That determination is unchallenged. None of the applicants argued that more than one new hospice program should be approved for Hillsborough in this cycle. Suncoast The Hospice of the Florida Suncoast (“Suncoast Pinellas”) was founded in 1977, and was one of the first hospices in Florida, and in the nation. Although it operates only in Pinellas County, Suncoast Pinellas has grown to become one of the largest nonprofit hospices in the country. Suncoast Pinellas is a subsidiary of Empath Health (“Empath”), which also provides a number of non-hospice services. As discussed further below, Empath is currently undergoing a merger with Stratum Health System (“Stratum”), which operates Tidewell Hospice in Sarasota and Manatee Counties. The Chief Executive Officer (“CEO”) of Empath and Suncoast Pinellas is Rafael Sciullo. Mr. Sciullo was recruited to be CEO of Suncoast Pinellas in 2013, where he has served ever since. When Mr. Sciullo arrived at Suncoast Pinellas, the company operated a human immunodeficiency virus (“HIV”) testing and treatment program, a PACE program, a home health program, and a palliative care program. Mr. Sciullo became concerned that patients in the HIV, PACE, and home health programs were not comfortable hearing the word “hospice,” as those patients did not view themselves as hospice patients. Mr. Sciullo reorganized Suncoast Pinellas by creating Empath in order to alleviate this concern with a more inclusive and mission directed organization. Empath is an administrative services provider that provides support to its affiliates, which include Suncoast Pinellas, Empath Partners in Care (“EPIC”),2 Suncoast PACE, Suncoast Hospice Foundation, and programs for palliative care, pharmacy, durable medical equipment (“DME”), and infusion services. Through its affiliates, Empath already provides several services within Hillsborough, including EPIC HIV services and support, and palliative care. The federal definition of hospice care requires a prognosis of a six- month or less life expectancy. However, Florida’s definition permits patients with a 12-month prognosis. Under its supportive care program, Suncoast Pinellas offers hospice services to patients with a prognosis of six to 12 months. As one of the largest not-for-profit hospices in the nation, Suncoast Pinellas offers specialized programs for veterans, the Jewish population, African Americans, the Hispanic population, and disease groups such as heart failure, Alzheimer’s, and COPD. The applicant entity for the CON is Suncoast Hospice of Hillsborough, LLC. If approved, Suncoast will appear beside Suncoast Pinellas in Empath’s organizational chart, operating as a subsidiary under the Empath Health, Inc., family of companies. Empath has entered into a Memorandum of Understanding with Stratum to merge the two organizations. The merger has not yet been accomplished; the companies are currently in the process of conducting due 2 Empath’s EPIC program provides programs and services to persons impacted by HIV and AIDS throughout the Tampa Bay area. diligence. However, the two companies have already agreed that if the merger is consummated, Mr. Sciullo will serve as the CEO of the merged entity, and will be in charge of both original entities after the merger. According to Mr. Sciullo, the merger will not distract or otherwise serve as an impediment to Suncoast’s plans to implement its new hospice program in Hillsborough. Cornerstone Cornerstone is a 501(c)(3) community-based, not-for-profit entity, founded in 1981 by compassionate nurses in Eustis, Florida, to care for patients during their last days of life. Licensed in 1984, Cornerstone (formerly, Hospice of Lake and Sumter, Inc.) has since grown to serve three hospice service areas (3E, 6B, and 7B) which encompass seven central Florida counties, including Polk County, which is contiguous to Hillsborough. Cornerstone has spent more than 35 years serving tens of thousands of patients and their loved ones in the Central Florida region. As a local, not-for-profit hospice, Cornerstone’s governing body is comprised of leaders from the communities it serves, and its board would be expanded to include new members from Hillsborough. This fosters local accountability to the populations Cornerstone serves. Due to its not-for-profit status, Cornerstone is also legally and ethically bound to benefit its communities, and its earnings are reinvested locally rather than inuring to the benefit of private owners. The Cornerstone Hospice Foundation is an independent, 501(c)(3), nonprofit foundation led by community volunteers. The purpose of the Foundation is to raise money for Cornerstone’s community programs, hospice houses, and for people with no method of paying for hospice. Cornerstone Health Services, LLC, is an affiliated entity which provides non-hospice palliative care services to patients. Cornerstone also includes Care Partners, LLC, which is a consulting and group purchasing organization that provides information and materials to other hospices and group purchasing options. Cornerstone leadership has extensive experience in hospice, including development and expansion of new programs in Florida and elsewhere. Cornerstone has achieved significant growth and expansion within its existing service areas in recent years, led largely by the team that would lead Cornerstone’s expansion into Hillsborough. Cornerstone serves all patients in need regardless of race, creed, color, gender, sexual orientation, national origin, age, disability, military status, marital status, pregnancy, or other protected status. Hospice and palliative care are the only healthcare services Cornerstone provides. This focus assures that Cornerstone is committed to providing high quality care to meet the needs of hospice patients and their families. VITAS VITAS Healthcare Corporation (“VITAS Healthcare”), the corporate parent of VITAS, is the largest provider of end-of-life care in the nation. VITAS Healthcare was initially founded in 1978 in South Florida. At that time, its leaders helped organize bipartisan legislative efforts to establish the state and federal regulatory mechanisms that guide the provision of hospice services today. Upon its inception, VITAS programs in Dade and Broward Counties participated in a federal demonstration project that resulted in the development of model clinical protocols and procedures used by hospice programs across the country. In 2018, VITAS Healthcare served 85,095 patients and maintained an average daily census of 17,743 patients among its 47 hospice programs in 14 states and the District of Columbia. As of 2018, VITAS Healthcare employed 12,176 staff members, including over 4,700 nurses nationwide. VITAS currently serves 46 of Florida’s 67 counties, which covers about 72% of Florida’s population. VITAS serves 16 of AHCA’s 27 hospice service areas under three separate licenses. VITAS successfully operates 34 satellite offices in Florida and provides facility-based care through freestanding inpatient units as well as its contracts with hospitals and nursing homes. In Florida in 2018, VITAS served over 36,000 patients, providing 3.3 million days of care with an average daily census of 9,028 patients. This was no aberration—at the time of the filing of its 6A CON application, VITAS had admitted over 35,000 patients in Florida during 2019. In addition to providing the four required levels of hospice care (see ¶ 35), VITAS also provides a full continuum of palliative and supportive care, and additional unreimbursed services that are beneficial to the hospice population it serves. VITAS has over 40 years of experience as a hospice provider, and has developed comprehensive outreach, education, and staff training programs and resources designed specifically to address the unique needs of a wide range of patient types, communities, and clinical settings. Similarly, VITAS recognizes that the needs of Florida patients vary between service areas, and it has endeavored to provide programs and services tailored to meet the needs of each community. In its Florida programs, VITAS provides complete hospice care, including medications, equipment and supplies, expert nursing care, personal care, housekeeping assistance, emotional counseling, spiritual support, caregiver education and support, grief counseling, dietary, physical, occupational and speech therapy, and volunteer support. VITAS has a long history of providing significant levels of care to all patients without regard to the ability to pay, as well as a demonstrated commitment to underserved populations such as the homeless, veterans, AIDS population, and minorities. VITAS provided almost $7 million in charity care in Florida in 2018, and $7.25 million in 2019 at the time it submitted its CON application. VITAS ensures that anyone who is appropriate for hospice services has the right to access them. VITAS is committed to giving back to the communities it serves through meaningful donations. It accomplishes this goal through VITAS Community Connections, a nonprofit organization, which makes donations and grants to local organizations and families. In 2018, VITAS made over $161,000 in charitable contributions to organizations in Florida. In that same year, VITAS contributed over $700,000 to sponsoring Florida community events. At the time of filing its Hillsborough application, VITAS employed nearly 5,500 persons in Florida, 2,235 of which are nurses. VITAS encourages and assists its nurses in obtaining board certification in hospice and palliative care through training, compensation incentives, and support. Due to VITAS Healthcare’s multi-state operations, VITAS can readily recruit staff to Florida from other markets. VITAS also relies on volunteers in a variety of roles to enhance patient care. In 2018, VITAS used 1,165 active volunteers in Florida, who provided over 145,054 volunteer hours. VITAS is led by an extremely experienced and highly qualified leadership team, many of which have long and successful tenures with the company. Hospice Care Generally Hospice refers both to care provided to terminally ill patients and the entities that provide the care. Hospice care is palliative care. Palliative care relieves or eliminates a patient's pain and suffering and helps patients remain at home. It differs from curative care, which seeks to cure a patient's illness or injury. 42 C.F.R. § 418.24(d); §§ 400.6005 and 400.601(6), Fla. Stat. Hospices provide physical, emotional, psychological, and spiritual comfort and support to patients facing death and to their families. The Medicare and Medicaid programs pay for the vast majority of hospice care. The services those programs require hospices to offer and the services the programs will pay for have become, de facto, the default definition of hospice care, the arbiter of hospice services, and the decider of when a patient is terminally ill. Florida requires a CON to establish a hospice program and regulates hospices through licensure. §§ 400.602 and 408.036(1)(d), Fla. Stat. Florida considers a patient with a life expectancy of one year or less to be terminally ill and eligible for Medicaid payment for hospice care. § 400.601(10), Fla. Stat. To be eligible for Medicare payment for hospice services, a patient must have a life expectancy of six months or less. 42 C.F.R. § 418.20; 42 C.F.R. § 418.22(b)(1). A hospice must provide a continuum of services tailored to the needs and preferences of the patient and the patient’s family delivered by an interdisciplinary team of professionals and volunteers. §§ 400.601(4) and 400.609, Fla. Stat. Hospice programs must provide physical, emotional, psychological, and spiritual support to their patients. A hospice must provide physician care, nursing care, social work services, bereavement counseling, dietary counseling, and spiritual counseling. 42 C.F.R. § 418.64; § 400.609(1)(a), Fla. Stat. In Florida, hospices must also provide, or arrange for, additional services including, but not limited to, “physical therapy, occupational therapy, speech therapy, massage therapy, home health aide services, infusion therapy, provision of medical supplies and durable medical equipment [DME], day care, homemaker and chore services, and funeral services.” § 400.609(1)(b), Fla. Stat. Federal requirements are similar. 42 C.F.R. § 418.70. Hospices are required to provide four levels of care. The levels are routine home care, general inpatient care, crisis care (also called continuous care), and respite care. Since hospice’s goal is to support a patient remaining at home, hospices provide the majority of their services in a patient’s home. Routine home care is the predominant form of hospice care. Routine care is for patients who do not need constant bedside support. A hospice may provide routine care wherever the patient lives. The location could be a residence, a skilled nursing facility (SNF), an assisted living facility (ALF), some other residential facility, or a homeless camp. Continuous care, sometimes called crisis care, may also be provided wherever the patient resides. It is more intense services for a short period of time. Continuous care supports a patient whose pain and symptoms are peaking and need quick management. With continuous care, unlike routine care, a nurse may be at a patient’s bedside 24 hours a day, seven days a week. Continuous care is an option allowing a patient to avoid admission to an inpatient facility. Hospices provide general inpatient care in a hospital, a dedicated nursing unit, or a freestanding hospice inpatient facility. To qualify for inpatient care, a patient must be acutely ill and need immediate assistance and daily monitoring to the extent that they cannot be cared for at home. Hospices must offer around-the-clock skilled nursing coverage for patients receiving general inpatient care. Respite care is caregiver relief. It allows patients to stay in an inpatient setting for up to five days in order to provide caregivers respite. Florida law requires hospices to accept all medically eligible patients. Each hospice must make its services available to all terminally ill persons and their families without regard to age, gender, national origin, sexual orientation, disability, diagnosis, cost of therapy, ability to pay, or life circumstances. A hospice may not impose any value or belief system on its patients or their families, and must respect the values and belief systems of its patients and their families. § 400.6095(1), Fla. Stat. Hospices frequently offer additional, uncompensated services that are not required by Florida licensure laws or federal Medicare requirements. Pre- hospice care and community counseling are two examples. Hospices often establish programs to meet the needs of particular populations, such as the Hispanic, African American, Jewish, veteran, and HIV/AIDS communities. Cornerstone, Suncoast Pinellas, and VITAS provide the hospice services required by state laws and funded by the Medicare benefit. All three providers also offer services beyond those required by, or paid for by, government programs. The Fixed Need Pool and Preliminary Agency Decision Pursuant to its rule-based numeric need methodology, AHCA determined and published a fixed need for one new hospice program in SA 6A, Hillsborough, in the second batching cycle of 2019. Under the Agency's need methodology, numeric need for an additional hospice program exists when the difference between projected hospice admissions and the current admissions in a service area is equal to or greater than 350. In this instance, the difference between projected hospice admissions and current admissions in SA 6A was 863, and therefore a numeric need for an additional hospice program exists in Hillsborough.3 In addition to the three litigant applicants, three other entities filed applications seeking approval for the new program. Those three applications have been deemed abandoned and are not at issue herein. On February 21, 2020, the Agency published its preliminary decision to award the hospice CON to Suncoast, and to deny the remaining applications. Thereafter, Cornerstone and VITAS both filed timely petitions for formal administrative hearing contesting the Agency’s preliminary decision. On April 1, 2020, Suncoast filed a “Cross Petition, Notice of Related Cases and Notice of Appearance” in support of the Agency decision on the competitively reviewed applications. None of the applicants petitioning for 3 According to AHCA’s need methodology, absent a showing of “not normal” circumstances, only one new hospice program may be approved for a SA at a time, regardless of the multiples of 350 “need” that may be shown. Fla. Admin. Code R. 59C-1.0355(4)(c). hearing alleged “special circumstances” or “not normal” circumstances in their application. Service Area 6A: Hillsborough County As can be seen by the map below, Hillsborough is located on the west coast of Florida along Tampa Bay. It includes 1,048 square miles of land area and 24 square miles of inland water area. Hillsborough is home to three incorporated cities: Tampa, Temple Terrace, and Plant City, with Tampa being the largest and serving as the county seat. The county is bordered by Pasco County to the north, Polk County to the east, Manatee County to the south, and Pinellas County to the west. (Source: Google Maps) According to AHCA’s Florida Population Estimates 2010-2030, published February 2015, Hillsborough’s total population as of January 2020 was estimated to be 1,439,041. Hillsborough’s total population is expected to grow to 1,557,830 by January 2025, or 8.25% over that five-year period. In 2020, 14% of Hillsborough’s population was aged 65 and older. According to the 2010 U.S. Census, 35.4% of the county population age 65 and older has a disability, and 17.2% of the county population is below the poverty level, compared to 12.2% statewide. The Hillsborough County Department of Health (“HCDOH”) reports that the county has a diverse mix of residents, with 52% White, 16% African American, 26% Hispanic, and 5% other races. Of the Hillsborough households living below the poverty level, 23.73% are Hispanic/Latino and 31.07% are African American. Nearly 10% of Hillsborough residents report not speaking English “very well.” The most recent U.S. Census indicates that the median income for households in Hillsborough is $54,742, considerably below the national average, with 17.2% reported below poverty level. A larger percentage of the county’s residents (3.3%) received cash assistance than did the state’s residents (2.2%), and a larger percentage (15.7%) received food stamp benefits than is the case for the state overall (14.3%), as reported by HCDOH. Hillsborough is currently served by two hospice providers: Lifepath Hospice (“Lifepath”); and Seasons Hospice and Palliative Care of Tampa, LLC (“Seasons”), a for-profit company. Following approval after an administrative hearing, Seasons was newly licensed to begin operations in Hillsborough in December 2016. Florida’s hospice CON rule prevents need for a new program from being shown for a period of two years following the addition of a new program to a service area. The purpose of the two-year forbearance is to allow new programs to gain a foothold in the market, and to potentially avoid a repeated need determination in future batching cycles. Hospice admissions at Lifepath for the period of July 1, 2018, through June 30, 2019, were 6,195, and for Seasons were 601. The addition of Seasons to the service area was not successful in deterring the need for yet another new program in Hillsborough. The Application Proposals and CON Conditions Suncoast Suncoast recently applied for approval for a hospice program in neighboring Pasco County, but, after a DOAH hearing, that application was denied in favor of another applicant. From that experience, Suncoast determined to better identify local needs before applying for approval in Hillsborough. Upon learning that a fixed need pool would be announced for Hillsborough, Mr. Sciullo directed his team of executives and staff over a series of strategy meetings to conduct an independent community needs assessment of Hillsborough. Mr. Sciullo tasked Kathy Rabon to oversee the development of a community needs assessment of Hillsborough to identify potential needs of Hillsborough residents, based on key informant surveys and other assessment tools. Ms. Rabon has significant experience in conducting feasibility studies for capital projects funded by the Suncoast Hospice Foundation, which she leads. Ms. Rabon began by reviewing existing community needs assessments of the county. Those assessments identified the health needs of Hillsborough’s underserved patients, and identified community leaders that informed the assessments. Ms. Rabon then contacted many of those key informants. At hearing, Ms. Rabon described the process she used to develop a community needs assessment for Hillsborough as follows: Q. When tasked with doing an assessment for Hillsborough's hospice, where did you start? What documents did you first review? A. A community needs assessment can take quite a while when you engage focus groups and need to meet with stakeholders. We didn't have the luxury of a lot of time. We also had the luxury of knowledge that other hospitals in Hillsborough County that are not-for-profit have to periodically do a community needs assessment. So rather than start from a blank piece of paper, I turned to those community needs assessments and I began compiling and gathering as many as I could that I felt were relevant to, A, the geographic boundaries of the entire county, which some did not, but B, also were timely. And I found that the Department of Health had done a very comprehensive community needs assessment in 2015-16 that had been updated in March of 2019 that I felt would provide a lot of good information. * * * I was responsible for identifying need and, if possible, identifying perhaps solutions that could be developed as a result of a partnership or a relationship or an engagement or a future plan that we could put together that would help solve a need in Hillsborough County relative to chronic and advanced illness. In addition to the HCDOH needs assessment and update, Ms. Rabon also obtained quantitative information for her assessment from the following sources: Community Health Improvement Plan 2016- 2020, Florida Department of Health in Hillsborough County, Revised January, 2018; Moffitt Cancer Center Community Health Needs Assessment Report 2016; Florida Hospital Tampa Community Needs Assessment Report 2016; Florida Hospital Carrollwood Community Needs Assessment Report 2016; South Florida Baptist Hospital 2016 Community Needs Assessment Report; Tampa General Hospital; Community Health Needs Assessment 2016; and Community Needs Assessment St. Joseph’s Hospitals Service Area 2016. Ms. Rabon also developed a key informant survey tool to elicit qualitative information regarding the healthcare needs of Hillsborough residents. The survey specifically asked about the strengths and weaknesses of the community for treatment of persons with chronic or advanced illness, and other pressing issues relating to end of life care. Those survey questions included, among others: What is your role, and responsibilities within your organization? What do you consider to be the strengths and assets of the Hillsborough community that can help improve chronic and advanced illness? What do you believe are the three most pressing issues facing those with chronic or advanced illness in Hillsborough County? From your experience, what are the greatest barriers to care for those with chronic or advanced illness? What are the strategies that could be implemented to address these barriers? Once meetings with key informants were complete, and 25 key informant surveys were returned, Ms. Rabon summarized her findings in a final Community Needs Assessment Summary. Ms. Rabon’s findings were consistent with assessments conducted by other organizations, including HCDOH, and local hospitals. The results of the Community Health Needs Assessments, Suncoast Key Informant Surveys, and detailed letters of support, identified the following gaps in end-of-life care for residents of Hillsborough: Need for Disease-Specific Programming: High cardiovascular disease mortality rates (higher than the state average and the highest of the six most populous counties in Florida) and low percentage of patients served by existing hospice providers. Other areas where there appears to be a gap in specific end-of-life programming and a large need in terms of Hillsborough resident deaths include: Alzheimer's Disease and Chronic Lower Respiratory Disease, both of which are in the top 5 leading causes of death in the county. Need for Ethnic Community-Specific Programming Nearly 30 percent of the Hillsborough population is Hispanic, with 19 percent of the county's 65+ population falling into the Hispanic ethnic category. The concentration of 65+ Hispanic residents in Hillsborough is higher than the state average. Surveys and assessments indicate a lack of knowledge in the Hispanic/Latinx[4] community in Hillsborough regarding end-of-life care. Many of these residents speak Spanish at home and/or have limited English proficiency. Hillsborough Hispanic population has low utilization of hospice due to factors including lack of regular physician and medical care, lack of information and cultural barriers. Lack of Available Resources for Homeless and Low-lncome Populations With the 5th largest homeless population in the state, Hillsborough has 1,650 homeless residents as of a Point in Time Count conducted in February 2019. Nearly 60 percent of the area’s homeless population is considered ‘sheltered’, yet there are no resources for end-of-life care for these patients where they live, whether it be an emergency shelter, safe haven or transitional housing. Additionally, 17.2 percent of the Hillsborough population lives below the poverty level and has limited access to coordinated care, including end-of- life services. Largest Veteran Population in Florida Requires Special Programming and Large Number of Resources More than 93,000 veterans currently reside in Hillsborough, with more than one-third over the age of 65. 4 Latinx is a gender-neutral neologism, sometimes used to refer to people of Latin American cultural or ethnic identity in the United States. The ?-x? suffix replaces the ?-o/-a? ending of Latino and Latina that are typical of grammatical gender in Spanish. See “Latinx,” Wikipedia (last visited March 19, 2021). While most hospice programs provide special services for veterans, Suncoast Pinellas has obtained Partner Level 4 certification by We Honor Veterans, a program of the National Hospice and Palliative Care Organization (“NHPCO”) in collaboration with the Department of Veterans Affairs (“VA”). Lack of Specialized Pediatric Hospice Program in the Area Pediatric hospice programming in Hillsborough is limited, as there are no specialized pediatric hospice providers in the county. Hillsborough is home to approximately 338,000 residents ages 0-17 in 2020, and is projected to increase to more than 368,000 by 2025. The pediatric utilization rate of hospice services in Hillsborough is low compared to the general population. For the year ended March 31, 2019, there were only five pediatric patients discharged from the hospital setting to home hospice or an inpatient hospice facility, while 106 pediatric patients died in the hospital. Absence of Continuum of Care Navigation Navigation of the healthcare system was highlighted as a key driver that will bring positive improvements to overall continuum of care in Hillsborough. Hillsborough residents are not accessing hospice services at a rate consistent with the rest of the state, and either access hospice programs very late in the disease process, or not at all. Transportation Challenges for Rural Areas of the County Transportation challenges as a deterrent to seeking medical care, particularly in rural areas of Hillsborough. Approximately one-third of the Hillsborough population is considered “transportation disadvantaged” meaning they are unable to transport themselves due to disability, older age, low income or being a high-risk minor/child. Suncoast retained David Levitt and his firm as its healthcare consultant and primary drafter of its CON application. To develop Suncoast’s application, Mr. Levitt utilized numerous reliable data sources and worked with Suncoast Pinellas’s staff. Mr. Levitt credibly confirmed the need for an additional hospice program in Hillsborough based on reliable healthcare planning data. AHCA’s CON application form, adopted by rule, requires applicants to submit letters of support with their CON applications. Suncoast complied with this requirement and included numerous letters of support from the Hillsborough community. One of the key informants identified by Ms. Rabon was Dr. Douglas Holt of the HCDOH. Dr. Holt agreed to meet with Mr. Sciullo and ultimately agreed to provide a letter of support, which was included with the Suncoast application. Mr. Sciullo also personally met with Dr. Larry Fineman, the regional medical director of HCA West Florida, who provided a letter of support. HCA West Florida hospitals are key referral sources of Suncoast Pinellas’s current hospice admissions. In addition to HCA West Florida, Suncoast Pinellas has an existing relationship with other Hillsborough hospitals: St. Joseph’s, Moffitt Cancer Center and Tampa General Hospital. Suncoast received letters of support from St. Joseph’s and Tampa General. The Agency’s witness, James McLemore, testified that letters from such referral sources were highly persuasive to the Agency, as they indicate the likelihood of successful operations. Suncoast’s witness, Dr. Larry Kay, credibly testified that he obtained letters of support from Dr. Howard Tuch, Director of Palliative Medicine at Tampa General Hospital; Dr. Larry Feinman, Chief Medical Officer at HCA West Florida; and Dr. Harmatz, the Chief Medical Officer at Brandon Regional Hospital, an HCA hospital within HCA West Florida. Those letters were included with the Suncoast application. Suncoast Pinellas currently has working relationships with BayCare, HCA, AdventHealth West Florida, Tampa General, and Moffitt hospital systems. Suncoast submitted letters from BayCare and HCA, which were included with its application. Suncoast received letters specifically related to partnering with Suncoast for inpatient services from St. Joseph’s (BayCare) and Brandon Regional (HCA). Suncoast also received a letter of support related to partnering with Suncoast for inpatient services from the Inn at University Village, a long- term care facility in Hillsborough; and support from a pediatric hospitalist who provides care to terminally ill and medically fragile children at St. Joseph’s Children’s Hospital and Johns Hopkins All Children’s Hospital. Suncoast also received letters of support from numerous community organizations, including Balance Tampa Bay and The AIDS Institute. Also included with the Suncoast application were several letters of support from [Remainder of page intentionally blank] the veterans’ community, including one from the Military Order of the World Wars.5 After considering Ms. Rabon’s Community Needs Assessment, and input from key informants, Suncoast developed programs and plans to meet each of the needs identified above. Suncoast conditioned the approval of its CON on the provision of those services. In all, Suncoast offered 19 conditions in its CON application intended to meet the unique needs of Hillsborough. Condition 1: Development of Disease Specific Programing: Suncoast is committed to providing disease-specific programming in Hillsborough: Empath Cardiac CareConnections, Empath Alzheimer’s CareConnections, and Empath Pulmonary CareConnections. Dr. Larry Kay and Dr. Janet Roman credibly testified that Suncoast will fulfill Condition 1 for disease specific programming. To fulfill Condition 1, Suncoast will provide Empath Cardiac CareConnections in Hillsborough. Dr. Roman designed and currently runs the CardiacCare Connections program in Pinellas County. Dr. Roman is a national expert in developing programs across the continuum of care to assist heart failure patients. Although Suncoast Pinellas has always treated patients with heart failure, since Dr. Roman’s arrival, cardiologists have been referring patients to Suncoast Pinellas earlier than before. Dr. Roman has trained Suncoast Pinellas’s nurses in all advanced heart failure therapies, including IV inotropes, and mechanical circulatory 5 As correctly noted by Cornerstone in its Proposed Recommended Order, letters of support included in the three applications, unless adopted by the sponsoring author at hearing or in sworn deposition received in evidence, are uncorroborated hearsay, and the contents therein may not form the basis of a finding of fact. However, the letters are not being received for the truth of the matters set forth therein, but rather the number and types of support letters included in the applications are relevant generally as a gauge of the level of community support for the proposals. The Hospice of the Fla. Suncoast, Inc. v. AHCA and Seasons Hospice and Palliative Care of Pasco Cty., DOAH Case No. 18-4986 (Fla. DOAH Sept. 5, 2019; Fla. AHCA Oct. 15, 2019) (“In a broad sense, comparison of each applicant's letters of support illuminates the differences between each applicant's engagement with the community.” FOF No. 127.). supports such as left ventricular assist devices (“LVAD”) and artificial hearts. Dr. Roman’s program has been successful at reducing hospital readmissions. Suncoast’s application provided significantly more detail about the operations of its heart program than either Cornerstone or VITAS. Cornerstone and VITAS’s descriptions of their heart programs do not reach the level of specificity of operation as Suncoast’s and are not backed up with a measure of success such as a reduction in readmissions. In furtherance of Condition 1, Suncoast will also offer Empath Alzheimer’s CareConnections. Suncoast Pinellas has already created the foundation for Empath Alzheimer’s CareConnections in Pinellas County, but has not yet been marketing the program under the brand of CareConnections. As part of Empath Alzheimer’s CareConnections, Suncoast will deploy a Music in Caregiving program for Hillsborough hospice patients, including those suffering from Alzheimer’s Disease. Suncoast will also offer Empath Pulmonary CareConnections in Hillsborough. Suncoast Pinellas has already created the foundation for Empath Pulmonary CareConnections in Pinellas County, but has not yet been marketing the program under the brand of CareConnections. Suncoast Pinellas already has several respiratory therapists full time caring for COPD and asthma patients. In Hillsborough, Suncoast plans to engage a pulmonologist as a consultant and to hire dedicated respiratory therapists as volume increases in Hillsborough. Condition 2: Development of Ethnic Community-Specific Programming Suncoast conditioned its CON application on the purchase of a mobile van staffed by a full-time bilingual LPN and a full-time bilingual social worker to discuss advanced care planning and education, and increase access to care to diverse populations. The van will operate eight hours a day, five days a week, and drive to areas in Hillsborough that have a need for the services offered by Suncoast and Empath. This outreach is intended to enhance access to care to diverse communities. The van will spend time at the HCDOH and its satellite clinics, and use Metropolitan Ministries as a resource for identifying additional locations that could benefit. The van will also visit key Latinx community locations within Hillsborough and offer Spanish language assistance. The van will be equipped with telehealth technology capabilities to link the LPN and social worker to the care navigation office to further enhance the care navigation function of the mobile van. The purpose of the mobile outreach van is to build relationships with, and trust in, the community, enhance visibility, and bring care navigation to areas of Hillsborough that may not typically access it. Suncoast Pinellas’s EPIC program has significant experience operating a mobile outreach unit. EPIC currently operates a mobile outreach and testing unit that provides HIV testing and sexually transmitted infection testing in the community. Condition 3: Development of Resources for Homeless and Low-Income Populations Suncoast conditioned its application on the development of resources for homeless and low-income populations. Under this condition, Suncoast will provide up to $25,000 annually for five years to Metropolitan Ministries. Metropolitan Ministries is a leading community-based organization in Hillsborough that serves homeless and low-income individuals. Christine Long, Chief Programs Officer for Metropolitan Ministries, provided a letter of support which was included in Suncoast’s CON application. Condition 4: Development of Specialized Veterans Program Suncoast conditioned its CON application on the development of a specialized veterans program, which includes a dedicated Veterans Professional Relations Liaison to collaborate with the local VA hospital, outpatient clinics, and veterans organizations. Suncoast Pinellas provides a wide range of specialized care for veterans, through its Empath Honors program, including Honor Flight and pinning ceremonies. Additionally, Suncoast Pinellas holds a Level 4 Certification from We Honor Veterans, a national program through the National Hospice and Palliative Care Organization (“NHPCO”) whose mission is to honor military veterans in hospice care. The NHPCO recently added a new Level 5 Partnership, for which Suncoast Pinellas has already applied for its Pinellas hospice program. Suncoast will also pursue a Level 5 Certification in Hillsborough, if awarded the CON. Condition 5: Development of Specialized Pediatric Hospice Program in Hillsborough County Suncoast will also develop a specialized pediatric hospice program in Hillsborough. Dr. Stacy Orloff started the Children’s Hospice Program at Suncoast Pinellas in 1990 and has been with Suncoast Pinellas for 30 years. Dr. Orloff helped draft the first waiver that the State of Florida submitted to CMS for approval to operate a PIC/TFK program. Once the PIC/TFK waiver was approved, Ms. Orloff led Florida’s PIC/TFK steering committee for 12 years. PIC/TFK is a Medicaid waiver program that provides palliative care services for children with a risk of a death event by age 21, and also provides counseling support for family members who lived at the child’s home, such as parents, siblings, and grandparents. A PIC/TFK provider must be a licensed hospice provider in the service area. Suncoast Pinellas has operated a PIC/TFK program in Pinellas since 2004, utilizing a pediatric interdisciplinary team to provide its PIC/TFK services. Suncoast Pinellas’s PIC/TFK program averages a census of approximately 40 children. Combining the PIC/TFK patients with pediatric patients, Suncoast Pinellas’s census averages approximately 50 children. Suncoast Pinellas has already received acknowledgment from Children’s Medical Services to permit it to operate a PIC/TFK program in Hillsborough if awarded the hospice CON. Initially, pediatric patients will be serviced by the Suncoast Pinellas pediatric staff. Suncoast Pinellas currently has sufficient staff availability to service Hillsborough at the commencement of the program. Suncoast anticipates that by the second year, the Hillsborough pediatric program will have a sufficient census to have a staff that serves only Hillsborough. VITAS’s regional Medical Director, Dr. Leyva, acknowledged that a pediatric patient will receive better care from a care team with pediatric expertise than with an adults-only team. Of the three applicants, Suncoast has demonstrated the most experience providing care to pediatric patients.6 In addition, Suncoast Pinellas has longstanding relationships with the local children’s hospitals, St. Joseph’s Children’s Hospital, and Johns Hopkins All Children’s Hospital. Concurrent care is a benefit created as part of the Affordable Care Act that allows children admitted to hospice care to continue to receive their curative care. Although all applicants have proposed providing concurrent care, only Suncoast has proposed a PIC/TFK program. Suncoast is the only applicant currently operating a perinatal loss program and miscarriage at home program. Dr. Orloff credibly confirmed that Suncoast will implement the perinatal loss program if approved in Hillsborough. Condition 6: Development of Continuum of Care Navigation Program Suncoast’s Community Needs Assessment identified that Hillsborough lacks effective access to the full continuum of healthcare services. Suncoast 6 AHCA’s witness, James McLemore, credibly testified that this is an area where Suncoast enjoys an advantage over the other applicants because “Suncoast went with an entire pediatric program.” Pinellas operates an entire care navigation department that can address any inquiry or referral regarding hospice and Empath’s other services, in order to direct that patient to the right care at the right time. All services offered by Empath, including hospice, palliative care, home health, EPIC, and PACE are available to individuals who call the Care Navigation Center. Care Navigation staff can also assist existing patients with questions involving, for example, DME. Suncoast Pinellas’s care navigation center is available 24 hours a day, 7 days a week, 365 days a year. If its application is approved, Suncoast will also offer its Care Navigation Department in Hillsborough. Condition 7: Development of a Program to Address Transportation Challenges for Rural Areas Suncoast has conditioned its application on developing a program to address transportation challenges for rural areas in Hillsborough. As part of this condition, Suncoast will provide up to $25,000 annually in bus vouchers for the first five years to current hospice patients and their families, as well as non-hospice patients. Critics of Suncoast’s plans to offer bus vouchers claimed that Hillsborough’s bus system does not reach all areas within the county. However, Suncoast has also conditioned its application on the provision of funds that may be used to purchase transportation, including ridesharing providers such as Uber. Condition 8: Interdisciplinary Palliative Care Consult Partnerships Suncoast will implement interdisciplinary palliative care partnerships with hospitals, ALFs, and nursing homes located in Hillsborough. Suncoast has already identified potential partnerships, including with Dr. Harmatz at Brandon Regional Medical Center, to launch the program. Condition 9: Dedicated Quality-of-Life Funds for Patients and Families Suncoast is committed to providing quality of life funds as described in Condition 9 in Suncoast’s CON application. Suncoast Pinellas has extensive experience with providing each interdisciplinary team with $1,200 of quality of life funds to be used to facilitate a safe environment for its patients, such as paying rent, getting rid of bedbugs, paying utilities such as electricity for air conditioning, and to power specialized medical equipment. On occasion these funds are also used to provide meaningful patient experiences, similar to the Make-a-Wish programs. Conditions 10 – 13: Development of Advisory Committees and Councils Suncoast has committed to establishing care councils and advisory committees to learn firsthand the needs and concerns of the community. A care council is made up of members from a particular community who provide input regarding the needs of the community. Suncoast Pinellas offers similar councils and committees in Pinellas County. These groups are critical to the success of Suncoast Pinellas’s mission. Condition 14: Development of Open Access Model of Care Suncoast has committed to implementing an open access model of care in Hillsborough. This condition recognizes that while some patients may be receiving complex medical treatments that may lead some to question whether the patient is terminal, those treatments are actually required for palliation and the patient’s comfort. Under this condition, Suncoast promises to admit these patients and provide coverage for their treatments. Condition 15: SAGECare Platinum Level Certification Joy Winheim testified at the final hearing regarding the HIV positive community and the LGBTQ community. Over her many years working with the HIV/AIDS community, Ms. Winheim has built lasting relationships with community partners in the Tampa Bay area, including HCDOH and the Pinellas County Health Department. Empath’s EPIC program has a permanent staff member housed within the HCDOH, and the HCDOH has physicians housed in EPIC’s Tampa office to provide medical care to EPIC’s clients. Ms. Winheim has built lasting relationships with community partners in the Tampa Bay LGBTQ community, including Metropolitan Community Church, an LGBTQ friendly church; the Tampa Bay Gay and Lesbian Chamber of Commerce; and Balance Tampa Bay. SAGE is a national organization dedicated to improving the rights of LGBTQ seniors by providing education and training to businesses and non- profits. The platinum level of SAGECare certification is the highest level and indicates that 80% of an organization’s employees and 100% of its leadership have been trained by SAGE. Leadership training is in the form of a four-hour in-person training. Employee training is in the form of a one-hour training conducted either in person or web-based. All of Empath’s entities are SAGECare certified at the platinum level. Although the platinum level certification requires only 80% of its employees to receive training, Empath Health required that 100% of its employees attend the training. SAGECare certification makes a difference to members of the LGBTQ community choosing a healthcare provider. Suncoast is committed to fulfilling this condition. Condition 16: Jewish Hospice Certification Suncoast Pinellas has a specialized Jewish Hospice Program and holds a Jewish Hospice Certification from the National Institute of Jewish Hospices. Suncoast has conditioned its CON application on achieving this same certification in Hillsborough by the end of year one. Condition 17: Joint Commission Accreditation The Joint Commission on Accreditation of Healthcare Organizations (“Joint Commission”) accreditation is the “gold standard” for hospitals, nursing homes, hospices, and other healthcare providers. Suncoast is currently accredited by the Joint Commission, and if approved, is committed to achieving Joint Commission accreditation for its Hillsborough program. Condition 18: Provision of Value-Added Services Beyond Medicare Hospice Benefit Suncoast has committed to provide its integrative medicine program in Hillsborough. Suncoast Pinellas’s existing integrative medicine program is staffed by an APRN who is also certified in acupuncture. Suncoast Pinellas’s integrative medicine program is a holistic approach for helping patients manage their symptoms with such therapies as acupuncture, Reiki,7 and aromatherapy. Suncoast Pinellas recently established a Wound, Ostomy, and Continence Nurse Program in Pinellas County to provide expertise in end-of- life wounds and incontinence issues in long-term care settings, particularly smaller ALFs that may not have the necessary staffing. Suncoast will also offer this program in Hillsborough. [Remainder of page intentionally blank] 7 Reiki (??, /'re?ki/) is a Japanese form of alternative medicine called energy healing. Reiki practitioners use a technique called palm healing or hands-on healing through which a “universal energy” is said to be transferred through the palms of the practitioner to the patient in order to encourage emotional or physical healing. Condition 19 – Limited Fundraising in Hillsborough County Suncoast has committed to limiting fundraising activities in Hillsborough. Ms. Rabon credibly testified that Suncoast can, and will, fulfill this condition.8 Suncoast’s PACE Program In addition to its conditions, Suncoast’s proposal also includes several other non-hospice services that will be made available in Hillsborough. For example, Suncoast Pinellas operates a PACE program. The PACE program provides everything from medical care to transportation for medical needs and adult daycare services, as well as respite services for caregivers. The overall goal of the PACE program is to reduce unnecessary hospital visits and nursing home placement and keep elderly participants at home. Suncoast Pinellas’s PACE program currently operates at capacity, with 325 participants enrolled. Over the last four years, Suncoast Pinellas PACE has referred 175 people to Suncoast Pinellas. And although there are approximately 14,000 eligible PACE participants in Hillsborough, there is not a PACE provider in the county. In recognition of this unmet need, Suncoast Pinellas is currently in the process of expanding PACE services to residents of Hillsborough. Suncoast’s PACE program distinguishes Suncoast from Cornerstone and VITAS, neither of which currently operates a PACE program in any of their service areas. Suncoast’s Volunteer Program Under the Medicare Conditions of Participation, hospice programs must use volunteers “in an amount that, at a minimum, equals 5 percent of 8 Both Suncoast and Vitas condition their applications on eschewing fundraising activities in SA 6A, apparently in an effort to minimize adverse impact on the two existing providers in the service area. However, neither Lifepath nor Seasons participated as a party to this litigation, or presented evidence at hearing as to revenues received through their fundraising activities. Thus, it is impossible to determine whether the conditions proposed by Suncoast and VITAS would have a material impact on either of the existing providers. the total patient care hours of all paid hospice employees and contract staff.” 42 C.F.R. § 418.78(e). Suncoast Pinellas regularly exceeds that 5% requirement and, in fact, reached 12% in the last fiscal year. Suncoast Pinellas currently has over 1,000 volunteers who support the hospice program by assisting with palliative arts, including Reiki and aromatherapy, Lifetime Legacies, pediatric patients, and transportation. Suncoast Pinellas’s volunteers also assist with Suncoast’s Pet Peace of Mind Program, for which Suncoast Pinellas won the inaugural award for program of the year in 2019. Suncoast is the only applicant that operates a teen volunteer program. Suncoast Pinellas’s teen volunteer program was established in 1994 and was the first of its kind in the entire country. In 1998, it was awarded the Presidential Point of Light award. Suncoast Pinellas’s Volunteer Services Director, Melissa More, regularly consults with hospices across the country on the development of teen volunteer programs. Ninety of Suncoast Pinellas’s 1,000 volunteers currently live in Hillsborough, but travel to Pinellas to volunteer at Suncoast Pinellas. Nine of those volunteers submitted letters of support for Suncoast’s CON application to serve Hillsborough. Doctor Direct Program Suncoast Pinellas’s existing Doctor Direct Program enables physicians in the community and their ancillary referral partners to contact a Suncoast Pinellas physician 24/7, who can answer any questions about a patient they think might be eligible for hospice, and questions related to other Suncoast Pinellas programs. Suncoast will provide its Doctor Direct Program in Hillsborough. Plan for Inpatient Services Suncoast received letters of support from hospitals and a nursing home indicating a willingness to enter into a contract for inpatient services with Suncoast. Suncoast intends to offer both inpatient units and “scatter- bed” arrangements with these providers. Suncoast received letters specifically related to potential partnerships with St. Joseph’s (BayCare) and Brandon Regional (HCA) for the provision of inpatient hospice services. Suncoast also received a letter related to a potential partnership with the Inn at University Village, a long-term care facility in Hillsborough, for the provision of inpatient services. Telehealth Suncoast Pinellas offers telehealth services using CMS and HIPAA- approved software so that patients can keep meaningful connections with their family and friends, regardless of ability to travel. In Hillsborough, Suncoast will provide nurses, social workers, and chaplains with traveling technology for use in the patient’s home to connect with family and friends. Utilizing telehealth in this way will help to minimize emergency room visits and hospitalizations. Suncoast will be prepared to implement its telehealth program in Hillsborough on day one of operation if awarded the CON. Outreach Efforts to Diverse Communities Suncoast is committed to, and has a proven track record of, community outreach efforts to diverse communities. As part of its outreach efforts in Hillsborough, Empath’s Vice President of Access and Inclusion, Karen Davis-Pritchett, met with the Executive Director of the Hispanic Service Council, Maria Pinzon, to discuss the organization’s outreach efforts and gain insight into the Hispanic community in Hillsborough. Ms. Davis- Pritchett learned that the Hispanic community in Hillsborough differs from the Hispanic community in Pinellas, in that Hillsborough has a large and spread out migrant population. Ms. Davis-Pritchett and Ms. Pinzon also discussed the transportation issues facing residents of Hillsborough. To address these transportation issues, Suncoast conditioned its CON application on the purchase and use of a mobile outreach van with bilingual staff to conduct outreach to the Hispanic and other diverse communities. Suncoast also conditioned its application on the provision of vouchers that may be used for buses or ride-sharing services. Ultimately, Suncoast obtained a letter of support from Ms. Pinzon, which was submitted with its CON application. Additionally, Suncoast conditioned its application on recruiting four community partnership specialists, who will conduct outreach to the African American community, the Hispanic community, the Veterans community, and the Jewish community, and six professional liaisons who will conduct outreach to clinical partners in Hillsborough. All of these positions will be dedicated to Hillsborough and be filled by individuals who are connected to these communities, and understand the importance of access to hospice care. Suncoast’s proposal includes a bilingual medical director, Dr. Jerez- Marte, for its Hillsborough program. Dr. Jerez-Marte regularly speaks Spanish with patients and staff, which would be a benefit to Hispanic patients in Hillsborough. Mr. Sciullo credibly testified that Suncoast will offer high quality hospice services in SA 6A, and will fulfill the 19 conditions proposed in its application. Cornerstone Based on its review of data and analytics that Cornerstone relies upon and conducts as part of its ongoing operations in Florida, Cornerstone recognized in the second quarter of 2019, long before AHCA published its need projections, that there was need for an additional hospice program to enhance access to hospice services in Hillsborough. Regardless of the service area, Cornerstone offers quality hospice care through consistent policies, protocols, and programs to ensure that patients are getting the highest quality care possible. Cornerstone will bring all aspects of its existing hospice programs and services to Hillsborough, including all of the programs and services described throughout its application. However, Cornerstone recognizes each service area is different in terms of the needs and access issues patients face, whether based on demographics, geography, infrastructure, a lack of information about hospice, or other factors. When looking to enter a market, Cornerstone conducts a detailed community-oriented needs assessment to determine the specific needs of the community with regard to hospice to best understand how to enhance access to quality hospice services. Cornerstone explores each potential new area to identify the cultural, ethnic, and religious makeup of the community, the current providers of end- of-life care in the community, and the unmet needs and gaps in care, which is critical to understanding where issues may lie. This allows Cornerstone to build and develop an appropriate operational plan to meet the needs identified in a particular market. Cornerstone conducted this type of analysis for its recent successful expansion in Marietta, Georgia, and has had success expanding access to hospice in its existing markets through ongoing similar analyses. Cornerstone conducted an analysis of Hillsborough similar to those it conducts in its existing markets and in expansion efforts outside its existing markets. In its assessment of Hillsborough, Cornerstone relied, in part, on the extensive knowledge of its senior leaders and outreach personnel, many of whom live and previously worked in Hillsborough, with regard to the population characteristics and needs of the Hillsborough area. This experience in the target service area affords Cornerstone’s team a detailed knowledge of the hospice-related needs of the county. Mr. D’Auria, who conducted much of the analytics internally for Cornerstone, also oversaw a team of Cornerstone staff who spent several weeks canvassing Hillsborough at a grassroots level. The Cornerstone team spoke to residents, medical professionals, community leaders, SNFs, ALFs, and hospitals, among others, on the local experience of hospice care, to identify any areas of concern regarding unmet needs or perceived improvements necessary relative to the provision of hospice care by the current providers. Cornerstone’s retained health planning experts, Mr. Roy Brady and Mr. Gene Nelson, further undertook an extensive data-driven analysis of Hillsborough’s health-related needs to explore the access issues and service gaps identified in Cornerstone’s analytics, knowledge of and discussions in the local community, as well as the issues raised in community health needs assessments,9 letters of support, and other resources. Together, the team concluded that quality hospice services are available in Hillsborough County through existing providers LifePath and Seasons Hospice. That care is available to patients of all ages and demographic groups with virtually any end-stage disease process. Yet some patients simply are not accessing hospice services at the expected rate in Hillsborough. For example, Cornerstone’s analyses identified specific unmet community need among particular geographic areas, as well as among persons with a diagnosis other than cancer, particularly those under age 65, persons with end-stage respiratory disease, the Hispanic and African American communities, migrant communities, residents of smaller ALFs, and veterans. Based upon its analysis of the healthcare needs of Hillsborough, Cornerstone included multiple conditions intended to address those needs. In 9 Cornerstone considered the health needs assessments released by Tampa General Hospital and the Moffitt Cancer Center, both published in 2019. Cornerstone also considered the health needs assessment prepared by HCDOH issued on April 1, 2016, as updated, including the March 2019 update. all, Cornerstone proposed 10 conditions in its CON application targeted to meet the hospice needs of Hillsborough: Licensure of the Hospice Program: Cornerstone commits to apply for licensure within 5 days of receipt of the CON to ensure that its service delivery begins as soon as practicable to enhance and expand hospice and community education and bereavement services in SA 6A; Hispanic Outreach: Cornerstone commits to provide two full-time salaried positions for bilingual staff as part of its Community Education Team. These Community Education Team members will be responsible for the development, implementation, coordination and evaluation of programs to increase community knowledge and access to hospice services, particularly designed to reach the Hispanic community in Spanish. Bilingual Volunteers: Cornerstone commits to recruit bilingual volunteers. Patients’ demographic information, including other languages spoken, is already routinely collected so that the most compatible volunteer can be assigned to fill each patient’s visiting request. Offices: Cornerstone commits to establish its first program office in the Brandon area (zip code 33511 or 33584) during the first year of operation. Cornerstone commits to establish a satellite office in the Town & Country area (zip code 33615 or 33634) during the second year of operations. Complimentary Therapies: Cornerstone conditions its application on offering alternative therapies to patients that may include massage therapy, music therapy, play therapy, and holistic (non-drug) pain therapy. These complimentary therapies are not generally considered to be part of the hospice's core services, but are enhancements to the patient’s care which often have a marked impact on the quality of life during their last days. Veterans: Cornerstone commits to providing services tailored to the military veterans in the community. Cornerstone will immediately upon licensure expand its existing We Honor Veterans Level 4 program to serve Hillsborough and will provide the same broad range of programs and services to veterans in Hillsborough as it currently provides in its existing service areas. Bereavement Counseling for Parents: Cornerstone will implement a program in its second year of operation which will provide outreach for bereavement and anticipatory grief counseling for parents of infants who have died. The Tampa area has several hospitals which provide high-level newborn and infant services such as Level III NICU and other programs, consequently there is a higher than average infant mortality rate due to this concentration of high-level services. Cornerstone will work with the local hospitals which provide high-level neonatal intensive care to develop and carry out this program. Cooperation with Local Community Organizations: Cornerstone commits to donate at least $25,000.00 for four years to non-profit community organizations focused upon providing greater healthcare access, disease advocacy groups and professional associations located in SA 6A. These donations will be to assist with their core missions, which foster access to care, and in collaboration with Cornerstone to provide educational content on end-of-life care. Separate Foundation Account: Cornerstone will donate $25,000.00 to a segregated account for SA 6A maintained and controlled by the Cornerstone Hospice Foundation. Additionally, all donations made to Cornerstone or the Foundation from SA 6A, or identified as a gift in honor of a patient served in the 6A program, shall be maintained in this segregated account and only used for the benefit of patients and services in Hillsborough. This account will be used to meet the special needs of patients in Hillsborough which are not covered under the Medicare hospice benefit and cannot be met through insurance, private resources, or community organization services or programs. Continuing Education Programming (CEUs): Cornerstone will commit to extending free CEU in- services to the healthcare community in Hillsborough. Topics will cover a wide range of both required and pertinent subjects and will include information on appropriate conditions and diagnoses for hospice admission, particularly for non-cancer patients. A minimum of 10 in-services will be offered in a variety of healthcare settings during each of the first five years. Additional CEU will be provided on an ongoing basis. In addition to formulating CON conditions, Cornerstone used information gleaned from its community exploration to develop an operational plan detailing the number and type of staff to hire, which programs to offer, and how to tailor its outreach and education to best enhance access to hospice services in Hillsborough to meet the unmet need. Given Cornerstone’s existing outreach to area providers in Hillsborough, such as Moffitt, Tampa General Hospital, and the VA, which already discharge patients to Cornerstone in neighboring service areas, Cornerstone fully expects that it will receive referrals to its hospice from providers throughout Hillsborough upon the initiation of operations in the county. Cornerstone will provide hospice services to those and any other patients throughout Hillsborough from day one. However, when seeking to expand access in new or existing markets, Cornerstone focuses not on taking patients from existing providers but on enhancing access to groups and populations that have been overlooked, or whose needs are not otherwise being met by existing hospices. Cornerstone therefore developed a phased operational plan to focus its outreach and education efforts on areas where there are barriers to access, rather than simply scattering their efforts haphazardly or concentrating on areas that already have a heavy hospice presence. Phase One of Cornerstone’s operational plan will begin immediately upon licensure and continue through the first six months of operation. During this time, Cornerstone will focus outreach and education efforts heavily on the underserved southeast portion of Hillsborough, including Plant City, Valrico, Brandon, Riverview, Mango, and Sun City Center. Phase One includes 68 ALFs, six SNFs, and four hospitals. Almost one-third of the population of Hillsborough resides in this area, and an estimated 28 percent of the residents are Hispanic, and 14 percent are African American. There is also a large, underserved migrant population in this area. Cornerstone conditioned its application on opening an office in Brandon during this initial phase in the first year of operation. Phase Two will expand Cornerstone’s targeted outreach efforts into the southwest quadrant of Hillsborough, including the Apollo Beach, Ruskin, Gibsonton, Progress Village, and Palm River areas. While the population of this phase is smaller than Phase One, the two areas combined make up almost a third of the county’s Hispanic population, and a fourth of the county’s African American population. Phase Three will reach into the broader Tampa area, including towns such as Temple Terrace, Pebble Creek, University, Ybor City, and Carrollwood. This is the largest and most populated of the four phases; however, it is also currently the most hospice-penetrated area of the county as the two existing providers, LifePath and Seasons, each have offices in Phase Three. There is also a hospice house and two hospice inpatient units in the area as well. Because this area already has better hospice visibility and access, and to avoid siphoning patients from existing providers, Cornerstone will focus on this area after Phases One and Two. Cornerstone will ramp up its outreach staffing consistent with the increased area, facilities, and population added during Phase Three. Combined, the first three phases of the operational plan will offer enhanced outreach and education to 90% of the Hillsborough population starting at the beginning of year two operations. Phase Four will encompass the remainder of the county to the west of Tampa in the Town ‘n’ Country area. While this area represents only about 10% of the county’s population, Phase Four has no hospice visibility currently in the form of hospice offices, hospice houses, or hospice inpatient units. Cornerstone has conditioned its application on establishing an office in the Town ‘n’ Country area within project year two to enhance hospice visibility and access in this area of the county. Upon implementation of Phase Four, Cornerstone’s targeted outreach and education will be fully integrated throughout the county. Cornerstone’s application included more than 174 letters of support for its proposal. The letters of support are from a broad range of individuals and facilities located within and outside Hillsborough, including families, SNFs, ALFs, hospitals, vendors, and local charitable organizations, among others. Cornerstone presented testimony from three authors of letters of support, Andrea Kowalski, Eric Luetkemeyer, and Colonel (Ret.) Gary Clark. Ms. Kowalski is an employee benefits coordinator for USI Insurance Representatives in Tampa who works with Cornerstone to build benefits programs for its employees. In addition to authoring her own letter of support, Ms. Kowalski also assisted in gathering approximately 40 additional letters of support for Cornerstone from her colleagues in Hillsborough. Ms. Kowalski strongly supports Cornerstone’s approval and indicated the community would benefit not only from enhanced access to Cornerstone’s excellence and expertise in caring for those with advanced illness, but also from the addition of a highly-regarded employer, which will provide additional options for healthcare workers and financial benefits as Cornerstone reinvests in the community. Mr. Leutkemeyer is the COO for Spectrum Medical Partners (“Spectrum”), the largest privately-held hospitalist group in Florida. Spectrum manages roughly 400 providers across the state, the majority of which (85%) are medical doctors or doctors of osteopathic medicine, either in hospital or post-acute settings, and sees roughly 2,000 patients per day. Spectrum’s footprint includes coverage in Hillsborough for entities such as Simply or Humana with which Spectrum contracts statewide. Spectrum is looking to expand its footprint and services in Hillsborough in the near future. As detailed in his letter, Mr. Luetkemeyer supports Cornerstone’s efforts to establish a hospice program in Hillsborough, indicated a desire to work with Cornerstone in the county if awarded, and believes the community would benefit from the additional resources and quality care that Cornerstone would provide. Colonel Clark, who retired from the United States Air Force in 1993, is co-founder and current Chairman of the Polk County Veterans Council, a volunteer organization of individuals interested in assisting veterans. Colonel Clark is also affiliated with, and participates in, a number of veterans organizations in Hillsborough, including as an adviser to the Mission United Suncoast Chapter in Hillsborough, which primarily assists veterans in transitioning from service to the civilian world. He also serves on the management advisory committee of James A. Haley Veterans’ Hospital in Tampa, which provides a broad spectrum of hospital-based care to area veterans. Colonel Clark has significant experience with Cornerstone through its participation in the Polk County Veterans Council, including on the Council’s committee for the Flight to Honor program, which provides veterans a flight to Washington D.C. to visit war memorials. If a veteran is unable to make the flight, a virtual flight and tour, as well as ceremonies or presentations, are provided by Cornerstone to veterans enrolled in hospice. Cornerstone is heavily involved in the Council’s Flight to Honor program— participating on the committee, recruiting volunteers, working with local schools to gather letters for the veterans on the flights, arranging for orientation prior to the flights, and putting on the virtual flights for those Veterans unable to make the flight due to various disabilities. Colonel Clark is also familiar with Cornerstone’s efforts to support veterans at James A. Haley Veterans’ Hospital in Tampa. Colonel Clark described Cornerstone’s support not only for veterans but for the community overall as “magnificent,” and detailed his support for Cornerstone’s application in a letter of support that is included in Cornerstone’s application. Cornerstone is well-positioned to quickly establish a successful hospice program to enhance access in Hillsborough, and its proposal is a carefully considered, long range plan that would bring its established and proven processes, procedures, and programs to the residents of the county. Cornerstone also posits that its existing presence nearby in Lakeland will enhance its ability to topple barriers to care and serve patients in adjacent SA 6A immediately. For example, Cornerstone has existing relationships with veterans groups that serve both Polk and Hillsborough, and will utilize those relationships to enhance access to the large veteran population in Hillsborough, as highlighted through Cornerstone’s condition to provide services tailored to the veteran community. VITAS VITAS, which operates a hospice program in adjacent SA 6B, proposes to expand into SA 6A under its existing license. This will allow VITAS to begin serving patients quickly without creating an entirely new administrative infrastructure for the opening. Although VITAS provides many of the same core programs in each of its service areas, it also recognizes that each community is different. VITAS performed a qualitative and quantitative assessment that examined the specific needs of Hillsborough regarding hospice care and services. Through its consultants and internal team, VITAS identified several communities, patient types, and clinical settings that are underserved in SA 6A. These include: the African American, Hispanic, and migrant communities, particularly those age 65 and older; impoverished, food insecure and homeless communities; patients with non-cancer diagnoses such as pulmonary disease, cardiac disease, Alzheimer’s Disease, and patients with sepsis; cancer patients in need of palliative care; high acuity patients in need of complex services and those needing admissions during evenings and weekends; patients requiring admission after hours and on weekends; and patients who reside in nursing homes and small ALFs. To understand the hospice needs within Hillsborough, VITAS conducted a two-step review—(1) analyzing data from a wide variety of sources including Medicare, AHCA, Florida Department of Elder Affairs, Florida CHARTS, and demographic and socioeconomic data; and (2) meeting with some healthcare and social service providers in Hillsborough. Key members of VITAS’s leadership team, including Patty Husted, Mark Hayes, and Dr. Shega, conducted an assessment in Hillsborough to identify the unmet need within the community and underserved populations. VITAS’s needs assessment team physically went into Hillsborough to visit nursing homes, ALFs, hospitals, and physicians to determine the unmet need and how to achieve greater access to hospice services for the residents of Hillsborough. VITAS’s team spent a significant amount of time conducting hospice outreach and education in Hillsborough in furtherance of the needs assessment. Specifically, VITAS’s team met with hospitals including H. Lee Moffitt Cancer Center, Baptist Health, BayCare, St. Joseph’s, and Brandon Regional; nursing homes, such as Hudson Manor, Ybor Health and Rehabilitation Center; and physician and nurse practitioner groups. VITAS’s needs assessment team also participated in physician advisory council meetings as part of its needs assessment for Hillsborough. During these meetings, VITAS gained perspective from these local physicians regarding the challenges faced by patients in need of hospice services in SA 6A, as well as insight as to what VITAS could bring from its existing programs to fill the unmet needs. VITAS also drew on the knowledge of the 18 VITAS employees currently living in Hillsborough. To address the needs it identified in SA 6A, VITAS proposes a broad array of programs and services to be offered in Hillsborough which are specifically targeted to increase the availability and accessibility of hospice services for underserved groups and Hillsborough residents more broadly. To demonstrate its commitment, VITAS conditioned its CON application on providing the following 20 programs and services in SA 6A: VITAS Pulmonary Care Program. VITAS Cardiac Care Program. Clinical research and support for caregivers of patients with Alzheimer’s and dementia. VITAS Sepsis Care Program. Veterans programs, including achieving Level 4 commitment to the We Honor Veterans program within the first two years of operation in SA 6A. Bridging-the-Gap Program and Medical/Spiritual Toolkit, which is an outreach and end-of-life education tool for African American and other minority communities. ALF Outreach and CORE Training Program. Palliative care resources and access to complex and high acuity services, including engaging area residents with serious illness in advance care planning and goals of care conversations, as well as offering palliative chemotherapy, inotrope drips and radiation to optimize pain and symptom management as appropriate. Provider clinical education programs for physicians, nurses, chaplains, HHA’s and social workers. Quality and Patient Satisfaction Program, including hiring a full-time Performance Improvement Specialist within the first six months of operation dedicated to supporting quality and performance improvement programs for the 6A hospice program. VITAS staff training and qualification, ensuring the medical director covering SA 6A will be board-certified in hospice and palliative care medicine. Hospice office locations. Deployment of a mobile van to increase access and outreach to rural counties. VITAS will not solicit donations. Outreach and end-of-life education for 6A residents experiencing homelessness, food insecurity, and limited access to healthcare, including advanced care planning for area homeless shelter residents and a partnership to provide a grant for housing and food assistance with a community organization. $5,000 will be distributed during the first two years to the Hispanic Services Coalition or similar qualified organization for promoting academics, healthy communities and engagement of Latinos. Outreach program for underserved residents of SA 6A. Educational grant, to the University of South Florida Foundation including $250,000 for fellowships, scholarships, education and workforce development as well as $20,000 for diversity initiatives. Inpatient hospice house and shelter for natural disasters and hurricanes. Medicaid Managed Care education Services beyond the hospice benefit, including, among others: 24/7 Telecare Program and access to admission on evenings and weekends, including outreach and end-of-life education for residents experiencing poverty, food insecurity, homelessness and/or food insecurity, including nutrition services, advanced care planning for shelter residents, and housing assistance. Hospice Education and Low Literacy (HELLO) Program. Multilingual education materials in several languages including Spanish, Chinese, Korean, Portuguese, Russian, Vietnamese and Creole. CAHPS Ambassador Program to generate interest, awareness and encourage ownership by team members of their team’s performance on CAHPS survey results. Community outreach and education programs. Partnership with a local college for fellowships, scholarships, education and workforce development and diversity initiatives. VITAS’s application contains approximately 50 letters supporting its proposed program, the vast majority of which are from hospitals, nursing homes, ALFs, physicians, and community organizations in Hillsborough County with direct hospice experience. VITAS obtained these letters of support as part of its community-oriented needs assessment, and they attest to the community’s confidence in VITAS’s ability to meet hospice care needs in Hillsborough. Included are letters of support from Cynthia Chavez, Executive Director at Hudson Manor Assisted Living; Brian Pollett, Administrator at Ybor Health and Rehabilitation Center; and Dr. Jorge Alfonso, Regional Chief Medical Officer at Dedicated Senior Medical Center. All three providers expressed a local need to address high acuity patients, including greater access to continuous home care. Statutory and Rule Review Criteria The review criteria are found in sections 408.035, 408.037, and 408.039, and rules 59C-1.008 and 59C-1.0355. (Prehearing Stipulation). Section 408.035(1) - Need for the health care facilities being proposed There are currently two licensed hospice programs in hospice SA 6A, and a need for one additional hospice program, as calculated using the need methodology found in rule 59C-1.0355(4), and published by AHCA, without challenge. AHCA’s need calculation compares reported hospice admissions during the base year with projected admissions in the horizon year and finds need if the difference between base and horizon year admissions exceeds 350, assuming there are no recently-licensed or CON-approved hospice programs in the service area. In this case, AHCA’s calculation revealed a net need of 863 hospice admissions for the January 2021 planning horizon. Each Applicant has put forth a proposal to meet the calculated need for one additional hospice program in Hillsborough. None of the applicants are advocating the approval of more than one new program. Section 408.035(2) – Availability, quality of care, accessibility, and extent of utilization of existing health care facilities and health services in the service district. It is undisputed that quality hospice services are available in Hillsborough today through existing providers LifePath and Seasons, including for patients of all ages and with essentially all end-stage disease processes, as well as for patients of all demographic groups. Relevant data demonstrates discharges to hospice in Hillsborough for a wide range of diagnoses and demographic groups, including African American and Hispanic patients, non-cancer and cancer patients, both over and under age 65; patients with end-stage cardiac disease; end-stage pulmonary disease and dementia, including Alzheimer’s disease, among others. However, despite the availability of quality hospice services, some patients simply are not accessing hospice services at the rate expected in SA 6A, as reflected by low penetration rates and low discharge-to-hospice rates, particularly within certain major disease categories and demographic groups, including Hispanic and African American residents. All three applicants agreed that the underutilization is concentrated among certain patient populations, including demographic groups and disease groups. Generally, all three applicants agreed that the Hispanic, African- American, veteran, and homeless populations are currently underserved in Hillsborough. In addition, Suncoast points to the need for a specialized pediatric hospice program in SA 6A; Cornerstone argues that non-cancer patients younger than age 65 are in need of enhanced access, as are residents of smaller ALF’s; and VITAS asserts that patients with respiratory, sepsis, cardiac, and Alzheimer’s diseases are underserved, as are patients requiring continuous care and high acuity services, such as high-flow oxygen. VITAS’s argument is based largely on a claim that the existing providers are not providing “any measurable continuous care,” as well as hearsay reports from area hospitals indicating a lack of high-acuity services available through existing hospice providers. However, VITAS’s health planning expert conceded that, in fact, existing providers are offering continuous care, and she was unable to quantify any purported dearth of continuous care in Hillsborough as compared to other providers or the statewide average. The record establishes that continuous care is part-and- parcel of the hospice benefit, and there was no evidence presented at final hearing to support the claimed lack of availability of that service from existing providers. Based on the foregoing, the evidence tended to show quality hospice care is available in SA 6A, that it is underutilized, and that the underutilization is driven by accessibility challenges among particular patient groups, and supports AHCA’s determination that another hospice program is needed in Hillsborough. Section 408.035(3) - Ability of the applicant to provide quality ofcare and the applicant’s record of providing quality of care Cornerstone is the only applicant accredited by the Joint Commission, which is a national symbol of quality that reflects its commitment to meeting high quality performance standards. Cornerstone’s Joint Commission accreditation, which was just recertified in 2020, and the accompanying high standards of quality care, will carry over to its new SA 6A program. As a new entity, Suncoast is not Joint Commission accredited, but conditions its application on achieving such accreditation by the end of year two. Suncoast Pinellas is Joint Commission accredited, and indeed, is one of only a handful of hospices nationwide, along with Cornerstone, to hold Joint Commission accreditation and/or certification. While VITAS represents that some affiliated VITAS hospice programs are Joint Commission accredited, VITAS, the applicant here, is not accredited by the Joint Commission, and makes no representation that it will seek or attain such accreditation for its new hospice program in SA 6A. There are two universal metrics codified in federal law that are used as a proxy for assessing the quality of care offered by hospice programs— Hospice Item Set (“HIS”) scores and Consumer Assessment of Healthcare Providers and Systems (“CAHPS”) survey scores. See 42 C.F.R. § 418.312; see also § 400.60501, Fla. Stat. (2020). CAHPS surveys are a subjective metric sent to family members and other caregivers months after a patient's death. The survey asks respondents to provide ratings like: “would definitely recommend,” “would probably recommend,” “would probably not recommend,” and “would definitely not recommend.” It also seeks yes or no responses to statements like: the hospice team “always communicated well,” “always provided timely help,” “always treated the patient with respect,” and “provided the right amount of emotional and spiritual support.” It also asks if the patient always got the help they needed for pain and symptoms, and if “they” received the training they needed. The CAHPS survey was created by CMS in conjunction with the Agency for Healthcare Research and Quality to measure and assess the care experience provided by a hospice. The purpose of the Hospice Compare Website is to allow the public to compare quality scores for CAHPS among different hospice providers. CAHPS scores are one measure of quality that is intended to allow for comparison across hospice programs. Significant time at final hearing was dedicated, through multiple witnesses, to discussing the strengths and weaknesses of CAHPS scores as a measure of quality. Ultimately, the greater weight of the evidence supports that CAHPS scores are an indicator of quality, but are not the only consideration, and suffer from limitations that prohibit drawing distinctions from minor differences in scores. The three applicants’ CAHPS scores are summarized in this chart: (Suncoast Ex. 42, BS p. 12203) While it is true that Suncoast Pinellas’s scores on all CAHPS measures are higher than those of Cornerstone, the slight difference between Suncoast Pinellas and Cornerstone is not significant given the subjective nature of the survey instrument. However, both Suncoast Pinellas and Cornerstone do score significantly higher than VITAS on most measures. Cornerstone’s CAHPS scores meet or exceed state averages on six of the eight measures, are within one to three points of the state average on the remaining two measures, and its average CAHPS score exceeds the state average. As a new entity, Suncoast does not have CAHPS scores. Suncoast Pinellas’s CAHPS scores meet or exceed state averages on six of the eight measures, are within one to two points of the state average on the remaining two measures, and its average CAHPS score exceeds the state average. In contrast, VITAS’s CAHPS scores fall below the state average on all eight metrics, fall five to seven points below the state average on seven of the eight metrics, and its average CAHPS score for all measures combined falls five points below the state average. Cornerstone and Suncoast Pinellas are within one to three points of each other on every CAHPS metric. The difference in scores between Cornerstone and Suncoast Pinellas is not statistically significant or meaningful, particularly given the shortcomings of CAHPS scoring. VITAS’s CAHPS scores are below both Cornerstone and Suncoast Pinellas, falling six and eight points below Cornerstone and Suncoast Pinellas, respectively, on the average of all CAHPS metrics. This difference is meaningful, particularly when viewed in the context of VITAS’s history of substantiated complaints discussed below. HIS scores, which assess documentation of various items, are more a process or compliance measure than a quality measure. Suncoast Pinellas’s HIS scores exceed the state and national average on all metrics, albeit most scores are within two points of the state average. Cornerstone’s HIS scores are on par with state averages on most metrics and meet or exceed the national average on every metric, except Pain Assessment. Cornerstone has worked to substantially improve its Pain Assessment score through better documentation protocols, raising its score from 52.1 to 89.1 in the last few years, and is implementing a new Electronic Records Management system to further improve its scores. VITAS’s HIS scores are on par with state averages on most metrics, and meet or exceed the national average on all metrics except Visits When Death Imminent. VITAS scores 68.4 on Visits When Death Imminent compared to the state and national averages of 83.2 and 82.4, respectively. As measured by the HIS scores, there was no credible, persuasive testimony establishing a meaningful difference among the three applicants. In contrast to CAHPS and HIS scores, the number and substance of complaints substantiated against each applicant by AHCA is a more direct indicator of quality of care. Suncoast has no prior hospice operations history, and therefore no prior substantiated complaints. Suncoast Pinellas has had only three substantiated complaints since 2008, and none since 2013. Cornerstone has only two substantiated complaints since 2008, and only one since Mr. Lee took over as CEO of Cornerstone in late 2012. VITAS has 73 substantiated complaints since 2008, including 10 substantiated complaints in the three years ending November 20, 2019, just prior to submission of the CON application at issue here. Between November 20, 2019, and June 17, 2020, VITAS had five additional substantiated complaints. VITAS’s health planning expert, Ms. Platt, also considered all AHCA survey deficiencies, whether based upon a complaint, life safety survey, or otherwise. Ms. Platt’s analysis demonstrates that VITAS had 80 such surveys with deficiencies since 2012, including 26 between January 2018 and June 2020. VITAS argues that its greater number of substantiated complaints are the consequence of higher patient volumes than Suncoast and Cornerstone. However, even taking into consideration the greater number of patient days provided by VITAS, VITAS had infinitely more surveys with deficiencies in 2019 than Cornerstone, which had zero. And VITAS had five times as many surveys with deficiencies for 2018 and 2019 as Cornerstone. A comparison of VITAS to Suncoast Pinellas yields similar results, with VITAS having significantly more surveys with deficiencies than Suncoast Pinellas, even when taking into consideration the greater number of patient days provided by VITAS. Complaints substantiated against VITAS demonstrate failures in many areas of patient care, including some of the specific aspects of hospice care at which VITAS claims to excel beyond other providers, such as after- hours care, the provision of continuous care, and care to patients wherever they live, including smaller ALFs. For example, a substantiated complaint against VITAS in November 2019 included a finding of “immediate jeopardy”—the most severe level of deficiency possible—for a patient who failed to receive proper care after-hours at end-of-life, resulting in a particularly painful death for the patient, and an excruciating experience for the patient’s daughter who witnessed her mother’s painful death, unaccompanied by hospice personnel. Two additional substantiated complaints from January and February 2020 found deficiencies in VITAS’s care to patients on continuous care, including one where the VITAS nurse had headphones in and was not paying attention when the patient fell. Indeed, VITAS’s own internal review of the substantiated complaint involving the patient who fell confirmed an upward trend in falls among VITAS patients. And, as recently as June 2020, a separate substantiated complaint found that VITAS abandoned a patient on continuous care, requiring the patient to be transferred to the hospital rather than continue to receive care in the “small ALF” where the patient resided. VITAS acknowledged the patients at issue in the substantiated complaints discussed at final hearing did not receive quality hospice care. Those five examples are only a sampling of the complaints substantiated against VITAS, and the others demonstrate similar quality deficiencies. The number of substantiated complaints weighs in favor of Cornerstone and Suncoast, and heavily against VITAS with regard to record of providing quality of care. There is no meaningful difference between Cornerstone and Suncoast in regard to substantiated complaints, and neither is entitled to preference in this regard. On balance, among the three applicants, the quality of care provided by Suncoast and Cornerstone is on equal footing, with both having a distinct advantage over VITAS. Section 408.035(4) - Availability of resources, including health personnel, management personnel, and funds for capital and operating expenditures, for project accomplishment and operation; and Section 408.035(6): The immediate and long-term financial feasibility of the project The parties stipulated that each of the applicants have available funds for capital and operating expenditures in the short term for purposes of project accomplishment and operation. Suncoast demonstrated that it has the resources to accomplish its proposed project. Suncoast provided detailed descriptions of the personnel that would be required to successfully implement its proposed program. Suncoast has reasonably projected the types of staff necessary to operate Suncoast in year 1 and 2 of operation. At hearing, Suncoast witnesses credibly described the roles of the staff contained in Suncoast’s Schedule 6, including the roles of administrator, care team manager, administrative assistant, regional hospice scheduler, business development liaisons, physicians, program director, nurses, hospice aides, respiratory therapists, staff for the mobile van in Condition 2 of its application, community partnership specialists, social workers, patient social team lead, chaplain, volunteer coordinator, and senior staff nurse. Suncoast’s financial expert, Armand Balsano, testified that part of his role in preparing Suncoast’s CON application was working with Suncoast Pinellas’s Chief Financial Officer, Mitch Morel, to develop Suncoast’s financial projections that were included on Schedules 1 through 8 of the application. Mr. Balsano, in collaboration with Mr. Morel, utilized Suncoast Pinellas’s internal financial modeling system to develop the financial schedules and financial narrative for the application. Mr. Balsano credibly testified that financial Schedules 1 through 8 are accurate and reasonable. Suncoast projects admissions of 460 patients for project year one and 701 patients for project year two. Suncoast’s health planner, David Levitt, developed Suncoast’s projected admissions based on experience of other providers entering a market with two existing providers. Suncoast’s projected number of admissions for years one and two are reasonable projections of admissions for a new hospice program in Hillsborough. Suncoast was criticized as having a lackluster record for admissions in its existing Pinellas hospice. While it is true that Suncoast Pinellas’s admissions declined slightly from 2013 to 2014, the overall trend has been one of increasing admissions. For example, based on Medicare claims data, from 2005 to 2019, Suncoast Pinellas’s admissions grew from 4,679 to 6,534.10 Financial feasibility may be proven by demonstrating the expected revenues and expenses upon service initiation, and determining whether a shortfall or excess revenue results. The projection of revenue is not complicated for hospice services. The vast majority of hospice care, more than 90%, is funded by the Medicare Program which pays uniform rates to all hospice providers. Mr. Balsano testified that Suncoast’s projected revenues in Schedule 7 are based on the revenues that are currently realized for the various payer categories, including Medicare, Medicaid, Commercial, and self-pay. Mr. Balsano credibly testified that the assumptions reflected on Schedule 7 of Suncoast’s CON application are reasonable and appropriate. 10 Suggestions by VITAS and Cornerstone that Suncoast’s internal data indicate a history of low utilization or inaccurate reports to AHCA are without merit. Mr. Sciullo credibly testified that the data reported to AHCA is the most accurate admissions data. Mr. Sciullo further credibly testified that the Utilization Trend Reports contained in Cornerstone’s exhibits 82 through 88, relied on by VITAS and Cornerstone, contain duplicate hospice admissions and admissions from non-hospice programs such as Suncoast’s home health program. Mr. Sciullo also credibly testified that the most accurate admissions numbers reported to AHCA are not generated from the Utilization Trend Reports. Rather, the admissions numbers reported to AHCA are produced by Suncoast’s reimbursement department. Mr. Sciullo’s testimony under cross examination demonstrated a confident and credible understanding of the nuances of the Utilization Trend Reports. Additionally, the suggestion that Suncoast would intentionally under-report admissions to AHCA lacks credibility because hospice providers in Florida are incentivized to report higher numbers of admissions. In Year 2, Suncoast projects net operating revenue of $7,138,000, which breaks down to approximately $172 per day of overall net revenue per patient day. Mr. Balsano’s credibly testified that this is a reasonable forecast of net operating revenue. Projected expenses were also reasonably projected by Suncoast. Mr. Balsano testified that Suncoast’s projected income and expenses in Schedule 8A includes salaries and wages, fringe benefits, medical supplies and ancillary services, and approximately 1.5% of inpatient days. Suncoast also included a separate allowance for administrative and overhead cost. Suncoast also allocated $752,000 in management fees to account for “back office services” and other support services that would be provided to the Hillsborough program through the Empath home office. Mr. Balsano arrived at this number by determining that a reasonable assessment would be the cost per patient day of $18, as reflected on Schedule 8 for year two. Mr. Balsano credibly testified that, for a startup program, it is appropriate to include the costs associated with services provided by the corporate office because one must be cognizant of what services are provided locally, and what services will be provided through the corporate office. Mr. Balsano further testified that it would not be reasonable to assume that 100% of the costs associated with corporate services to a new hospice program would be fixed. As Mr. Balsano explained, the variable costs must be accounted for as well. Mr. Balsano credibly testified that Suncoast’s net profit in year two as reflected in Schedule 8A is $615,416. It is found that Suncoast has reasonably projected the revenues and expenses associated with its proposed hospice, and that Suncoast’s proposal is financially feasible in the long term. Cornerstone projected admissions of 448 patients in year one, and 819 patients in year two, for the highest year two admissions of the three applicants. In comparison, Suncoast projected admissions of 460 patients in year one and 701 in year two, while VITAS projected 491 patients in year one and just 593 in year two. Cornerstone’s projected admissions were developed by health planning experts Roy Brady and Gene Nelson based on the experience of recent new hospice programs in the state of Florida, were discussed and confirmed by Cornerstone personnel prior to being finalized, and are a reasonable projection of admissions for years one and two of operations in Hillsborough. Despite the highest anticipated year two admissions, Cornerstone’s projection still fell below the SA 6A service gap of 863 patients and therefore did not, standing alone, establish any greater adverse impact on area providers than Suncoast or VITAS. Cornerstone emphasized its mission as an organization, and intent for this proposal, to expand penetration by resolving unmet need as opposed to capturing patients already served by existing providers. The adverse impact analysis in Cornerstone’s application therefore represents a worst-case scenario by assuming all of its patients otherwise would be served by existing providers, a premise undercut by the substantial published need. Using this approach, Cornerstone anticipated that LifePath would bear the overwhelming burden of its entry into Hillsborough, with a projected adverse impact on LifePath of 408 patients in year one, and 747 in year two. Cornerstone anticipated adverse impact to Seasons of 39 patients for year one, and 72 patients for year two. Even in this worst-case scenario, existing [Remainder of page intentionally blank] providers’ volumes in Cornerstone project years one and two exceed their historical volumes.11 Cornerstone has available health personnel and management personnel for project accomplishment and operation. Cornerstone’s existing staff, as well as its projected incremental staff for the new program, is reflected in schedule 6A of its application. The projected incremental staff shown in schedule 6A is based on established ratios and methodologies Cornerstone uses in its existing hospice programs. The projected incremental staff is all the incremental staff Cornerstone will need to establish the new program in Hillsborough, and combined with its existing personnel, are sufficient to achieve program implementation as proposed in the application. Both Suncoast and VITAS criticized Cornerstone’s financial projections as flawed because they did not present the fully allocated costs of the project. According to Mr. Balsano, Cornerstone’s projected profit margin is unreasonable and, in fact, is “an extreme outlier.” As he explained, Cornerstone’s financial schedules make no allocation of shared service costs for critical services to be provided by the home office. According to Suncoast and VITAS, this omission is unreasonable when viewed in context with Cornerstone’s Schedule 6, which does not allocate any FTEs to back office support services. Not shown are the expenses Cornerstone will incur for finance, billing, revenue cycle, accounts receivable, payroll, human resources, 11 Relative adverse impact on existing hospice programs of competing applicants has been used as a dispositive factor for favoring one applicant over another. See, Hospice of Naples, Inc. v. Ag. for Health Care Admin., DOAH Case No. 07-1264, ¶ 274 (Fla. DOAH Mar. 3, 2008; Fla. AHCA Jan. 22, 2009) (“One factor outweighs all others, however, in favor of VITAS. VITAS's application will have much less impact on HON and its fundraising efforts and in turn on the high-quality services that HON presently provides in Service Area 8B.”). However, as noted here, neither of the existing providers presented evidence as to the relative impact that any of the applicants would potentially have on its existing operations, or whether such impacts would be material. Accordingly, there is no evidentiary basis for providing an advantage to one or another of the applicants based upon consideration of adverse impact. and contract negotiations, among others. Notably, hospice providers include home office costs as part of their Medicare cost reports filed with CMS.12 Because Cornerstone did not allocate home office costs in its application, its profit margins are substantially higher than all other applicants for the October 2019 Batching Cycle. While most applicants fall within the $100,000 – $500,000 range, Cornerstone projected a staggering $4.9 million profit margin. There is nothing in the CON application form or instructions that require that financial projections be presented on a “fully allocated” basis. Notably, in its review of the financial projections, AHCA determined that each applicant’s proposed program appeared to be financially feasible in the long-term. Cornerstone’s financial feasibility analysis included consideration of payer mix, level of service mix, admissions, average lengths of stay, patient days and incremental staffing needs, among others, and focused on the resulting incremental revenues and expenses generated by addition of the new program in Hillsborough. Cornerstone’s projected admissions are reasonable and appropriate for the proposed new program in Hillsborough. Cornerstone’s proposed incremental staff, combined with its existing staff, is sufficient for project accomplishment and operation. Cornerstone’s projected payer mix is based upon consideration of Cornerstone’s own historic experience, the demographics and recent hospice payer characteristics of Hillsborough, and consideration of Cornerstone’s goal to serve the non-cancer under-65 population, which may reduce Medicare 12 In terms of its budgeting process, Cornerstone has one “bucket” for its administrative overhead/home office expenses and then separate buckets for each of its hospice programs. Home office expenses include human resources, IT, compliance, and facility maintenance. Cornerstone does not allocate its home office expenses to each of its hospice programs within its internal books. However, when an audit is performed, the performances of each hospice program and the home office expenses are all included, and the home office expenses are allocated to each of its hospice programs. levels slightly from what they otherwise may be, and is reasonable and appropriate for its proposed hospice program in Hillsborough. Cornerstone’s projected level of service mix and average length of stay are based upon Cornerstone’s historical experience, and are reasonable and appropriate for the proposed hospice program in Hillsborough. Likewise, Cornerstone’s projected revenues as set forth in schedule 7A are based upon the projected volumes, service level mix, payer mix projections, and Medicare service level specific rates, and are a reasonable projection of revenues for the proposed project in Hillsborough. Cornerstone has established the long-term financial feasibility of its proposed SA 6A program. VITAS’s financial projections were prepared through the work of an internal team led by Lou Tamburro, Vice President of Development for VITAS. VITAS reasonably based these projections on the successful opening and ramp up of new hospice programs in Service Areas 1, 3E, 4A, 6B, 7A, 8B, and 9B, and other Florida communities. VITAS has a clear understanding of what startup costs will be, and it was appropriate for VITAS to rely on its past history of success in developing these projections. VITAS projects admissions of 492 patients for project year one and 593 patients for project year two. Mr. Tamburro developed the projected admissions using an internal model based upon VITAS’s prior experience. While Mr. Tamburro is an expert in health finance, not health planning, Ms. Platt reviewed VITAS’s projections and credibly concluded they are reasonable. VITAS proposes to dedicate more resources to SA 6A than the other two applicants in the second year of operations; 74% of that expense is focused on direct patient care, with only 23% associated with administrative and overhead, and 2% property costs. In contrast, Suncoast and Cornerstone only dedicate 54% and 56%, respectively, of their expenses on direct patient care and 41% and 42%, respectively, on administrative and overhead. However, VITAS’s higher direct patient care costs are at least partially explained by the larger number of clinical and ancillary FTE’s associated with the higher levels of continuous care projected by VITAS than either Suncoast or Cornerstone. As would be expected, VITAS also projects to admit a larger number of high acuity patients than Suncoast or Cornerstone. Given VITAS’s vast experience in the start-up and operation of hospice programs, including 16 within Florida, there is no reason to doubt that the VITAS Hillsborough program would be financially feasible in the long term. The following table summarizes the three applications’ financial metrics: Cornerstone Suncoast Vitas Total Project Costs $286,080 $703,005 $1,134,149 Operating Costs Yr.2 $6 million $5.7 million $8.6 million Net Profit Yr.2 $4,972,346[13] $615,416 $154,913 Proj. Admits Yr. 2 819 701 593 Routine Home Care 95.4% 97.5% 94% General Inpatient 3.5% 1.5% 2.5% Continuous Care 0.3% 0.5% 3.5% Respite 0.8% 0.5% 0% Section 408.035(5) The extent to which the proposed services will enhance access to health care for residents of the service district; and Section 408.035(7) The extent to which the proposal will foster competition that promotes quality and cost-effectiveness. Rule 59C-1.0355 and the criteria for determination of need for a new hospice program found within that rule, is predicated upon the notion that, 13 As noted, Cornerstone’s relatively large profit margin is a function of its incremental cost, versus fully allocated cost, financial projections. when need exists, approval of an additional program will foster competition beneficial to potential and prospective hospice patients in the service area. As between the three applicants, Suncoast did the most thorough and extensive analysis of the current needs of the Hillsborough population. This effort was driven by the fact that Suncoast had recently applied for a new hospice program in neighboring Pasco County, and was denied in favor of a competing applicant. In that case, Administrative Law Judge Newton specifically faulted Suncoast for failing to carefully evaluate the hospice needs of Pasco County residents: Suncoast, in effect, proposes a branch operation for Pasco County. Suncoast did not conduct the focused, individualized inquiry into the needs of Pasco County that Seasons did. Nor did it begin developing targeted ways to serve the needs or begin establishing relationships to further that service. The Hospice of the Fla. Suncoast v. Ag. For Health Care Admin., Case No. 18- 4986, ¶ 126 (Fla. DOAH Sept. 5, 2019; Fla. AHCA Oct. 16, 2019). As explained by Mr. Sciullo at hearing, Suncoast took the above criticism to heart, and determined to conduct an exhaustive evaluation of the hospice needs in SA 6A, and to formulate a strategy for addressing those needs. Specifically, Suncoast’s intent was to identify issues and gaps in services facing residents of Hillsborough, and to enable a dialogue with existing community partners and providers in order to create shared solutions. As part of this comprehensive effort, Suncoast met with more than 50 key individuals and organizations, representing a broad range of general and special populations within the county. This effort resulted in the development of collaborative strategies and action plans to fill the gaps and meet the unmet need for additional hospice services in Hillsborough, as reflected in the Suncoast application conditions. In contrast to Suncoast, Cornerstone did not conduct its own needs assessment, but rather relied on the community needs assessments prepared by the HCDOH and two area hospitals. Moreover, rather than reaching out to the Department of Health and to the area hospitals that prepared those assessments to conduct further research or seek their support of its CON application, Cornerstone simply “verified that their documentation was thorough enough.” Cornerstone’s limited outreach effort in Hillsborough is further demonstrated by the letters of support submitted with its CON application. While Suncoast obtained letters of support from the HCDOH and numerous hospitals and community organizations in Hillsborough, Cornerstone failed to obtain a single letter of support from any hospital in Hillsborough. Despite submitting approximately 150 letters of support (many of which were form letters, and letters from Cornerstone employees), Cornerstone failed to obtain any letters from the Hispanic community, the African American community, the HIV community, the migrant community, or organizations that assist the homeless, unlike Suncoast. As Mr. McLemore testified, “a large part” of the review criteria is “hav[ing] the commitment from the organizations in the service area. I think that’s where – a little bit where Cornerstone was a little off base. They did have a bunch of letters of support, but again, they were not specific to the service area.” Mr. McLemore further testified that, rather than a large pile of letters, he was looking for letters “that are definitely from hospitals, nursing homes and civic organizations, healthcare organizations in the area.” Cornerstone’s failure to conduct meaningful and thorough outreach efforts in Hillsborough is also demonstrated by its generic list of CON application conditions. As multiple Cornerstone witnesses acknowledged, the services Cornerstone is proposing to offer in Hillsborough are identical to the services Cornerstone already offers in its existing service areas. Specifically, Cornerstone conditions its application on Hispanic outreach, bilingual volunteers, multiple office locations within a service area, complementary therapies, veterans-specific programming, bereavement counseling for parents, cooperation with local community organizations, a separate foundation account for the specific service area, and continuing education programming, all of which are services that Cornerstone already offers in its existing service areas. Thus, unlike Suncoast, which used the existing community health needs assessments as a starting point for its own comprehensive needs assessment, and proposed conditions that are reflective of the unique needs of Hillsborough, the conditions proposed by Cornerstone are almost identical to the services Cornerstone currently provides elsewhere. Cornerstone’s plan to serve Hillsborough in phases does not immediately address the unmet need for hospice services countywide. Cornerstone will not send its marketing team to facilities and other referral sources in those phased areas until Cornerstone has completed each phase of its plan. Although Cornerstone’s witnesses testified that Cornerstone will not turn away referrals from parts of the county before Cornerstone begins operations in those areas, they also confirmed that Cornerstone will not actively seek referrals from other phased areas until it is ready to move into those areas. Unlike Suncoast, and to a lesser extent VITAS, there is no evidence that Cornerstone conducted a thorough needs assessment of SA 6A before developing its phased implementation plan. Cornerstone simply looked at a map of where existing providers have offices and decided to start elsewhere. Likewise, Cornerstone did not conduct any independent assessment of the needs of the four different geographic areas of its plan to determine whether Cornerstone will be capable of serving all of the county’s residents immediately upon CON approval. Further, Cornerstone did not conduct any review or analysis of comparable start-ups in Florida when preparing its SA 6A CON application. VITAS undertook an analysis of information from a variety of sources, including meetings with various individuals within Hillsborough regarding the perceived gaps in care. Based on this review, VITAS identified a number of patient groups with purported unmet needs: African American and Hispanic populations; migrant workers; patients residing in the eastern and southern parts of the county who are not accessing hospice at the same rate as other parts of the subdistrict; patients with respiratory, sepsis, cardiac, and Alzheimer’s diagnoses; patients requiring continuous care and high acuity services such as Hi-Flow oxygen; patients requiring admission in the evening or on weekends; and patients residing in small, less than 10-bed, ALFs. VITAS proposed a number of solutions to address the purported needs identified in Hillsborough, and largely included those proposed solutions as conditions of its application. However, VITAS failed to identify a specific operational plan for Hillsborough. The purported gaps in care and solutions identified in VITAS’s application for Hillsborough largely mirror those identified in its application for Service Area 2A that was submitted during the same cycle, despite significant differences between the makeups of those two service areas. VITAS’s application included 47 letters of support. Many of the letters are from persons and organizations outside Hillsborough, and even include a letter from one of VITAS’s employees, Kellie Newman, and two letters in support of its 2A application. At hearing, VITAS offered testimony from letter of support authors Mary Donovan and Margaret Duggar. Ms. Donovan lives in Miami and is VP for Caregiver Services, Inc., a nurse staffing agency that contracts with VITAS in other areas of the state and hopes to do so in Hillsborough. Ms. Duggar is the President of MLD & Associates, Inc., located in Tallahassee, which is a management firm that serves as executive staff for a number of entities. Neither of these letters is probative of VITAS’s ability to meet the hospice needs of Hillsborough residents. Ultimately, the applicants all agreed that the unmet need in SA 6A is not purely numeric: it is concentrated among certain patient populations, including Hispanic and migrant communities; non-cancer patients under age 65, including those with dementia, Alzheimer’s, respiratory, and cardiac disease; and lower income groups. Each applicant tailored their proposal to address the perceived, underlying access barriers accordingly. Two primary theories concerning the source of access barriers in Hillsborough developed at final hearing: (a) that access barriers, and hence, unmet need in the service area stem from a lack of access to relevant hospice services through existing providers once a patient has entered hospice care; and (b) that access barriers, and hence, unmet need in Hillsborough, stem from a lack of outreach and education necessary to bring awareness of hospice services to Hillsborough residents so that they access hospice services in the first place. All three applicants proposed to tailor their hospice services and programming to the particular residents of Hillsborough. But Suncoast’s proposal and conditions focused more heavily on outreach and education to bring geographically and culturally-driven awareness of the hospice benefit to patients appropriate for hospice. As noted, Suncoast also did a more comprehensive needs analysis, which allowed Suncoast to focus its CON conditions on those segments of the Hillsborough population most in need of improved access to hospice services. Among the applicants, Suncoast alone proposes to implement a dedicated pediatric hospice program, which is not currently offered in Hillsborough. Dr. Stacy Orloff, accepted as an expert in pediatric hospice care, confirmed in her testimony the following: Suncoast's pediatric hospice program includes a dedicated integrated care team comprised of a fulltime pediatric nurse with more than 25 years’ hospice experience, a pediatric medical director, a full-time licensed social worker, a team assistant, a volunteer coordinator and a pediatric team leader. Additionally, there are part-time staff members including LPNs and CNAs with dedicated pediatric hospice experience. This is an important distinction, as many hospice programs claim to provide pediatric hospice services, but oftentimes they utilize the same care teams that provide care for adult patients. Suncoast's longstanding expertise and network of community partners for its pediatric program will ensure that the proposed pediatric hospice program fits the specific needs of the pediatric patient and family. Suncoast will use a combination of existing staff and PRN assistance until the pediatric caseload is large enough to warrant addition of new team members in Hillsborough County. Suncoast's existing pediatric hospice team has a strong relationship with St. Joseph's Children's Hospital, which it will utilize to expand its network of pediatric providers to increase hospice awareness and utilization in Hillsborough. Suncoast conditions its application on purchasing a $350,000 mobile van, the “Empath Mobile Access to Care,” to conduct mobile outreach activities in Hillsborough for ethnic-specific programming and outreach to homeless. VITAS also conditioned its application on a “Mobile Hospice Education Unit” van, and included photos of similar vans that it operates in other service areas. The Suncoast van will be staffed by a full-time bilingual LPN and a full-time social worker prepared to discuss advanced care planning and education, and will be equipped with telehealth technology capable of linking with the Empath Care Navigation Office. In contrast, VITAS did not explain how its van will be staffed, or whether any of the staff will be clinicians. Indeed, from the photos included in the application, the van appears to be more of a mobile advertisement for VITAS, than it does a tool for hospice education and outreach. VITAS attempted to differentiate its proposal by pointing to disease- specific programming for patients with pulmonary and cardiac conditions, Alzheimer’s, and sepsis. But, Cornerstone and Suncoast are also capable of caring for patients with those conditions. And, specific to sepsis programming—a feature of VITAS’s presentation at final hearing— septicemia is not usually the primary reason a patient enrolls in hospice. Instead, sepsis is a complication of another terminal condition for which a patient is admitted to hospice, and therefore does not represent a need unto itself. VITAS further attempted to differentiate its program by pointing to its comparatively longer average length of stay, arguing that longer average lengths of stay are indicative of greater access and quality. However, this notion was countered by credible testimony that longer lengths of stay, along with a higher percentage of live discharges and higher 30-day readmission rate, may, alternatively, represent targeting of patients unlikely to experience the types of access barriers at which CON is aimed, and may be indicative of lower quality and higher costs. And VITAS’s healthcare planning expert did not conduct an analysis, and offered no opinion, as to the specific cause of VITAS’s comparatively longer length of stay. Taken together, the evidence was inconclusive as to whether longer lengths of stay reflect access enhancements generally, or as applied to VITAS’s proposal. Section 408.035(9) - The applicants’ past and proposed provision of health care services to Medicaid patients and the medically indigent. Rule 59C-1.0355(2)(f) provides that hospice services must be available “to all terminally ill persons and their families without regard to age, gender, . . . cost of therapy, ability to pay, or life circumstances.” Consistent with rule, hospice providers must provide care to Medicaid patients. Medicaid pays essentially the same for hospice care as does Medicare. As such, there is no financial disincentive to accept Medicaid hospice patients. VITAS and Cornerstone both have a history of providing Medicare, Medicaid, and medically-indigent care; Suncoast’s affiliated entity, Suncoast Pinellas, has a similar history, and all three applicants propose to provide care to Medicare, Medicaid, and the medically indigent. While the three applicants project that they will experience different payor mixes for Medicaid and indigent patients, there is no evidence in this record that any of the applicants have discriminated against such patients in the past, or would do so in their Hillsborough program. Cornerstone argues that it is entitled to preference over Suncoast because Cornerstone’s projected percentage of Medicaid and medically indigent admissions (6%) is almost double that of Suncoast (3.3%). However, Cornerstone’s projection is exactly that: a projection of the payor mix it may experience in its new program. Significantly, Cornerstone did not commit to a 6% Medicaid/indigent payor mix within its CON conditions, and therefore that level of Medicaid/indigent admissions is unenforceable. Rather than the applicants’ projected payor mixes, what is significant are plans to reach out to the Medicaid and charity care population to improve their knowledge about, and use of, hospice services. Suncoast’s application presents a specific plan for doing exactly that. All of the applicants have proposed programs for outreach to financially disadvantaged communities within Hillsborough, and none of the applicants are entitled to preference under this criterion. Rule 59C-1.0355(4)(e) – Preferences for a New Hospice Program.Preference shall be given to an applicant who has a commitment to serve populations with unmet needs. Each applicant expressed a commitment to provide hospice services to populations with unmet needs. And to a greater or lesser extent, each applicant conducted an analysis of the specific populations with unmet needs in Hillsborough. No evidence was presented to establish that care for hospice patients with the varying identified conditions or within the various demographic groups is not available in Hillsborough. Rather, the evidence demonstrates that patients are not accessing hospice services, despite their availability to residents of Hillsborough. Among the three applicants, Suncoast best demonstrated a plan for enhancing access to quality hospice care for these populations, as well as a track record of past experience with enhancing access to quality hospice services for these populations. Preference shall be given to an applicant who proposes to provide the inpatient care component of the Hospice program through contractual arrangements. Each of the applicants propose to provide the inpatient care component of the hospice program through contractual arrangements, and presented testimony regarding their ability to do so. Likewise, all three applicants presented letters from entities in Hillsborough regarding their purported willingness to contract for the inpatient care component of the hospice program. However, no applicant presented non-hearsay evidence from any entity within Hillsborough regarding a willingness to contract for the inpatient care component of the hospice program. The applicants are on equal footing in terms of the ability to contract for inpatient care. Notwithstanding its intention to provide the inpatient component of the hospice program through contractual arrangements, VITAS conditioned its application on applying for a CON to construct an inpatient hospice house within the first two years of operation. However, VITAS presented no evidence to establish the need for an additional inpatient hospice house in SA 6A, and no evidence was presented to demonstrate that an inpatient hospice house is a more cost-effective alternative to contracted beds. The proposals by Cornerstone and Suncoast to contract for the inpatient component of the hospice program represent a better use of existing resources than that of VITAS, which will incur the expense of a freestanding hospice house for its proposed program. On balance, this preference weighs equally in favor of Cornerstone and Suncoast, and against VITAS. 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. Each applicant presented evidence of a commitment to serve patients who do not have primary caregivers at home; the homeless; and patients with AIDS. However, the programs proposed by Suncoast to address the needs of these populations are more precisely targeted than those of the other applicants, and Suncoast is therefore entitled to preference. Proposals for a Hospice service area comprised of three or more counties. SA 6A is comprised of a single county, Hillsborough. This preference is therefore not applicable in this case. Preference shall be given to an applicant who proposes to provide services that are not specifically covered by private insurance, Medicaid, or Medicare. All three applicants propose to provide services in Hillsborough that are not specifically required or paid for by private insurance, Medicaid, or Medicare. The added services beyond those covered by private insurance, Medicaid, or Medicare as proposed by the applicants differ slightly, but on balance, weigh equally in favor of approval of each applicant. Rule 59C-1.0355(5) – Consistency with Plans. Each of the applicants conducted an analysis of the needs of Hillsborough residents and included evidence within their applications and through testimony at final hearing regarding the consistency of their respective plans with the needs of the community. However, Suncoast’s evaluation of the needs specific to Hillsborough was more thorough, and its application is best targeted at meeting the identified needs. Rule 59C-1.0355(6) – Required Program Description. Each applicant provided a detailed program description in its CON application. The elements of the program descriptions are discussed above in the context of the various statutory and rule criteria. Ultimate Findings Regarding Comparative Review Suncoast conducted the most comprehensive evaluation of the end of life care needs of Hillsborough residents, and developed targeted programs and services to address those needs. Those programs and services are identified as CON conditions, and are enforceable by AHCA. The depth and breadth of Suncoast’s commitments to the residents of Hillsborough exceed those of Cornerstone and VITAS. Unlike the other applicants, Suncoast offers needed programs which are not currently available in Hillsborough, including a dedicated pediatric hospice program, and enhanced transportation options for persons living in rural areas of the county. Suncoast and Cornerstone are comparable in terms of history of providing quality care. VITAS is inferior in this regard, as evidenced by the numerous confirmed deficiencies in recent years. Undoubtedly, VITAS has redoubled its efforts to improve quality in response to the numerous confirmed deficiencies and complaints, but based upon the record in this case, Suncoast and Cornerstone have a better history of providing quality care. Suncoast would be able to commence operations in SA 6A more quickly than Cornerstone or VITAS. It has connections with other healthcare providers in Hillsborough and could easily transition to that adjacent geographic area. All three proposals would enhance access to hospice services in the county, but Suncoast’s program would be the most effective at enhancing access. A careful weighing and balancing of the statutory review criteria and rule preferences favors approval of the Suncoast application, and denial of the Cornerstone and VITAS applications. Upon consideration of all the facts in this case, Suncoast’s application, on balance, is the most appropriate for approval.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered approving Suncoast Hospice of Hillsborough, LLC’s, CON No. 10605 and denying Cornerstone Hospice and Palliative Care, Inc.’s, CON No. 10602 and VITAS Healthcare Corporation of Florida’s, CON No. 10606. DONE AND ENTERED this 26th day of March, 2021, in Tallahassee, Leon County, Florida. COPIES FURNISHED: D. Ty Jackson, Esquire GrayRobinson, P.A. 301 South Bronough Street, Suite 600 Post Office Box 11189 Tallahassee, Florida 32302 Seann M. Frazier, Esquire Parker, Hudson, Rainer & Dobbs, LLP Suite 750 215 South Monroe Street Tallahassee, Florida 32301 Kristen Bond Dobson, Esquire Suite 750 215 South Monroe Street Tallahassee, Florida 32301 Marc Ito, Esquire Parker Hudson Rainer & Dobbs, LLP 215 South Monroe Street, Suite 750 Tallahassee, Florida 32301 S W. DAVID WATKINS Administrative Law Judge 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (850) 488-9675 www.doah.state.fl.us Filed with the Clerk of the Division of Administrative Hearings this 26th day of March, 2021. Julia Elizabeth Smith, Esquire Agency for Health Care Administration Mail Stop 3 2727 Mahan Drive Tallahassee, Florida 32308 Stephen A. Ecenia, Esquire Rutledge, Ecenia & Purnell, P.A. Suite 202 119 South Monroe Street Tallahassee, Florida 32301 Gabriel F.V. Warren, Esquire Rutledge Ecenia, P.A. 119 South Monroe Street, Suite 202 Post Office Box 551 Tallahassee, Florida 32301 Elina Gonikberg Valentine, Esquire Agency for Health Care Administration Mail Stop 7 2727 Mahan Drive Tallahassee, Florida 32308 Amanda Marci Hessein, Esquire Rutledge Ecenia, P.A. Suite 202 119 South Monroe Street Tallahassee, Florida 32301 Allison Goodson, Esquire GrayRobinson, P.A. Post Office Box 11189 Tallahassee, Florida 32302 Maurice Thomas Boetger, Esquire Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 Richard J. Shoop, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 James D. Varnado, General Counsel Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 Thomas M. Hoeler, Esquire Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 3 Tallahassee, Florida 32308 Jonathan L. Rue, Esquire Parker, Hudson, Rainer and Dobbs, LLC Suite 3600 303 Peachtree Street Northeast Atlanta, Georgia 30308 D. Carlton Enfinger, Esquire Agency for Health Care Administration Mail Stop 7 2727 Mahan Drive Tallahassee, Florida 32308 Simone Marstiller, Secretary Agency for Health Care Administration 2727 Mahan Drive, Mail Stop 1 Tallahassee, Florida 32308 Shena L. Grantham, Esquire Agency for Health Care Administration Building 3, Room 3407B 2727 Mahan Drive 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.
The Issue Whether the Certificate of Need (CON) applications filed by Regency Hospice of Northwest Florida, Inc. (Regency), Odyssey Healthcare of Northwest Florida, Inc. (Odyssey), and United Hospice of West Florida, Inc. (United) for a new hospice program in Agency for Health Care Administration (AHCA or the Agency) Service Area (Service Area) 1, satisfy, on balance, the applicable statutory and rule review criteria sufficiently to warrant approval and, if so, which of the three applications best meets the applicable criteria for approval.
Findings Of Fact The Parties AHCA The Agency for Health Care Administration is the state agency authorized to evaluate and render final determinations on CON applications pursuant to Section 408.034(1) Florida Statutes.1 Regency Regency Hospice of Northwest Florida, Inc. (Regency) is a for-profit, wholly-owned subsidiary of Regency Healthcare Group, LLC (RHG). Regency is a start-up corporation formed for the purpose of owning and operating a new hospice program in Service Area 1. (Findings relating to the creation of Regency and Regency Hospice of Northwest Florida, LLC (Regency LLC) are set forth in section III.) RHG was formed in 2005 for the purpose of acquiring and then owning and operating hospice operations in the southeastern United States. The company's sole business is providing hospice services. In February 2006, RHG acquired the hospice operations of Regency Hospice with locations in Georgia and South Carolina. In June 2006, RHG acquired New Beacon Hospice with multiple locations in Alabama. In addition to these acquisitions, RHG opened a new Medicare licensed hospice program in Augusta, Georgia, and also opened two additional satellite offices in Gainesville, Georgia, and Gadsden, Alabama. RHG operates under the "Regency" brand name in Georgia and South Carolina (seven hospice offices) through its wholly- owned subsidiary Regency Hospice of Georgia, LLC, and operates under the "New Beacon" brand name in Alabama (eights hospice offices) through its wholly-owned subsidiary New Beacon Healthcare Group, LLC. Presently, RHG owns and operates ten Medicare certified hospice programs at 15 office locations: eight in Alabama, four in Georgia, and three in South Carolina. The offices are located in urban and rural settings. If approved in Florida, RHG would operate the hospice through the wholly-owned subsidiary Regency Hospice of Northwest Florida, Inc. There is no separate corporate management of Regency at the subsidiary level. The supervision, management, and control of all of the RHG hospice operations, whether operating under the Regency or New Beacon brand name, are centralized in the senior management team of RHG located in Birmingham, Alabama. The mission, core values, service standards, operating practices, protocols and policies are uniform throughout the company regardless whether a hospice program is operated under the New Beacon or Regency brand name. RHG senior management team has demonstrated a history of developing successful hospice operations. The origin of Regency's New Beacon hospice operations in Alabama dates back approximately 25 years when the hospice was first established in Birmingham, Alabama. The Birmingham hospice was initially owned by the Baptist Health System as a department of Montclair Hospital. Over time, the Baptist Hospice expanded its operations through acquisitions and opening of new programs in locations outside of Birmingham. Eventually, Baptist-owned hospice operations merged with the hospice operations of the Catholic health system in 1997. The joint Baptist/Catholic venture was operated under the name of Unity Health Services changing its name to New Beacon in 2001. In 2006, the Baptist and Catholic health systems decided to sell their hospice operations in Alabama. Both Odyssey and Regency submitted bids to purchase the New Beacon operations. Although Odyssey was the highest bidder, the hospice program was sold to Regency, apparently because RHG shared New Beacon's philosophy regarding providing hospice care. The Baptist and Catholic health systems continue to have a minority ownership in Regency and share a seat on the seven-member board of directors. RHG's hospice operations have grown in terms of patient admissions and average daily census since the acquisition of Regency and New Beacon. RHG plans to focus efforts in the southeast and expand into southern Alabama and the Florida panhandle. RHG's present plans are to open from three to ten new hospice locations in 2008 including the three Florida panhandle locations at issue in this case if approved. New Beacon is a recognized provider of choice in Alabama for some health care providers and its operations have been successful. RHG's operations in Georgia and South Carolina have also been successful. Under RHG's management and prior to its acquisition, New Beacon has afforded high quality of care to the patients its served. There are numerous examples of highly complex, difficult, and costly patients that New Beacon has accepted both before and after the acquisition. There have been no apparent changes in New Beacon's direction or philosophy since acquisition by RHG. Some witnesses who testified on behalf of Regency, expressed a preference for New Beacon over Odyssey based on ease of referrals and complexity of care of patients New Beacon accepts. Odyssey Odyssey Healthcare of Northwest Florida, Inc. (Odyssey) is a for-profit, wholly-owned subsidiary of Odyssey Healthcare, Inc. (Odyssey Healthcare). Odyssey is a start-up corporation formed for the purpose of filing a CON application at issue in this proceeding and owning and operating a new hospice program in Service Area 1. Odyssey Healthcare is a publicly-traded company founded in 1996 and focuses on caring for patients at end-of-life care. Odyssey Healthcare's sole line of business is hospice services. Since 1996, Odyssey Healthcare has started up and acquired more than 80 hospice programs in 30 states. Odyssey Healthcare presently operates approximately 76 Medicare certified hospice programs, including the operation of two hospice programs in Florida. Odyssey Healthcare has approximately 5,000 employees through affiliated programs and serves approximately 8,000 patients per day across its 76 hospice programs and serves has approximately 34,000 admissions in a 12-month period. Last year, Odyssey Healthcare started five or six new hospice programs. Odyssey is the only one of the three co-batched applicants with start-up and operational hospice experience in Florida - in AHCA Service Areas 4 and 11. Since 2003, Odyssey Healthcare has started up approximately 40 new hospice programs, but over the past several years, Odyssey Healthcare has closed or sold seven programs as underperforming or, in some cases, in light of unfavorable market conditions. Odyssey Healthcare has not sold or closed other hospice programs, such as those located in New Orleans and Baton Rouge, Louisiana, following the hurricane, or in Boston, Massachusetts, notwithstanding the loss of money in those markets or other market conditions. Odyssey Healthcare's patient population consists of approximately 68 percent non-cancer and 32 percent cancer patients. Odyssey Healthcare was the subject of an investigation by the United States Department of Justice (DOJ) that ultimately resulted in a settlement and the payment of $13 million to the federal government in July 2006. The settlement did not involve the admission of liability or acknowledgement of wrongdoing. As part of the settlement with the United States Department of Health and Human Services, Office of Inspector General, Odyssey Healthcare entered into a corporate integrity agreement (CIA) for five years. Ody 4 at 32. According to Odyssey Healthcare, the federal investigation allowed Odyssey Healthcare to self- audit to ensure compliance with the Medicare conditions for participation followed by an outside verification agency. The federal investigation was not related to quality of care issues. Medicare CAP problems result from longer patient stays that are not balanced by shorter patient stays, thus leading to increased overall revenue per patient. Medicare CAP limitations have been a problem for the hospice industry at large because they place a ceiling on the overall Medicare revenue per patient that a hospice may receive. Odyssey Healthcare's Medicare CAP liability increased from approximately 2 million dollars in 2004 to approximately 12 million dollars in 2005 to approximately 16 million dollars in 2006, but lower in 2007. Odyssey Healthcare has plans in place to reduce its Medicare CAP exposure that may have negative short-term affects. Odyssey Healthcare's net income declined significantly from 2004 to 2006. The decline is due in part to Medicare CAP limitations. Regency has had one cap repayment ($670,000, T 201) and United has had none. United United Hospice of West Florida, Inc. (United) is a wholly-owned subsidiary of United Hospice, Inc. (UH), which, in turn, is a wholly-owned subsidiary of United Health Services, Inc. (UHS) commonly known as UHS-Pruitt. UH is an existing provider of hospice services in Georgia, South Carolina, and North Carolina. UHS has also established a not-for-profit foundation, which offers the public and professional community information and assistance regarding end of life care and planning. UHS-Pruitt was founded in 1969 as a nursing home company and has expanded to become a comprehensive long-term care provider in Georgia, South Carolina, North Carolina, and Florida. UHS-Pruitt provides several services including nursing homes, hospices, assisted living facilities, pharmacy services, medical supplies, durable medical equipment, outpatient rehabilitation, adult day care, and home health services. UHS-Pruitt currently has a 120-bed skilled nursing facility (Santa Rosa Heritage, operated by United Hospice, Inc.), pharmacy services, rehabilitation office (including therapy programs), durable medical equipment, located in Milton, Santa Rosa County, Florida. UHS-Pruitt has approximately 8,000 employees in all of its programs. The main focus of United Hospice, Inc. and UHS-Pruitt has been the nursing home business, with additional product lines developed as an adjunct to the delivery of nursing home services as noted herein. United Hospice Foundation was established to educate individuals about hospice services and end-of-life decision making. The foundation provides training and educational programs to both the professional and the lay community regarding these subjects. The foundation is operated independently from the for-profit portions of UHS-Pruitt. UHS-Pruitt by and through United Hospice, Inc. for the most began providing hospice services in 1993 and offers hospice programs in approximately 13 to 20 locations in Georgia, North Carolina, and South Carolina, with the vast majority of the programs in Georgia. The hospice programs were start-up programs, not acquisitions. There is evidence that approximately 40 to 42 percent of United Hospice, Inc.'s hospice patients reside in company owned nursing homes. United Hospice, Inc. opened one or more new hospice program each year during the past several years and is internally discussing three new hospices "[t]hrough pure development, as opposed to acquisition." Overview of Hospice Services In Florida, a hospice program is required to provide a continuum of palliative and supportive care for terminally ill patients and their family. A terminally ill patient has a medical prognosis that his or her life expectancy is one year or less if the illness runs its normal course. §§ 400.601(3) and (8), Fla. Stat. Under the Medicare program administered by the federal government, a terminally ill patient is a person who has a life expectancy of six months or less. Hospice services must be available 24 hours a day, 7 days a week, and must include certain core services, such as nursing services, social work services, pastoral or counseling services, dietary counseling, and bereavement counseling services. Physician services may be provided by the hospice directly or through contract. § 400.609(1)(a), Fla. Stat. Hospice care and services provided in a private home shall be the primary form of care. Hospice care and services may be provided by the hospice to a patient living in an assisted living facility, adult family-care home, nursing home, hospice residential unit or facility, or other non-domestic place of permanent or temporary residence. The inpatient component of care is a short-term adjunct to hospice home care and hospice residential care and shall be used only for pain control, symptom management, or respite care. The hospice bereavement program must be a comprehensive program, under professional supervision, that provides a continuum of formal and informal support of services to the family for a minimum of one year after the patient's death. §§ 400.609(1)- (5), Fla. Stat. The goal of hospice is to provide physical, emotional, psychological, and spiritual comfort and support to a dying patient and their family. Hospice care provides palliative care as opposed to curative care, with the focus of treatment centering on palliative care and comfort measures. Hospice care is provided pursuant to a plan of care that is developed by an interdisciplinary team consisting of, e.g., physicians, nurses, social workers, counselors, including chaplains. There are four levels of service of hospice care: routine home care, continuous care, general inpatient care, and respite care. Generally, hospice routine home care is the vast majority of patient days and respite care is typically a very minor percentage of days. Continuous care is basically emergency room type or crisis care that can be provided in a home care setting or in any setting where the patient resides. Continuous care is provided for short amounts of time usually when symptoms become severe and skilled and individual interventions are needed for pain and symptom management. The inpatient level of care provides the intensive level of care within a hospital setting, a skilled nursing unit, or in a free-standing hospice inpatient unit. Respite care is generally designed for caregiver relief. Medicare reimburses different levels of care at different rates. Approximately 85 to 90 percent of hospice care is Medicare related. There are certain services required by specific patients that are not necessarily covered by Medicare and/or private or commercial insurance. These services may include music therapy, pet therapy, art therapy, massage therapy, and aromatherapy. There are other more complicated and expensive non-covered services such as palliative chemotherapy and radiation that may be indicated for severe pain control and symptom control. Each applicant proposes to provide hospice patients with the all of the core services and many of the other services mentioned above. However, there are several distinctions among the applicants which are discussed later. Regency's LOI and CON Application Prior to the final hearing, Odyssey and United filed separate motions requesting entry of an order dismissing Regency's petition and CON application. Odyssey and United argue that Regency Hospice of Northwest Florida, LLC's initial LOI and shell CON application were defective because only a corporation, not a limited liability company, authorized to do business in Florida on the date these documents were filed, can be a viable applicant to provide hospice services in Florida. As a result, the Agency should have rejected the LOI and shell CON application because Regency LLC was not an existing corporation on the date the LOI and shell CON application were filed contrary to Florida law. The following findings of fact relate to this issue. On November 2, 2006, Regency Hospice of Northwest Florida, LLC was formed as a Delaware limited liability company for the purpose of pursuing approval of a CON to provide for a new hospice program in Florida. (Regency LLC was 100 percent owned by RHG and did not differ in structure from Regency, except for the difference in entity status.) On November 3, 2006, the Florida Secretary of State certified that Regency LLC was properly registered to conduct business in Florida on November 3, 2006. In October 2006, Odyssey and United filed separate LOIs. By Agency rule, these filings created a grace period for filing additional LOIs. During the grace period, on November 7, 2006, Regency LLC filed a LOI to establish a new hospice program in Service Area 1. On November 9, 2006, the Agency issued a letter to Regency LLC, accepting the LOI. On November 22, 2006, Regency LLC filed its initial shell application with the Agency. The initial CON application consisted of two pages. Reg 7; T 118. Thereafter, Odyssey advised the Agency that Regency LLC's CON application should be withdrawn from further consideration because the applicant entity, Regency LLC, was not a corporation under Florida law, but was instead a limited liability company. On November 28, 2006, the Agency notified Regency LLC that it was withdrawing Regency LLC's CON application for consideration on the basis that Regency LLC was a limited liability company, rather than a corporation. On November 29, 2006, a certificate of incorporation was filed on behalf of Regency Hospice of Northwest Florida, Inc., with the State of Delaware. A certificate of conversion was filed converting the limited liability company to a corporation, i.e., Regency Hospice of Northwest Florida, LLC to Regency Hospice of Northwest Florida, Inc. On December 5, 2006, a certificate of conversion and articles of incorporation were filed on behalf of Regency Hospice of Northwest Florida, Inc. with the Florida Secretary of State. The Florida Secretary of State issued a document stating in part: "The Certificate of Conversion and Articles of Incorporation were filed December 5, 2006, with an organizational date deemed effective November 2, 2006, for REGENCY HOSPICE OF NORTHWEST FLORIDA, INC., the resulting Florida corporation." On October 24, 2007, the Florida Secretary of State certified that Regency Hospice of Northwest Florida, Inc. "is a corporation organized under the laws of the State of Florida, filed on December 5, 2006, effective November 2, 2006." (emphasis added). On December 11, 2006, Regency Hospice of Northwest Florida, Inc., filed a formal petition (by letter) requesting a hearing in connection with the Agency's prior notice indicating withdrawal of the CON application. On or about December 21, 2006, a settlement agreement was reached among representatives of the Agency and Regency Hospice of Northwest Florida, LLC and "now known as" Regency Hospice of Northwest Florida, Inc. The Agency agreed to accept a timely filed and complete CON application by Regency Hospice of Northwest Florida, Inc. The Agency was persuaded that Regency was a proper applicant in light of its conversion from Regency LLC to Regency. On or before December 27, 2006, Regency, Odyssey, and United timely filed their completed CON applications, also known as the omissions responses. In particular, the president and CEO of Regency executed the "certification by the applicant," Schedule D-1, which stated in part: "I certify that the applicant for this project will license and operate the health services, programs, or beds described in this application." Reg 7 at Schedule D-1, p. 9. On January 9, 2007, the Agency adopted and approved the settlement agreement by entry of a Final Order. On January 12, 2007, the Agency published its decision in the Florida Administrative Weekly to accept the Regency Hospice of Northwest Florida, Inc., CON application. On January 16, 2007, the Agency advised Odyssey of the final Agency's decision to accept Regency's CON application. On February 5, 2007, Odyssey filed a petition to challenge the Agency's decision to accept Regency's CON application. On April 19, 2007, the Agency partially granted the Agency's own motion to dismiss "to the extent that the Petition is dismissed as moot and due to the fact that the Petitioner did not have standing to file the Petition at the time it was filed." In essence, the Agency decided that because Odyssey had already filed a petition to challenge the Agency's preliminary decision to deny its CON application and the Agency approval of Regency's application, that the filing of that petition rendered the original petition to challenge the agency's decision to allow Regency of Northwest Florida, Inc. to submit a CON application moot.2 There is no evidence that Odyssey sought appellate review of the Agency's April 19, 2007, Final Order. On November 8, 2007, Odyssey filed a Motion for Summary Recommended Order seeking dismissal of Regency's CON application. A similar motion was filed by United on November 9, 2007. Regency, joined by the Agency, filed a response. On November 26, 2007, a hearing was held regarding the motions and all counsel were heard. After hearing argument of counsel, the motions were denied without prejudice. As a matter of fact, Regency Hospice of Northwest Florida, Inc. did not exist at the time the LOI and shell CON application were filed with the Agency. The LOI and the shell CON application were filed on behalf of Regency Hospice of Northwest Florida, LLC that was not a corporation authorized to do business in the State of Florida and not eligible at that time to file a LOI or CON application to provide a new hospice program. Whether Regency Hospice of Northwest Florida, Inc., formed after the LOI and shell CON application were filed, is a viable applicant turns on whether the "conversion" statutes apply, or if not, whether the 'forgiveness clause,' Section 408.039(5)(d), Florida Statutes, applies. For the reasons stated in the Conclusions of Law, the issues regarding Regency's corporate status, while novel, are resolved in Regency's favor. Fixed need pool Pursuant to its numeric need methodology, the Agency published a fixed need pool or a numeric need for one new hospice program in Service Area 1 for the second batching cycle of 2006. In forecasting need under the rule methodology, the Agency uses the historical average three-year death rate. It applies it against the forecasted population two years out or for a two-year planning horizon, in this case January 2008. The projected first year of operation for a new provider in this case is 2008. Then, the Agency uses the statewide penetration rate, which is the number of hospice admissions divided by hospice deaths. The penetration rate is also considered a use rate in other health care arenas, but in hospice it is generally referred to as a penetration rate. The statewide average penetration rate is subdivided into four categories: cancer over age 65; cancer under age 65; non-cancer over age 65; and non-cancer under age 65. The projected hospice admissions in each category are then compared to the most recent published actual admissions to determine the number of projected un-met admissions in each category. If the total un-met admissions in all categories exceeds 350, the need for a new hospice is shown, unless there is a recently approved hospice in the service area or a new hospice provider has not been operational for less than two years. According to the Agency's fixed need pool methodology, the net un-met need for hospice's admissions in Service Area 1 is 450 additional hospice admissions in 2008. Among the four categories, there is a higher need projected among non-cancer patients. The percentage of non- cancer patients can vary from community to community and a hospice patient's admissions will likely reflect that local decedent population. (Historically, for RHG hospice operations, approximately 62 percent of the admissions were non-cancer diagnoses and 38 percent were cancer diagnoses, whereas Odyssey Healthcare's overall hospice experience is approximately 68 percent non-cancer and 32 percent cancer and UHS's experience is approximately 64 percent non-cancer and 36 percent cancer.) Demographics of Service Area 1 AHCA Service Area 1 consists of four counties: Escambia, Santa Rosa, Okaloosa, and Walton Counties, located in the northwest portion of the Florida panhandle. Geographically, the service area is large. It spans from the Florida-Alabama border on the west in Escambia County to the eastern border of Walton County over 100 miles away. The July 2006 population estimates for Service Area 1 indicate that the total population was approximately 700,000 with the four counties having the following population: Escambia (303,578); Santa Rosa County (140,988); Okaloosa County (193,298); and Walton County (56,900). In the most recent calendar year, there were 5,800 deaths in the service area and 6,400 deaths per year projected in the two-year planning horizon. The largest population center is Escambia County (and the city of Pensacola) followed by Okaloosa, Santa Rosa, and Walton Counties. Walton County is the fastest growing county, which experienced 40 percent growth in the last six years followed by Santa Rosa with approximately 20 percent growth. Overall, the service area grew approximately 11 to 12 percent. When Escambia County is excluded, the service area grew approximately 19-20 percent for the three eastern counties. Between 2006 and 2011, Santa Rosa County is projected to grow by approximately 16 percent and Walton County by approximately 20 percent. Service Area 1 has two major east-west arteries, with the I-10 corridor cross the central and more northern portion of the service area, and U.S. Highway 98 running along the coastal beach communities. There are 13 hospitals, 27 nursing homes, and two existing hospice providers in Service Area 1. The two existing hospice providers are Covenant Hospice and Hospice of the Emerald Coast. Covenant Hospice currently has its headquarters in Pensacola, Escambia County, and satellite offices in Milton, Santa Rosa County and Crestview and Niceville in Okaloosa County. It appears that Emerald Coast has its headquarters in Pensacola and a satellite office in Crestview. The existing hospice providers do not have offices in Walton County and neither has an office in Fort Walton Beach along the coast in Okaloosa County. Currently, Covenant Hospice provides approximately 86 percent of the hospice care in Service Area 1 followed by Emerald Coast providing approximately 14 percent of the hospice services. Emerald Coast does not serve hospice patients without primary caregivers. Based upon the 2,000 U.S. Census, the population of the State of Florida is 65.4 percent White; 14.6 percent African-American; 16.8 percent Hispanic; and 3.2 percent in the other category. With respect to Escambia, Santa Rosa, Okaloosa, and Walton Counties, the percentages of African-Americans, Hispanics, and others are as follows: Escambia (21.4 percent African-American, 2.7 percent Hispanic, and 5.0 percent other; Santa Rosa (4.2 percent African-American, 2.5 percent Hispanic, and 4.2 percent other; Okaloosa (9.1 percent African-American, 4.3 percent Hispanic, and 5.6 percent other); and Walton County (7.0 percent African-American, 2.2 percent Hispanic, and 3.5 percent other). The Hispanic population in Service Area 1 is low relative to the State of Florida, although it is projected to grow. On a percentage basis by county, the African-American population is lower than the statewide percentage, except Escambia County, which also has the largest population of the four counties in Service Area 1. The proposals Regency's proposal Regency proposes to establish its new hospice program with the immediate opening of three offices at commencement of operations in Pensacola, Escambia County; along the coast in Fort Walton Beach, Okaloosa County; and along the I-10 corridor in De Funiak Springs, Walton County. In its CON application, Regency projected the number of admissions in years one and two, 2008 and 2009, 242 and 496, respectively. With the projected average length of stay (ALOS) 60 days in year one and 80 days in year two, the overall projected patient days were 14,543 in year one and 39,686 in year two. The ALOS projections were demonstrated to be consistent with other Florida hospice start-up operations. The resulting total average daily census (ADC) from the proposed three office locations is 40 in year one growing to 108 in year two, with continuing growth thereafter. The Regency projections appear to be reasonable and achievable. Regency projects that it can open all three offices for $195,745. Odyssey suggests that Regency has impermissibly amended its CON application by describing proposed programs and services in great detail during the final hearing that were minimally, at best, discussed in Regency's CON application, including the omissions responses. See Odyssey's PRO at 44-52. In its CON application, Regency notes that it is a subsidiary Regency Healthcare Group, LLC, which offers hospice services in three states, Alabama, Georgia, and South Carolina. Regency described the corporate structure, including the entities operating in these states. Regency is also affiliated with two non-profit foundations, which accept donations and provide support to their hospice programs. Regency places heavy reliance on the experience of the existing hospice programs in Alabama, Georgia, and South Carolina. In its CON application, Regency lists several types of programs currently offered. For example, the Regency Hospice/New Beacon programs have a full-time pharmacist (Pharm. D.) on staff to assist their teams. Regency lists the services that its staff will directly provide and provide through contractual arrangements. Reg 7 at 33-34. (Regency [and United] mention providing dietary services through contractual arrangements, but the service is required to be provide by staff. AHCA 1 at 17.) Regency mentions that it will sponsor community education programs. Id. at 16. Regency also lists several non-reimburseable services provided by its affiliated hospice programs such as bereavement (for at last 12 months (13 months according to hearing testimony) following death of the patient) and chaplain services, the recruitment, training, and supervision of volunteers, hospice care for the medically indigent, flower and music ministries, and assistance with utility bills, food, clothing, and other necessities for needy patients. See Reg 7 at 2, 25, and 26. On page 12 of its CON application, Regency notes that for the year ending October 31, 2006, Regency affiliated hospice programs rendered 18.4 percent of total days of care to African- Americans and that "Regency will focus on this population as an outreach group since it is a significant part of the population of Service Area 1. This is particularly the case in Escambia County, which has the largest population, and African-Americans may be an underserved group." Regency mentions a potentially unmet need in Walton County and commits to opening an office in De Funiak Springs to serve the rural areas of the county. Id. at 23-25. Regency commits to providing care to persons without caregivers. Id. In several places in its CON application, Regency references continuous care generically, id. at 5-6, and based on the experience of Regency's affiliated hospice programs in other markets and expectations for the start-up of a new program, Regency projects patient days for continuous home care, routine home care, inpatient respite care, and general inpatient care. Id. at 32. On Schedule 7A, Regency has a line dedicated for continuous care as part of its revenue projections and also Schedule 8A provides for an expense for continuous care for years one and two. Id. at 27-28, 30, and 32. (Regency proposes 1.46 percent of continuous case; Odyssey, 1.33 percent; and United, a negligible amount.) During the final hearing, Regency expounded on these services. For example, there was testimony that as part of the "flower ministry," Regency expects to offer a Christmas tree program. It appears that the flower ministry and Christmas tree programs are local programs within the Birmingham, Alabama, area, spearheaded by a volunteer. It does not appear that Regency presently provides this service on a corporate-wide basis, although there is some intent to do so - it would depend on the leadership of their volunteers. See T 125-126, 142, 368, 537; Reg 83. In its CON application, Regency notes at page 32 that "[t]rained volunteers will provide important services by helping families and loved ones care for patients, by raising funds to support hospice services, and by performing administrative report functions." One witness, Ms. Acton, testified that her testimony was limited to the volunteer program in Jefferson County. Regency included letters of support in the deposition testimony of Richard Mason, Reg 79, indicating that Regency would be able to establish inpatient programs at the three Sea Crest nursing homes in Service Area 1 in Pensacola, Destin, and Crestview. (There is no affiliation between Sea Crest and RHG or its subsidiaries, except for two minority investors in Sea Crest who are also investors in RHG.) Overall, Regency's CON application mentions, although not in elaborate detail, the programmatic aspects of its proposal that were discussed in much more detail during the final hearing. United's proposal United proposes to establish a new hospice program in Service Area 1 with the headquarters in Milton, Santa Rosa County, Florida. It intends to open its first satellite office in Walton County when market forces indicate that it would be more efficient to have another office. United plans to have a dedicated hospice team located in Walton County to ensure access to services to the Walton County residences. United also proposes to have inpatient arrangements at its sister-facility in Milton as well as at nursing homes in Okaloosa and Walton Counties. United included letters of support from all three nursing homes indicating that it would be able to establish the proposed inpatient sites. In its CON application and during the final hearing, United provided a detailed discussion of hospice services it will offer. United is projecting project costs of $336,467. United Hospice of West Florida, Inc.'s parent is UHS- Pruitt, whose principle business appears to be the nursing home business. UHS-Pruitt also has a number of operating subsidiaries that appear to supply or enhance those nursing homes with physical therapy or pharmacy services. In its CON application, United focuses on minority outreach to the Hispanic population in the service area. As noted herein, the population of Hispanics in the service area is quite low compared to the statewide average. In its CON application, United projected that it would achieve 264 admissions in year one and 454 admissions in year two. United applied a median length of stay of 27 days to arrive at its projection of 7,185 patient days in year one and 12,061 patient days in year two. United's admissions and average daily census ramp up through the end of year one and then remain flat showing no growth throughout the second year of operation. United's projections appear to be reasonable and achievable. Odyssey's proposal Odyssey proposes to initiate hospice services by opening an office in Pensacola, Escambia County. In the final quarter of year two, Odyssey proposes to open a second office in Okaloosa County, and an office in Walton County in year three. Within six months following the opening of the Walton County office, Odyssey plans to open a fourth office in Santa Rosa County. Odyssey projected 270 admissions in year one and 411 admissions in year two. Odyssey projected in its CON application that it would have an ALOS of 25 in year one and 50 in year two, resulting in total patient days of 6,750 in year one and 20,550 in year two. Odyssey's projections for routine care for year two are similar to the percentages proposed by United and Regency. Odyssey proposes less cancer, but more respite and non-cancer care than United and Regency. United proposes more inpatient care than Regency and Odyssey. Odyssey's projections appear to be reasonable and achievable. Odyssey anticipates that it will cost $464,720 to start its Escambia office. Odyssey Healthcare, through its not-for-profit affiliate, Hospice of the Palm Coast, currently operates two start-up hospice programs in Florida, Volusia County, with a satellite office in Flagler County, Florida, and one in Dade County, Florida, with a satellite office in Monroe County. Both programs are licensed and Medicare/Medicaid certified. Odyssey will benefit from the clinical experience, expertise, management resources, and financial strength of Odyssey Healthcare in implementing its program within Service Area 1. Odyssey start-up team has a group of experts located in Odyssey's Dallas support center. The team consists of designated experts from several departments including billing, human resources, clinical compliance, and IT. The team meets weekly and is responsible to support the start-up hospice programs. For Odyssey Healthcare, hospice care is delivered via an interdisciplinary team of caregivers who specialize in end- death-of-life care, including nurse care managers, physician, nurses, spiritual advises, bereavement coordinators, social workers, home health aides, and members of the patient's family. The manager of the team is an RN who addresses the needs of the patient and family and develops a specific plan of care with the physician. The RN case managers coordinate care with other team members while the patient's physician works with the Odyssey medical director and other team members to assure that all symptoms are controlled, pain managed, and the patient and family informed. Other members of the interdisciplinary team include a chaplain, home healthcare aide, social worker, trained volunteers, bereavement coordinator, on-call nursing team, and other specialists. The interdisciplinary team delivers these services in a context of Odyssey Healthcare's 14 service standards by focusing on admissions within three hours of a physician admission order. Odyssey Healthcare offers certain educational tools which will be implemented by Odyssey to furnish healthcare providers with information about non-cancer and cancer diagnoses of all types. Odyssey commits to spending $25,000 in its first year of operation for community outreach and marketing. Odyssey identified the African-American community as an underserved population in Service Area 1. Odyssey Healthcare operates in numerous locales where there are culturally diverse areas such as Miami/Dade County and El Paso, Texas, with high percentages of Hispanic population. Other Odyssey Healthcare hospice programs have also reached out to African-American communities in Memphis, Tennessee, and Charleston, North Carolina. Odyssey's interdisciplinary teams are often made up of Hispanic or African-American medical directors, home health aides, social workers, priest, ministers, and nurses. Odyssey Healthcare has recreated a developmental model called community education representatives (CERs) to educate the community as to the benefits of hospice services and the services that are provided by Odyssey. These CERs are used to establish and develop referral sources in part. Odyssey Healthcare programs offer extensive bereavement programs (for 13 months after the death of the patient) as part of the core Medicare services it provides. Odyssey Healthcare operates hospice programs in Birmingham, Montgomery, and Mobile, Alabama. The Mobile program is in Baldwin County, which is contiguous to the Pensacola, Escambia County, an area Odyssey proposes to serve. Odyssey Healthcare's Mobile, Alabama, hospice program has an inpatient agreement with Providence Hospital in Mobile, Alabama, which has a related facility, Sacred Heart Hospital, in Pensacola, Florida, which has the same parent organization. Odyssey will benefit from Odyssey Healthcare's resources and experience with respect to start-ups as well as centralized services such as accounting, centralized billing, and training. All other benefits include the size of Odyssey Healthcare, comprehensive scope of hospice services, service standards, staff education including palliative care center vocation, commitment to education, and investment and technology. Odyssey Healthcare has internally developed an in- house pharmaceutical system called Hospice Pharmaceutical Services (HPS). HPS is a separate company and not a wholly- owned subsidiary of Odyssey Healthcare. HPS provides services 24 hours a day, 7 days a week, including pre-admission consultations on referrals. HPS hotline is housed in the Dallas Odyssey Healthcare corporate office and is staffed by a Pharm. D., a pharmacist, and seven hospice certified RNs and at least two on-call nurses who cover the pharmacy system 24/7. The HPS staff is available to the attending physician and to the local hospice nursing staff when needed. Odyssey included several letters of support in its CON Application. Statutory and Rule Review Criteria Rule Preferences The Agency is required to give preference to an applicant meeting one or more of the criteria specified in Florida Administrative Code Rule 59C-1.0355(4)(e)1.-5. The first preference is for an applicant who has a commitment to service populations with unmet needs. Each of the applicants identified population groups they believe to have unmet needs. Hospice patients can be viewed as consisting of four basic categories: cancer patients under age 65; cancer patients age 65 and older; non-cancer patients under age 65; and non- cancer patients age 65 and older. (This is the breakdown of hospice patients used by the Agency in its need methodology.) It appears that the largest underserved group of these four is the under age 65 non-cancer patients, followed by the non-cancer patients age 65 and older and cancer patients age 65 and older. The only over-served group was the cancer patients under the age 65. All applicants stated a commitment to serve non-cancer patients. However, only Odyssey and United identified this group as an underserved group and provided evidence concerning how they would meet the needs of this group. Historically, RHG hospice programs have provided approximately 62 percent of its patient care to non-cancer patients; whereas UHS has provided approximately 64 percent, followed by Odyssey Healthcare at approximately 68 percent. One witness suggested that a range of 35 to 50 percent was reasonable, although there are factors that affect the range such as age of the program. Regency and Odyssey identified African-Americans as a traditionally underserved group. However, while it is possible to extract the percent of the population by race group in the service area, neither applicant presented any concrete data to show that existing providers in the service area are failing to meet the demands of the African-American population or that this population group is underserved by the existing providers. The percentage of African-Americans in Escambia County according to 2000 Census information was 21.4 percent; 4.2 percent in Santa Rosa County; 9.1 percent in Okaloosa County; and 7.0 percent in Walton County. Regency stated that it "will focus on this population as an outreach group since it is a significant part of the population of Service Area 1." Reg 7 at Odyssey stated that African-Americans in the service area would benefit from Odyssey's experience. See Ody 1 at (bates stamp) 46, 59 and 74. United does not discriminate against individuals based upon ethnicity or for any other reason and it historically provides care to minorities. Both of the existing providers have offices in Escambia County and Regency and Odyssey both propose offices in this county. Odyssey presented data claiming that RHG hospice programs did a below average job in outreach and service to the African-American communities in areas served by RHG. The analysis was flawed in part because it compares the statewide experiences of RHG and Odyssey Healthcare based upon the operations in different local communities (e.g. rural versus urban) that can have different demographic compositions. Overall, the evidence indicates that RHG and Odyssey Healthcare have demonstrated a record of doing a credible job of outreach and service to the African-American community. All applicants agreed that providing continuous care services is an important level of service for hospice patients. In Service Area 1, continuous care accounts for only 0.6 percent of patient days; whereas the national and Florida averages are four and two percent, respectively. As noted herein, Regency and Odyssey propose a specific percent of continuous care, 1.46 and 1.33 percent, respectively, and United projects a negligible amount, see United 1 at Schedule 7A, although United proposes to provide the service. United identified patients without caregivers as an underserved population because Hospice of the Emerald Coast does not accept these patients. All three applicants will serve this population. United identified Hispanics as a population with unmet needs. Service Area 1 has the lowest percent of total population that is Hispanic of all of AHCA's service areas, although there is projected growth. In calendar year 2006, there were 59 Hispanic deaths out of 5,821 deaths in Service Area 1 or approximately one percent. In Santa Rosa County, where United plans to initially open its sole office, there were approximately seven Hispanic deaths in 2006. It was estimated that a little more than 20 Hispanics would use hospice services in the service area per year. Regency and Odyssey deserve preference under this subsection and United to a lesser degree. The second 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-effective alternative. Each of the applicants proposes to serve inpatients through contractual arrangements. No applicant is proposing a freestanding inpatient unit. Through its related skilled nursing facility in Santa Rosa County, United has an existing relationship with a health care facility that will be used to provide inpatient care. United did not include all of the room and board expenses for Medicaid nursing home patients in its financial projections. United provided unauthenticated letters of support to demonstrate that it will be able to offer inpatient services in Santa Rosa, Okaloosa, and Walton Counties. United expects to offer only one office (primary headquarters) in Santa Rosa County that would serve the four- county service area. United expects to establish working teams in the other counties. Regency does not have any directly affiliated inpatient providers. However, Regency has commitments to enter inpatient contracts with, among other facilities, three nursing homes operated by Sea Crest Management through mutual investors. These nursing homes are located in Destin and Crestview in Okaloosa County, and Pensacola in Escambia County. Regency also has a commitment from Healthmark Hospital in De Funiak Springs, Walton County. Although Odyssey did not include any letters of support from any potential inpatient service locations in its original CON application, it stated that it will contract with acute care providers and skilled nursing home facilities in the service area. (Odyssey's CON applications have general letters of support of its application.) At hearing, Odyssey provided letters of support from area nursing homes, including a memorandum of understanding from the administrator of Southern Oaks Nursing Home in Pensacola, a 210-bed facility, indicating a willingness to provide inpatient services for Odyssey patients. Each applicant can be expected to contract for inpatient services and satisfy this preference. The third preference shall be given to an applicant who has a commitment to service patients who do not have primary caregivers at home; the homeless; and patients with AIDS. Each of the applicants presented evidence demonstrating a history and commitment to serve such patients and have in place programs and policies to ensure that such services are provided. The fourth preference provides: "In the case of proposals for a hospice service area 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." The two Service Area 1 existing hospice providers have their headquarter offices in Escambia County and there are currently satellite offices in Santa Rosa and Okaloosa Counties. There are no offices in Walton County, which is the smallest county of the four by population, 56,900 or approximately eight percent in 2006, but with the highest projected growth, 16,299, by percent, approximately 40 percent. Regency plans to open an office in Escambia and Walton Counties and an additional office in Fort Walton Beach along the Okaloosa County coastal area where neither existing providers have a current office location. Regency proposes the widest geographic coverage of offices of the three applicants, although the Escambia County office would add little. Its Walton County office would make it the only service provider with an office in that county. Odyssey plans to initially open an office in Escambia County and open an additional office in Okaloosa County starting toward the end of the second year of operation. Odyssey plans to open an office in Walton County in its third year of operation and a fourth office in Santa Rosa County six months thereafter. United proposes to open an office initially in Milton, Santa Rosa County. United proposes to have a dedicated hospice team in Walton County. No persuasive evidence was presented that residents of Walton County (or any other county in the service area) do not have access to hospice services or are actually underserved. The fifth and final preference provides: "Preference shall be given to an applicant who proposes to provide services that are not specifically covered by private insurance, Medicaid, or Medicare." All of the applicants meet this preference. Odyssey identifies several proposed services such as bereavement, pet, message, aroma, and music therapy, dialysis, palliative radiation, and palliative chemotherapy. United identifies similar services, although United provides bereavement coordination through either a social worker or chaplains. United does not allocate a specific position exclusively for bereavement. Regency identifies similar services such as bereavement following death, chaplain services, recruitment and training of volunteers, flower and music ministries, and assistance with utility bills, food, clothing, and other necessities. (The bereavement services offered, as well as policies and procedures used by RHG's hospice programs, are similar.) Bereavement and volunteer services are not specifically reimbursed by Medicare, but they are conditions of participation. The State of Florida requires all hospice providers to serve indigent patients and the applicants agree to provide hospice services to all regardless of their ability to pay. § 400.6095(1), Fla. Stat. The applicants have established charitable foundations to provide assistance to the medically needy for services that Medicare does not reimburse. Consistency with Plans; Letters of Support Florida Administrative Code Rule 59C-1.0355(5) requires consideration of the applications in light of the local and state health plans. The local health council plans are no longer a factor in this proceeding. Each applicant provided letters of support ranging from three for Regency; approximately 20 for Odyssey; and 161 for United. Statutory Review Criteria Section 408.035(2), Florida Statutes - availability, quality of care, accessibility, and extent of Utilization The Agency published a fixed need for one additional hospice in the service area. See § 408.035(1), Fla. Stat. There is no persuasive evidence to rebut the presumption of need and all parties concur there is a need for one new hospice. The service area is served by two hospice providers: Hospice of the Emerald Coast with a market share of 14 percent and Covenant Hospice with a market share of 86 percent. The extent of utilization of the two providers results in the projection for unmet need of 450 hospice admissions in 2008 growing to an unmet need of 507 admissions in 2009. Regency, United, and Odyssey projected the following admissions for their respective second year or operation (2009): 496, 454, and 411. Each applicant can reasonably meet the projected need in conjunction with the existing providers. Neither of the current providers has offices located in Walton County or in the Fort Walton Beach coastal communities. Regency plans to locate offices in these areas, which may improve accessibility. Odyssey proposes to serve Walton County from its Pensacola office until it opens a Walton County office. United proposes to meet the needs in Walton County by establishing a dedicated hospice team there and by establishing an inpatient treatment center at an existing nursing home. Aside from the numeric need projections, there is no persuasive evidence that any geographic portion of the service area or any discreet population category, such as African- Americans, Hispanic, or by age and cancer versus non-cancer groups, needing hospice services are truly underserved, although there is evidence that there are some gaps in services for the existing hospice providers when compared to statewide numbers of hospice use. Section 408.035(3), Florida Statutes - ability to provide quality of care and record of providing quality of care Each applicant has a history of providing quality hospice services. Each applicant has reported overall good responses on patient and family satisfaction surveys. Each applicant proposes to provide a broad array of hospice services to all persons regardless of their ability to pay. It is expected that each applicant will continue to provide quality of hospice services as they have in their existing programs. Each applicant will staff its hospice programs according to national guidelines. Regency proposes to staff its program with nurses on a ratio of one nurse for every ten patients as opposed to the ratio of one nurse for every 12 patients (the National Hospice and Palliative Care Organization [NHPCO] standard) proposed by Odyssey and United. Regency proposes more home visits per week (five-to- six hours per week) and more direct care hours as a percent of total staff hours than Odyssey and United. (The national average is four visits per week.) Regency and Odyssey have developed service standards. All of the applicants propose to offer similar hospice services that are discussed herein. There is evidence that Regency, in its Birmingham program, accepts medically complex patients when other providers may not. There is no evidence that any Regency or United hospice program has been cited for conditional level deficiencies, whereas Odyssey has been cited in approximately three programs, although the specifics and severity of each deficiency is unclear. It appears the deficiencies have been cleared. T 1244-1252. Odyssey also operates under a CIA, unrelated to any quality of care concerns. RHG has a Doctor of Pharmacy (Pharm. D.) on staff who is experienced in hospice and palliative care pharmacy issues. Dr. Blodgett makes regular visits to the offices in Alabama and at least quarterly visits to each of RHG hospice programs in Georgia and South Carolina; participates in IDT meetings, quarterly in South Carolina and Georgia and on a regular basis in Alabama; and is available for consultations on a regular basis. Dr. Blodgett averages between four to five home visits while working for New Beacon in Alabama. She has not made house calls yet in Georgia and South Carolina, although she consults with nurses in those areas and provides training for the hospice staff. Having a Pharm. D. on staff is advantageous for a hospice program. Dr. Blodgett recounted several representative events when she was able to directly assist a patient in dire straits. Dr. Blodgett currently oversees all of Regency's local hospice operations in Alabama, Georgia, and South Carolina with a combined average daily census of 900 to 1,000 patients, roughly 600 at New Beacon and 350 at Regency Hospice. RHG contracts for pharmacy services when Dr. Blodgett is unavailable. Odyssey provides pharmacy services through a consulting contract arrangement with a specialized pharmacy that is co-located with odyssey at its Dallas, Texas, headquarters. The consulting pharmacy has a Pharm. D. and a pharmacist on staff to provide consulting services to Odyssey's programs. The Pharm D. does not provide home visits. UHS-Pruitt has a subsidiary company, United Pharmacy Services, headed by a Pharm. D., which provides pharmacy services to the company's long term nursing home facilities, including its affiliated nursing home in Santa Rosa County. Fifty percent of United Pharmacy Services business is unrelated to UHS. The Pharm. D. is not responsible for oversight of the hospice operations. There are two licensed pharmacists who are not Pharm. D.'s within United Pharmacy Services who provide training for hospice staff and provide consulting services as needed 24/7. As a normal practice, they do not provide medications for hospice patients who at home. They consult on every hospice admission. Odyssey Healthcare has operational experience in Florida with two hospice programs, beginning in 2004. No confirmed complaints have been reported by the Agency. (Regency and United do not operate hospice programs in Florida.) Odyssey also has contiguous hospice program across Perdido Bay in Alabama. Odyssey Healthcare operates 76 Medicare certified hospice programs (or seeking certification) in 30 states. Odyssey will adopt Odyssey Healthcare's quality and improvement plans and its operational policies and procedures. United has an existing relationships with related party providers, particularly its Milton nursing home in Service Area 1. The United family of health companies located there includes a skilled nursing home, pharmacy, durable medical equipment provider, and a therapy provider. These shared resources may increase efficiency for United's hospice program. It also provides United with local contacts with physicians, hospitals, and nursing homes. Of course, in time, it is reasonable that Regency and Odyssey would develop similar relationships, although having existing relationships is a plus for United. An issue was raised regarding the applicant's commitment to provide continuous care. For the second year of operation, Regency proposes 1.46 percent; Odyssey, 1.33 percent; and United, a negligible amount, although United expects to provide continuous care days as needed by its patients. Given its existing nursing home as a component of its corporate family, United naturally provides more services to patients in its nursing homes and nursing homes owned by others. Section 408.035(4), Florida Statutes - availability of resources, including health personnel, management personnel, and funds for project accomplishment and operation Each of the applicants is a start-up company, relying on its parent organizations for financial and management strength. Each applicant has demonstrated sufficient resources to fund the start-up of a new hospice program. Controversies arose regarding when Regency and Odyssey would actually start-up operations following issuance of a CON and the amount each applicant allocated for start-up costs. Odyssey provided a start-up timeline in its application. The timeline assumes approximately six months from CON approval until Medicare certification. The timeline provides for approximately 60 days between licensure and Medicare certification. The timing of licensure and Medicare certification is imprecise at best. A provider is not entitled to reimbursement from Medicare until after certification. Operational expenses for treatment of patients between state licensure and Medicare certification would generally fall under start-up costs. Approximately three months prior to state licensure, Odyssey intends to hires a general manager who begins interviewing and hiring key staff. Other staff including the admission coordinator, RN, home health aide, dietician, social worker, and chaplain are hired in the third month. Odyssey projected its total project cost of $464,720 and total start-up costs of $350,000, with $240,000 allocated for salaries/benefits/taxes, over the six-month period from licensure approval until Medicare certification. (Odyssey exhibit 39 projects start-up expenses of $343,191.) Regency projected on Schedule 1 that its total project costs would be $195,745, with pre-opening staffing and recruitment costs of $36,500. Total start-up costs are projected at $60,000 for three offices. Mr. Morris joined RHG in February 2006. He is currently CEO for RHG and has experience with hospice programs. Subsequent to RHG's acquisitions, RHG started three hospice programs, one of which is a Medicare certified program in Augusta, Georgia, and two satellite offices. T 47, 50, 59-60, 62, 95-96. United projected on Schedule 1 that its total project costs would be $336,467, with total start-up costs at $57,257. According to Dr. Luke, if Odyssey's start-up model and time line is applied to Regency, i.e., month one is actual Medicare certification rather than licensure, Regency would need $543,408 in pre-opening expenses for the three offices it plans to open instead of $60,000 listed by Regency on Schedule 1. Odyssey also criticized United's projected start-up costs as too low based on Odyssey's six month start-up time line. United proposed it would hire most of its staff 30 days prior to licensure. United's vice president in charge of development who has started 15 to 20 hospice operations stated that it is a reasonable approach to hire, orient, and train staff one month prior to licensure. According to Dr. Luke, if Odyssey's start-up model and time line is applied to United, United would need $201,482 rather than $57,257 projected by United on Schedule 1. If month one is the month when United achieves licensure, then the start- up expenses would be $115,846 according to Dr. Luke. The persuasive evidence shows that Regency and United do not use the Odyssey start-up model and time line. Regency's pre-opening costs on Schedule 1 include only the pre-opening salaries prior to initial state licensure of the hospice rather than Odyssey's approach. The salary and wage expenses for Regency after initial licensure are included on its Schedule 8A projection of expenses, whereas it appears Odyssey started its Schedule 8A expenses on the date of Medicare certification. Dr. Luke agreed that this difference in approach would reduce his estimate of pre-opening expenses from $543,408 to $297,792. In other words, if Regency's month one, year one is licensure not certification, according to Dr. Luke, Regency's start-up expenses would be $297,792. Unlike Odyssey, Regency proposes to hire its local executive director one month prior to licensure. All of the additional patient care staff necessary to care for the low initial patient census in the first month of operation would also be hired and undergo training 30 days prior to licensure. Additional staff would be hired and start on day one of licensure and undergo training during the first month of operation while the patient census is in the ramp up stage. While Odyssey and Regency propose differing start-up models and time lines with differing hiring schedules and Regency's time line appears to be quite concentrated, both applicants have sophisticated parent company's who have experience with hospice operations, albeit that Odyssey has more experience than Regency or United with start-up hospice programs, especially in Florida where Regency and United have no experience and Odyssey has experience with two start-up hospice programs. (Regency has not done any start-up hospice programs in a state where either Regency or New Beacon had no presence, although it was noted by a witness that the markets were similar except for the CON process in Florida.) Like, Odyssey, United has start-up experience and given its time-line, its projected start-up costs are reasonable. The start-up costs and expenses projected by the applicants are reasonable, although it would appear the Regency's projected start-up costs may be overly optimistic. In any event, the parent organizations have sufficient funds to cover projected start-up costs and expenses. All of the applicants demonstrated they can recruit staff to adequately provide hospice services. Section 408.035(5), Florida Statutes - extent to which proposed services will enhance access to health care for residents of the service district There is a projected need for one additional hospice program in the service area. Approval of any of the applicants would enhance access to some degree and it is difficult to predict which applicant would enhance access the best. Regency proposes to open three offices immediately in Escambia, Okaloosa, and Walton Counties. Regency would have the only office offering hospice services located in Walton County. Covenant has an office in Niceville in Okaloosa County and not far from Fort Walton Beach, also a site proposed for a Regency office. The existing providers have their headquarters in Escambia County, also the location of Odyssey's headquarters and initial office. Thereafter, Odyssey plans to open offices in Okaloosa, Walton, and Santa Rosa Counties in this order. United plans to open its initial office in Santa Rosa County where its related nursing home is located. United plans to have dedicated hospice team in Walton County and perhaps a second office located there in the future. Of the three applicants, United would enhance access the least. The proposed office locations for Regency and to a lesser extent Odyssey would probably favor Regency rather than Odyssey, although it is one of degree. Some of the factors that favor Regency and Odyssey over United are: Regency and Odyssey expect to provide a specific percent of continuous care, 1.46 and 1.33, respectively; both project to serve more patients (by patient census) than United; both will focus efforts more on a service area wide basis than related nursing home patients in the case of United; and both will devote more FTEs for community hospice/education representatives and information materials than United. Section 408.035(6), Florida Statutes - immediate and long-term financial feasibility Short-term financial feasibility is considered to be the ability of an applicant to finance the start-up of operations. Each of the parent entities of the applicants has sufficient funds to finance the start-up of operations and, as a result, each applicant demonstrated immediate or short-term financial feasibility. Each of the financial projections relating to long- term financial feasibility submitted by the applicants has problems. There is no rule or statute that expressly defines long-term financial feasibility, notwithstanding the requirement that an applicant provide the Agency with detailed financial projections, including a statement of the projected revenues and expenses for the first two years of operation after completion of the proposed project. § 408.037(1)(b)3., Fla. Stat. The applicants provided financial projections for two years of operation. Thus, as identified by the applicants, long-term financial feasibility relates to whether an applicant has the ability to break even or show a profit by the end of the second year of operations. See generally T 1412, 1533. Regency's errors including typographical errors, admittedly small (the inclusion of Medicare revenue that would not be received for the first 45 days to two months of operation while the hospice program would not yet have Medicare certification), would not affect the projected long-term financial feasibility of its project. The errors affect the year one projections only and resulted in a projected write-off of approximately $31,000 or an increase to the projected loss of approximately $31,000. Regency shows a profit in year two. Also, regardless of whether Regency's projection of pre-opening expenses is reasonable or not, which it appears to be, Regency has adequate cash on hand to open its three proposed offices and the pre-opening expense if greater than projected is not likely to affect long-term financial feasibility. United's financial schedules contained an error by omitting the room and board expenses for Medicaid nursing home residents who receive hospice care. This failure to include the full cost of inpatient care would result in a shortfall in the pro forma of between $50,000 to $150,000 and potentially $373,000 in year two of operation. United also explained that it used a conservative number of patient days on its financial schedules. It is likely that if United had used a mean average length of stay rather than a median length of stay, the projected revenues would likely have increased although offset by increasing expenses. In other words, it would have increased the average daily census and thereby increased the revenues. Mr. Shull testified that he expected that the United proposal would be financially feasible in the long-term based on the experience in its other hospice programs. Odyssey's financial projections were the subject of focus by the applicants. See, e.g., Odyssey's PRO at paragraphs 53-55; Regency's PRO at paragraphs 203-210; and United's PRO at 43-45. On Schedule 6, an applicant sets forth its projected staffing for the project. When reporting full time equivalents (FTEs) for staffing, the Agency does not proscribe the specific format to be used. On its original Schedule 6 contained in the application, Odyssey set forth the number of year-end FTEs as opposed to using a weighted average of FTEs for the year. Regency suggested that, as a result of Odyssey's portrayal of staffing information, there was no link between Odyssey's Schedule 6A FTEs and salaries and the expense for staff's salaries and wages on Schedule 8A. Regency also contended that Odyssey did not account for staffing expenses associated with the provision of respite care and continuous care. Further, although Odyssey proposes to spend $25,000 in community outreach and marketing programs in its first two years of operation, that expense was not included in its pro forma projections. Odyssey prepared numerous exhibits, including revisions, that deal with these areas and various witnesses explained and offered rebuttal in response. Regarding the continuous care/respite issue, if appropriate revisions are made to Odyssey's pro forma, on paper, there is likely to be a projected net loss in year two of approximately $100,000. Odyssey proposes changing the 13.5 percent management fee that was included in the application to a seven percent management fee. Odyssey Healthcare's two not-for-profit Florida hospice entities are charged a seven percent management fee, similar to the fee it charges to other not-for-profit subsidiaries. Odyssey's proposed seven percent management fee is in line with the management fees proposed by Regency (7.2 percent) and United (6.3 percent). It appears reasonable to charge not-for-profit entities a lower fee because these entities would not be charged with the home office costs associated with various regulatory filings associated with being a publicly traded company. On the other hand, other than perhaps being a mistake, Odyssey's rationale for charging a different management fee for the applicant, a for-profit entity, T 1039, than other related for- profit entities is a departure from the norm. Changing the management fee and accounting for all of the adjustments to its financial schedules would result in Odyssey showing a year two profit of approximately $80,000. Section 408.035(7), Florida Statutes - extent to which proposal will foster competition that promotes quality and cost- effectiveness Approval of any of the applicants is likely to foster competition, thereby improving quality and cost-effectiveness in the service area, although there is no evidence that the current providers do not provide quality of care or are not cost- effective. Hospice services are not price competitive because Medicare pays a flat per diem rate to all providers in a given area and the vast majority of hospice patients are Medicare patients. Each provider has the ability to increase community awareness of available hospice services thus increasing the opportunity for increasing market penetration of all providers. United has existing linkages in the community that it serves through its related nursing home and other related companies. United's prospects of achieving cost-efficiencies and economies of scale are increased because of these relationships. Regency and Odyssey can also achieve similar efficiencies through their existing relationships with related entities. Having an office in a particular county such as Walton County, would most likely establish and promote a presence in the area that would be beneficial given its rural setting. However, it was not persuasively proven that opening more versus fewer offices in the short-term is more beneficial to the potential hospice patient pool from the standpoint of actually promoting cost-effectiveness and quality of care, although it does increase the physical presence of a hospice provider and give potential patients more choices. Section 408.035(8), Florida Statutes - costs and methods of construction, etc. None of the applicants are proposing construction as part of their hospice programs, thus, this criterion is not applicable. (Section 408.035(10), Florida Statutes, is also not applicable.) Section 408.035(9), Florida Statutes - the applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent All of the applicants propose to serve all eligible patients without regard to ability to pay and have a history of providing patient care to the medically indigent. All of the applicants have allocated patient days to serving, e.g., Medicaid patients. Regency offered to provide 2.5 percent of patient days to the medically indigent as a condition on the CON. Odyssey and United did not offer a similar condition. However, the Agency states in the SAAR that "[b]ecause hospice programs are required to provide services to anyone seeking them, CON conditions are not necessary to ensure such care is given." AHCA 1 at 6. Ultimate findings of fact The Agency determined that there is a numeric need for one additional hospice program in the service area. On balance, each of the applicants satisfies the applicable statutory and rule criteria, although the projected long-term financial feasibility by year two on paper of United's proposal was not proven. This proceeding involves a close question. The Agency preliminarily approved Regency's application. The only evidence of the Agency's rationale for its position is stated in the SAAR, which does not include consideration of the facts presented in this de novo hearing. Each of the applicant's related entities has experience starting-up, owning, and operating hospice programs with Odyssey related entities operating two programs in Florida unlike Regency and United. Each applicant's related hospice entities provide a broad array of hospice services to all persons regardless of their ability to pay, race, severity of illness, or setting where hospice services need to be provided. Each applicant demonstrated a history of service, by related entities, to Medicaid and medically indigent patients. The residents of the service area would benefit regardless of which applicant is approved. The applicants are committed to community outreach and can be expected to heavily market their services. All of the applicants demonstrated that they will actively recruit needed personnel. United's presence in the service area may give United an edge with regard to recruitment, but if so, the edge is slight. Consistent with NHPCO standards, Odyssey and United propose a ratio of one nurse for every twelve patients. Regency proposes a better ratio: one nurse for every ten patients. Regency's Pharm. D., although spread thin given the number of hospice programs served by Regency's related entities in three states, is a positive feature. Despite correcting errors in its financial projections, Regency demonstrated financial feasibility in year two of operations and should receive a comparative advantage. Odyssey and United had problems with proving long-term financial feasibility. Odyssey, after revisions to its financial schedules and reducing the proposed management fee, demonstrated financial feasibility by year two. United can expect to have a loss in year 2, but like Odyssey, its parent organization has a strong financial position and is committed to the project such that it is likely to be financially feasible beyond year two. Regency expects to initially open three offices and, in particular, one in rural Walton County. Odyssey plans to open an office in each county within the service area, although staggered. United plans to open one office initially and takes a wait and see approach regarding opening other offices. The approach of United and to a much lesser extent Odyssey, require less overhead expense but is not necessarily appropriate given the need for an additional hospice services over a four-county area, although the need projection does not indicate which portion or portions of the service area need the additional program the most or where underserved persons may be located, although there are gaps in service. Regency should receive a slight advantage for proposing to offer slightly more continuous care than Odyssey and a greater advantage over United, which expects to provide the service, but did not allocate a specific percentage of care. United receives an edge given its established relationships in the service area by and through its related service providers. The United family includes a nursing home, pharmacy, durable medical equipment provider, and a therapy provider. It gives United the opportunity to share resources among programs to increase efficiency. Odyssey receives a plus given current operations in Florida and contiguous operations across Perdido Bay in Alabama. Odyssey Healthcare's prior problems with the federal government, Medicare cap issues, and unfavorable surveys detract from the overall positive features of Odyssey's proposal. Regency has had one Medicare cap issue. United does not share these problems. Overall, and in a tight comparative review hearing, the persuasive evidence favors Regency followed by Odyssey with United closely behind Odyssey.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered approving of Regency's CON No. 9971 and denying United's CON No. 9955 and Odyssey's CON No. 9954. DONE AND ENTERED this 30th day of April, 2008, in Tallahassee, Leon County, Florida. S CHARLES A. STAMPELOS 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 30th day of April, 2008.
The Issue Whether the Certificate of Need (CON) applications filed by Odyssey Healthcare of Collier County, Inc., d/b/a Odyssey Healthcare of Northwest Florida, Inc. (Odyssey), and HPH South, Inc. (HPH), for a new hospice program in the Agency for Health Care Administration (AHCA or the Agency) Service Area 5B, satisfy, on balance, the applicable statutory and rule review criteria to warrant approval; and whether such applications establish a need for a new hospice based on special circumstances, and, if so, which of the two applications best meets the applicable criteria for approval. Holding: Neither applicant proved the existence of special circumstances warranting approval of an additional hospice program in Service Area 5B. Although neither application is recommended for approval in this Recommended Order, both applicants, on balance, satisfy the applicable statutory and rule criteria. Of the two, HPH best satisfies the criteria.
Findings Of Fact The Parties AHCA The Agency for Health Care Administration is the state agency authorized to evaluate and render final determinations on CON applications pursuant to Subsection 408.034(1), Florida Statutes. HPH HPH is a newly created not-for-profit corporation formed to initiate hospice services in Pinellas County. HPH is a wholly-owned subsidiary of Hernando-Pasco Hospice, Inc., d/b/a HPH Hospice and is one of the oldest, not-for-profit community hospices in Florida. HPH Hospice was incorporated in 1982 to serve terminally ill persons within Hernando and Pasco Counties. HPH was approved to expand its services north to Citrus County in 2004. HPH is a high-quality provider of hospice services in the service areas where it currently operates. It provides pain control and symptom management, spiritual care, bereavement, volunteer, social work, and other programs. HPH employs a physician-driven model of hospice care, with significant involvement of hospice and palliative care physicians who are physically present treating patients in their homes. The number of physician home visits provided to hospice patients by HPH physicians is larger than many hospices in Florida and throughout the United States. In 2009, HPH provided over 35,000 visits by physicians, advanced registered nurse practitioners, and licensed physician assistants to its hospice patients. The majority of these visits occurred in the patients' homes. HPH operates multiple facilities that allow for provision of services to patients in various settings and hospice levels of care. Among its facilities, HPH operates four buildings it calls Care Centers, at which patients can receive general in-patient care. Additionally, HPH operates four units which it calls Hospice Houses. Those units provide for residential care in a home-like environment for patients who do not have caregivers at home or who otherwise are in need of a home. HPH receives no reimbursement for room and board for the care provided at its Hospice Houses and expends over $1.4 million annually in charity care to operate these Hospice Houses for the benefit of its patients. HPH has an established record of providing all levels of hospice care and does not use its Care Centers as a substitute for providing continuous care in the patient's home when such care is needed. Annually, HPH provides approximately percent of its patient days for continuous care patients. HPH has well-developed staff education and training programs, including specialized protocols for care and treatment of patients by terminal disease type such as Alzheimer's, COPD, cancer, failure to thrive, and pulmonary diseases. Odyssey Odyssey is the entity applying for a new hospice program in Service Area 5B. The sole shareholder of Odyssey is Odyssey HealthCare Operating B, LP, which is a wholly-owned subsidiary of Odyssey HealthCare, Inc. (OHC), Odyssey's parent and management affiliate. Odyssey was formed for the purpose of filing for CON applications in Florida and, thereafter, for owning and operating hospice programs in Florida. OHC is a publicly-traded company founded in 1996 and focuses on caring for patients at the end of life's journey. OHC's sole line of business is hospice services. OHC's patient population consists of approximately 70 percent non-cancer and 30 percent cancer patients. OHC is one of the largest providers of hospice care in the United States. OHC has approximately 92 Medicare-certified programs in 29 states, including established programs in Miami-Dade (Service Area 11) and Volusia (Service Area 4B) Counties and a start-up program in Marion County (Service Area 3B), which was licensed in January 2010. Over four years ago, OHC was the subject of an investigation by the United States Department of Justice that ultimately resulted in a settlement and payment of $13 million to the federal government in July 2006. The settlement did not involve the admission of liability or acknowledgement of any wrongdoing by OHC. As part of the settlement, OHC entered into a corporate integrity agreement (CIA) with a term of five years. Odyssey is now in the final year of the CIA. The settlement and CIA allow OHC to self-audit to ensure compliance with the Medicare conditions of participation, which is the first and only time the OIG has allowed a provider to self audit. Suncoast Suncoast is a large and well-developed comprehensive hospice program serving Pinellas County, Service Area 5B. Suncoast is the sole provider of hospice services in Service Area 5B. According to data reported to the Department of Elder Affairs, Suncoast had 7,375 admissions and provided 795,102 patient days of care in 2009, more than any other Florida hospice. In that same year, Suncoast provided 115,247 patient days of care in assisted living facilities, the third highest total in Florida. Suncoast considers itself a model for hospice across the United States and the world. Suncoast has a large depth and breadth of programs, including community programs offered by its affiliate organizations, such as the AIDS Service Association of Pinellas County, the Suncoast Institute, and Project Grace. Suncoast is active in the national organization for hospices and interacts with programs that use it as a model and resource. Unlike the applicants, Suncoast does not use the Medicare conditions or definitions to limit or define the scope of services it provides. Under the Florida definition, hospice is provided to patients with a life expectancy of 12 months or less. HPH, by way of contrast, uses the Centers for Medicare and Medicaid Services definition for hospice, i.e., a prognosis of six months or less. Overview of Hospice Services In Florida, hospice programs are required to provide a continuum of palliative and supportive care for terminally ill patients and their families. Under Florida law, a terminally ill patient has a prognosis that his/her life expectancy is one year or less if the illness runs its normal course. Under Medicare, a terminally ill patient is eligible for the Medicare Hospice benefits if their life expectancy is six months or less. Hospice services must be available 24 hours a day, seven days a week, and must include certain core services, including nursing, social work, pastoral care or counseling, dietary counseling, and bereavement counseling. Physician services may be provided by the hospice directly or through contract. Hospices are required to provide four levels of hospice care: routine, continuous, in-patient, and respite. Hospice services are furnished to a patient and family either directly by a hospice or by others under contractual arrangements with a hospice. Services may be provided in a patient's temporary or permanent residence. If the patient needs short-term institutionalization, the services are furnished in cooperation with those contracted institutions or in a hospice in-patient facility. Routine home care comprises the vast majority of hospice patient days. Florida law states that hospice care and services provided in a private home shall be the primary form of care. Hospice care and services, to the extent practicable and compatible with the needs and preferences of the patient, may be provided by the hospice care team to a patient living in an assisted living facility (ALF), adult family-care home, nursing home, hospice residential unit or facility, or other non-domestic place of permanent or temporary residence. A resident or patient living in an ALF, nursing home, or other facility, who has been admitted to a hospice program, is considered a hospice patient, and the hospice program is responsible for coordinating and ensuring the delivery of hospice care and services to such person pursuant to the statutory and rule requirements. The in-patient level of care provides an intensive level of care within a hospital setting, a skilled nursing unit or in a freestanding hospice in-patient facility. The in- patient component of care is a short-term adjunct to hospice home care and home residential care and should only be used for pain control, symptom management, or respite care in a limited manner. In Florida, the total number of in-patient days for all hospice patients in any 12-month period may not exceed 20 percent of the total number of hospice days for all the hospice patients of the licensed hospice. Continuous care, similar to in-patient care, is basically emergency room or crisis care that can be provided in a home care setting or in any setting where the patient resides. Continuous care, like in-patient care, was designed to be provided for short amounts of time, usually when symptoms become severe and skilled and individual interventions are needed for pain and symptom management. Respite care is generally designed for caregiver relief. It allows patients to stay in hospice facilities for brief periods to provide breaks for the caregivers. Respite care is typically a very minor percentage of overall patient days and is generally designed for caregiver relief. Medicare reimburses the different levels of care at different rates. The highest level of reimbursement is for continuous care. Approximately 85 to 90 percent of hospice care is covered by Medicare. The goal of hospice is to provide physical, emotional, psychological, and spiritual comfort and support to a terminally ill patient and their family. Hospice care provides palliative care as opposed to curative care, with the focus of treatment centering on palliative care and comfort measures. There is no "bright line test" as to what constitutes palliative care and what constitutes curative care. The determination is made on a case-by-case basis depending upon the facts and circumstances of each such case. However, palliative care generally refers to services or interventions which are not curative, but are provided for the reduction or abatement of pain and suffering. Hospice care is provided pursuant to a plan of care that is developed by an interdisciplinary group consisting of physicians, nurses, social workers, and various counselors, including chaplains. There are certain services required by individual hospice patients that are not necessarily covered by Medicare and/or private or commercial insurance. These services may include music therapy, pet therapy, art therapy, massage therapy, and aromatherapy. There are also more complicated and expensive non-covered services, such as palliative chemotherapy and radiation that may be indicated for severe pain control and symptom control. Suncoast provides, and both Odyssey and HPH propose, to provide hospice patients with all of the core services and many of the other services mentioned above. Fixed Need Pool The Agency has a numeric need formula within its rule for determining the need for an additional hospice program in a service area. See Fla. Admin. Code R. 59C-1.0355(4)(a). When applying the formula in the present case, AHCA ultimately determined that the fixed need was zero for the second batching cycle of 2009. In the absence of numeric need, an applicant must document the existence of one of three delineated special circumstances set forth in Florida Administrative Code Rule 59C-1.0355(4)(d), i.e., (1) That a specific terminally ill population is not being served; (2) That a county or counties within the service area of a licensed hospice program are not being served; or (3) That there are persons referred to hospice programs who are not being admitted within 48 hours. Absent numeric need or one of the delineated special circumstances, there cannot be approval of a new hospice program. In forecasting need under the hospice rule's methodology, AHCA uses an average three-year historical death rate. It applies this average against the forecasted population for a two-year planning horizon. AHCA also uses a statewide penetration rate, which is the number of hospice admissions divided by hospice deaths. The statewide average penetration rate is subdivided into four categories: cancer over age 65, cancer under age 65, non-cancer over age 65, and non-cancer under age 65. The projected hospice admissions (based on death rate and projected population growth) in each category are then compared to the most recent published actual admissions to determine the number of projected un-met admissions in each category. If the total un-met admissions in all categories exceed 350, a new hospice is warranted, unless there is a recently approved hospice in the service area or a new hospice provider has not been operational for two years. In the instant case, AHCA's final projections showed the net un-met need for hospice's admissions in Service Area 5B was 318, i.e., below the threshold amount of 350 necessary to establish need for an additional hospice program. The fixed need pool for the purpose of this administrative hearing is zero. HPH is primarily basing its determination of need for a new hospice on its contention that there are three specific terminally ill population groups in Pinellas County that are not being served. Odyssey is primarily basing its determination of need for a new hospice on its contention that there are persons being referred to the existing hospice program in Pinellas County who are not being admitted within 48 hours. The Proposals HPH's Proposal HPH proposes to establish its new hospice program in Pinellas County, Service Area 5B. HPH is currently licensed to provide hospice care in three contiguous sub-districts north of Service Area 5B, i.e., in Hernando, Pasco, and Citrus counties. HPH's corporate headquarters is located in Pasco County, ten to 15 minutes from the Pinellas County border. HPH currently operates a home health agency in Pinellas County. HPH's CON application identifies special circumstances justifying approval of its proposal, including four sub-populations of terminally ill persons who are currently underserved in Service Area 5B: (1) patients living in ALFs; (2) patients requiring continuous care; (3) medically complex patients; and (4) patients not being admitted within 48-hours. Another circumstance identified by HPH to support approval of its application is the fact that Pinellas County is one of the most populous and most elderly service areas in the State, and yet, it only has a single hospice provider. HPH argues that the fact Suncoast is a sole hospice provider for the service area exacerbates and contributes to the problems of gaps in available hospice services to the specific terminally ill sub-populations identified in its CON application. HPH proposes a de-centralized model of hospice service delivery similar to its model in the three contiguous counties where HPH presently provides hospice services. HPH proposes contracting with existing nursing homes and hospitals for in-patient beds ("scatter beds") throughout Service Area 5B. HPH then projects that it could offer in-patient services in the local neighborhoods of patients and families where they live, as opposed to transferring patients to a single in-patient facility for the provider's convenience. As census increases, HPH commits to establish, by month seven of operation, a dedicated in-patient unit to provide in-patient level of care and Hospice House residential care to patients in a home-like environment. Like its hospice operations in Hernando, Pasco and Citrus Counties, HPH proposes to implement its "physician- driven" model of hospice care in Service Area 5B, allowing for greater involvement of physicians in the care and treatment of hospice patients, including physician home visits. Odyssey's Proposal Odyssey proposes to address lack of competition2 in Service Area 5B and the special circumstance of patients not being admitted within 48 hours of referral. Under AHCA's hospice rule, an applicant may demonstrate the need for a new hospice provider if there are persons referred to a hospice program who are not being admitted within 48 hours. However, the applicant must indicate the number of such persons. Odyssey relies upon referral of admission statistical information previously provided by Suncoast to a sister Odyssey entity in a 2005 hospice CON matter. Suncoast at that time provided three years of data that demonstrated between 1,700 (31 percent of admissions) and 2,300 (38 percent of admissions) of patients admitted to Suncoast were admitted 72 hours or more after referral. The definition of referral by Suncoast, however, differs from the definition of referral relied upon by Odyssey. (See Paragraph 56, herein.) Odyssey also provided letters of support from the community to further evidence the existence of the 48-hour special circumstance. However, the letters of support originally appeared in an application filed by Odyssey in 2007 and were not given any weight in the instant proceeding based on their staleness. Odyssey also contends that the existence of a sole provider in Service Area 5B has created a monopolistic situation in the service area. It further contends that the lack of competition has led to the existence of a 48-hour special circumstance in Service Area 5B. Approval of Odyssey's application will, it says, eliminate the monopoly currently existing in Service Area 5B and will address the lack of competition currently occurring in Service Area 5B. Subsection 408.045(2), Florida Statutes, speaks of a "regional monopoly," but there is no credible evidence in the record to suggest that Suncoast's position as a sole provider in Pinellas County constitutes a "regional monopoly." Facts Concerning Special Circumstances Arguments Service Area Demographics Hospice Service Area 5B, Pinellas County, is a single-county hospice service area with a population of approximately one million residents. Pinellas County is currently ranked as the fourth largest county in the State in total numbers of elderly persons over 65 years of age, as well as elderly persons over 75 years of age, behind only Miami-Dade, Broward and Palm Beach Counties. Pinellas County also experienced the fourth highest number of total deaths in the State in 2008--11,268. Pinellas County's mortality rate in recent years has slowed. However, even considering a slower growth rate in the number of deaths, Pinellas County likely will remain the fourth largest county in the State in both elderly population and number of deaths through 2015. Although it is the fourth largest service area in terms of likely hospice patients, Suncoast is the sole hospice provider in Service Area 5B. By contrast, the other three largest service areas all have multiple hospice programs to serve their large elderly populations with eight providers in Service Area 11 (Miami-Dade), five providers in Service Area 10 (Broward), and three providers in Service Area 9C (Palm Beach). In assessing the extent of utilization of hospice services in Service Area 5B, HPH through its health planner, Patricia Greenberg, noted that Suncoast appears to have over-stated its utilization rate in its semi-annual reports to AHCA. Ms. Greenberg testified that Suncoast's AHCA data includes patients who are not truly hospice patients and are, instead, patients who are participating in non-hospice programs operated by Suncoast, including palliative care programs known as "Suncoast Supportive Care" and "Hospital Support." The number of such patients was not quantified by Ms. Greenberg.3 Suncoast counters that it does not let the conditions of participation define the scope and breadth of hospice services it offers. Suncoast tries not to be defined by the Medicare conditions of participation and has programs that are not covered by the benefit, including but not limited to its residential care at Woodside and its caregiver services. Specific Terminally Ill Populations HPH identified as under-served in Service Area 5B medically complex patients with complex medical needs, including multiple IVs, wound vacs, ventilator, complex medications, or acutely uncontrolled symptoms in multiple domains. These are the same kinds of patients who would require continuous care within their homes. Hospice patients have become more highly acute in recent years. More patients are being discharged from hospitals with highly complex medical conditions, often directly from hospital intensive care units. Patients discharged directly from hospitals tend to have higher acuity levels. Ms. Greenberg reviewed Suncoast's data on hospital discharges and found Suncoast statistically lags behind HPH in caring for medically complex patients discharged from hospitals. Looking at a three-year average, HPH had 3.7 percent of its hospice discharges directly admitted from hospitals, compared to percent for Suncoast. This is more than a 50-percent deviation between hospital discharges to hospice for HPH versus Suncoast. However, a comparison of Suncoast to HPH does not establish that there is a specific underserved population in Service Area 5B which is not receiving services. One case manager testified to sometimes not being able to timely find hospice placements for medically complex patients. Such patients would then have to be transferred from the hospital to a nursing home or rehabilitation facility. However, she did not testify that this specific terminally ill population was not being served, only that they were being served somewhere other than in an in-patient hospice bed. Medically complex patients, including those needing continuous care, were another specific terminally ill population identified by HPH. At page 54 of her deposition, Deborah Casler, a case manager at Helen Ellis Hospital, addressed those populations, saying, "[w]hat I am going to say is if anybody needed continuous care through Suncoast, it would happen, but it wasn't always a quick and easy process." HPH compared its percentage of continuous care patient days with Suncoast, showing that HPH had more. That does not equate to an absence of service for any specific terminally ill population. HPH attempts to create a presumption that services are not being provided by conditioning its application on a certain percentage (3 percent) of days for continuous care patients. That is merely a projection of intent; it is not evidence that a certain population is not currently being served. Assisted Living Facility Residents HPH provided anecdotal evidence that some ALFs in Pinellas County were not pleased with the services being provided by Suncoast. One ALF administrator was dissatisfied that Suncoast took a long time to admit her resident (but the resident was ultimately admitted). Another was disappointed with Suncoast because it took a long time to get medications for her resident. Another felt like Suncoast's quality of care was inferior. HPH provides a greater percentage of hospice services to ALF residents in Pasco (12.7 percent), Hernando (26.5 percent), and Citrus (23.5) counties than Suncoast provides to ALF residents in Pinellas County. There are approximately 215 ALFs in Pinellas County of varying sizes, i.e., from three beds to almost 500 beds. Suncoast did not provide services to all of them. There was no showing, however, that any resident of an ALF who needed or requested hospice services was denied such care. None of the evidence presented by HPH establishes the existence of a group of ALF residents who were not being served in the service area; nor does the evidence prove that any specific ALF residents are, in fact, terminally ill. The 48-Hour Admission Provision Neither Suncoast, nor Odyssey presented any hard data on timeliness of admissions. In fact, none of the parties could agree as to what action constitutes an admission. Suncoast says an admission must include a physician order and a consent by the patient and family. Odyssey identifies a referral as a telephone call from a family member, even if the call is simply an inquiry as to what services might be available. Odyssey says that the majority of its patients are admitted within three hours of referral and at least 80 percent are admitted within 24 hours. During that three-hour time frame, Odyssey will contact the family, contact the physician in order to evaluate and admit, if appropriate, screen the patient to ensure he or she meets the eligibility guidelines, go out and meet with the family, and provide support while necessary information is being gathered. HPH candidly admits that the issue of admissions within 48 hours does not, in and of itself, justify the approval of a new hospice program in Service Area 5B. However, HPH argues, it is an element of hospice services that HPH would do better than the other parties. There is no credible evidence in the record that an identified number of persons in Pinellas County had not been admitted to hospice within 48 hours of referral. Statutory and Rule Review Criteria Rule Preferences The Agency is required to give preference to an applicant meeting one or more of the criteria specified in Florida Administrative Code Rule 59C-1.0355(4)(e)1 through 5: Commitment to serve populations with unmet need.-- There is no numeric need in this matter. Neither applicant proved the existence of a population with unmet need. Commitment to provide in-patient care through contract with existing health care facilities.-- Both HPH and Odyssey intend to use scatter beds and to contract with existing health care providers. Commitment to serve homeless and AIDS patients, as well as patients without caregivers.--Both applicants have shown a history of serving such groups and commit to do so in Pinellas County. Not Applicable. Commitment to provide services not covered by insurance, Medicare or Medicaid--Both applicants have a good history of providing indigent care and commit to do so in Pinellas County. Consistency with Plans; Letters of Support Florida Administrative Code Rule 59C-1.0355(5) requires consideration of the applications in light of the local and state health plans. The local health council plans are no longer a factor in this proceeding. The state health plan addresses the concept of letters of support. Again, as neither applicant proved special circumstances warranting approval of a new hospice program, this comparison is unnecessary. However, there was considerable testimony and argument at final hearing concerning letters of support and the issue deserves some discussion. Each applicant provided letters of support. In fact, HPH's application contained over 250 letters of support from a wide range of writers, including physicians, nurses, ALF and nursing home administrators, and others. AHCA even complimented HPH's letters of support in both quantity and quality. Such letters are, of course, hearsay and cannot be relied upon to make findings as to the statements made herein. However, the fact that HPH generated so many letters of support is a fact that lends additional credence to their application. Odyssey's letters of support, by comparison, were much fewer in number. The letters were also dated, having come from a CON application filed some three years prior to the application currently at issue. The content of those letters would also be hearsay. And in the present action, the age of the letters would reduce their significance as support for the Odyssey CON application at issue. Statutory Review Criteria The Agency reviews each CON application in context with the criteria set forth in Subsection 408.035(1)(a) through (j), Florida Statutes: Subsection 408.035(1)(a), Florida Statutes--The need for the health care facilities and health services being provided There was no need projected by AHCA under its need methodology. Neither party established the existence of special circumstances warranting approval of a new hospice program in Service Area 5B. Subsection 408.035(1)(b), Florida Statutes-- availability, quality of care, accessibility, and extent of utilization Suncoast is the sole provider of hospice services in Service Area 5B. This service area is one of the largest in the State. There are other service areas which have a single hospice provider, but Service Area 5B is the largest service area to be served by a single hospice provider. Service Area 5B experienced the fourth largest number of deaths in the State in 2008, an important factor in the provision of hospice care. Suncoast has 15 interdisciplinary care teams, each of which, lead by a patient-family care coordinator, includes RNs, home health aides, counselors, volunteers, and a chaplain. Suncoast has a north community service center in Palm Harbor that houses four patient care teams. On the back of that property is Brookside, Suncoast's newly built 30-bed in-patient facility. In central Pinellas County, Suncoast has its main service center with six patient care teams along with administrative and support offices. Suncoast has a pharmacy, as well as durable medical equipment and infusion departments, located in Largo. In central Pinellas County is Suncoast's ten-acre, 72-bed Woodside facility. Thirty-six of the beds are in-patient and 36 are residential. On the back of the property are 18 efficiency apartments called "Villas" with separate living, sleeping and kitchen areas. When patients become too ill to remain at home, their spouse may move into a villa until the patient dies. In the southern portion of the county is Suncoast's south community service area which houses five patient care teams, as well as "ASAP." ASAP is Suncoast's AIDS Service Association of Pinellas County which serves and provides support to patients with HIV and AIDS. Suncoast also has in-patient contracts with every hospital in Pinellas County and a number of contracts with nursing homes for in-patient care. Patients may receive continuous care in the home whether that is a residence, an ALF, or a nursing home or may receive care in the Suncoast in-patient unit. There is disagreement over whether Suncoast accurately reports its admissions and whether all reported admissions are actually hospice patients. Further, HPH points out that its penetration rate in counties where it operates is much higher than Suncoast's penetration rate in Pinellas County. However, the most credible evidence is that Suncoast is effectively serving the needs of hospice-eligible residents of Service Area 5B. Subsection 408.035(1)(c), Florida Statutes--ability to provide quality of care and record of providing quality of care Both applicants satisfy this criterion. Both applicants can provide a broad range of quality hospice services to all its patients. HPH touts its physician model, including physician home visits, as evidence of its commitment to quality care. Physician visits have been proven to help patients get pain under control more quickly, an important factor considering ten percent of hospice patients die within 48 hours of admission. Odyssey is a large company and has extensive operational policies and procedures concerning provision of quality care to its patients. Odyssey has a program called Care Beyond which it believes will enhance quality care in Service Area 5B. Odyssey has had some regulatory violations while HPH has not. However, Odyssey has resolved those violations favorably. Subsection 408.035(1)(d), Florida Statutes-- availability of resources, including health personnel, management personnel, and funds for project accomplishment and operation The parties stipulate that both applicants meet this criterion. Subsection 408.035(1)(e), Florida Statutes--extent to which proposed services will enhance access to health care for residents of the service district Both applicants satisfy this criterion. HPH is the existing provider of hospice services in the adjacent service area to Service Area 5B. HPH can use its existing contacts in Service Area 5B to extend its service to residents of that area. HPH has already established relationships with Airamed Corporation and its 11 nursing homes and ALF in Service Area 5B. HPH also commits to being more directly involved with smaller ALFs in Pinellas County. Odyssey is a large hospice with significant resources which can be utilized to enhance access for residents of Service Area 5B. It commits to bring quality personnel to Service Area 5B as part of its successful start-up procedures. Subsection 408.035(1)(f), Florida Statutes--immediate and long-term financial feasibility The parties stipulate that both applicants meet this criterion. Subsection 408.035(1)(g), Florida Statutes--extent to which proposal will foster competition that promotes quality and cost-effectiveness Both applicants are established providers of hospice services. The absence of any other hospice provider in Pinellas County means there is no effective competition. If either of the applicants was granted a CON for a new hospice in Service Area 5B, it would likely foster competition and promote quality and cost-effectiveness. Subsection 408.035(1)(h), Florida Statutes--costs and methods of construction, etc. This criterion is not applicable to the instant case. Subsection 408.035(1)(i), Florida Statutes--the applicant's past and proposed provision of health care services to Medicaid patients and the medically indigent Both applicants meet this criterion. HPH offers extensive services that go beyond the Medicare requirements of participation. It also operates "Hospice Houses" which provide room and board to homeless hospice patients. Odyssey's record of indigent care is evidenced by the fact that approximately 55 percent of its non-Medicare net revenue is from Medicaid, and 9.5 percent of its non-Medicare services are provided to indigent patients. Subsection 408.035(1)(j)--designation as a Gold Seal Program This criterion is not applicable to the instant case. Ultimate Findings of Fact The Agency determined that there is no need for an additional hospice in the service area based upon the fixed need pool formula. Neither applicant was able to establish the existence of special circumstances warranting approval of a new hospice in the service area. There is no specific terminally ill population which is not receiving hospice services that has been identified by the applicants. There is no persuasive evidence that there is an identifiable number of individuals who were referred to hospice, but were not admitted within 48 hours.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a final order be entered by the Agency for Health Care Administration denying the CON applications of HPH South, Inc. (No. 10066), and Odyssey Healthcare of Collier County d/b/a Odyssey Healthcare of Central Florida (No. 10068). DONE AND ENTERED this 30th day of November, 2010, in Tallahassee, Leon County, Florida. S R. BRUCE MCKIBBEN 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 30th day of November, 2010.
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 Whether a need exists for an additional hospice in Agency for Health Care Administration service area 1. Whether the certificate of need application of Bay Medical Center to establish the hospice, on balance, meets the criteria for approval.
Findings Of Fact The Agency For Health Care Administration (“AHCA”) is the state agency which administers the certificate of need (“CON”) program for health care facilities and services in the state. AHCA published a need for one additional hospice program in service area 1, in Volume 22, Number 5 of the Florida Administrative Weekly (February 2, 1996). Bay Medical Center (“BMC”), which currently operates a hospice in service area 2A, is the applicant for CON 8377 to establish the additional hospice program in service area 1. Hospice of Northwest Florida, Inc. (“HNWF”) is an existing provider of hospice services in both service areas 1 and 2A. Service area 1 encompasses Escambia, Santa Rosa, Okaloosa, and Walton Counties. Adjacent service area 2A includes Bay, Holmes, Washington, Jackson, Calhoun and Gulf Counties. Hospice care is provided to terminally ill persons, defined as those with a life expectancy of six months or less if their disease runs its normal course. It is palliative and comfort-oriented, rather than curative. Clinical, pschosocial, and spiritual services are provided by an interdisciplinary team, which includes a physician, nurses, social workers, home health aides, chaplains, and bereavement counselors. In addition to paid staff, hospices also use volunteers. Social workers, chaplains, and bereavement counselors work with patients' families for up to a year following death. Services are provided in patients' homes, nursing homes, or acute care hospitals. Hospice care is less expensive than aggressive acute care for the terminally ill. It is estimated that every dollar of hospice care saves a dollar and a half in Florida. Hospice services began in the United States in the 1970’s and were approved for government reimbursement in the 1980’s. Routine home hospice care is reimbursed at a per diem rate, for which the hospice provides care, and pharmaceutical drugs and supplies. Hospices also receive financial support from fund raising activities, and typically provide substantial community services which are otherwise unfunded and not reimbursed. These include community outreach programs in churches and schools, and services to families in which a death was accidental. In 1985, the national hospice penetration rate or P Factor (the percentage of total deaths in which patients received hospice care) was approximately 8 percent. By 1995, the P Factor had increased to 17 percent, with the greatest rate of growth in the most recent five years. In Florida, approximately 29.6 percent of all deaths occur after a person has been admitted to a hospice program. In service area 1, the P Factor is 21 percent. Bay Medical Center BMC is a legislatively - created independent special governmental district, authorized initially to provide health care services to Bay County, but now also to surrounding areas. It operates a 353-bed public, not-for-profit full service hospital in Panama City, Florida, but does not receive tax support. Over 190 physicians staff BMC’s hospital with every specialty, except rheumatology, endocrinology, and neonatology. BMC’s tertiary services include an open heart surgery program. BMC also provides ambulatory or outpatient services. Since 1992, BMC has operated a hospice program in service area 2A, with offices in Panama City (on the campus of the BMC hospital) and in Marianna. The Marianna office opened in February 1997, as a result of the Florida Legislature's 1995 amendment to the enabling legislation allowing BMC to offer services beyond Bay County. The 1995 legislation also expressly authorizes BMC to provide hospice services and to create other organizations to further its mission. The Board of Directors of BMC created the Bay Medical Center Hospice (BMCH). BMCH is governed by a board of directors which is separate and distinct from the board of BMC, although BMC is the entity licensed to operate the hospice program in service area 2A. The BMCH board members live and work in each of the six counties of service area 2A. BMC, which holds the existing license, is the applicant in this proceeding. The board of BMC met on the day that the letter of intent was due, February 19, 1996. A few days prior to the meeting the Chairman of the Board executed the letter of intent, and sent it to a health planning consultant in Tallahassee. After the Board met and passed the resolution authorizing the filing of the letter of intent, the consultant filed the letter of intent with AHCA in Tallahassee. In service area 2A, BMCH has an average daily census of 58-64 patients. BMC projected and HNWF stipulated that BMC can reasonably attain 250 admissions for a total of 12,471 patient days in year one, and 300 admissions for 18,706 patient days in year two of operation in service area 1. BMCH currently advertises its hospice services on television and radio stations, and in newspapers with coverage extending into service area 1. Fund-raising events, including the holiday tree lighting program, are used to market hospice services. Hospice services are also explained in newsletters which reach 27,000 households and all physicians in the area. BMC purchased over 100 sixty-second radio spots, which aired on three stations over a two month period in 1996. The hospice radio spots reached an estimated 87,000 people an average of five times each. BMC estimates a total project cost of $129,591, if CON 8377 is approved, to extend hospice services into service area 1. BMC proposes to condition CON 8377 on the provision of a minimum of 12.8 percent Medicaid and 3.65 percent charity care by the end of the second year of operation, and the care of 7 AIDS patients (with a minimum of 350 total visits) each year. Hospice of Northwest Florida HNWF is an existing provider of hospice services in AHCA service areas 1 and 2A. It is the only licensed hospice in service area 1 and competes with only BMC in 2A. HNWF, organized by hospitals in Pensacola, was issued a CON in December 1982 and a license in 1983, to operate a hospice in Escambia, Santa Rosa, Okaloosa, Walton, Holmes, Washington and Jackson Counties. The home office of HNWF is located in Pensacola. HNWF admitted its first patients and families in January 1984. In 1987, HNWF opened a branch office in Fort Walton Beach, later apparently consolidated with a Niceville office, to serve Okaloosa and Walton Counties. An additional branch office was opened in Marianna in 1991. An adjunct medical director for the Marianna and Niceville offices was hired in 1996. In December 1995, HNWF received a CON waiver and its license was amended to allow it to operate in the remainder of service area 2A, in Bay, Gulf, and Calhoun Counties. HNWF then opened a branch office in Panama City, in August 1996. HNWF also operates, and is expanding from six to eight beds, a residential facility in Pensacola, to house hospice patients without homes or without at-home caregivers. Prior to opening the Panama City office, HNWF historically served Holmes, Washington, and Jackson Counties, while BMCH served patients in Bay, Gulf, Washington, and Calhoun Counties. From 1993 to the present time, HNWF has increased its contracts or agreements from the Pensacola hospital to all of the hospitals in the service areas, including two military hospitals, from none to virtually all assisted living facilities, and from five to all except two or three nursing homes. HNWF operates an extensive outreach and educational effort, including a monthly half-hour television show, which is estimated to reach over 200,000 people in Escambia and Santa Rosa Counties. Other efforts include radio talk show appearances, speaking engagements reaching over 5,000 people in 1996, and extensive direct physician contact. HNWF also relies on it chaplaincy and bereavement programs to extend information about hospice care, particularly to culturally diverse groups of people. Despite these efforts, the number of hospice patients in service area 1 has remained relatively constant. HNWF served 969 patients in calendar year (CY) 1995, and 963 in CY1996. HNWF contends that its lack of growth is due, in part, to declining referrals from nursing homes despite increased referrals from other sources. HNWF attributes the nursing home decline to government investigations of suspected excessive nursing home reimbursements. There is no waiting list for HNWF's services, and its goal is to admit patients within 24 hours of referral. HNWF criticized BMCH’s outreach efforts as inadequate and misdirected, attracting only “easy” patients, those easily diagnosed as qualified for hospice care by well-informed referral sources. On this basis, HNWF expects BMC to take hospice patients from HNWF and not from any growth in hospice patients. HNWF also expects competition from BMC to adversely affect its ability to provide enhanced and unfunded services, including bereavement services in schools, on military bases, and in work- places, and its ability to operate satellite offices and the residential facility. Revenues from patient care are supplemented by donations and grants. In 1992, HNWF established a foundation to coordinate fund raising efforts. The approval of the BMC application, according to HNWF, will also affect the types of hospice services available in the area. In general, more sophisticated hospice services can be provided by larger hospices, including palliative chemotherapy and radiation. BMC’s expert testified that HNWF will continue to be a large hospice with or without the approval of a CON for BMC, and that the additional program will create additional demand for the service. The parties stipulated that subsections 408.035(1)(m) and (3), Florida Statutes, and Rule 59C-1.0355(7) and (8), Florida Administrative Code, are not applicable to this proceeding. At hearing, the parties also stipulated that BMC's list of capital projects meets the requirements of subsection 408.037(2)(a). Rule 59C-1.0355(4)(a) - Numeric Need; Subsections 408.035(1)(b) - like and existing services; (d) - available alternatives Rule 59C-1.0355, the hospice rule, includes the formula for calculating the numeric need for hospice programs. Numeric need exists if the projected total number of hospice patients in service area one for the planning horizon (1400 for July 1997) minus the actual number of hospice patients in the base year (969 in calendar year 1995) is equal to or greater than 350 (in this case, 431). The statewide P Factor, 29.6 percent, is used in the formula to calculate the ratio of projected hospice patients to projected total deaths. The statewide rate represents the normative minimum applied to each service area by operation of the formula in the rule. In service area 1, the P Factor in the base year was 21 percent. The statewide P Factor is an average of rates for various disease categories and ages. Those rates range from a high of hospice care for 70.9 percent of deaths due to cancer in people 65 and over, to a low of 14.1 percent for people under 65 with all other diseases. BMC cites HNWF's relatively low hospice penetration rate as proof of the need for an additional hospice program to create and accommodate additional potential demand. HNWF asserts, however, that certain local circumstances cause the deviation from the statewide P Factor. HNWF also contends that more people received hospice services than the number used in the formula for the base year. The result, according to HNWF is an excess projected demand for hospice services by the July 1997 planning horizon. The extenuating local circumstances cited by HNWF, are the sizable active duty military population, the strong Medicaid AIDs program, the aggressiveness of home health agencies, the prevalence of cancer centers, and the established practice parameters of medical doctors in the service area. The number of active duty military in service area 1 is 23,162. The number of those who die from terminal illnesses is statistically insignificant, because it is military policy to retire personnel who are diagnosed with terminal illnesses, which enhances death benefits to survivors. BMC's expert confirmed that policy and the improbability of serving military patients, although HNWF has served military base families after active duty casualties. Military families represent some of those served by HNWF in the base year, who are not included in the numeric need formula as hospice admissions. In the numeric need formula, according to BMC's expert, military personnel are included in projected deaths to younger age cohorts from causes other than cancer. Of the 431 projected additional hospice admissions, BMC’s expert calculated that, at most, 3 projected hospice deaths of those result from including the active duty military population. By contrast, HNWF's expert testified that the military population of 23,162 multiplied by the statewide death rate of .008 results in an estimated 186 deaths, or approximately 62 hospice patients. The background information in support of the fixed need pool, prepared by AHCA, shows that AHCA calculates projected hospice patients by age and disease. The actual base year service area non-cancer deaths under 65 (1010) divided by the actual service area total deaths (4562), times total projected deaths (4816) gives the total projected deaths non-cancer under 65 (1066). Of the 1066 deaths, 150 are expected to be hospice patients. It is not reasonable to assume that 186 deaths will occur among active duty military, or that 62 of the 150 non- cancer hospice patients under 65 will be in that group. It is more reasonable to assume, as BMC's expert did and as the state numeric need methodology does, that the age cohort of that group has and will continue to have a significantly lower death rate and lower hospice admissions than the 65 and over population. HNWF's expert health planner was unable to distinguish service area 1 from the rest of the state in terms of the strength of the Medicaid AIDs waiver program, the presence of prisons, the existence of home health agencies, the presence of cancer centers, or physicians' practice patterns. Similarly, BMC's expert found no statistical relationship between home health agency visits and hospice utilization. BMC's expert also noted that some hospices provide services to prisoners. HNWF's expert agreed that there is no prohibition to providing hospice services to prisoners. In some areas of the state, such as Gainesville and Tampa, cancer centers co-exist with high levels of hospice utilization. There was no evidence to distinguish physicians' practice patterns in service area 1 from the areas of the state. The argument that HNWF served more than the reported 969 in the base year, through it AIDs support groups, in schools, and for families in which deaths were accidental also does not distinguish HNWF. The evidence shows that hospices typically provide services to persons other than patients and their families, and benefit in terms of marketing and fund-raising. The incidence of AIDS in service area 1 is below that of the state. That could affect the gap between 21 percent and 29 percent, by approximately 3 or 4 percent. Late referrals to hospice services can adversely affect utilization rates. The federal government program, Restore Trust, initiated a HCFA Inspector General's investigation into charges of waste, fraud, and abuse in nursing homes and home health agencies. The decline in referrals to hospice programs coincided with the investigation, while hospice referrals and admissions in non-nursing home settings increased. There is no evidence, however, that service area 1 nursing homes were subject to more intense scrutiny than any others in the state. In fact, the Executive Director of HNWF testified that the effects of Restore Trust were national. The active duty military population difference of 3 fewer projected hospice deaths, and the 3 or 4 percent gap in the P Factor due to the lower incidence of AIDs are insufficient to explain the gap between P Factors of 21 and 29 percent. BMC's expert's estimate that ninety percent of the gap results from the lower than average P Factor is, at most, reduced to eighty-six percent. From 1994 to 1996, as the hospice utilization statewide reached 27.7 percent, the rate increased from 22 to 27 percent in service area 2A. By contrast, the rate increased from 17 to 22 percent in service area 1. For the six months ending December 31, 1996, the rate in service area 1 declined to 18 percent, while that in service area 2A increased to 24 percent. One of the highest rates in service area 2A is in relatively rural Washington County, in which BMC and HNWF have the greatest overlap in services. HNWF has approximately 60 percent and BMC has 40 percent of the hospice market in Washington County. In western Washington County, hospice rates range from 27 to 100 percent, with the remainder of the county in the 18 to 27 percent range. In service area 2A, there has been a steady increase in hospice admissions for HNWF and BMC, except for a decline at BMC immediately after HNWF opened an office in Panama City. Subsection 408.035(1)(a) - need in relation to district and state health plans; Rule 59C- 1.0355(5) and (4)(e) District health plan allocation factor one favors applicants having hospice services available seven days a week, district-wide for 24 hours a day as needed, regardless of a client’s ability to pay. BMCH currently complies with the requirement in service area 2A and can do so in service area 1. By carefully selecting patients, hiring staff in appropriate locations to serve the patients, and expanding slowly geographically, as HNWF has done, BMC can meet the requirements. Initially, BMC will focus on adjacent Okaloosa and Walton Counties. District allocation factor two, for proposals to add beds or use existing inpatient facilities rather than construct new facilities, is met by BMC. By proposing to contract with existing hospitals and nursing homes, BMC also meets the preference in Rule 59C-1.0355(4)(e)2. State health plan preference one, for applicants who seek Medicare certification, is consistent with BMC’s current and proposed operations. State health plan preference two favors members of the National Hospice Organization ("NHO") and applicants accredited by the Joint Commission on Accreditation of Health Care Organizations ("JCAHO"). BMCH is a member of the NHO. BMC is JCAHO-accredited, after receiving a rating of ninety-six of a possible one hundred in the scoring system in December 1996. Recently, BMCH was separately surveyed by the JCAHO, and received favorable exit comments. BMCH is also annually surveyed by AHCA, which identified no deficiencies in its January 1996 report. BMCH and HNWF each had one complaint regarding practices and procedures in 1996. A BMCH nurse disposed of controlled drugs when no longer needed in the patient's home, without the required signature of the patient's family representative on the disposal record. HNWF received a complaint and disciplined the responsible admitting nurse who failed to convene the appropriate staff to timely prepare an Interdisciplinary Care Plan. Neither incident indicates that the hospices are not providing a high quality of care. It is reasonable to expect BMC hospice to meet the requirements of the preference and to provide appropriate hospice care. See, also, subsection 408.035(1)(b) and (c), on the quality of care of the existing hospice and the applicant’s ability to provide quality of care. In proposing to establish a physical presence in rural, underserved Walton County, BMC meets state preference three and the preference in Rule 59C-1.0355(4)(e)4. State health plan preference four for applicants proposing to meet unmet needs of specific groups, such as children, is consistent with BMC's current and proposed operations. The same preference is also a requirement of Rule 59C-1.0355(4)(e)1. State health plan preference five favors applicants proposing residential services to patients without at-home assistance. BMC proposes to provide caregivers or to use existing inpatient facilities to provide residential services. The proposal is, therefore, also consistent with Rule 59C- 1.0355(4)(e)3 as it relates to those who are without primary caregivers at home or who are homeless. The sixth and final state health plan preference, for hospices proposing to use additional beds in existing facilities rather than new construction, is not applicable to the BMC proposal. On balance, the BMC application meets the preferences in the rule, and in state and district health plans. Subsection 408.035(1)(b) and (1)(d) - availability and quality of like and existing services; other alternatives Alternatives to hospice care include home health, acute, and nursing home care, all of which are available. The state policy, as reflected in numeric need methodology, encourages the use of hospice services until every service area achieves the state norm. Consistent with that policy, theoretically, HNWF could be even more aggressive in marketing and outreach than it has been. Historically, for BMC and HNWF, however, hospice services are more available, more accessible, better utilized, and higher in quality of care in areas in which they compete. Subsection 408.035(1)(c) - economics and improvements of joint, cooperative or shared resources Because BMC operates an existing hospice, it is reasonable to expect economics of scale and improvements based on its experience, if it establishes a second hospice. BMC expects to use existing human resources and billing departments. Subsection 408.035(1)(f) - need for special equipment or services not available in adjoining areas The statutory criterion is inapplicable to the case. Subsection 408.035(1)(g) and (h) - need for research, educational, health professional training BMC's is not a proposal which is intended to assist a research or educational program. In-service and volunteer training programs are proposed for the benefit of its staff and to assure the quality of its own services. Subsection 408.035(1)(h) - available manpower, management personnel; (1)(i) - immediate and long-term financial feasibility of the proposal BMC has over $21 million in cash, and revenues and gains in excess of $4 million for the year ending September 30, 1995. BMC has and continues to generate sufficient funds to provide over $24 million for planned capital projects over the next two years, including $129,591 in costs for the additional hospice program. BMC’s proposal is financially feasible in the short term. HNWF claims that the BMC proposal is not financially feasible in the long term, based on understated salaries, wages, and benefits, travel expenses, depreciation, and interest. Salaries, wages, and benefits are based on the staffing ratios at BMCH, which, according to HNWF, serves a more concentrated population in Panama City. Initially, BMC plans to serve Okaloosa and Walton Counties from a Destin office, with staff appropriately located throughout the areas to timely and efficiently serve patients. BMC plans to hire 6.6 full time equivalent (FTEs) administrative staff and 11.4 FTEs patient care staff. HNWF asserts that BMC will need an additional 1.7 FTEs for nurses, 2.6 for home health aides, and 1 FTE for a social worker. HNWF also questioned the ability of BMC to implement its proposed children's programs without a registered nurse with pediatric experience. HNWF asserted that .4 FTE for a chaplain was inadequate, as is reliance primarily on volunteer chaplains. The adequacy of the proposed staffing is supported by calculating the 50 day average length of stay times the annual volume of 250 patients, times 1.6 (the projected worked hours per patient day), which equals 10.85 FTEs for patient care. BMC's 11.4 FTEs for patient care in year one is a reasonable, conservative complement of staff. In addition, HNWF received 19 percent of its 1996 hours worked from volunteers, and has a history of hiring specialized staff and establishing specialized programs and departments when justified by the demand for those services. For its first seven or eight years, HNWF was well- served by a volunteer medical director. The bereavement coordinator was hired in 1990. The children's bereavement specialist was hired in 1993, when bereavement and social services became separate departments. Travel expenses, projected by BMC, were also criticized by HNWF. HNWF would increase miles for each visit from 13.9, as estimated in BMC’s CON application, to 18.3 miles per visit as experienced by HNWF. One assumption, which invalidates HNWF’s projection of travel distances, is that each separate visit will originate and end at the Destin office, not that BMC staff would make some visits going directly from their residences to the patient's home, or that they would arrange schedules to make several visits without returning to the office between each visit. In addition, BMCH will initially cover two counties rather than the entire service area. As a result of a mathematical error in the BMC CON application, the depreciation expense for year one of operations is $25,578, not $21,962. HNWF's expert's adjustments to interest expenses assumed that any additional expenses would require additional borrowing. BMC, however, has not materially underestimated expenses, considering the $3,616 difference in depreciation. The pro forma is conservatively based on revenues and expenses without reliance on charitable donations, although hospices typically depend on donations to break-even financially. In 1996, HNWF received a total of $339,780 in contributions. To estimate what BMC might expect in District 1, it is reasonable to exclude from HNWF's experience, approximately $80,000 in interest on reserve invested income (used by HNWF in 1996) and $90,000 in grants, since BMC has not applied for any grants. The balance, representing memorials and fund-raising of $240,000 reasonably indicates the level of contributions which a new BMC hospice might expect in service area 1. That level, for BMC, is proportionately half that projected by BMC, or $60,000 to $80,000 in year one, and $130,00 to $185,000 in year two of operations. With a projected loss in income of $28,091 in year one, a projected profit of $74,054 in year two, and considering historical hospice fund-raising, BMC's operation of a hospice in service area 1 is reasonably expected to be financially feasible in the long term. Adverse Impact Subsection 408.035(1)(l) - probable impact on costs, effects of competition. Using BMC's experts' utilization projections for service area 1, HNWF projects that its net operating income will decline from a negative $408,070 to a negative $655,712 in year one, and from a negative $355,404 to a negative $612,696 in year two. Approximately $420,000 in total contributions to HNWF is expected each year, although that number has increased annually since 1993, from 183,750, to $224,415 in 1994, to $282,368 in 1995, and $339,780 in 1996. BMC suggests that the adverse impact analysis should consider HNWF's total operations in service areas 1 and 2A to determine financial feasibility. Health planning experts for both BMC and HNWF acknowledge that there are up to 431 more people available for hospice admissions than are currently receiving hospice services. They also agree that number will increase by approximately 100 a year as the population increases, and that the presence of a new hospice provider will increase hospice penetration rates. In addition, as HNWF's witnesses emphasized, nursing home hospice admissions were depressed temporarily due to a government investigation. BMC’s expert also noted that, as long as available admissions exist, increasing hospice utilization is largely a function of how the hospice delivers its services. For example, the historic requirement that patients have a caregiver at home has adversely affected HNWF’s penetration rate. As recently as November 1996, at least one referral source, Sacred Heart Hospital, in Pensacola was distributing an HNWF brochure which specifically required an eligible hospice patient to have “[a] capable caregiver in the home to meet the patient’s day-to-day basic needs." Essentially, the same requirement is included in a list of admissions criteria on page 49 of BMC's CON application. HNWF and BMC have both changed their policies and now admit patients without caregivers, which is reasonably expected to increase admissions of patients. With competition to identify and alleviate access barriers, HNWF and BMC are better able to increase hospice utilization rates by eliminating self-imposed constraints. Based on the rapid increase in hospice utilization in service area 2A after HNWF began to compete with BMC, it is reasonable to assume the same effect of competition in service area 1. By the year 2000, BMC's expert reasonably projects hospice penetration rates of 29 percent in service area 1, equaling the current statewide average. As the late entrant into a limited geographical area within the market, BMC is projected to capture approximately one-third of that market by the years 2000 to 2001, leaving two thirds for HNWF. At the same time BMC and HNWF are reasonably expected to divide in half the market in service area 2A. At those levels, HNWF will range, in total projected admissions for both service areas, from 1,186 to 1,400, from 1997 to 2001. The evidence that a BMC hospice in service area 1 will not adversely impact HNWF is more persuasive. The suggestion that health care providers or the public will be confused by the presence of BMCH in service area 1 is rejected. Subsection 408.035(1)(n) - The applicant’s past and proposed provision of health care services to Medicaid patients and the medically indigent. BMC is a disproportionate share Medicaid provider, having historically provided over 97 percent of all indigent care in Bay County. In 1995, the charity care write-off was over $8.5 million. The effect of approving BMC’s CON is increased hospice penetration in service area 1, caused by an expanding market for hospice services. As a disproportionate share provider of inpatient acute care services, BMC is uniquely capable of identifying and referring low income patients for hospice care. Subsection 408.035(1)(0) - The applicant’s past and proposed provision of services which promote a continuum of care in a multilevel health care system, which may include, but is not limited to, acute care, skilled nursing care, home health care, and assisted living facilities. BMCH is a part of a multilevel system with levels of care ranging from a 353-bed acute care tertiary hospital to a home health agency. Because of 1995 legislation, these services are available to persons beyond the boundaries of Bay County. Consistent with this statutory criterion, hospice services should also be extended.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency For Health Care Administration enter a Final Order issuing CON 8377 to Bay Medical Center to establish a hospice program in service area 1, conditioned on providing annually a minimum of 12.8 percent Medicaid care, 3.65 percent charity care, and service to a minimum of 7 AIDs patients with a minimum of 350 visits. DONE AND ENTERED in Tallahassee, Leon County, Florida, this 19th day of May, 1997. ELEANOR M. HUNTER Administrative Law Judge Division of Administrative Hearings The DeSoto Building 1230 Apalachee Parkway Tallahassee, Florida 32399-3060 (904) 488-9675 SUNCOM 278-9675 Fax Filing (904) 921-6847 Filed with the Clerk of the Division of Administrative Hearings this 19th day of May, 1997. COPIES FURNISHED: Richard Ellis, Senior Attorney Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building 3, Suite 3431 Tallahassee, Florida 32308-5403 Darrell White, Esquire William B. Wiley, Esquire McFarlain, Wiley, Cassedy & Jones, P.A. Post Office Box 2174 Tallahassee, Florida 32315-2174 J. Robert Griffin, Esquire J. Robert Griffin & Associates, P.A. 2559 Shiloh Way Tallahassee, Florida 32308 Sam Power, Agency Clerk Agency For Health Care Administration 2727 Mahan Drive Fort Knox Building 3, Suite 3431 Tallahassee, Florida 32308-5403 Jerome W. Hoffman, General Counsel Agency For Health Care Administration 2727 Mahan Drive Fort Knox Building 3, Suite 3431 Tallahassee, Florida 32308-5403
The Issue The issue in this proceeding is whether the application of Catholic Hospice, Inc., to establish a hospice program in District 10 meets the statutory and rule criteria for approval.
Findings Of Fact 1. Catholic Hospice, Inc. (Catholic Hospice) is the preliminarily approved applicant for Certificate of Need (CON) Number 9333, to expand hospice services, currently provided in Dade County, into adjacent Broward County, Florida. 2. The Agency for Health Care Administration (AHCA) is the department authorized to administer the Florida CON program for health care facilities and services. 3. Catholic Hospice applied for CON Number 9333 to initiate services in Eroward County, which is designated AHCA, District 10, for the July 2001, planning horizon. As the parties stipulated prior to the final hearing, AHCA published zero as the numeric need for an additional hospice program in Broward County. At the time the CON application was submitted, Catholic Hospice asserted that its proposal would meet an unmet need for hospice care for the Hispanic and Haitian populations, in particular, and the growing multi-ethnic population in Broward County, in general. Catholic Hospice also initially indicated that its program would increase access to hospice care by eliminating financial, language, religious, and cultural barriers. At the hearing, Catholic Hospice presented evidence to support its intention to improve access for the Hispanic population by overcoming language and cultural barriers, and its assertion that the existing hospice programs are not consistently and aggressively reaching Hispanics. 4. Catholic Hospice is a partnership established in 1988 by the Archdiocese of Miami, St. Francis Medical and Health Care Services, and Mercy Hospital. The governing body is a 15-member Board of Directors with five directors from each of the three member organizations. The Board is ethnically diverse and includes three directors who are native Spanish language speakers. Catholic Hospice serves people of various religions, having, within the last year and a half, established the L'Chaim Jewish Hospice Program. 5. Catholic Hospice has steadily increased the proportion of care it gives to Hispanics in Dade County. In 1989, approximately 30% of Catholic Hospice patients were Hispanic. By 1999, Catholic Hospice served 740 Hispanic patients out of a total of 1157. By 2000, the number and proportion of Hispanic patients increased to 841 out of a total of 1228. Currently, over 60% of Catholic Hospice's patients are Hispanics, while 55% of the total populaticn of Dade County is Hispanic. Existing Hospice Programs and Services 6. The existing hospice providers in Broward County are vitas Healthcare Corporation (Vitas), Hospice Care of Broward County, Inc. (Hospice Care of Broward), Hospice by the Sea, Inc. (HBTS), and Hospice of the Gold Coast. All of the existing hospices have elected to qualify for and to obtain accreditation from the Joint Commission for Accreditation of Health Care Organizations. 7. Vitas is the successor to the organization known as Hospice of Miami, established in 1978. Vitas is a for-profit organization, having been established prior to the enactment of the Florida law which currently requires hospices to be not-for- profit corporations. ‘Currently, Vitas operates twenty separately licensed programs in seven states with an average daily census of 5,400 patients. In 1999, Vitas admitted 5,921 patients in Broward County and 4,382 in Dade County. It is the largest provider of hospice care in the United States, and in Broward and Dade Counties. In Broward County, Vitas cared for 180 Hispanic patients in 1998, 238 in 1999, and 206 through November 15, 2000. Approximately 3.3 to 4% of its total number of Broward County patients are Hispanic. 8. Hospice Care of Broward operates in both Dade and Broward Counties, with offices in both Fort Lauderdale and Miami. The main business office is the one in Fort Lauderdale with close to 180 employees as compared to a staff of 50 in the Miami office. The Miami and Fort Lauderdale operations share the same board of directors, executive director, development director, finance director, and clinical director of operations. 9. Hospice Care of Broward cares for patients in their homes, in hospitals or nursing homes, and in its own 5-bed residence in Fort Lauderdale. Approximately half of their Dade County patients and 2% of their Broward County patients are Hispanic. In 1999, Hospice Care of Broward admitted a total of 999 patients in Broward County and 172 in Dade County. 10. HBTS, established in 1979, is a not-for-profit corporation, which serves both AHCA District 9, for Palm Beach County and AHCA District 10, for Broward County. It operates a 30-bed inpatient center in Palm Beach and, by contract, provides care at various hospitals, including Hollywood Medical Center, Holy Cross Hospital, Cleveland Clinic Hospital and North Ridge Hospital. 11. In Broward County, HBTS served five Hispanic patients out of a total of 287, in 1998; 7 out of 415 in 1999; and 15 out of 641 in 2000, or almost 2.4%. 12. Hospice of the Gold Coast is a relatively small operation, serving approximately 200 patients a year, primarily at the North Broward Hospital District facilities. Its office located in the northeastern area of the County, which has a relatively small Hispanic population. As a result, Hispanic utilization of Hospice of the Gold Coast was estimated at 2% by one expert. 13. In general, hospice care is provided to terminally ill patients who are certified by a medical doctor as having a prognosis of death within six months. The care is, therefore, palliative, that is, to provide comfort to the dying patient, not curative. The patient and family members are treated as a unit by an interdisciplinary team which includes doctors, nurses, home health aides, chaplains, social workers, and counselors. Hospice services are gaining in acceptance and utilization in the United States. It is considered cost effective and is, therefore, subject to reimbursement by Medicare, Medicaid and private insurances. Many hospice services to relatives and the community, however, including camps for bereaved children, are funded by charitable donations to the programs. 14. In its CON application, Catholic Hospice describe two cases in which hospice patients in Broward expressed a preference for its care. One doctor who testified by deposition for Catholic Hospice said he supports the application because there is no real advocate for Hispanics in Broward County. He complained of discriminatory practices in county hospital emergency rooms. He also expressed frustration that the existing hospices are not supporting his clinic, but admitted that he is not familiar with referrals to hospices. When his hospital patients need hospice, the social service departments handle referrals. He refers his other potential hospice patients to their churches. See Catholic Hospice Exhibit 20. Demographic Data 15. Approximately 80% of all hospice patients are over 65 years old. Hospice patients, obviously, are those whose deaths 10 are not unexpected, that is, not the victims of homicides, suicides or fatal motor vehicle accidents. Hospice services were traditionally provided largely to terminally-ill cancer patients, who still make-up the majority of patients statewide. 16. Catholic Hospice's expert noted that, particularly after some Dade County communities were destroyed by Hurricane Andrew, the trend of Hispanic migration into Broward County has been increasing. The projected increase in the Broward Hispanic population, from 2000 to 2005, is 45,900 for people under age 65 and 7,000 for people 65 and over. 17. The total Hispanic population of Broward County, is approximately 205,000 people out of a total of 1.5 million, or an estimated 12.6 to 13.4%. It is projected to increase to 15.6% by 2005. By comparison, Hispanics are approximately 55% of the population in Dade County. In Broward, Hispanics are more heavily concentrated in south central and southwestern areas of the County. One of Catholic Hospice’s offices is located in the northern Dade County area of Miami Lakes, conveniently near the southern areas of Broward County. Broward County residents are included in the staff and volunteers working in that office. The other office is in Kendall. Consistent with the concentration of the population, the largest number of Hispanics discharged from a Broward County hospital come from Memorial Hospital West. il 18. Catholic Hospice took the position that hospice care for Hispanics in Broward County should be provided within two or three percentage points of that which the group represents in the total population. The fact that the Broward providers serve from two to 4% Hispanic patients is, according to Catholic Hospice, indicative of underservice to the group. 19. Catholic Hospice's health planning expert conceded, however, that a better analysis than Hispanic population as a percentage of the total, would take into consideration more specific demographic data, including age, death rates by ethnicity, and causes of death. 20. Hispanics over 65 were 8.7% of the total Hispanic population in Broward County, 3.4% were over 75 years old. By comparison, over 20% of the total Broward County population is over 65, and over 10% over 75. Catholic Hospice offered its Dade County service, where 60% of its patients are Hispanics, as an example of its ability to achieve better results serving Hispanics in Broward County. In Dade County, however, the pool of potential patients is larger, with smaller differences between ethnic groups. Hispanics over 65 are 14.4% of the total population, almost identical to the 14.6% the non-Hispanic and total Dade populations over age 65. 21. Differences in age cohorts in the population are, as expected, reflected in differences in death rates. In 1998, 12 there were 641 Hispanic deaths in Broward County. of these, 383 were in the 65 and over age group, and 258 were under 65 years old. For 1999, there were 718 Hispanic deaths, of which 455 were 65 and over, and 261 were under 65. In the larger and older Hispanic population of Dade County, there were 9,220 Hispanic deaths, in 1999. 22. Hispanics in Broward County have a lower number of deaths per thousand, which is consistent with the relative youth of the group, as compared to the total population. In 1998, Hispanics accounted for 3.64 deaths per thousand, while there were 10.71 deaths per thousand in the total population of Broward County. In 1999, the Hispanic rate was 3.83 per thousand, as compared to 10.89 per thousand for the total population. When death rates are adjusted to exclude as causes accidents, suicides, and homicides, the Broward Hispanic death rates for 1998 and 1999 were 3.8 and 4%, respectively. 23. The analysis of the Hispanic population by age, death rates, and causes of death indicates that the current level hospice services, ranging between 2% for lower volume providers to 4% for Vitas, is the appropriate, expected level. 24. The level of hospice care which Catholic Hospice deemed appropriate is virtually impossible to reach considering the reality of the causes of death. Using Catholic Hospice's expert health planner's expectation that nine percent of all 13 Hispanics who died in Broward County should have hospice care, then 680 of 718 deaths in 1999, would have had to have been admitted to hospice. Numeric Need 25. Due to the demographic make-up and the level of care provided by the existing four hospice programs in District 10, AHCA published a zero numeric need for additional programs. AHCA publishes a need for a new hospice program when its formula demonstrates that the number of additional patients who would elect hospice care equals or exceeds 350 patients over and above the current volume of hospice admissions. 26. The formula, in Rule 59C-1.0355(4) (a), Florida Administrative Code, for projecting additional hospice deaths, uses actual three-year resident deaths in four groups of people, those with and without cancer, who are both over and under age 65. 27. When the formula was applied to the Broward County data, the result was 5,947 projected hospice patients for the July 2001, planning horizon. When compared to the actual volume, in 1999, of 7,550 patients served by the four existing hospice programs, the number of projected additional patients is a negative 1,603. The negative number is based on the statewide hospice experience and indicates that the hospices in Broward 14 County, in 1999, served 1,603 more people than they were expected to serve two years later. Penetration Rate, Accessibility and Availability 28. Although not used in the formula, the negative need calculation is, in part, a function of what the health planners described as the hospice use rate or hospice penetration rate. All of the expert health planners who testified agreed that the hospice penetration rate is the single most significant factor in determining the extent of the existing hospice utilization. The total number of hospice deaths divided by the total number of deaths during the same time period in the same planning area gives that planning area's penetration rate. 29. In Florida, the statewide hospice penetration rate for is 33.5%. In Broward County, District 10, the rate is 46.6%, the highest in the State. By contrast, the national average is approximately 29%. For adjacent District 11, which includes Dade County, the penetration rate is 30.7%. 30. For Hispanics in Broward County, the hospice penetration rate was 37.3% in 1999. In Dade County, the Hispanic hospice penetration rate was 28.2% in 1999, indicating greater opportunities for growth in Dade. In general, the data indicates that Hispanics in Broward are utilizing hospice care more than Hispanics in Dade County, and more than the total population of Florida. 15 31. The adequacy of access to hospice care in terms of geographical coverage has been considered. In Broward, with a total of 1,211 square miles and four hospices, each one averages 303 square miles. The smallest geographical area for hospices in Florida was 280 square miles for the one hospice operating in Pinellas County. The statewide average, however, is 1,083 square miles for each hospice in Florida. There are no apparent geographical limitations on access to hospice care in Broward County. 32. As the parties stipulated, accessibility in terms of timeliness is not at issue. There is no indication that hospice referrals do not get a response within 48 hours, a special circumstance, specified in Rule 59C-1.0355(4) (d)3., Florida Administrative Code. Spanish Language Material and Spanish-Speaking Staff 33. Catholic Hospice conceded that the existing Broward County hospices provide appropriate printed material, forms, and promotional information in Spanish. But, Catholic Hospice argued that it has the ability to reach out to and serve Hispanic patients better than any of the other existing providers based on its experience and staff. Catholic Hospice noted that the percentages of Hispanics to total Dade County patients it serves is higher, ranging between 61 to 67% than Vitas' to 35 to 40%, even though in absolute numbers Vitas 16 served twice as many Hispanics, in Dade County in 1999, as did Catholic Hospice. 34. Spanish-speaking staff is inadequate to serve Spanish- speaking patients, according to Catholic Hospice, unless every member of the hospice interdisciplinary team speaks Spanish. In response to discovery requesting numbers of fluent Spanish speakers on staff in Broward County, HBTS reported three full- time equivalent (FTE) employees. Each FTE represents a 40-hour work week. 35. Hospice Care of Broward reported that it employs, in Broward, three nurses, one home health aide, two chaplains, but no social workers or bereavement counselors who speak Spanish. Although that was considered inadequate by Catholic Hospice's expert, Hospice Care of Broward noted its ability to use Spanish-speaking staff from its Dade office. Catholic Hospice also indicated its intention to use its staff from Dade, if needed, as well as some of its current staff members and volunteers in Dade who actually reside in Broward County. 36. Vitas employed three chaplains, six registered nurses, three doctors, three home health aides, a secretary, a case worker, six pool staff and various others, for a total of 42 Spanish speakers in Broward County. Vitas was considered inadequately staffed by Catholic Hospice's expert for not having a Spanish-speaking social worker, although its chaplains and not 17 just social workers provide bereavement counseling. At the time, Vitas' census of Hispanic patients included seven in three different nursing homes, and 29 patients at home. 37. Catholic Hospice listed the names of 69 Spanish- speaking employees, who staff Catholic Hospices current operations in Dade County. Catholic Hospice's expert testified that, with 69 Spanish-speaking staff members, it adequately met the needs of 840 Hispanic patients. It must be concluded, logically, that Vitas, with 42 Spanish-speaking staff members, also had an adequate number to serve 238 Broward County Hispanic admissions in 1999. Including all of Catholic Hospice's administrators and excluding all but apparently fluent Spanish- speaking staff, the ratio of staff to Hispanic admissions is 9.9 to one for Catholic and 5.7 to one for Vitas. 38. All of the hospices rely on volunteers to help provide care to patients and their relatives. They also rely on relatives to serve as translators, if necessary. In addition, some hospice employees who are not fluent in the language do speak and understand some Spanish. Staffing 39. The staffing and related expenses, included in Catholic Hospice's financial projections, were criticized as inadequate. An expert for Vitas testified that $80,000 rather than $50,000 is appropriate for an hospice administrator; that 18 $18.99 an hour, Catholic Hospice's second year projection, is more appropriate for the first year than the first year projection of $17.78 an hour, or $37,000 a year, which was proposed for the first year for a registered nurse; that, although starting salaries are $16,000, or $7.69 an hour for nurses' aides, Catholic Hospice should expect to pay a minimum of $8.50 an hour in Broward County; that $35,000 a year is unreasonable for a patient care manager, a position typically filled by a registered nurse; and that $37,000 rather than $32,000 is more reasonable for a licensed clinical social worker. 40. The Vitas' expert also testified that 7.6 not 6 FTEs for registered nurses are needed, and more than one FTE for a social worker for the entire County for the first year. The proposal to hire one bereavement counselor, and one volunteer coordinator in the second year, but none in the first was also criticized as an underestimate of staffing needs, considering an average daily census of 30 patients in the first year, and 50 patients in the second. 41. Catholic Hospice used its experience and ratios established by national associations to project staffing needs. The projections are reasonable in providing, for example, one nurse for every ten patients and one home health aide for every eight patients. The nursing shortage, which all parties concede 19 exists in South Florida will likely increase the time and expense for Catholic Hospice to recruit its staff. Some health care facilities also find it necessary to provide signing bonuses, which Catholic Hospice has not proposed to do. At the time of the hearing, Catholic Hospice needed more staff and was participating in a jobs fair in Dade County. 42. In terms of its own operations, Catholic Hospice could also use and benefit from economies of scale, by using some of its existing staff and volunteers in Broward County. Its per unit costs would decrease primarily from sharing administrative staff, in much the sawe way as Hospice Care of Broward operates in both counties. For this reason, the criticism of Catholic Hospice that its propesed staffing and salaries are adequate is rejected, even though its work papers showed more staff than its CON application. Financial Feasibility 43. Catholic Hospice expects to serve 220 patients in the first year and 400 in the second. The average length of stay for each hospice patient in Broward County was around 40 days For Catholic Hospice, in Dade County, it was 48.9 days in 1999. When patient days are calculated from admissions with an average of 48.9 days, the results are 10,219 for the first year, and 19,574 for the second year. Catholic Hospice's application uses 10,905 patient days for the first year, and 25,520 for the 20 second year. It appears that utilization is overestimated by 700 admission in the first year and 6000 in the second year. To reach the second year projection of 400 admissions, the average length of stay would have to be 63.8 days. 44. One expert quantified the effect on projected revenues as a result of Catholic Hospice's overstatement of utilization by patient days. The conclusion was that projected revenues would decrease by $136,000 in the first year, and $1,063.881, in the second year. When Medicare rate increases approved by Congress are considered, the projected revenue decreases are approximately $65,000 in the first year, and that adds back $123,000, to the expected decrease of $1,063,881, increasing it to about a $900,000 reduction in revenues for the second year. 45. The analysis of revenues as compared to patient days was flawed having not reflected a proportionate reduction in variable expenses. Vita's expert's assumed that expenses should not be reduced because: Catholic Hospice had underestimated staffing and salaries. The finding that staffing and salaries are adequate means that, although Catholic Hospice overestimated revenues, the exact amount cannot be determined. The evidence that revenues and utilization are overestimated means that Catholic Hospice failed to prove that its proposal is financially feasible. The assumption is made that revenues are sufficient to‘cover projected start-up costs of $69,493. 21 46. Catholic Hospice's expert criticized the use of average length of stay to determine patient days. That approach is more reasonable than that used by Catholic Hospice which relied on its start-up experience in Dade County in 1989, to guess what Broward patient days might be in 2002 and 2003. When Catholic Hospice started, its average lengths of stay were 21.17 days in 1989, and 32.1 days in 1990. 47. Additional factors which cast doubt on the likelihood of Catholic Hospice achieving its projected utilization and revenues are the pattern of referral sources in Broward County and the level of charity care. Physicians referred approximately 43% of all hospice patients in Broward County, while approximately 24% came from hospitals in 1999. It will take Catholic Hospice longer to establish referral relationships with a number of different physicians. Lower revenues are also reasonably expected with higher percentages of charity care. Historically, in Dade County, charity care has accounted for -23% of Catholic Hospice's services, but it projected 3.5% for Broward County. 48. The CON application submitted to AHCA was incomplete, having omitted key information necessary for AHCA to determine financial feasibility, including the following: (1) failure to distinguish between Broward and Dade operations in sufficient detail for an evaluation of Broward separately, 22 although payer mix assumptions for each were different ; (2) inadequate breakdown of admission by payer type; (3) no provision for dietetic and nutritional counseling; (4) no specific allocation of FTEs for a medical director; (S) no details of a staff recruitment and retention plan; and (6) a material discrepancy of $3 million, given the projected year two net profit of $39,100, between revenues on one schedule as compared to the notes to the same schedule. Impact on Existing Providers 49. The existing providers presented evidence related to the potential impact on their admissions, revenues, and staffing, if Catholic Hospice begins operating in the Broward County market. They need to maintain or increase their censuses to have some leverage for contract negotiations, and to provide charity care and unreimbursed services, such as bereavement services. Catholic Hospice maintained that it would not adversely affect existing providers, citing the experience in Dade County when Hospice Care of Broward began operations in 1998. The situations are distinguishable. From 1997 to 1999, for example, hospice admissions increased 16.7% in Broward and 35.3% in Dade County. Dade County started with a lower-than- average hospice penetration rate in 1998. Most importantly, 23 AHCA published a numeric need for an additional hospice which led to the approval of the Hospice Care of Broward CON. 50. Although Vitas' market share in Dade County increased during the time that Hospice Care of Broward began operations there, the smaller hospices, Hospice Care of South Florida and Catholic Hospice lost market shares. Similarly, recent increases in the market share of HBTS in Broward County have adversely affected Hospice Care of Broward, but not Hospice of the Gold Coast, which has the affiliation with a hospital district, or Vitas. Based on these experiences, it is reasonable to expect that the smaller providers will experience a disproportionately greater adverse impact from the entry of Catholic Hospice into the Broward County market. 51. Assuming that: Catholic Hospice achieves it projection of 220 patients in its first year of operations in Broward County and 400 in the second year, then it will adversely affect all of the existing providers, at least to the extent of limiting their potential growth. 52. Using the total number of projected hospice patients for 2002 and 2003, and allocating all incremental admissions to Catholic Hospice first, the result is that 61 cases for 2002, and 120 for 2003, are available for Catholic Hospice. That leaves an additional 159 admissions for the first year and 280 24 for the second year, waich must come from patients who would have otherwise used the existing hospices. 53. When proportional losses of cases to Catholic Hospice are assumed with static market shares, the expected impact in terms of lost admissions are 5 and 8 from Hospice of the Gold Coast, 11 and 20 from HBTS, 21 and 37 from Hospice Care of Broward, and 121 and 215 from Vitas, in years one and two, respectively. 54. If the assumption is made that the market shares will change, following established trends, then projected losses will increase most (to 16 in 2002 and 29 in 2003) for the hospice which has been expanding most rapidly, HBTS. More consistent providers, in terms of volume, would have lower projected losses, for example, 15 and 26 admissions in years one and two, respectively, for Hospice Care of Broward County. 55. Of the three scenarios presented, the most reasonable assumptions are that proportional losses of the type which occurred in Dade County would also occur in Broward, and that market share trends would continue. If that happens, then the smaller providers would lose more potential patients, up to 91 and 165 from HBTS, 87 and 158 from Hospice Care of Broward, and 27 and 49 from Hospice of the Gold Coast, in years one and two, respectively. For Hospice Care of Broward, the loss of 158 is 25 significant when compared to total volume of approximately 1000 patients. 56. The market share analyses could be criticized for relying on projected population growth, but not factoring in an increase in the penetration rate. In fact, the penetration rate in Broward, as high as it is, has been increasing, but in relatively small increments, from 45.8% in 1993 to 46.6% in 1999. The .8% increase is considered approximately flat, particularly having followed a 7% decline in the Broward hospice penetration rate from 45.8% in 1993 to 38.6% in 1994. The fluctuations in the penetration rate and the decline in deaths from cancer and AIDs support the reasonableness of the assumption of a static penetration rate in the market share analysis. 57. Only HBTS presented evidence on the financial impact of the projected losses, ranging from a low of $61,554 for 20 lost admissions to a high of $507,464 for the more reasonable assumption of 165 lost admissions. The magnitude of the detrimental impact, put in context, is significant given HBTS' losses from operations of $1.8 million in 1999, and $1 million in 2000, which had to be offset by charitable contributions and income from investments. 58. In addition to lower operating revenues from patient care reimbursements, HBTS also projected losses from charitable 26 contributions. In 1993, HBTS received $629 in charitable donation for each hospice patient admitted, from bequests, memorials, tributes, holiday remembrances from families and friends. Contributions from these sources are directly related to the care given to individual patients and, therefore, to the total number of patients. At HBTS, over 64% of its total charitable contributions are in the combined categories of tributes and bequests. The adverse financial impact on HBTS including reduced charitable contributions, is $74,149 for 20 cases and up to $611,301 for 165 cases. 59. WVitas received referrals from Holy Cross Hospital, a Catholic facility in Broward County which would be expected to enter an agreement with Catholic Hospice. Vitas also runs a bereavement group for Spanish speakers at Holy Cross Hospital. Holy Cross Hospital is listed, in the CON application, as the likely source of a contract for services with Catholic Hospice. In a three-month period, Vitas received 30 referrals resulting in 25 hospice admissions from Holy Cross Hospital. In Dade County, Vitas receives virtually no referrals from Mercy Hospital, which is also a Catholic institution and one of the Catholic Hospice partners. Therefore, despite the projected disproportionate impact in the market, to Vitas' advantage, if all other things were comparable to the Dade County experience, because of the institutional relationships between Catholic 27 Hospice and Holy Cross Hospital, Vitas' is reasonably expected to be adversely affected. It is impossible to determine if projected losses are significant in terms of the total Vitas operation, since it provides over three-fourths of all hospice care in Broward and returned approximately $10 million in revenues in 1999, to its corporate operations. There is also no evidence that more competition with Vitas will enhance services or reduce costs. 60. Expert witnesses acknowledged a severe nursing shortage in South Florida, approaching crisis proportions. The existing providers are always recruiting and never fully staffed. The kind of care required of hospice nurses, the pressure of dealing with dying patients, the need for them to be on call rather than working only on scheduled shifts, the preference for oncology nurses, and the need for bilingual nurses further limits the available pool. The shortage has increased since 1998, when Hospice Care of Broward expanded into Dade County. Hospices are also not free to attract nurses by raising rates to pay increasingly higher salaries, but must resort to other incentives which increase recruiting costs. Hospice patient care is usually reimbursed on a per diem basis, regardless of actual costs, at rates set by the Medicaid and Medicare programs. The existing hospices reasonably expect an adverse impact on their staffing, recruiting time and costs, 28 particularly for nurses and home health aides, if Catholic Hospice enters the market in Broward County and succeeds in staffing its project as proposed. Agency Action and Rules 61. The Chief of the Bureau of Health Facility Regulation for AHCA, who is also an expert in health planning, testified that the review process in this case was the same as for most CONs. Within AHCA, however, the initial recommendation was to deny the application because of insufficient data to support the allegation of a lack of access for the Hispanic population. 62. The decision to approve CON Number 9333 was made because AHCA Secretary, "Ruben King-Shaw indicated that he felt that it was a policy priority at the highest level of the current administration, both within the Agency and I would say at the level of the Governor, to promote culturally sensitive access to end of life care. And that he referenced a presentation that I believe that he had heard Secretary Brookes (phonetic) of the Department of Health make a day or two prior to our meeting where he said that Dr. Brookes was one of the best speakers that he had ever seen on the issue of culturally sensitive health care and barriers to -- cultural barriers to health care." Transcript, p. 955-956. 63. In addition to the statutory review criteria for CONs, AHCA relied on Rule 59C-1.030, Florida Administrative Code, which lists general criteria for evaluation of CON applications, 29 and Rule programs. there is included 64. follows: 59C-1.0355, which applies specifically to hospice The need to serve a particular ethnic minority, if evidence that their access to a service is limited, is in the criteria. The most relevant provisions of Rule 59C-1.030 are as (2) Health Care Access Criteria. (a) The need that the population served or to be served has for the health or hospice services proposed to be offered or changed, and the extent to which all residents of the district, and in particular low income persons, racial and ethnic minorities, women, handicapped persons, other underserved groups and the elderly, are likely to have access to those services. (b) The extent to which that need will be met adequately under a proposed reduction, elimination or relocation of a service, under a proposed substantial change in admissions policies or practices, or by alternative arrangements, and the effect of the proposed change on the ability of members of medically underserved groups which have traditionally experienced difficulties in obtaining equal access to health services to obtain needed health care. (c) The contribution of the proposed service in meeting the health needs of members of such medically underserved groups, particularly those needs identified in the applicable local health plan and State health plan as deserving of priority. (d) In determining the extent to which a proposed service will be accessible, the following will be considered: 30 1. The extent to which medically underserved individuals currently use the applicant's services, as a proportion of the medically underserved population in the applicant's proposed service area(s), and the extent to which medically underserved individuals are expected to use the proposed services, if approved; 65. In the absence of numeric need, the special circumstances subsection in Rule 59C-1.0355(4) (d)1., Florida Administrative Code, on which Catholic Hospice relied is as follows: Evidence submitted by the applicant must document one of the following: 1. That a specific terminally ill population is not being served. 66. One expert testified that the provision should be narrowly construed to require a proposal to care for a specific terminal diagnosis, such as AIDS, but AHCA reasonably rejected that interpretation as applied to this case. Care fora particular ethnic group is specifically recognized as a valid consideration in Rule 59C-1.030. 67. AHCA's expert also noted, that under its rules, there is no reason to approve the application of Catholic Hospice if it fails to show that there is an underserved population, in this case, Hispanics in Broward County. The CON was prepared based on a belief that Hispanics are underserved, but without any data on Hispanic utilization. That data is not routinely 31 collected by AHCA and only became available in this case as a result of discovery. AHCA also determined that Catholic Hospice needed to show evidence that the existing providers are not meeting the area's needs. Catholic Hospice failed to show any need for its services in Broward County. In fact, there is affirmative evidence that the Hispanic hospice penetration rate should be what it is, which is approximately the same as the Hispanic death rate, adjusted to exclude unexpected causes of death. Therefore, the application of Catholic Hospice should be denied.
Conclusions For Petitioner Hospice by the Sea, Inc.: Robert A. Weiss, Esquire Karen A. Putnal, Esquire Parker, Hudson, Rainer & Dobbs, LLP 118 North Gadsden Street The Perkins House, Suite 200 Tallahassee, Florida 32301 For Petitioner Vitas Healthcare Corporation: Geoffrey D. Smith, Esquire Steven E. Oole, Esquire Blank, Meenan & Smith, P.A. 204 South Monroe Street Post Office Box 11068 Tallahassee, Florida 32302-3068 For Petitioner Hospice Care of Broward County, Inc.: Stephen A. Ecenia, Esquire R. David Prescott, Esquire Thomas W. Konrad, Esquire Rutledge, Ecenia, Purnell and Hoffman, P.A. 215 South Monroe Street, Suite 420 Post Office Box 551 Tallahassee, Florida 32302-0551 For Respondent Catholic Hospice, Inc.: Theodore E. Mack, Esquire Powell & Mack 803 North Calhoun Street Tallahassee, Florida 32303 For Respondent Agency for Health Care Administration: Richard A. Patterson, Esquire Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building Three, Suite 3431 Tallahassee, Florida 32308-5403
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter a final order denying the application of Catholic Hospice for Certificate of Need Number 9333 to establish a hospice program in District lo. DONE AND ENTERED this [3% day of July, 2001, in Tallahassee, Leon County, Florida. Ahicamae rn Yt. ELEANOR M. HUNTER 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 /.3r* day of July, 2001. COPIES FURNISHED: Sam Power, Agency Clerk Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building Three, Suite 3431 Tallahassee, Florida 32308-5403 38 Julie Gallagher, General Counsel Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building Three, Suite 3431 Tallahassee, Florida 32308-5403 Robert A. Weiss, Esquite Karen A. Putnal, Esquire Parker, Hudson, Rainer & Dobbs, LLP 118 North Gadsden Street The Perkins House, Suite 200 Tallahassee, Florida 32301 Geoffrey D. Smith, Esquire Steven E. Oole, Esquire Blank, Meenan & Smith, P.A. 204 South Monroe Street Post Office Box 11068 Tallahassee, Florida 32302-3068 Stephen A. Ecenia, Esquire R. David Prescott, Esquire Thomas W. Konrad, Esquire Rutledge, Ecenia, Purnell and Hoffman, P.A. 215 South Monroe Street, Suite 420 Post Office Box 551 Tallahassee, Florida 22302-0551 Theodore E. Mack, Esquire Powell & Mack 803 North Calhoun Street Tallahassee, Florida 32303 Richard A. Patterson, Esquire Agency for Health Care Administration 2727 Mahan Drive Fort Knox Building Three, Suite 3431 Tallahassee, Florida 32308-5403
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 The issues in this case are: Whether Petitioner, Agency for Health Care Administration (“Petitioner” or “AHCA”), is entitled to recover Medicaid funds paid to Respondent, HCR Manor Services of Florida, LLC, d/b/a Heartland Home Health Care and Hospice (“Respondent” or “Heartland”), for hospice services Respondent provided during the audit period between July 1, 2011, through December 31, 2014; Whether Heartland should be required to pay an administrative fine, pursuant to Florida Administrative Code Rule 59G-9.070(7)(e); and The amount of any investigative, legal, and expert witness costs that AHCA is entitled to recover, if any.
Findings Of Fact Based on the evidence presented at the final hearing, the prehearing statement, and the record in this matter, the following Findings of Fact are made: Parties AHCA is the state agency responsible for administering the Florida Medicaid program. Medicaid is a joint federal/state program to provide health care and related services to qualified individuals. Heartland is a provider of hospice and end-of-life services in Florida. During the Audit Period, Heartland maintained a hospice program headquartered in Jacksonville, Florida. The program is enrolled as a Medicaid provider and has a valid Medicaid provider agreement with AHCA. As a hospice care provider, Heartland has an inter- disciplinary team ("IDT"), which includes persons with medical, psychosocial, and spiritual backgrounds to provide comfort, symptom management, and support to patients and their families. Each patient is reviewed in a meeting of the IDT every two weeks. A Medicaid provider is a person or entity that has voluntarily chosen to provide and be reimbursed for goods or services provided to Medicaid recipients. As an enrolled Medicaid provider, Heartland is subject to statutes, rules, and Medicaid handbooks incorporated by reference into rule, which were in effect during the Audit Period. See, e.g., Florida Medicaid Hospice Services Coverage and Limitations Handbook, 2007 (“Handbook”), adopted by Fla. Admin. Code R. 59G- 4.140(2)(2007). Audit Process The Handbook contains six bullet points for a physician to consider when making a determination regarding a patient’s initial certification for hospice eligibility. While those six bullet points provide factors for consideration by the certifying physician, each recipient is not required to meet each bullet point to be eligible for hospice care. The six bullet points are as follows: Terminal diagnosis with life expectancy of six months or less if the terminal illness progresses at its normal course; Serial physician assessments, laboratory, radiological, or other studies; Clinical progression of the terminal disease; Recent impaired nutritional status related to the terminal process; Recent decline in functional status; and Specific documentation that indicates that the recipient has entered an end-stage of a chronic disease. The initial certification for hospice applies for a 90-day period. The patient can then be recertified for a second 90-day period. Thereafter, all subsequent recertifications apply for a 60-day period so long as the patient meets the requirements to receive hospice benefits. To determine eligibility, the Handbook provides: The first 90 days of hospice care is considered the initial hospice election period. For the initial period, the hospice must obtain written certification statements from a hospice physician and the recipient’s attending physician, if the recipient has an attending physician, no later than two calendar days after the period begins. An exception is if the hospice is unable to obtain written certification, the hospice must obtain verbal certification within two days following initiation of hospice care, with a written certification obtained before billing for hospice care. If these requirements are not met, Medicaid will not reimburse for the days prior to the certification. Instead, reimbursement will begin with the date verbal certification is obtained. * * * For the subsequent election periods, written certification from the hospice medical director or physician member of the interdisciplinary group is required. If written certification is not obtained before the new election period begins, the hospice must obtain a verbal certification statement no later than two calendar days after the first day of each period from the hospice medical director or physician member of the hospice’s interdisciplinary group. A written certification must be on file in the recipient’s record prior to billing hospice services. Supporting medical documentation must be maintained by the hospice in the recipient’s medical record. The U.S. Department of Health & Human Services, Centers for Medicare and Medicaid Services (“CMS”), contracted with HI, a private vendor, to perform an audit of Heartland. HI retained Advanced Medical Reviews (“AMR”) to provide physician reviews of claims during the audit process in order to determine whether the patients met the criteria for Medicaid Services. HI notified Heartland of the audit on or about June 30, 2016. The audit was conducted between August 25, 2016, and December 20, 2016. The scope of the audit was limited to Medicaid recipients that received hospice services from Heartland during the period of July 1, 2011, through December 31, 2014, the Audit Period. The files were identified for review using the following criteria: The recipient was not dually eligible (eligible for both Medicaid and Medicare); Heartland provided hospice services for 182 days or longer, based on the recipient’s first and last day of service within the Audit Period; and HI excluded recipients who had at least one malignancy (cancer) primary diagnosis and had a date of death less than one year from the first date of service with Heartland. Thus, the objective of the audit was to determine whether certain Medicaid patients were, in fact, and pursuant to applicable law, eligible for hospice benefits provided by Heartland. When HI applied the audit criteria to the Medicaid claims paid by AHCA to Heartland, HI determined that Heartland had provided hospice services to five Medicaid recipients for 182 days or longer during the Audit Period. To qualify for the Medicaid hospice program, all recipients must, among other things: a) be certified by a physician as terminally ill with a life expectancy of six months or less if the disease runs its normal course; and b) voluntarily elect hospice care for the terminal illness. HI employed claims analysts who performed an initial review of Heartland’s patient records to determine if the recipients were eligible for Medicaid hospice benefits. All HI claims analysts are registered nurses. If the HI claims analyst was able to assess that the patient’s file contained sufficient documentation to justify eligibility for hospice benefits for the entire length of stay under review in the audit, there was no imposition of an overpayment for that file pursuant to the audit process and, thus, the claim was not evaluated further. If the HI claims analyst was unable to assess whether the patient’s file contained sufficient documentation to determine eligibility for hospice benefits, or if only a portion of the patient’s stay could be justified by the HI claims analyst, the file was forwarded to an peer review physician to make the ultimate determination as to eligibility for Medicaid hospice benefits and whether an overpayment was due the Florida Medicaid program. HI contracts with peer review organizations that provide physicians to perform the peer review. One of those organizations was AMR, which provided peer review services for the Heartland audit. Heartland Audit Regarding the Heartland audit, HI staff members identified the physicians who provided care to the recipients at Heartland. The physicians at Heartland had an active specialty in family medicine. Because HI did not have any family physicians on staff at the time of the audit, HI identified physicians specializing in internal medicine. Internal medicine was selected because the nature of the practice involves treatment of various medical conditions. The peer reviewers selected to review recipient records to determine eligibility for hospice were, to the maximum extent possible, of the same specialty as the Heartland physicians. The HI claims analysts reviewed Heartland’s patient records for five recipients and determined that no further action was warranted with respect to two recipients. The claims analysts were registered nurses. As a result, three files were referred for physician peer review by AMR. AMR maintains a secure portal (“AMR Portal”) that HI personnel access to transmit all received provider files to AMR. AMR’s peer review physicians use the AMR Portal to review the totality of the provider’s submitted documentation, including all patient records, and provided their comments. Initially, AHCA selected Ankush Bansal, M.D., to review the patient files identified for physician review. Dr. Bansal determined that all three recipients were ineligible for hospice services. HI prepared a Draft Audit Report (“DAR”), which identified overpayments of Medicaid claims totaling $127,015.43, relating to three recipients. On March 7, 2017, HI presented the DAR to Heartland for comment and response. The alleged overpayments for the three recipients were for the time periods as follows1/: Patient P.C., for service dates 03/13/2012 – 9/11/2012. Patient S.L., for service dates 03/02/2013 – 9/22/2013; and Patient V.P, for service dates 11/13/2012 – 2/28/2014; During the pendency of the audit, but after the DAR was provided to Heartland, Dr. Bansal became unavailable for further work on the audit. Thus, AMR retained two new physicians (Ibrahim Saad, M.D., and Patrick Weston, M.D.) to perform the re-reviews of the patient records. After Heartland responded to the DAR, Heartland’s response was provided to the two new AMR peer review physicians, who, after reviewing Heartland’s response to the audit, reevaluated the medical documentation in light of the additional information and argument provided by Heartland. The new peer reviewers, Drs. Saad and Weston, agreed with the original peer reviewer, Dr. Bansal, that the three recipients were not eligible for hospice services. As a result of that comment and review process, no claims were adjusted. Once approved by CMS and AHCA, the DAR became the FAR. The FAR set forth an overpayment amount of $127,015.43 in Medicaid overpayments owed to AHCA based upon the three Medicaid recipients serviced by Heartland during the Audit Period. HI submitted the FAR to CMS. CMS provided the FAR to AHCA with instructions that AHCA furnish the FAR to Heartland and initiate the state recovery process. The FAR contains the determinations made by the AMR peer review physicians finding that each of the three patients identified therein were ineligible for hospice coverage as the documentation did not support the eligibility requirement of having a terminal illness with a life expectancy of six months or less if the illness ran its normal course. AHCA sent the FAR to Heartland. In the Notice letter, AHCA explained that a fine of $25,403.09 had been applied and costs were assessed in the amount of $75.55. The total amount due for the alleged overpayment, fines, and costs was $152,494.07. Experts Due to the nature of the review and re-review process, the final hearing primarily focused on the testimony of each parties' experts regarding whether particular recipients met the criteria of Medicaid hospice benefit eligibility. The undersigned notes that Heartland did not offer testimony regarding the patients’ eligibility from the physician who actually evaluated the recipients in dispute or certified any of the recipients as terminally ill during the Audit Period. Dr. Stevens, the certifying physician for at least two of the three patients, testified but did not offer specific testimony about the respective patients’ Medicaid hospice eligibility. The experts presented by AHCA and Heartland in this matter did not examine the recipients. For each patient, an AHCA and the Heartland expert reviewed the patient records and provided an opinion as to whether the six bullet points of the Handbook were satisfied to determine whether the recipient was "terminally ill with a life expectancy of six months or less if the disease runs its normal course." In performing their respective peer reviews, the peer review physicians were instructed to use their clinical experience and the Handbook. As set forth above, the Handbook, adopted by Florida Administrative Code Rule 59G-4.140, requires a recipient to have a terminal diagnosis with a life expectancy of six months or less if, the terminal disease follows its normal course in order to be eligible for Medicaid hospice services. It also requires that the hospice maintain documentation supporting that prognosis at initial certification and for every recertification. AHCA’s Experts Dr. Ibrahim Saad Dr. Saad, board-certified in internal medicine, was actively practicing in Florida at the time of the audit. Dr. Saad regularly sees and treats patients with liver disease and congestive heart failure as part of his practice. Dr. Saad reviewed and rendered his opinion as to the hospice eligibility of two recipients in the FAR, patients P.C. and V.P. Dr. Saad is a physician licensed under chapter 458, Florida Statutes, who has been regularly providing medical care and treatment within the past two years and within the two years prior to the audit as explained above. Dr. Saad began practicing medicine in Florida in August of 2015. Prior to practicing in Florida, he completed a three-year residency in Michigan, during which he actively treated patients. He was the chief resident his last year of the residency. The last two years of his medical school consisted of clinical rotations, during which he actively treated patients. In its PRO, Heartland argued that Dr. Saad did not have “five years full-time equivalent experience providing direct clinical care to patients.” However, there is no statutory requirement for a peer reviewer to have five years of experience. Although attesting to the statement is a requirement established by AMR, it has no bearing on whether Dr. Saad met the criteria for a peer reviewer under Florida law. Dr. Saad qualifies as a peer reviewer under the Florida Statutes. When weighing the testimony of Dr. Saad, the undersigned considered material factors regarding Dr. Saad’s qualifications. Dr. Saad has not certified a patient as being terminally ill. However, Dr. Saad regularly sees and treats hospice patients and patients with end-stage diseases. Based upon his experience, Dr. Saad understands what factors are properly considered when estimating a patient’s life expectancy. Dr. Saad also routinely makes life expectancy prognostications for his patients. Based on the factors above, Dr. Saad was accepted as an expert in internal medicine. Dr. Patrick Weston Dr. Weston has been actively practicing as a physician since 2009, meaning he had been in practice for 10 years at the time of the hearing. Prior to 2009, Dr. Weston completed a three-year cardiovascular fellowship, and prior to that, he completed a two-year residency in internal medicine. Dr. Weston often sees and treats patients with cancer. Dr. Weston has referred patients to hospice. Dr. Weston reviewed and rendered his opinion as to the hospice eligibility of one recipient in the FAR, patient S.L. Dr. Weston was board-certified in internal medicine in 2007. He was also board-certified in cardiology in 2010 and nuclear cardiology in 2011. Cardiology is a subspecialty of internal medicine. Dr. Weston’s internal medicine certification expired on December 31, 2017. However, he anticipates obtaining the certification again, and at the time of the hearing, was planning to take the test in a few months. Although his certification lapsed, Dr. Weston continued to actively treat patients, spending approximately 50 percent of his time practicing internal medicine. More importantly, the certification was active when he performed the audit. Dr. Weston treats hospice patients and refers patients to hospice on a regular basis. Based upon his experience, Dr. Weston understands what factors are properly considered when estimating a patient’s life expectancy. Dr. Weston routinely makes life expectancy prognostications for his patients. Based on the factors above, Dr. Weston was accepted as an expert in internal medicine. When weighing the testimony of Dr. Weston, the undersigned considered material factors regarding Dr. Weston’s qualifications. Dr. Weston has not certified a patient as being terminally ill. Dr. Weston is not board-certified in hospice or palliative care. After the audit, but before the hearing, Dr. Weston moved to a new practice, in which he has a flexible schedule, sometimes working no hours per week and sometimes working 60 hours per week. However, he testified that on average, he works about 100 hours per month. Heartland’s Expert Dr. Michael Shapiro Dr. Shapiro attended the Ross University School of Medicine, performed his residency at the Medical Center of Central Georgia and Mercer University, and performed a fellowship at the University of South Florida in hospice and palliative medicine. Dr. Shapiro was first exposed to hospice medicine during his residency, where there was both a palliative care service and a hospice service. After his residency, Dr. Shapiro spent a year as a junior faculty member at Mercer University where he performed palliative rounds on a weekly basis, in addition to practicing both general inpatient and outpatient medicine. Dr. Shapiro’s fellowship provided training on both the clinical and significant administrative aspects of hospice and palliative medicine, as well as hospice benefits. As part of this training, Dr. Shapiro learned how to appropriately evaluate patients to determine if they are eligible for the Medicaid hospice benefit. After completing his fellowship, Dr. Shapiro began working full time in hospice with Cornerstone Hospice (“Cornerstone”) as a team physician. In that role, Dr. Shapiro performed patient visits, held admission phone calls for new patient certifications, and performed other tasks as the physician member of the IDT. Dr. Shapiro also assessed patients to determine whether they were eligible for the Medicaid hospice benefits and executed written certifications for patients who were terminally ill and eligible for hospice benefits. Dr. Shapiro is currently the hospice medical director and chief medical officer of Cornerstone. In that role, he oversees all the physicians and hospice clinical practitioners, and actively participates in training. Dr. Shapiro also provides hospice physician training to new Cornerstone employees regarding the hospice benefit beyond the organization’s educational requirements. Dr. Shapiro estimates that, during his time at Cornerstone, he has assessed well over 1,000 patients to determine whether they have a terminal illness of six months or less if, the illness runs its normal course. He has determined eligibility by taking the history and performing a physical examination of patients, as well as by evaluating a patient based strictly on the medical records. Dr. Shapiro is board-certified in family medicine, hospice and palliative medicine, and as a hospice medical director. He also serves as the chair of the National Partnership for Hospice Innovation Medical Affairs Forum, which is a collaborative group of larger, not-for-profit hospices who focus on improving the clinical aspects of hospice. Based on the findings set forth above, Dr. Shapiro was accepted as an expert in hospice medicine, family medicine, and as a hospice medical director. When weighing the testimony of Dr. Shapiro, the undersigned took note of several factors regarding Dr. Shapiro’s qualifications. Dr. Shapiro testified that during his time at Cornerstone, he assessed more than 1,000 patients. He also acknowledged that Cornerstone underwent an audit in 2016, similar to the one at issue in this case, while he was medical director of the facility. The outcome of that audit resulted in Cornerstone being required to pay AHCA more than $700,000 in overpayments. While this factor does not disqualify Dr. Shapiro as an expert, the significant overpayment is a factor when weighing his testimony regarding the eligibility of recipients for Medicaid hospice services. Patient Review Patient P.C. Patient P.C. was a 54-year-old female who was admitted to hospice with a terminal diagnosis of end-stage congestive heart failure on March 13, 2012. P.C. presented with a secondary history of chronic obstructive pulmonary disease (asthma), GERD, and back pain. She had been hospitalized in the prior three years and was dependent regarding six of six activities of daily living (ADLs), including ambulating, toileting, transferring, dressing, feeding, and bathing. The claim period in question is March 13, 2012, through September 11, 2012. At the time of admission, P.C.’s most recent hospitalization, on March 7, 2012, was for a primary diagnosis of acute renal injury, lower extremity pain, and headache with a noted history of cardiomyopathy. During the admission, tests were conducted to rule out an acute kidney injury versus chronic kidney disease. The records noted that cardiology was only following her for her cardiomyopathy condition. Thus, the hospital admission was not related to her hospice-admitting diagnosis of congestive heart failure. Prior to admission, the most recent report from her primary cardiologist was dated December 9, 2011. At that time, the doctor noted that she was “doing generally well from a cardiac standpoint” and that she “appears to be stable from a heart failure standpoint.” Moreover, in the most recent record from her primary electrophysiologist, dated November 11, 2011, it was noted that she had New York Heart Association (“NYHA”) Class II symptoms. Her initial nursing assessment on March 15, 2012, showed that P.C. was able to ambulate 30 feet, she had no complaints of chest pain, no edema noted, she did not need oxygen, and she was independent with activities of daily living. Her ejection fraction was 20 percent at the time, her PPS was 50 percent, and her level of consciousness was not altered. The initial nursing assessment also indicated that P.C. was independent in all six ADLs. The follow-up assessment five days later on March 20, 2012, noted “none” for the ADL dependent category. NYHA’s functional classification is incorporated into the Heartland guidelines for determining prognosis for heart disease. The criteria for Class IV (terminally ill) patients with heart disease include “patients with cardiac disease resulting in inability to carry on physical activity without discomfort. Symptoms of heart failure or of the anginal syndrome may be present even at rest. If any physical activity is undertaken, discomfort is increased. Dr. Saad testified that the NYHA classifications are based primarily on the level of ambulation and whether the patient has significant chest pain at rest. Dr. Saad testified that a patient classified as being in Class II is someone with mild symptoms with ambulation. There may be some shortness of breath or chest pain. P.C.’s records reflect that she was able to ambulate 30 feet, she did not require oxygen, and she did not have chest pain. Based on P.C.’s records, she should have been classified as a Class II cardiac patient. Although the heart disease guideline form in her records indicated she was initially designated as NYHA Class IV, both Drs. Shapiro and Saad agreed that P.C. did not meet the criteria for NYHA Class IV, but rather, she met the criteria for Class II. In addition, patient P.C. was not using any oxygen when she was admitted to hospice and she was on room air. Dr. Saad credibly testified that a patient with end-stage heart failure would need to be on oxygen. During her stay in hospice, P.C.’s PPS was 50 percent and it increased to 60 percent in the second period. Her weight fluctuated between 160 and 170 pounds. Dr. Shapiro’s testimony that P.C.’s weight fluctuation could be attributed to fluid retention was not supported by the patient records. Based on P.C.’s patient records, there was not sufficient evidence to demonstrate that she had six months or less to live. Between the visit at which her cardiologist found her to be stable and her entry into hospice, there was no evidence of any additional complications with her heart disease. Moreover, there was no evidence of functional decline, impaired nutritional status, or overall progression of her heart disease during the recertification periods. Respondent’s expert noted that the patient experienced chronic leg and back pain and had chronic opioid dependency. However, this factor is not sufficient to support hospice eligibility. Dr. Shapiro pointed to several factors to support his contention that P.C.’s condition had progressed and her functionality had declined. During the recertification period with dates of March 13, 2012, through June 10, 2012, P.C. developed symptoms and progression of her underlying condition, including, shortness of breath with ambulation, tiring easily, and experiencing confusion about her medications. She was hospitalized on May 15, 2012, where she presented with oxygen saturations in the low 80s and a chest x-ray finding pulmonary congestion and opacities. During the hospital stay, P.C. was found to have anemia, with a hemoglobin measurement of 9.7. Dr. Shapiro testified that the lowered hemoglobin increased mortality by about 32 percent, and when coupled with untreated arrhythmias and underlying stage II heart disease, P.C.’s mortality at one year was almost 70 percent. During the certified period June 11, 2012, through September 8, 2012, P.C. began using supplemental oxygen for shortness of breath and fatigue and was suffering from orthopnea. The records reflect that P.C. was using a cane to ambulate upon admission to hospice due to vertigo. There was insufficient evidence of her nutritional decline; her weight fluctuated between 160 to 170 pounds; and her eating ranged from 25 to 75 percent. She was also independent regarding six of six ADLs. During the period September 9, 2012, through November 7, 2012, P.C. elected to revoke hospice on September 11, 2012, only three days into the final benefit period at issue. The patient records do not support a finding that P.C. met the Medicaid hospice eligibility standard during the disputed period of March 13, 2012, through September 11, 2012. The greater weight of the evidence supports a finding that P.C. was not eligible for Medicaid services and, thus, AHCA is entitled to recover an overpayment of $28,866.27. Patient S.L. Patient S.L. was a 56-year-old female, admitted to hospice on March 2, 2013, with a terminal diagnosis of squamous cell head and neck cancer. The claim periods at issue are March 2, 2013, through September 22, 2013. Based on her patient records, it is noted that S.L. had a history of cancer in the neck and upper lip. She had a wide local resection of her upper lip to remove the cancer on July 28, 2011. In May 2012, a CT scan of her neck showed evidence concerning cervical metastases. She then had a left neck dissection on May 10, 2012. The patient records did not show any recurrence of cancer after the dissection. In January 2013, her patient records showed that she had complaints of neck and jaw pain. However, her appearance was noted as “[o]therwise healthy looking, well nourished, in mild distress.” Upon discharge, the recommendation was that she continues medications as prescribed by the primary care physician and follow up in three months. On March 1, 2013, the day before she entered hospice, she visited Shands complaining of pain in the neck on the left side. The record noted that she is a “poor historian and emotionally unstable.” The record also noted that she was “sitting comfortably in the chair in no pain or distress” and her vital signs were within normal limits. The report found no evidence of the source of pain on the clinical exam so she was referred for a CT scan for further imaging. There was no referral for hospice services. In fact, there is no referral for hospice treatment by a physician in S.L.’s records. S.L. self-reported a 20-pound weight loss at the time of admission, in addition to increased symptoms of fatigue and shortness of breath. Dr. Shapiro testified that these symptoms, in conjunction with metastatic cancer, demonstrated a clinical need and appropriateness for hospice. However, there were no records to support a current diagnosis of cancer or a 20-pound weight loss. The information in the records that was used to admit S.L. for hospice services was unreliable and at times, inaccurate. There is no evidence to support that S.L. had a current diagnosis of cancer at the time of her admission. Her records reflect a history but no recurrence. There is no evidence to support S.L.’s self-reported 20-pound weight loss at the time of admission. The record demonstrates that within the prior year, S.L.’s weight had a range between 120 to 130 pounds. In addition, in the initial certification assessment, the hospice physician stated in his narrative that the cancer had metastasized to the lungs. However, there is no evidence that demonstrates that cancer was in S.L.’s lungs and, thus, the record does not support this statement. Further, there is a note on the recertification document that “MD visit Mar 2013 pt informed cancer has grown.” However, as stated above, S.L. was referred for a CT scan during her March 1, 2013, visit, but there is no mention of her cancer growing. Based on the foregoing, S.L.’s patient records do not support a finding that S.L. met the Medicaid eligibility standards for hospice services. During the recertification period of March 3, 2013, through May 30, 2013, S.L. was hospitalized for a possible overdose attempt. After this hospitalization, it was found that S.L. was experiencing lower extremity neuropathy, in addition to continued complaints of back and neck pain. However, none of these factors relate to her initial admitting diagnosis of cancer. Further, neither of the factors is noted as comorbidities that would warrant hospice services. A CT scan revealed nodal involvement, which Dr. Shapiro testified that literature suggests results in a 50-percent decrease in the rate of survival. However, follow-up testing was ordered to confirm the nature of the nodal mass, which is not sufficient documentation to demonstrate progression of cancer. S.L. experienced anxiety and she was becoming easily tearful, frustrated, and paranoid. A visit to her maxillofacial surgeon on August 20, 2013, revealed a palpable neck mass, which required further investigation. More importantly, however, the treating physician noted that “[s]he has referred herself to hospice . . . it is not at all clear that she should be a hospice patient at all.” Both a positron emission tomography (“PET”) scan conducted on August 30, 2013, and a biopsy performed by S.L.’s maxillofacial surgeon returned negative. The medical records contained in S.L.’s file do not support a finding that the Medicaid hospice eligibility standard was met during the disputed period. Based upon the greater weight of evidence, it is determined that S.L. was not eligible for Medicaid hospice services at the initial assessment or for the recertification periods. As a result, AHCA is entitled to recover an overpayment of $29,601.95. Patient V.P. Patient V.P. was a 45-year-old male with a history of end stage liver disease with comorbidities of alcoholic cirrhosis and Hepatitis C. His other comorbidities included esophageal varices grade III, hypertension, portal tension, anemia, anxiety, and polysubstance abuse. The claim period at issue is November 13, 2012, through February 28, 2014. V.P. had been admitted to the hospital seven times in the year prior to being admitted into hospice, the most recent of which was six weeks prior to his hospice admission. V.P. was admitted at that time for acute gastrointestinal hemorrhage and anemia due to the hemorrhage. He also had noted cirrhosis, very low blood counts, varices, and portal hypertension. Dr. Shapiro testified that these were significant clinical indicators of decompensated liver cirrhosis and findings suggestive of progressed liver disease. Based on this information, Dr. Shapiro opined that V.P. was appropriately admitted to hospice. Over a month before entering hospice, V.P. had an endoscopy, which showed grade III varices, but no bleeding, which meant that the disease was not active. Dr. Saad testified that this was significant because when looking at a terminal diagnosis, you are looking at a disease that is not responsive to treatment. Dr. Saad testified that the two main factors that are considered in determining the function of the liver are the INR and the albumin levels. V.P. had an international normalised ratio (“INR”) of 1.3 on October 3, 2012, and at admission, which is elevated and shows that he has liver disease, but it had not progressed to become end stage. Similarly, a normal albumin level is 3.5 and his was 3.0, which shows it is slightly decreased. The lower albumin level of 3.0 suggests that V.P. had liver disease, but that the level had not decreased to the point of end stage. More importantly, the patient records reflect that V.P.’s albumin level was 3.5 on September 27, 2012, and it decreased to 3.0 on September 28, 2012. According to the Heartland guidelines, an INR of greater than 1.5 and an albumin level of less than 2.5 coupled with other indicators of progression support a diagnosis of end- stage liver disease. During the recertification period of November 12, 2012, through February 10, 2013, V.P. suffered from increased abdominal pain requiring medication management changes, shortness of breath on walking, dizziness with associated elevated blood pressure, and muscle atrophy, all signs of the severity of his underlying liver disease. V.P. also experienced a fall on November 15, 2012. Due to these factors, Dr. Shapiro opined that V.P. continued to be appropriate for hospice. V.P. experienced abdominal pain during the recertification period of February 11, 2013, through May 11, 2013, which resulted in another medication regimen modification. V.P. was also transferred to a skilled nursing facility due to increased daily care needs. During this period, V.P. also began experiencing increased anxiety and depression. V.P.’s laboratory findings demonstrated an elevated INR of 1.5 from the previous month (of 1.3), which could lead to spontaneous bleeding. Dr. Shapiro also testified that V.P. experienced another fall, demonstrating his general weakness and continued functional decline. During the recertification period of May 12, 2013, through July 10, 2013, the records show increased drowsiness and lethargy, which were found to not be related to his medication but rather to his disease. V.P. experienced increased pain and ineffective control near the end of May, resulting in yet another medication modification. V.P. also had swelling and fluid retention in his lower extremities, which Dr. Shapiro opined illustrated muscle mass wasting in advancing liver disease. V.P.’s alkaline phosphatase increased from 136 to 178, and an ultrasound showed ascites in his abdomen, hepatomegaly, and a renal stone. V.P. also exhibited non-verbal signs of pain, as well as a significant and sharp increase in shortness of breath. The shortness of breath occurred while V.P. was speaking and led to the presence of intermittent orthopnea, which is commonly found in terminal liver patients and demonstrates disease progression. V.P. had documented pancytopenia, when combined with swelling and fluid retention, shows an advancing disease state where a patient is more susceptible to infection. V.P. experienced such an infection during this period, and he was treated with antibiotics for cellulitis. V.P. also suffered an additional fall in September and had continued decline in appetite, consuming only 25 percent to 50 percent of his meals. On December 17, 2013, V.P. was examined by a team physician who noted that V.P. exhibited confusion, forgetfulness, slurred speech, muscle atrophy, frailty, depressed mood, anxiousness, ascites, and moderate dependence in his activities. Other hospice team members also witnessed V.P.’s progressive symptoms, including confusion and repetitive speech. V.P. experienced another fall that resulted in a head injury, followed by slurred speech and lethargy. Despite another change in his medication, V.P.’s clinical symptoms progressed. He started suffering from hypoxia, abdominal tenderness, and ascites. A chest x-ray showed congestive heart failure. V.P. also developed a urinary tract infection requiring antibiotic treatment. Dr. Shapiro testified that these were clear findings that demonstrated V.P. was appropriate for hospice. During the recertification period of January 7, 2014, through February 28, 2014, V.P. required additional nursing needs and visits. V.P. developed crackles (persistent fluid and congestion) in his lungs and had increased abdominal girth, at one point measured as a 1.5-inch increase over a two-week period. In addition, V.P. experienced two separate falls, suffered from increased fatigue and weakness, and had recurrent cellulitis (bacterial infection). A chest x-ray dated February 5, 2014, showed that V.P. developed pneumonia. In the radiology report, it is noted that the exam was overall worse compared to the January 1, 2014, exam. V.P. died on February 11, 2016. Dr. Saad testified that individuals can have good days and bad days and that they can wax and wane, but you look at whether they return to their baseline. While, there were some exacerbations, or infections, each issue may have ultimately resolved. However, V.P.’s records, including his lab results, x-rays which showed development of pneumonia within slightly more than a month, multiple reoccurring falls, a number of infections, increasing ADL dependence, and worsening confusion support a finding that V.P. was eligible for hospice services. The evidence does not support by a preponderance of evidence that V.P. was not entitled to hospice services and as a result, AHCA is not entitled to recover overpayment for patient V.P. Overpayment Calculation Based on the Findings of Fact above, AHCA is entitled to recover overpayment for hospice services to P.C. and S.L. in the amount of $58,468.22. Fine Calculation When calculating the appropriate fine to impose against a provider, MPI uses a formula based on the number of claims that are in violation of rule 59G-9.070(7)(e). The formula involves multiplying the number of claims in violation of the rule by $1,000 to calculate the total fine. The final total may not exceed 20 percent of the total overpayment of $58,468.22, which results in a fine of $11,693.64.
Recommendation Based on the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that the Agency for Health Care Administration enter a final order directing Heartland to pay $58,468.22 for the claims found to be overpayments and a fine of $11,693.64. The undersigned reserves jurisdiction to award investigative, legal, and expert witness costs. DONE AND ENTERED this 7th day of March, 2019, in Tallahassee, Leon County, Florida. S YOLONDA Y. GREEN 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 7th day of March, 2019.
