96-001401CON Hospice Of Central Florida, Inc. vs. Agency For Health Care Administration Status: Closed Recommended Order on Tuesday, May 6, 1997.

Summary: Challenge to hospice fixed need dismissed. Other criteria don't overcome fixed need pool of one. Comparison of two applications close but non-cancer and AIDS focus deciding factors.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

VITAS HEALTHCARE CORPORATION )

OF CENTRAL FLORIDA, )

)

Petitioner, )

)

vs. )

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, ) CASE NO. 96-1401

)

Respondent, )

)

and )

)

WUESTHOFF HEALTH SERVICES, INC., )

and HOSPICE INTEGRATED HEALTH )

OF DISTRICT VII-B, INC., )

)

Intervenors. )

HOSPICE INTEGRATED HEALTH SERVICES )

OF DISTRICT VII-B, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 96-4077

)

WUESTHOFF HEALTH SERVICES, INC., )

)

Respondent. )

VITAS HEALTHCARE CORPORATION )

OF CENTRAL FLORIDA, )

)

Petitioner, )

)

vs. ) CASE NO. 96-4078

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, HOSPICE INTEGRATED )

OF DISTRICT VII-B, INC., and )

WUESTHOFF HEALTH SERVICES, INC., )

)

Respondents. )

WUESTHOFF HEALTH SERVICES, INC., )

)

Petitioner, )

)

vs. ) CASE NO. 96-4079

)

AGENCY FOR HEALTH CARE )

ADMINISTRATION, and HOSPICE )

INTEGRATED OF DISTRICT VII-B, INC., )

)

Respondents. )

____________________________________)

RECOMMENDED ORDER

On November 18-26, 1996, a formal administrative hearing was

held in this case in Tallahassee, Florida, before J. Lawrence

Johnston, Administrative Law Judge, Division of Administrative

Hearings.

APPEARANCES

For Petitioner Seann M. Frazier, Esquire

Hospice Integrated Panza, Maurer, Maynard & Neel, P.A.

Health systems of 3600 North Federal Highway, Third Floor

District VII-B,Inc.:Ft. Lauderdale, Florida 33308

For Petitioner David C. Ashburn

Wuesthoff Health Gunster, Yoakley, Valdes-Fauli &

Services, Inc.: Stewart, P.A.

515 North Adams Street

Tallahasse e, Florida 32301

For Intervenor J. Robert Griffin

Vitas Healthcare J. Robert Griffin & Associates, P.A.

Corporation: 2559 Shiloh Way

Tallahassee, Florida 32308

For Respondent Richard Patterson

Agency for Health Agency for Health Care Administration

Care Administration: 2727 Mahan Drive, Suite 3431

Tallahassee, Florida 32308-5403

STATEMENT OF THE ISSUES

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.

PRELIMINARY STATEMENT

On February 2, 1996, the Agency for Health Care

Administration (AHCA) published notice that, according to its

rule methodology, there was a need for one additional hospice

program in AHCA Service Area 7B. Shortly thereafter, an existing

hospice provider in Service Area 7B, Vitas Healthcare Corporation

of Central Florida, Inc. (formerly Hospice of Central Florida,

Inc., and hereinafter “Vitas”) challenged the ACHA’s

determination (the “fixed need pool challenge”). AHCA referred

the fixed need pool challenge to the Division of Administrative

Hearings (DOAH), where it was given DOAH Case No. 96-1401.

Initially, final hearing in DOAH Case No. 96-1401 was set for

September 6, 1996.

In response to its announcement of a fixed need pool, the

AHCA received two applications to establish a new hospice

program: Hospice Integrated of District VII-B, Inc. (Hospice

Integrated) filed CON Application No. 8406; and Wuesthoff Health

Services, Inc. (“Wuesthoff”) filed CON Application No. 8407. The

two applications were competitively and comparatively reviewed by

AHCA officials.

After reviewing both applications and balancing the review

criteria, the AHCA concluded that Hospice Integrated’s

application best met the needs of patients in Osceola and Orange

Counties. The AHCA announced in a publication dated July 19,

1996, its preliminary intent to award a CON to Hospice Integrated

and to deny the application made by Wuesthoff.

Wuesthoff challenged the grant of Hospice Integrated’s

application instead of its own; Vitas challenged the grant of

either application. Hospice Integrated thereafter filed a

petition supporting the AHCA’s initial decision. These petitions

were referred to DOAH, given DOAH Case Nos. 96-4079, 96-4078 and

96-4077, respectively, and consolidated with DOAH Case No. 96-

1401 (the Vitas fixed need pool challenge), and final hearing in

the consolidated cases was scheduled for November 12-15 and 18-

21, 1996. Later, final hearing was continued to November 18-22

and 25-27, 1996.

The parties filed a Prehearing Stipulation on November 6,

1996. On the first day of the final hearing, they also filed a

supplemental Stipulation of Facts.

At final hearing, Hospice Integrated called eight witnesses

(including AHCA’s Chief of CON and Budget Review Office) and had

IHS Exhibits 1-7 and 9-11 admitted in evidence. AHCA called one

additional witness and had AHCA Exhibits 1 and 2 admitted in

evidence. Wuesthoff called 11 witnesses and had Wuesthoff

Exhibits 1-5, 7-11, 13-14, 17-18, 20-21, 25, 32-33, 35-36

admitted in evidence. Vitas called five witnesses and had Vitas

Exhibits 1-9 and 11-12 admitted in evidence.

After presentation of the evidence, the parties ordered the

preparation of a transcript of the final hearing and requested 30

days from the filing of the transcript in which to file proposed

recommended orders. The last of the 13 volumes of transcript was

filed on February 4, 1997. Vitas moved for an extension of time

to March 31, 1997, for filing proposed recommended orders, but

the applicants opposed the motion, and it was denied.

The parties’ proposed recommended orders were timely filed

on March 6, 1997. Vitas also filed a Notice of Voluntary

Dismissal of its fixed need pool challenge, DOAH Case No. 96-

1401.

FINDINGS OF FACT

Hospice

1. Hospice is a special way of caring for pati ents 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.

2. To be eligible for hospic e 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.

3. 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.

4. 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.

5. 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.

6. 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

7. 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).

A. Vitas

8. 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.

9. 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.

10. 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).

11. 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.

12. 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.

13. 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.

14. 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.

B. Comforter

15. Hospice of the Comforter began providing hospice care

in 1990. Comforter is not-for-profit. Like Vitas, it admits

patients regardless of payor status.

16. 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.

17. Comforter provides outreach and community education as

actively as possible for a smaller hospice.

18. Comforter does not have the financial strength of

Vitas. It maintains only about a two-month fiscal reserve.

Fixed Need Pool

19. On February 2, 1996, AHCA publi shed 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

20. 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.

21. 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.

22. 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.

23. 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.

24. 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.

25. 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.

26. 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.

27. 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.

28. 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.

29. 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.

30. 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.

31. 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

32. 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.

33. 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.

34. 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.

35. 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.

36. 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.

37. 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.

38. 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.

39. 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.

40. 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.

41. 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.

42. IHS’ hospices are members of the NHO. They are not

accredited by the Joint Commission on the Accreditation of Health

Care Organizations (JCAHO).

43. 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.

44. 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.

45. In its application, Hospice Integrated h as 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.

46. 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.

47. 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.

48. 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

49. 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).

50. 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.

51. Wuesthoff Foundation serves as the fundraising entity

for Wuesthoff Systems and its components.

52. 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.

53. 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.

54. 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.

55. 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.

56. 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.

57. If approved in Service Area 7B, Wuesthoff wo uld 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.

58. Wuesthoff proposes to use 38 volunteers duri ng 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.

59. 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.

60. 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.

61. 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.

62. 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.

63. 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.

64. 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.

65. 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.

66. 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.

67. 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.

68. 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

69. Both applications are financially feasible in the

immediate and long term.

A. Immediate Financial Feasibility

70. Free-standing hospice proposals like those of Hospi ce

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.

71. 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.

72. 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.

73. 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.

74. 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.

B. Long-Term Financial Feasibility

75. 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.

76. 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.

77. 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.

78. Vita s’ 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.

79. 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.

80. Vitas’ expert contend ed 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.

81. 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.

82. 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.

83. 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.

84. 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.

85. 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. 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.

b. A projection of area hospice costs

increases/decreases to occur due to the addition of

another hospice provider.

c. A projection of the ratio of administrative

expenses to patient care expenses.

d. Identification of sources, private donations,

and fund-raising activities and their affect on current

providers.

e. Projection of the number of volunteers to be

drawn away from the available pool for existing hospice

providers.

86. 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.

87. 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.

88. 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.

89. 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.

90. 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 .

91. 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.

92. 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.

93. 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.

94. Wuesthoff se eks 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.

95. 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.

96. 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.

97. 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.

98. 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.

99. 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.

100. 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.

101. 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.

102. 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.

103. 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.

104. 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%).

105. 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.

106. 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.

107. 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%.

108. 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.

109. 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.

110. 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.

111. 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.

112. Wuesthoff has agree d 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.

113. 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 .

114. While neither applicant specifically addressed the

provision of services to minorities, both made commitments to

provide services for Medicaid patients and the indigent.

115. 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.

116. 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.

117. Both applicants will provide care for patients without

primary caregivers.

118. 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.

119. 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.

120. 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.

121. 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.

122. 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.

123. Both applicants meet this preference.

124. Wuesthoff’s Brevard Hospice has JCAHO as well as

membership in the National Hospice Organization (NHO).

125. IHS’s hospices are NHO members, and Hospice

Integrated’s application states that it will become a member of

the NHO.

126. Wuesthoff’s JCAHO accreditation does not give it an

advantage under this preference.

Other Points of Comparison

127. In addition to the facts directly pertinent to the

State and Local Health Plan Preference, other points of

comparison are worthy of consideration.

A. General Hospice Experience

128. 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.

129. 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.

130. 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.

131. 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.

132. 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.

B. Policies and Procedures

133. 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.

134. 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.

C. Regulatory Compliance

135. 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.

136. 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.

137. 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.

138. 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).

139. 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.

140. 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.

D. Not-for-Profit Experience

142. 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 .

E. Presence and Linkages in Service Area 7B

143. 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.

144. 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.

145. Besides learning from experience, Wuesthoff proposes

to counter Hospice Integrated’s advantage through its proposed

affiliation with Florida Hospital.

146. 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.

147. 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.

F. Quality Hospice Services

148. Both applica nts 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.

149. 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.

150. 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.

151. None of IHS’s new hospices are even eligible for JCAHO

accreditation because they have not been in existence long

enough.

G. Bereavement Programs

152. 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.

153. 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.

154. 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.

H. Continuum of Care

155. 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.

156. 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

157. 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.

158. Wuesthoff’s application failed to provide for

continuous or respite hospice care. However, Wuesthoff clearly

is capable of remedying this omission.

Result of Comparison

159. 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.

CONCLUSIONS OF LAW

160. Certificate of need review criteria generally are

found in Section 408.035, Fla. Stat. (1995). However, Section

408.043(2), Fla. Stat. (1995), makes special provisions for

hospices, including the following:

When an application is made for a certificate of need

to establish or to expand a hospice, the need for such

hospice shall be determined on the basis of the need

for and availability of hospice services in the

community. The formula on which the certificate of

need is based shall discourage regional monopolies and

promote competition.

161. The “formula on which the certificate of need is

based” is contained in F.A.C. Rule 59C-1.0355 (the “rule”).

Paragraph (1) of the rule states that it implements Section

408.043(2), Fla. Stat. (1995), among others. Paragraph (4) of

the rule sets out the “Criteria for Determination of Need for a

New Hospice Program.”

162. Subparagraph (4)(a) of the rule sets out a formula for

determined the numeric need for a new hospice program. It

essentially compares the projected number of patients electing a

hospice program in a planning service area, such as 7B, in the

planning year, using statewide hospice use rates for each of four

components of patients (terminal cancer patients age 65 and over,

terminal cancer patients under 65, terminal non-cancer patients

age 65 and over, and terminal non-cancer patients under 65), with

actual current hospice use. If the result of the comparison is a

“gap” of 350 or more hospice admissions, the formula establishes

a numeric need for an additional hospice program.

. Subparagraph (4)(b) of the rule provides:

Regardless of numeric need shown under the formula in

paragraph (4)(a), the agency shall not normally approve

a new hospice program for a service area unless each

hospice program serving that area has been licensed and

operational for at least 2 years . . ..

163. Subparagraph (4)(c) of the rule provides:

Regardless of numeric need shown under the formula in

paragraph (4)(a), the agency shall not normally approve

another hospice program for any service area that has

an approved hospice program that is not yet licensed.

164. Subparagraph (4)(d) of the rule provides that, in the

absence of numeric need, the following special circumstances must

be shown to justify approval of an additional hospice program:

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.

3. That there are persons referred to hospice

programs who are not being admitted within 48

hours . . ..

165. In this case, it has been demonstrated that, under the

rule, there is a need for an additional hospice program in

Service Area 7B. There is numeric need under subparagraph (4)(a)

because the “gap” far exceeds 350. With reference to

subparagraph (4)(b), each hospice program serving 7B has been

licensed and operational for at least 2 years. With reference to

subparagraph (4)(c), there are no approved but unlicensed hospice

programs in 7B. As a result, the agency published notice of a

fixed need pool (FNP) of one additional hospice program for

Service Area 7B. It was not necessary for the applicants to

resort to or demonstrate the special circumstances set out in

subparagraph (4)(d) of the rule.

166. In addition to the clear provisions of the “Criteria

for Determination of Need for a New Hospice Program” found in

F.A.C. Rule 59C-1.0355(4), other AHCA rules support this view.

F.A.C. Rule 59C-1.008(2)(d) requires the agency to award the

“services identified in a fixed need pool . . . based on the

availability of a qualified applicant and proposed project which

meets statutory review criteria . . ..” F.A.C. Rule 59C-

1.008(2)(e) provides:

The fixed need pools and other relevant planning

information shall be used by the agency to review the

application against all statutory criteria contained in

paragraphs 408.035(1)(a) through (n), F.S., and

applicable rules, and policies.

It then goes on to give guidance in the event there is no need

methodology in place.

167. From the time of its initial pleading in Case No. 96-

1401 up to the filing of its proposed recommended order in these

consolidated cases, Vitas took the position that the FNP

determination in this case was incorrect for various reasons.

(Vitas did not file a challenge to the FNP rule under Section

120.56, Fla. Stat. (1995).) However, when Vitas filed its

proposed recommended order, Vitas dismissed its FNP challenge.

168. Instead, Vitas has maintained that, notwithstanding

the FNP, there is no need for a new hospice program in Service

Area 7B. Vitas’ argument derives from the general statutory

certificate of need review criteria found in Section 408.035,

Fla. Stat. (1995), and referenced in the FNP rules. But, as will

be seen, Vitas’ argument actually amounts to an improper

challenge to AHCA’s rules.

169. At the outset of considering Vitas’ arguments, it

should be noted that Section 408.035(1), Fla. Stat. (1995), does

not establish minimum criteria for approval of a CON application.

Rather, it only requires AHCA to “review applications for

certificate-of-need determinations . . . in context with the

following criteria . . ..” Some of the 408.035(1) review

criteria overlap, some are mutually inconsistent, and some are

hard to understand. It is apparent from the statutory criteria

that cost containment is not the only purpose to be served by the

certificate of need statute. In reviewing CON applications “in

context with” the criteria, the conflicting goals and objectives

of certificate of need regulation--the desire for effective cost

containment, the desire to provide health services for the poor,

and the desire for an efficient, effective and certain

administrative processing of certificate of need applications--

must be reconciled. For these reasons, a balanced consideration

must be given to the criteria. See Balsam v. Dept. of Health and

Rehab. Services , 486 So.2d 1341 (Fla. 1 st DCA 1986); Humana,

Inc., v. Dept. of Health and Rehab. Services , 469 So.2d 889 (Fla.

1 st DCA 1985). “[T]he appropriate weight to be given to each

individual criterion contained in the statute regarding CON

applications is not fixed, but rather must vary on a case-by-case

basis, depending on the facts in each case.” Collier v. Dept. of

Health and Rehab. Services , 462 So.2d 83 (Fla. 1 st DCA 1985).

170. Vitas first cites Section 408.035(1)(a), which refers

to “need . . . in relation to the applicable district plan and

state health plan . . ..” Vita s then points to various district

and state plan preferences to be used in comparing proposals and

argues that there is no need if an applicant cannot demonstrate

that it meets all of the preferences . It is true that F.A.C.

Rule 59C-1.0355(5), on “Consistency with Plans,” requires that an

applicant “provide evidence in the application that the proposal

is consistent with the needs of the community and other criteria

contained in local health council plans and the State Health

Plan.” But the requirement that an application be consistent

with the local and state plans does not transform these

preferences into minimum criteria. Secondly, Vitas omits

reference to the one provision of the state health plan which

does , by its terms, relate to need and establish minimum criteria

for assessing need— i.e. , the FNP rule.

171. Vitas made similar arguments with reference to the

Section 408.035(1)(b) and (d) criteria. Criterion (1)(b) is:

“The availability, quality of care, efficiency, appropriateness,

accessibility, extent of utilization, and adequacy of like and

existing health care services and hospices in the service

district of the applicant.” Criterion (1)(d) is: “The

availability and adequacy of other health care facilities and

services and hospices in the service district of the applicant,

. . . which may serve as alternatives . . ..” Vitas argues

essentially is that existing hospice providers (Vitas and Hospice

of the Comforter), along other health care alternatives available

to hospice-eligible patients (including VNA’s Hope and Recovery

Program and the continuation of aggressive treatment), are

meeting, and can continue to meet the needs of those patients,

and that there is no need for an additional hospice program.

172. Other references to the Section 408.035(1) criteria in

the FNP rule also do not transform them into minimum criteria.

For example, F.A.C. Rule 59C-1.0355(3)(b), on “Conformance with

Statutory Criteria,” provides that an application for a hospice

CON will not be approved “unless the applicant meets the

applicable review criteria in sections 408.035 and 408.043(2),

F.S., and the standards and need determination criteria set forth

in this rule.”

173. Consideration of the Section 408.035(1)(b) and (d)

criteria cannot be used to overcome the determination of a FNP

under the FNP rule. To do so would defeat the express purpose of

the rule and, in effect, amount to a challenge to the validity of

the rule. See Sacred Heart Hosp. Of Pensacola v. AHCA, et al. ,

14 FALR 5198, 5199 (AHCA 1992)(“the capacity of existing

providers is not dispositive”).

174. Vitas’ arguments also served 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

Section 408.035(1)(b) and (d) criteria 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.

175. At the very least (at best, from Vitas’ point of

view), “a finding of numeric need establishes a rebuttable

presumption of need.” Final Order, Martin Memorial Medical

Center, Inc. v. Agency for Health Care Administration, et. al. ,

17 FALR 1631, 1532 (AHCA, 1995). See also Balsam , supra . At

best, Vitas was able to prove: 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

applicants may not be able to improve much on the efforts of the

existing providers in this regard; 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. But those considerations do not defeat the finding of a

“health planning need” under a balanced consideration of all of

the criteria, including the FNP rule; otherwise, inordinate

weight would be given to factors other than the FNP rule.

176. In addition, Vitas’ arguments glossed over contrary

evidence in the record. 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 . Finally, there was considerable 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.

177. It is possible for consideration of other criteria to

override even a FNP determination. Clearly, a proposed project

must be financially feasible, both in the immediate and long

term, under Section 408.035(1)(i), Fla. Stat. (1995). See

Suburban Medical Hosp. v. Dept. of Health and Rehab. Serv. , 600

So.2d 1195, 1196-1197 (Fla. 3d DCA 1992); First Hosp. Corp. of

Fla. v. Dept. of Health and Rehab. Serv. , 589 So.2d 310 (Fla. 1st

DCA 1991). But Vitas’ argument on this criterion hinged in part

on its contention that there is no need for an additional hospice

program in Service Area 7B. It also was based in part on a

misapprehension of the facts. As found, both projects are

financially feasible in the immediate and long-term.

178. Section 408.035(1)(l), Fla. Stat. (1995), requires

consideration of the “probable impact of the proposed project on

the costs of providing health services proposed by the applicant,

. . . the effects of competition on the supply of health services

being proposed and the improvements or innovations in the

financing and delivery of health services which foster

competition and service to promote quality assurance and cost-

effectiveness.” Although Vitas argued that the proposed hospice

programs were adversely impact the existing providers, the

argument does not clearly articulate an alleged impact under the

408.035(1)(l) criterion. To the contrary, the addition of a

hospice program clearly will increase competition, and reduced

admissions to a program does not create a quality assurance issue

for hospice, as is would, for example, for open heart surgery.

179. Vitas also pointed to the Local Health Plan’s

Preference One, for a proposal that includes a comprehensive

assessment of the impact on existing providers. As already

indicated, this is a preference for choosing from among more than

one competing application. In any event, both applicants

assessed the impact on the local providers, albeit not as Vitas

would have had them do. As found, there may be an impact on

existing providers, but the extent of the impact is not enough to

overcome the FNP determination in this case.

180. Having rejected Vitas’ arguments that no new hospice

program should be approved, the even more difficult decision of

choosing between the two applicants in this case remained to be

made. As indicated, AHCA (and the Administrative Law Judge) must

give a balanced consideration to the applications in light of all

the statutory and rule criteria. Neither the statute nor the

rules give much guidance as to the relative importance of the

various criteria, but the best possible comparison has been made.

It has been found, and must be concluded, that the Hospice

Integrated application is the better choice in this case.

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

[phone] SUNCOM 278-9675

Fax FILING [phone]

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

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions within 15

days from the date of this Recommended Order. Any exceptions to

this Recommended Order should be filed with the agency that will

issue the final order in this case.