Compassionate Care Hospice of the Gulf Coast, Inc. v. State of Florida, Agency For Health Care etc.

FIRST DISTRICT COURT OF APPEAL
STATE OF FLORIDA
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No. 1D16-5062
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COMPASSIONATE CARE HOSPICE
OF THE GULF COAST, INC.,

Appellant,

v.

STATE OF FLORIDA, AGENCY FOR
HEALTH CARE ADMINISTRATION,

Appellee,

and

TIDEWELL HOSPICE, INC.,

Intervenor.
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On appeal from the Agency for Health Care Administration.
Justin M. Senior, Interim Secretary.

May 25, 2018

MAKAR, J.

Hospice care in Florida is regulated by industry-specific
certificate of need statutes implemented by the Agency for Health
Care Administration, known as AHCA. To gain entry to the
marketplace, a hospice provider must apply for and obtain a
certificate of need; it cannot simply set up shop and compete for
business. At issue is the application of Compassionate Care
Hospice of the Gulf Coast, Inc. (“CCH”), which AHCA denied based
on its determination that CCH failed to overcome a presumption
that no need existed for a new hospice program in Hospice Service
Area 8D (Sarasota County). CCH challenges that determination,
claiming that AHCA is not fulfilling its regulatory mission because
Service Area 8D is monopolized by one incumbent provider and
denial of CCH’s application perpetuates the existing regional
monopoly to the disadvantage of those whose needs may not be
served.

As background, AHCA publishes what is called the “fixed need
pool,” which is the agency’s assessment of the need for new
facilities in each service area. For Hospice Service Area 8D in 2014,
it determined a fixed need of zero for new hospice programs, which
creates a rebuttable presumption that no new hospice provider is
needed. Fla. Admin. Code R. 59C-1.0355(3)(b) (2018) (“A
Certificate of Need for the establishment of a new Hospice program
. . . shall not be approved unless the applicant meets the applicable
review criteria . . . and the standards and need determination set
forth in this rule.”). CCH—whose corporate parent provides
hospice services in seven Florida counties including Miami-Dade—
did not directly challenge the fixed need determination (though it
could have); instead, it applied to establish a new hospice program
in Service Area 8D, seeking to overcome the presumption based on
“special circumstances,” including the existing regional monopoly
in Sarasota County and the need to promote competition in the
area.

As to regional monopolies and competition, Florida hospice
law states:

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.

§ 408.043(2), Fla. Stat. (2015) (emphasis added). The Legislature
made clear that—to the extent possible in a government-controlled
industry—the economic value of competition was to be promoted

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and regional monopolies discouraged. This pro-competition, anti-
monopoly sentiment is reflected in the administrative rule that
governs how an applicant can obtain a certificate of need despite
AHCA’s determination that no need exists:

Applications to establish a new hospice program shall not
be approved in the absence of a numeric need indicated
by the formula in paragraph (4)(a) of this rule, unless
other criteria in this rule and in Sections 408.035 and
408.043(2) [discouragement of regional monopolies and
promotion of competition], F.S., outweigh the lack of a
numeric need.

Rule 59C-1.0355(3)(b), Fla. Admin. Code. Thus, even if AHCA has
determined that no need exists, an applicant can still receive a
certificate for a new facility, but must demonstrate that the
discouragement of regional monopolies/promotion of competition—
combined with other rule-based criteria—“outweigh the lack of a
numeric need.” It may also show a “specific terminally ill
population is not being served” and “a county or counties within
the service area of a licensed Hospice program are not being
served.” Rule 59C-1.0355(4)(d), Fla. Admin. Code (2018).

The takeaway from the statutory structure of the hospice
certificate of need process, which has been in place for thirty years,
is that AHCA has much play-in-the-joint in making a
determination as to whether to allow a new entrant into a hospice
service district, a point repeatedly confirmed by the caselaw
addressing certificates of need generally, which says that the
“appropriate weight” to be assigned to each statutory criterion has
no fixed value and “must vary on a case-by-case basis, depending
upon the facts of each case.” Collier Med. Ctr., Inc. v. State, Dep’t
of Health & Rehab. Servs., 462 So. 2d 83, 84 (Fla. 1st DCA 1985);
see also N. Ridge Gen. Hosp., Inc. v. NME Hosps., Inc., 478 So. 2d
1138, 1139 (Fla. 1st DCA 1985) (“[T]he legislative purpose behind
the certificate of need law is to provide for a balanced consideration
of all relevant criteria.”). In other words, statutory criteria have a
free-floating value that may vary if sufficiently linked to the facts
of a case. One hospice criterion (say, for example, discouragement
of regional monopolies) may be assigned a lesser value if another
criterion (say, whether a specific terminally-ill population is being

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unserved) is assigned great weight. So long as a “balanced
consideration of all relevant criteria” was performed, and some
reasonable explanation exists for the final outcome, the caselaw
suggests an appellate court should defer to the result, absent some
abdication by the agency of its responsibilities.

On this point, Tidewell notes that its status as the sole hospice
provider in Sarasota County (as well as Manatee, Charlotte, and
Desoto counties in three adjoining service areas, which is unique
in Florida) is neither improper nor illegal; and that section
408.043(2) does not require that AHCA give greater weight to the
policy goal of discouraging regional monopolies and promoting
competition than to the other factors. All that may be true, but it
does not provide meaningful guidance on how AHCA’s discretion
to deny entry is adjudged. In this case, Tidewell likes the balance
that AHCA has struck, supporting Tidewell’s continued regional
monopoly in Sarasota County. But AHCA could alter course policy-
wise and give greater weight to eliminating regional monopolies
and increasing competition by allowing more entry into Hospice
Service Area 8D; that change of policy would alter the dynamics of
the hospice marketplace, potentially putting Tidewell in the
position of explaining why the issuance of a certificate of need to
CCH or another competitor was improper.

Given the lack of specific weights assigned to each factor, how
an appellate court can decide if AHCA has valued economic
competition too much or too little is unclear. Nonetheless, we see
it as a close call in this case whether to reverse because the
evidence establishes (and the hearing officer found) that Tidewell
is a monopolist, that CCH’s entry into Sarasota County is
economically viable and will increase competition, but that new
competition will reduce Tidewell’s market share and result in an
adverse financial impact on the incumbent with no clear showing
of a specific unserved population.

In the end, however, we cannot overturn the denial of CCH’s
request to serve the Sarasota hospice market, simply because the
record establishes that a regional monopoly exists and that
competition would be fostered by entry. Rather, we are constrained
to decide whether AHCA was in its rights to reject the proffered
basis for CCH to enter the market, that being whether an unserved

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population exists and whether new facilities would harm the
incumbent where no new market growth was shown. Because the
record shows “a balanced consideration of all relevant criteria,”
and a stated basis for rejection of CCH’s application that is
plausible, we affirm on all issues presented.

AFFIRMED.

B.L. THOMAS, C.J., and WINOKUR, J., concur.
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Not final until disposition of any timely and
authorized motion under Fla. R. App. P. 9.330 or
9.331.
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Geoffrey D. Smith and Susan C. Smith, of Smith & Associates,
Melbourne, for Appellant.

Tracy Cooper George, Chief Apepllate Counsel for Agency for
Health Care Administration, Tallahassee, for Appellee Agency for
Health Care Administration.

Robert D. Newell, Jr., of Newell, Terry & Douglas, P.A.,
Tallahassee, for Intervenor Tidewell Hospice, Inc.

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