632 B.R. 544
Bankr. M.D. Fla.2021Background
- Debtor (Friends of Citrus and the Nature Coast, Inc.) operated a 16‑bed inpatient hospice (Hospice House) built in 2005; it had an 80 kW natural‑gas generator that powered emergency lighting, refrigeration, red receptacles in patient rooms, and the HVAC blower but could not power the HVAC system.
- Debtor’s written Comprehensive Emergency Management Plan relied on pre‑evacuation/evacuation to other county skilled facilities or hospital beds as its method to maintain patient safety in emergencies; the plan was shared with Vitas during due diligence and was never cited by AHCA.
- After the Hollywood Hills deaths, Florida adopted emergency‑power rules requiring nursing homes and assisted living facilities to maintain sufficient alternate power (e.g., generators) to keep resident areas ≤81°F for 96 hours; AHCA did not adopt a parallel mandatory generator rule for hospices.
- Federal regulation 42 C.F.R. § 418.113 requires hospices to have emergency preparedness addressing “alternate sources of energy to maintain temperatures,” but CMS guidance states that a generator is not mandated and facilities determine alternate sources by risk assessment.
- Debtor sold its hospice operations (including Hospice House) to Vitas in September 2018; Debtor represented compliance with all applicable laws and escrowed $1.3M to secure indemnity obligations.
- Vitas later claimed the Debtor breached that representation because the 80 kW generator could not power HVAC and sought indemnification from escrow for a new 350 kW generator; the court found the Debtor did not violate federal or state law, sustained the objection to Vitas’s claim, and ordered turnover of the escrowed funds.
Issues
| Issue | Vitas (Plaintiff) Argument | Debtor (Defendant) Argument | Held |
|---|---|---|---|
| Whether Debtor breached its representation of legal compliance by lacking a generator able to run HVAC | Rule 42 C.F.R. § 418.113 and FL rules require an alternate energy source to maintain safe temperatures; no practical alternative to a generator exists, so Debtor was noncompliant | Neither state nor federal law required a generator; Debtor had a compliant evacuation‑based emergency plan and other limited backup cooling measures | No breach. Court: Debtor complied with applicable law; indemnity not owed |
| Whether federal regulation requires hospices to have a generator as the alternate energy source | CMS intent and hospital analogies imply stringent requirements for hospices | CMS guidance and final rule state providers may use alternatives and are not required to install generators; facilities assess risk and choose appropriate measures | § 418.113 does not mandate a generator; choice depends on facility risk assessment |
| Whether Florida law (post‑Hollywood Hills) mandated a generator for hospices | Post‑Hollywood Hills AHCA rules show a trend toward generator mandates; hospices should be treated similarly | AHCA promulgated explicit generator mandates only for nursing homes and assisted living facilities, not for hospices; building code provisions do not require generator capacity to maintain temperatures | Florida rules did not impose a hospice generator mandate; building code reference did not compel HVAC‑sized generator |
| Whether the Debtor’s evacuation plan satisfied the regulatory ‘‘alternate source of energy’’ requirement | Evacuation is impractical/unreliable in storms; therefore not an acceptable substitute for onsite alternate energy | Evacuation plan was reasonable given location, low census, contracts with local facilities, had worked during prior hurricanes, and was accepted by AHCA | Evacuation plan met regulatory requirements and was reasonable and effective; regulatory compliance established |
Key Cases Cited
- None — the opinion relies on statutes, Florida administrative rules, and CMS regulations/guidance rather than reported case law.