STATE AGENCY ACTION REPORT ON APPLICATION FOR CERTIFICATE OF NEED

STATE AGENCY ACTION REPORT ON APPLICATION FOR CERTIFICATE OF NEED A. PROJECT IDENTIFICATION 1. Applicant/CON Action Number VITAS Healthcare Corporation of Florida/CON #10174 100 South Biscayne Boulevard, Suite 1300 Miami, Florida 33131 Authorized Representative: Michael M. Hansen Senior Vice President - Field Services (305) 350-6969 2. Service District/Subdistrict Hospice Service Area 9C (Palm Beach County) B. PUBLIC HEARING A public hearing was requested and held on behalf of Hospice of Palm Beach County regarding the applicant s proposed establishment of an eight-bed freestanding inpatient hospice facility in Hospice Service Area 9C, Palm Beach County. The public hearing was held on Friday, January 4, 2013 at the Quantum Foundation s Community Meeting Room in West Palm Beach. Andrea Stephenson, Executive Director of the Treasure Coast Health Council conducted the hearing. Karl Acuff of the Law Office of Karl David Acuff, representing Hospice of Palm Beach County, spoke in opposition to the project. Mr. Acuff stated the applicant provided no evidence to demonstrate a freestanding facility would be more cost effective than contractual arrangements with existing hospitals and nursing homes, as required by Rule 59C-1.0355(7), Florida Administrative Code (F.A.C.). He questioned the need for the project, citing low occupancy rates in Palm Beach County s existing hospice beds. Mr. Acuff indicated VITAS overstated current inpatient admissions in the service area, with numbers that would require doubling the inpatient census record in order to meet projected need. He stated the three inpatient facilities VITAS cited as evidence of their ability to build the proposed facility were acquired from existing hospice providers. Mr. Acuff stated that VITAS is a significant provider of acute service care to hospice patients through continuous home care, and the application

neglected to address VITAS current role providing hospice care in this capacity. He also indicated the application lacked details on the admission process for the new facility. Mr. Acuff stated the facility will include only a cold kitchen, with no staff provided for the food prep area. He also stated that there is no licensed dietician on staff, while (VITAS) alludes to nurses being included in that line, that is a separate and distinct requirement under the facility rules. While you can have nurses provide dietary consulting for a standard hospice program, when it comes to inpatient, Rule 58A 2.019 F.A.C., requires a licensed dietician. 1 Mr. Acuff concluded by saying the applicant failed to prove that a freestanding facility was the most efficient use of funds, and asserted VITAS interest in the project was motivated by a desire to acquire a larger share of the hospice market, instead of meeting a need for this service. Mr. Acuff also submitted an 11-page document at the hearing. This document indicates that VITAS failed to document that the proposed facility will be more cost-efficient than contractual arrangements because it did not show the cost for contracted inpatient beds in a hospital or nursing home. It concludes that without VITAS disclosing these costs or incorporating the six million dollar project costs, there is no way the Agency may determine if the proposed facility is cost efficient. Mr. Acuff provides evidence of declining death rates in Palm Beach County, with fewer terminally ill residents requiring hospice care during the last six years. He contends there is under-utilization of current hospice beds in Palm Beach County, and provides a count of beds and bed days of nine facilities to support this statement. Mr. Acuff states VITAS s claim that approximately three to five percent of hospice patients require inpatient care at some point during their hospice stay is incorrect in that far greater numbers of hospice patients require inpatient care, but only for a short period of their total stay, which results in a smaller need projection. Mr. Acuff states that the applicant s historical provision of inpatient care in Palm Beach County at only a two percent rate and the applicant s overall national experience of about a three percent rate. He concludes that VITAS s projected utilization would be realistic only if the very upper limit (five percent) of the asserted planning range is chosen. 1 Rule 58A-2.109 F.A.C., requires that the hospice provide consultation by a licensed dietitian but does not require that the hospice directly employ a licensed dietitian. 2

There were three speakers in support of the project. Michael Hansen, Senior VP of Field Services for VITAS stated that VITAS has an extensive history of hospice service, both nationally and in Palm Beach County, where they serve approximately 500 patients per day. He stated that the need for hospice services in Palm Beach County was clear, and debate over need focused on a small percentage point of disagreement. Mr. Hansen provided four maps to demonstrate need for a facility in the southern end of Palm Beach County. The first map used U.S. Census data to display the population aged 65 and over of Palm Beach County, showing greater density for this age group in the southern region of the county. The second map displayed current inpatient hospice units in Palm Beach County, showing a preponderance of existing facilities in the northern end of the county. The third map displayed public transit patterns in Palm Beach County, demonstrating better public transit for those aged 65 and over in the southern end of the county. The final map plotted VITAS patient distribution over the past year, showing a concentration of patients in the southern portion of the county. Mr. Hansen stated that due to the scarcity of inpatient hospice facilities in the southern end of the county, and the high cost of contract beds, the need for the project was justified. He concluded by stating the project planned to be co-located for training purposes and would house an endof-life community resource center. Mary Zalaznik, Senior VP of VITAS Hospice Operations addressed the issue of continuous home care provided by VITAS to the community of Palm Beach County. She stated that VITAS did not intend to discontinue this needed service; however, the proposed inpatient facility was needed because continuous home care cannot always provide the level of care required by the most acute patients. Ms. Zalaznik stated that regarding contract beds available to VITAS in local hospitals, several problems existed. She stated contract beds are not always available, and when they are, patients are cared for by existing facility staff, at ratios determined by the host facility. Ms. Zalaznik stated quality of care may suffer due to facility patient/nurse ratios and the lack of hospice trained staff. She concluded by stating the proposed project would provide a 1-4 nurse/patient ratio, trained hospice staff, and improve access to inpatient hospice services for those in the southern region of Palm Beach County. Terry Rigsby, attorney with Pennington, Moore, Wilkinson, Bell & Dunbar, P.A., stated that in addition to the applicant, Hospice of Palm Beach County (HPBC) and Hospice by the Sea serve Palm Beach County. He stated that each of these providers has a freestanding inpatient facility (36 beds and 30 beds respectively). Mr. Rigsby stated that both of these facilities are east of I-95, despite 70 percent of residents residing west of I-95, where the applicant intends to locate the proposed facility. Mr. Rigsby stated that HPBC is a nonprofit corporation of which 3

Spectrum Health is the sole member, and is supported by two local foundations, with assets of approximately fifteen and eighty million dollars respectively. He further stated that HPBC dominates subdistrict 9-C with approximately 65 percent market share. Additionally, in the last fiscal year HPBC reported 5.7 million dollars in revenues in excess of expenses. Mr. Rigsby stated that HPBC operates six inpatient care centers in Palm Beach County, one freestanding, and five affiliated with community hospitals. HPBC has exclusive contracts with these five hospitals, strengthening further domination of the local hospice market. Mr. Rigsby stated the applicant is asking the state for the opportunity to provide the same effective, efficient and appropriate care that HPBC is allowed to provide. He concluded by stating that a freestanding hospice facility provides ideal care to patients and families, and that HPBC previously acknowledged in a filing with the Agency that contract bed care is not ideal. Mr. Rigsby also submitted written material in which he expanded on the financial aspect of HPBC, noting high salaries paid to CEO s during a time when HPBC laid off nearly five percent of its workers. He cited this as evidence that HPBC was not justified in an attempt to block competitors due to anticipated financial impact. Mr. Rigsby provided extensive documentation in the form of financial, tax, news articles, and previous CON applications to support statements made during the hearing regarding HPBC. Letters of Support Included in the application were 39 unduplicated letters of support (Appendix 2-Community Letters of Project Endorsement). All were signed, 37 were dated between October 26 and October 31, 2012, and 34 indicated a Palm Beach County, Florida address. Thirty three were of a form letter variety. Common themes in the support letters were that the project would create necessary jobs that will facilitate care to our terminal citizens and their families and presently the hospice care needs of our community in this very specialized home like setting are underserved. Stanton Collemer, Chief Financial Officer, The Center for Family Services of Palm Beach County, Inc., stated that, We are fortunate to have Vitas in our community, they are very community oriented and always going above and beyond to meet the needs in our community. Arlene Kaplan, Ph.D., MSW, Coordinator of the Field Education Program and Assistant Director, School of Social Work, Florida Atlantic University, stated that VITAS Innovative Hospice Care (Palm Beach County) has been a field placement site for her school s student interns since 2006. Dr. Kaplan 4

also stated that VITAS has provided educationally enriching field placements for 20 graduate social work students and VITAS is committed to furthering education and training of social workers who will work with terminally ill clients and their families. Cathy Bowers, MSA, NCG, President, National Patient Advocate, Inc., stated in her support letter that as a nationally certified guardian, she has had experience with patients who are very ill, near death and eventually pass away. She indicated that as the Palm Beach County population ages, it is critical that inpatient hospice care is expanded. Michael Dane, Executive Director, Florida Assisted Living Coalition, stated that he, cannot fathom another hospice provider more qualified to identify the needs for this level of care. Mr. Dane also stated that, only VITAS Innovative Hospice Care has the foresight, the vision, the recognition to take this bold step for the right direction. A sample of individuals that signed the form letter variety letters were as follows: Joan Williams, BSN, RN.C, Administrator, Homemakers and Companions of Florida, Inc.; Olga Brunner, President, A Good Daughter, Inc. (Member, National Association of Professional Geriatric Care Managers); Sharon Cohan, LCSW, Patient Services Manager and Tracy Navakas, Senior Campaign Manager, The Leukemia & Lymphoma Society; Jaime Estremera-Fitzgerald, Chief Executive Officer, Area Agency on Aging; Milka Santos, ACBSW, Vice President of Education and Support Services, South Palm Beach County Chapter, National Parkinson Foundation; Karen Harvey, Owner, Senior Transition Solutions; Judi Christiano, Administrator, Heritage Park East/Assisted Living Facility #5113; Danielle Hartman, MNM, President & CEO and Risa Demato, Site Director-Weisman Delray Community Center, Ruth Rales Jewish Family Services; Gloria Jacobs, Administrator, Senior Home Companions Nurse Registry, Senior Home Companions, Inc.; Carolyn Topper, LCSW, BCD, Personal People Care, Inc.; Barbara Curtis, Day Center Manager, Louis and Anne Green Memory and Wellness Center, Christine E. Lynn College of Nursing, Florida Atlantic University and Rhonda Schroeder, President, Home Health Administrator, Elder Alternatives. 5

C. PROJECT SUMMARY VITAS Healthcare Corporation of Florida (CON #10174), a Florida forprofit corporation, proposes to establish a new, eight-bed freestanding inpatient hospice facility in Hospice Service Area 9C (Palm Beach County). The proposed inpatient hospice facility is to be co-located with a community outreach and education center and a hospice program administrative office. The proposed location will be up to 30 miles south of the applicant s existing facility-based inpatient unit (at Palms West Hospital), in Palm Beach County, Florida. The primary zip codes to be served are stated to be 33446, 33437, 33484, 33496 and 33434; additionally, zip codes 33436, 33426, 33473, 33472, 33498, 33433, 33444, 33445, 33483 and areas west of Interstate (I)95 in 33487 and 33431 are expected to be secondary service areas 2. The applicant is licensed to operate hospice programs in Hospice Service Areas 4A, 4B, 7A, 7B, 7C, 8B, 9C, 10 and 11 but has no freestanding inpatient hospice facilities in Florida. VITAS states it has 36 inpatient units nationwide, three of which are existing freestanding units. Total project cost is $6,037,514. Costs covered are for land, building, equipment, project development, financing and start-up. The project involves 12,500 gross square feet (GSF) of new construction with new construction costs of $2,573,254. The applicant does not propose conditions on the project. D. REVIEW PROCEDURE The evaluation process is structured by the certificate of need review criteria found in Section 408.035, Florida Statutes, rules of the State of Florida, and Chapters 59C-1 and 59C-2, Florida Administrative Code. These criteria form the basis for the goals of the review process. The goals represent desirable outcomes to be attained by successful applicants who demonstrate an overall compliance with the criteria. Analysis of an applicant's capability to undertake the proposed project successfully is conducted by evaluating the responses provided in the application and independent information gathered by the reviewer. 2 Per the United States Postal Service website at https://tools.usps.com/go/ziplookupaction!input.action, each of the applicant s primary and secondary service area zip codes correlate to one of the following Palm Beach County cities: Boca Raton; Boynton Beach and Delray Beach. 6

Applications are analyzed to identify various strengths and weaknesses in each proposal. If more than one application is submitted for the same type of project in the same district (subdistrict or service planning area), applications are comparatively reviewed to determine which applicant best meets the review criteria. Section 59C-1.010(3)(b), Florida Administrative Code, prohibits any amendments once an application has been deemed complete. The burden of proof to entitlement of a certificate rests with the applicant. As such, the applicant is responsible for the representations in the application. This is attested to as part of the application in the certification of the applicant. As part of the fact-finding, consultant Steve Love analyzed the application in its entirety with consultation from financial analyst Everett Butch Broussard, who evaluated the financial data and Said Baniahmad of the Office of Plans and Construction, who reviewed the application for conformance with the architectural criteria. Jessica Hand provided the public hearing information. E. CONFORMITY OF PROJECT WITH REVIEW CRITERIA The following indicate the level of conformity of the proposed project with the review criteria and application content requirements found in Sections 408.035 and 408.037, and applicable rules of the State of Florida, Chapters 59C-1 and 59C-2, Florida Administrative Code. 1. Fixed Need Pool a. Does the project proposed respond to need as published by a fixed need pool? Or does the project proposed seek beds or services in excess of the fixed need pool? Rule 59C-1.008(2), Florida Administrative Code. The Agency does not publish need for inpatient hospice beds. Hospice programs are required by federal and state law to provide hospice patients with inpatient care when needed (42 Code of Federal Regulations 418.108) and no more than 20 percent of a hospice s total patient days may be inpatient days per Section 400.609(4), Florida 7

Statutes. Inpatient care may be provided through contractual arrangements in hospitals and nursing homes, and is generally provided on a short-term basis within the total hospice stay. As previously stated, the applicant operates no freestanding inpatient hospice facilities in Florida. Existing freestanding inpatient hospice facilities in Hospice Service Area 9C are as follows: 30 inpatient hospice beds operated in Boca Raton by Hospice by the Sea, Inc. and 36 inpatient hospice beds operated in West Palm Beach by Hospice of Palm Beach County, Inc. In total, there are 66 licensed inpatient hospice beds in Hospice Service Area 9C, as stated above. There are no CON approved inpatient hospice facilities pending licensure in Hospice Service Area 9C. b. If no Agency policy exists, the applicant will be responsible for demonstrating need through a needs assessment methodology, which must include, at a minimum, consideration of the following topics, except where they are inconsistent with the applicable statutory or rule criteria: Population demographics and dynamics; Availability, utilization and quality of like services in the district, subdistrict or both; Medical treatment trends; and Market conditions. Population demographics and dynamics As of January 2012, Hospice Service Area 9C s total population was 1,332,348 persons. Palm Beach County is projected to grow by 7.16 percent reaching a total population of 1,427,808 by January 2017, as shown below. Hospice Service Area 9C Palm Beach County Population January 1, 2012 January 1, 2017 Age Population Group January 2012 January 2017 Increase Percent Under 65 1,040,638 1,098,991 58,353 5.61% 65+ 291,710 328,817 37,107 12.72% Total 1,332,348 1,427,808 95,460 7.16% Source: Florida Agency for Health Care Administration Population Estimates 2010 to 2025, published February, 2012. As shown above, the service area s population age 65 and over is expected to increase at a much more rapid rate than the under age 65 population 12.72 percent compared to 5.61 percent from January 2012 to January 2017. 8

VITAS states that growth statistics indicate modest subdistrict population growth and provides estimates from 2010 through 2035, in the chart below. Population Projections, Bureau of Economic and Business Research (BEBR) 2009 vs. 2011 Source: CON application #10174, Chart 3. The Palm Beach County Planning Division - Planning, Zoning and Building Department, 2011 Population Allocation Model, Page 3 of 15, Table 3 at http://www.pbcgov.com/pzb/planning/population/2011/modeldoc_nov11.pdf. VITAS also reports steady annual increases in patient average daily census (ADC) trends over the past five years. The applicant s Chart 1 VITAS Average Daily Census Trend yearly summary portion indicates an ADC of 51 for the 12-month period ending November 2008 to an ADC of (34) for the 12-month period ending November 2012 3. However, the monthly total indicates an ADC of over 500 patients during the 12-month period ending November 2012, compared to less than 400 during the period ending November 2008. 3 Chart 1 is in CON application #10174 s charts section, which does not have page numbers. 9

Per the applicant, VITAS nationwide experience indicates that approximately three to five percent of hospice patients will require inpatient care at some point during their enrollment in a hospice program. The applicant estimates that 15 to 25 of its service area patients require inpatient hospice services on an average daily basis. The applicant also states its existing hospital-based inpatient unit in the north central portion of the county accommodates 12 patients. In conclusion, the applicant indicates that should the project not be approved, VITAS patients appropriate for inpatient hospice care will be provided service in contract beds, or remain in home care, both of which situations may not optimally address the patient s needs. Availability, utilization and quality of like services Per the applicant, the fact that 83 percent of the hospice inpatient beds are located to the east of Interstate 95 implies that access for patients and families to the west of that divider will likely be more difficult. The reviewer notes that the two licensed freestanding inpatient hospice facilities in Palm Beach County are located east of I-95. The applicant states a belief that the population residing in the southwestern portion of the service area may encounter barriers in terms of easy access to hospice inpatient services. The applicant offers a patient distribution chart to account for its reported current situation. 10

VITAS Healthcare Corporation of Florida (CON #10174) Hospice Service Area 9C Patient Distribution 12 Months Ending November 2012 Source: CON application #10174, Chart 4. The applicant states letters of support indicate that residents in the service area may encounter barriers regarding easy access to the proposed services. These support letters were described in Part B-Public Hearing/Letters of Support. The reviewer notes that while the support letters endorse the project, they did not describe existing barriers in access to hospice inpatient services. 11

Medical treatment trends VITAS states its experience indicates that hospice patients are often referred and admitted at a very late stage in the disease process. A stated result of this is that more patients are referred and admitted directly from acute care settings and may be actively dying. The applicant reports these circumstances can result in an increased need for inpatient levels of care, stressing an already limited resource capacity throughout Hospice Service Area 9C. Market conditions Existing freestanding inpatient hospice facilities in Hospice Service Area 9C were previously described. The applicant states a belief that the current Palm Beach County freestanding inpatient hospice facility bed capacities, at existing sites, are of a relatively large scale and that the community s choice would be for service to be available in a more intimate setting. VITAS comments that a home-like setting is required by CMS Conditions of Participation and indicates the project will provide such a setting and augment it with an associated community outreach center. The applicant states that this will become the model for inpatient hospice services. In addition, VITAS states its projections indicate patients served in the proposed facility will be admitted primarily from its home care census when inpatient care is indicated by the plan of care. 2. Agency Rule Criteria and Preferences a. Rule 59C-1.0355 (7) Florida Administrative Code states that the Agency will not normally approve a proposal for construction of a freestanding inpatient hospice facility unless the applicant demonstrates that the freestanding facility will be more costefficient than contractual arrangements with existing hospitals or nursing homes in the service area. The application shall include the following: (1) A description of any advantages that the hospice program will achieve by constructing and operating its own inpatient beds. VITAS contends that advantages will be realized through project approval, as described below. 12

Patients receiving hospice services in the southern portion of the county and to the west of I-95 will have an additional option for home-like inpatient services in a more convenient and more accessible location. The cost in inpatient unit space within facilities has escalated to a point such that rental space has become more expensive than the cost of constructing a freestanding unit. The reduction of space cost will allow the redirection of funding into continued enhancement of high-quality patient and family services. The availability of the co-located resource center enhances the community s access to end of life education and support resources. (2) Existing contractual arrangements for inpatient care at hospitals and nursing homes. VITAS states it has a contractual arrangement with Palms West Hospital for contract bed availability for patients requiring the inpatient level of care. The applicant reiterates contract bed arrangements are sub-optimal in terms of patient care and hospice program staff productivity. The applicant reports in the current situation, patients are placed in various locations within a contracted facility and are often cared for by separate clinical teams, often not specifically trained in end of life hospice protocols. VITAS reiterates that contract bed rates consume an inordinate percentage of government reimbursement rates and indicates that it recently was unable to secure a reasonable rental price in the southern portion of Palm Beach County, as the per day rate was beyond $390.00 per day (approximately 60 percent of the Medicare inpatient per day reimbursement rate) at full occupancy 4. The applicant indicates this creates financial burdens for hospice programs and the dispersion of patients throughout these facilities decreases the efficiency of hospice caregivers attending to those patients. The reviewer notes the applicant does not offer a side-byside description or other itemization of expected savings to be 4 This is from CON application #10174, page 3, where the applicant indicates space rental expense exceeds the real estate funding costs of less than $100.00 per patient bed day for the freestanding facility s year two. 13

realized from the project. The reviewer also notes the application does not include the nursing homes that the applicant contracts with for inpatient care. VITAS does not demonstrate that the proposed freestanding facility will be more cost-efficient than contractual arrangements with existing hospitals or nursing homes in the service area, as required by Rule 59C-1.0355(7) F.A.C. (3) Anticipated sources of funds for the construction. VITAS indicates that the proposed project will be funded by working cash flows of the applicant and its parent organization VITAS Healthcare Corporation. b. Rule 59-1.0355(8) Florida Administrative Code: Semi-Annual Utilization Reports. Each hospice program shall report utilization information to the Agency or its designee on or before July 20 th of each year and January 20 th of the following year. The applicant does not directly respond to this rule. However, VITAS regularly submits semi-annual utilization reports as required by the above rule. The Agency s semi-annual utilization reports do not require a hospice to report inpatient hospice days. 3. Statutory Review Criteria a. Is need for the project evidenced by the availability, quality of care, accessibility and extent of utilization of existing health care facilities and health services in the applicant s service area? ss. 408.035(1)( a) and (b), Florida Statutes. There are three licensed hospice providers in Hospice Service Area 9C, as follows: Vitas Healthcare Corporation of Florida (the applicant); Hospice by the Sea, Inc.; and Hospice of Palm Beach County, Inc. Hospice by the Sea, Inc. operates a 30-bed inpatient hospice facility in Boca Raton and Hospice of Palm Beach County, Inc. operates a 36-bed inpatient hospice facility in West Palm Beach. VITAS reiterates its belief that the two freestanding inpatient hospice facilities in Hospice Service Area 9C may be perceived by patients and families as institutional, in their feel and operation. Per the applicant, this may be due to their bed capacity (30+). The reviewer notes project support letters stated hospice 14

care in the community, in a home like setting, is underserved; however, these letters did not specifically state hospice care services in the area were institutional in their feel or operation. The applicant states that its smaller facility will offer a more home-like and personal environment for the comfort of patients and families it serves. VITAS identifies the following factors to demonstrate need for the project: Inpatient units that are owned and operated by hospice providers embrace the hospice philosophy and approach to patient care; Acute care hospitals and nursing homes have fundamentally different missions from hospices, and those differences are reflected in the skills and approaches of the professionals who staff each type of care setting; Dedicated inpatient units, especially those that are freestanding, are designed to support family participation and presence in a home like comfortable setting; and The proposed freestanding unit is multi-functional in nature, providing a care setting designed specifically for end of life care, containing a destination resource center for end of life education and services, and will include a small hospice administrative office providing access to additional on-site hospice-experienced staff available to assist and cross-train. VITAS reports an average daily census of over 500 patients in Palm Beach County. VITAS also reports that approximately 90 percent of these patients are Medicare and Medicaid recipients, for which VITAS describes compensation at a fixed per diem rate. As stated earlier, the reviewer notes VITAS does not provide a list of itemized costs to demonstrate anticipated savings as a result of this project. VITAS indicates that the two existing freestanding inpatient hospice facilities in Palm Beach County are located east of I-95. This is confirmed by the reviewer. The applicant also reports that seven hospital-based inpatient hospice units are located in Palm Beach County. Below is the applicant s chart to account for the two existing freestanding inpatient hospice facilities and seven hospital-based inpatient hospice units in Palm Beach County. These facilities are listed in order of location from northern to southern Palm Beach County. 15

Hospice Service Area 9C-Palm Beach County Existing Freestanding Inpatient Hospice Facilities and Hospital-Based Inpatient Hospice Units Inpatient Unit Name Street Address City Zip Code Jupiter Medical Center 1201 S Old Dixie Hwy Jupiter 33458 Palm Beach Gardens Medical Center 3360 Burns Road Palm Beach Gardens 33410 Hospice of Palm Beach County 5300 East Avenue West Palm Beach 33407 Good Samaritan Medical Center 1309 North Flagler Drive West Palm Beach 33401 Palms West Hospital 13001 Southern Blvd Loxahatchee 33470 JFK Medical Center 5301 South Congress Ave Atlantis 33462 Bethesda Memorial Hospital 2815 South Seacrest Blvd Boynton Beach 33435 Delray Medical Center 5352 Linton Boulevard Delray Beach 33484 Hospice by the Sea 1531 W Palmetto Park Blvd Boca Raton 33486 Source: CON application #10174, Chart 6. Note: The reviewer added zip codes and used the facility address per the Agency s licensure records. The applicant indicates there are 88 hospital-based inpatient hospice beds and 66 licensed hospice beds in the existing freestanding hospice facilities in Palm Beach County. This totals 154 beds. The applicant indicates 26 of these 154 beds (or approximately 17 percent) are located west of I-95. 16

VITAS reports the Palm Beach County Planning and Zoning Department has determined Palm Beach County has a population of 1,320,134, with approximately 919,783 (approximately 69.67 percent of the county s residents) residing to the west of I-95. Below is the applicant s chart to account for Palm Beach County s age 65+ resident population by zip code. Palm Beach County, Florida Age 65+ Resident Population by Zip Code Source: CON application #10174, Chart 2. Per VITAS, Chart 2 (above) and Chart 4 (previously shown) demonstrate the need for the proposed project, in the southwest part of the county. It is restated here that the applicant offers no conditions for this project. Further, the reviewer notes that geographically, the southwest part of Palm Beach County is relatively unpopulated, compared to more eastern and coastal parts of the county. Large portions of south-southwestern Palm Beach County are comprised of the following: Arthur R. Marshall/Loxahatchee National Wildlife Refuge; Browns Farm Wildlife Management Area; Stormwater Treatment Areas; Everglades Agricultural Area and the Holey Land Wildlife Management Area, per the website at http://www.floridacountiesmap.com/palm_beach_county.shtml. 17

However, the applicant s stated primary and secondary zip code service area, in extreme southeastern Palm Beach County, highly correlate with much more dense populations. VITAS states that it has inpatient service contracts for hospice patients with the following seven Palm Beach County hospitals Boca Raton Regional Hospital, Delray Medical Center, Good Samaritan Medical Center, JFK Medical Center, St. Mary s Medical Center, Wellington Regional Medical Center and West Boca Medical Center. The applicant indicates the dispersal of patients throughout contracting hospitals and nursing facilities creates difficulties and compromises productivity for hospice staff such as massage therapy, social workers, chaplains, bereavement facilitators and hospice physicians. The applicant states though it contracts for inpatient hospice care with a number of Palm Beach County nursing homes, a hospice cannot use nursing homes that employ licensed practical nurses as charge nurses because nursing staff requirements for hospice care require the charge nurse to be a registered nurse. VITAS did not provide the names of the nursing homes it contracts with for inpatient hospice care. b. Does the applicant have a history of providing quality of care? Has the applicant demonstrated the ability to provide quality care? ss. 408.035(1)(c), Florida Statutes. The applicant states its parent, VITAS Healthcare Corporation, was awarded its first Florida license in 1980 and that VITAS Healthcare Corporation of Florida was awarded its license in 2002. The reviewer confirms the applicant was first licensed for hospice services in Palm Beach County in December 2002. The applicant s current license was effective November 13, 2011 and expires November 12, 2013. Per the application, VITAS serves over 4,000 patients and their families in nine Florida hospice service areas. The applicant also reports that the parent provides high-quality, comprehensive, standard-setting hospice and palliative care services to over 14,000 patients nationwide, including a full range of patient care protocols, multi-disciplined team practices and recognized staff training. Although not discussed by the applicant, the reviewer notes that VITAS Innovative Hospice Care of the Palm Beaches, 1901 S. Congress Avenue, Boynton Beach, Florida 33426 appears on the Find A Member website of the National Hospices and Palliative Care Association (http://www.nhpco.org.). The applicant s previously stated primary service area zip codes pursuant to this project appear on the zip codes serviced list of this website. 18

Although not discussed by the applicant, the reviewer notes that VITAS Healthcare Corporation of Florida participated in the Agency s Family Evaluation of Hospice Care Satisfaction Survey, April through June 2012, attaining a five-star rating on each of the five questions in the survey. Respondents ranged from a low of 357 to a high of 485. The reviewer notes the applicant had the most respondents for each of the five survey questions, when compared to the respondent count for each of the same five survey questions submitted by the other licensed hospice providers in Palm Beach County. The five-star rating is the highest attainable and indicates respondents were 90 to 100 percent satisfied with the hospices performance. Agency records indicate VITAS had four substantiated complaints statewide (encompassing nine hospice service areas) during the threeyear period ending January 23, 2013. A single complaint can encompass multiple complaint categories. The substantiated complaint categories were quality of care/treatment (4), administration/personnel (2), nursing services (1), and resident/patient/client assessment (1). c. What resources, including health manpower, management personnel, and funds for capital and operating expenditures, are available for project accomplishment and operation? ss. 408.035(1)(d), Florida Statutes. The financial impact of the project will include the project cost of $6,037,514 and incremental operating costs in year two of $1,538,860. The applicant provided audited financial statements for the periods ending December 31, 2011 and 2010. These statements were analyzed for the purpose of evaluating the applicant s and parent s ability to provide the capital and operational funding necessary to implement the project. Short-Term Position: The applicant s current ratio of 1.1 indicates current assets are slightly greater than current obligations, but is below average and a slightly weak position. The ratio of cash flow to current liabilities of 3.1 is well above average and a strong position. Overall, the applicant has an adequate short-term position (see Table 1 below). 19

Long-Term Position: The ratio of long-term debt to net assets of 0 indicates the applicant has no long-term debt, a strong position. The ratio of cash flow to assets of 24.3 percent is above average and a strong position. The most recent year had an operating income of $66,317,556, which resulted in a 17.4 percent operating margin. Overall, the applicant has a strong long-term position (see Table 1 below). Capital Requirements: Schedule 2 indicates total capital projects of $7.0 million which consist of the CON application subject to this review, current year capital expenditures for Florida and non-specified capital expenditures. Available Capital: Funding for this project will be provided by the applicant. Based on our review, the applicant has available working capital of $2.8 million and cash flow from operations of $63.5 million. The applicant appears to have sufficient capital to fund this project and the entire capital budget. Staffing: Schedule 6 indicates, by September 2015 (the first year of the proposed project) and by September 2016 (the second year of the project), the applicant forecasts for this project a constant 14.72 FTEs. The breakdown is as follows: 3.8 FTEs secretary; 1.0 FTEs team manager; 0.5 FTEs physicians category-other; 5.6 FTEs registered nurses [RNs]; 1.4 FTEs nurses aides; 0.5 FTEs nursing category-other; 1.92 ancillary services-vac/sick all and 1.0 FTEs social services category-other. Notes to Schedule 6 indicate the proposed staff will be augmented when needed by the applicant s existing hospice program staff dietary services are stated to be included in the nursing category. VITAS indicates that it employs over 5,000 professional and management staff in Florida and over 300 staff members in Palm Beach County encompassing patient care, administrative and management personnel. The applicant does not discuss staff recruitment and retention mechanisms or practices. Conclusion: Funding for this project should be available as needed. 20

TABLE 1 VITAS Healthcare Corporation of Florida CON application # 10174 12/31/2011 Current Assets (CA) $23,144,885 Cash and Current Investment $0 Total Assets (TA) $260,917,116 Current Liabilities (CL) $20,364,278 Total Liabilities (TL) $20,364,278 Net Assets (NA) $240,552,838 Total Revenues (TR) $382,024,540 Interest Expense (IE) $0 Operating Income (OI) $66,317,556 Cash Flow from Operations (CFO) $63,467,807 Working Capital $2,780,607 FINANCIAL RATIOS 12/31/2011 Current Ratio (CA/CL) 1.1 Cash Flow to Current Liabilities (CFO/CL) 3.1 Long-Term Debt to Net Assets (TL-CL/NA) 0.0 Times Interest Earned (OI+IE/IE) N/A Net Assets to Total Assets (NA/TA) 92.2% Operating Margin (OI/TR) 17.4% Return on Assets (OI/TA) 25.4% Operating Cash Flow to Assets (CFO/TA) 24.3% d. What is the immediate and long-term financial feasibility of the proposal? ss. 408.035 (1)(f), Florida Statutes. For year two of operations, the applicant projected the following percentage of total patient days by group: Medicare at 88.9 percent, Medicaid at 7.9 percent, self-pay/charity at 2.2 percent, and commercial insurance at 1.1 percent. The applicant indicated on Schedule 7A that it intends to provide daily hospital service (general inpatient) for which the Department of Health and Human Services sets rates. The Federal rate was calculated using the Florida Wage Index for Medicare Hospice payments of 0.8705 and inflated through September 2016. The average price adjustment factor used was 2.83 percent per year based on the new CMS Market Basket Price Index as published in the 3rd Quarter 2012 Health Care Cost Review. 21

Estimated patient days for each level of service from Schedule 5, year two, were multiplied by the calculated reimbursement rate for that service in order to estimate the total revenue that would be generated by that number of patient days. The results were then compared to the applicant s estimated gross revenue. The results of the calculations are summarized in Table 2 below. The applicant s projected gross revenue was 4.84 percent, or $83,105, less than the calculated gross revenue. Understating revenues is a conservative approach, and the difference in revenue projected is not deemed material and therefore considered reasonable. Incremental operating profits from this project are expected to increase from $34,844 in year one, to $90,457 in year two. Conclusion: This project appears to be financially feasible. HOSPICE REVENUE TABLE 2 CON application #10174--VITAS Healthcare Corporation of Florida Wage Index for Palm Beach County (0.8705) Wage Component Wage Index Adjusted Wage Amount Unadjusted Component Payment Rate Routine Home Care $103.77 0.8705 $90.33 $47.26 $137.59 Continuous Home Care $605.65 0.8705 $527.22 $275.81 $803.03 Inpatient Respite $84.56 0.8705 $73.61 $71.66 $145.27 General Inpatient $430.04 0.8705 $374.35 $241.80 $616.15 Payment Rate Inflation Factor Inflation Adjusted Amount Patient Days Year 2, September 30, 2016 Calculated Gross Revenue Routine Home Care $137.59 1.106 $152.17 0 $0 Continuous Home Care $803.03 1.106 $888.11 0 $0 Inpatient Respite $145.27 1.106 $160.66 0 $0 General Inpatient $616.15 1.106 $681.43 2,644 $1,801,705 Total 2,644 $1,801,705 From Schedule 7 $1,718,600 Difference -$83,105 Percentage difference -4.84% 22

e. Will the proposed project foster competition to promote quality and cost-effectiveness? ss. 408.035(1)(e) and (g), Florida Statutes. This application is for an existing hospice program provider in Hospice Service Area 9C to build a new freestanding, eight-bed inpatient hospice facility in Palm Beach County. There are currently two freestanding and seven hospital-based (of which the applicant is one) hospice inpatient units in Palm Beach County. Therefore, this project is not offering a new choice of hospice program providers in the service area. The project is proposing a freestanding inpatient hospice facility for a current hospice program provider. The impact of the price of services on consumer choice is limited to the payer type. Most consumers do not pay directly for hospice services rather they are covered by a third-party payer. The impact of price competition would be limited to third-party payers that negotiate price for services, namely managed care organizations. Therefore, price competition is limited to the share of patient days that are under managed care plans. The applicant is projecting 1.1 percent of its patient days from managed care/commercial insurance payers with 96.7 percent of patient days expected to come from fixed price government payer sources (Medicare and Medicaid), with the remaining 2.2 percent as self-pay/charity. With the large majority of patient care being provided from fixed price government payer sources, this project is not likely to have any discernible positive impact on price based competition to promote cost effectiveness. As providers offer new or enhanced services to patients and families as a means to compete on quality measures, costeffectiveness would be impacted since the new or enhanced services would be offered despite the large percentage of fixed priced government payers. In other words, the potential exists for new or enhanced services to be provided for the same federal and state dollars. Conclusion: This project is not likely to result in price-based competition. f. Are the proposed costs and methods of construction reasonable? Do they comply with statutory and rule requirements? ss. 408.035 (1)(h), Florida Statutes; Ch. 59A-4, Florida Administrative Code The proposed building will be dedicated to end of life care resulting in a multi-functional facility. This facility is designed as a one-story 12,500 square foot building, with the patient care segment of approximately 9,000 square feet with separate entry. The construction type is listed in the narrative as Florida Building Code (FBC) Type II-B, National Fire 23

Protection Association (NFPA) Type II (0,0,0) and is fully sprinklered. These construction types with sprinkler are adequate for size and type of occupancy for the proposed facility. Patient rooms are arranged in two four-room segments separated by a nurse station and required support spaces. The main entrance, lobby, dining, dietary and food serving area are located in the central part of the building. The community center, administrative areas, and public services are in a separate section and will be identified by exterior signage, designed with its own entrance and reception hall. The plans indicate that the building will be sub-divided into three smoke compartments. All beds are located in private rooms which exceed the minimum space requirements of the FBC. As designed, the rooms provide ample space to accommodate family members with access to outdoor private patios. All patient rooms are provided with a private toilet room attached. The project narrative indicates and it appears that all patient bedrooms and toilet rooms will be accessible. All required functional spaces appear to be provided and are adequately sized. The common area of the patient care segment will include a massage room and an aroma-therapy and meditation room with outdoor access. The plans are schematic and will require further development, but there are no major code deficiencies identified at this stage. Based on the analysis of actual cost data of a similar project, the estimated construction costs appear to be within the expected range. The information provided in the project completion forecast appears to be reasonable. The architectural review of the application shall not be construed as an in-depth effort to determine complete compliance with all applicable codes and standards. The final responsibility for facility compliance ultimately rests with the owner. 24

The Agency does not require any further plan reviews concerning this project for hospice licensure; however, the Agency will provide a formal review of construction documents for any owner who wants to insure code compliance. g. Does the applicant have a history of providing health services to Medicaid patients and the medically indigent? Does the applicant propose to provide health services to Medicaid patients and the medically indigent? ss. 408.035(1)(i), Florida Statutes. Hospice programs are required by federal and state law to provide hospice patients with inpatient care when needed (42 Code of Federal Regulations 418.108). Hospice care also must be provided regardless of ability to pay and regardless of age, race, religion, sexual orientation, diagnosis, payer source or financial status. VITAS states it has consistently admitted and provided care to patients irrespective of their ability to pay. Per the applicant, it has provided for the medically indigent in excess of $17,000,000 in patient care on a year to date basis in 2012 and $7,000,000 of that amount was provided within the service area in charitable assistance for Medicaid and medically indigent patients. VITAS expects total patient days of 2,429 in year one (ending September 2015) and 2,644 in year two (ending September 2016), per Schedule 7A. The majority of patient days, both years, are attributed to Medicare patient days. VITAS Healthcare Corporation of Florida Self-Pay, Charity and Medicaid Patient Days 12 Months Ending September 2016 Payer Source Patient Days Percentage Self-Pay 57 2.16% Charity* 0 0.00% Medicaid 208 7.87% Total Patient Days 2,644 100.0% Source: CON application #10174, Schedule 7A. Note: * The applicant s Schedule 7A does not indicate a charity patient day category or count. However, notes to Schedule 7A state that the applicant s current and projected experience is to provide two percent of patient care revenue as charity. Schedule 7A for year one ending September 2015, shows the applicant projects patient days by payer as follows: self-pay 2.22 percent; Medicaid 7.86 percent; Medicare 88.80 percent and commercial insurance 1.11 percent. For year two ending September 2016, the estimated patient payer mix is: self-pay 2.16 percent; Medicaid 7.87 percent; Medicare 88.88 percent and commercial insurance 1.10 percent. The reviewer notes year one totals 99.99 percent and year two 100.01 percent, which is probably due to rounding estimates. 25

F. SUMMARY VITAS Healthcare Corporation of Florida (CON #10174), a Florida forprofit corporation, proposes to establish an eight-bed freestanding inpatient hospice facility in Hospice Service Area 9C (Palm Beach County). The proposed freestanding inpatient hospice facility is to be located up to 30 miles south of the applicant s existing hospital-based inpatient location (Palms West Hospital). VITAS provides primary and secondary service area zip codes that are consistent with the following Palm Beach County cities: Boca Raton; Boynton Beach and Delray Beach. Total project cost is $6,037,514. The project involves 12,500 GSF of new construction and construction costs of $2,573,254. The applicant does not propose conditions on the project. Need/Access: The Agency does not publish need for inpatient hospice beds. There are two facilities with a total of 66 licensed inpatient hospice beds and no CON approved freestanding hospice facilities or beds pending licensure in Hospice Service Area 9C. VITAS contends that population demographics and dynamics indicate that the elderly population (age 65+) particularly toward the southeastern portion of Palm Beach County coupled with no freestanding inpatient hospice facilities west of I-95 justify the project. VITAS states serving an ADC of over 500 patients in Palm Beach County and estimates that based on its national experience, three to five percent of its hospice patients will need inpatient services at some point in their hospice service tenure. VITAS projects the potential need for inpatient capacity for its Palm Beach County program is in the range of 15 to 25 patients. VITAS contends that medical trends indicate patients are often referred or admitted into hospice at later stages of their terminal illnesses, often calling for more inpatient services. 26