Death and Profits

Page 7 of 12

"In Orlando we didn't even realize it had been done until after the law had been passed," adds Brenda Horn, executive director of Orange County's nonprofit hospice program. "We were not consulted about it at all." But if she had been consulted, she would have opposed the change. "I agree with the hospice licensing law the way it was originally written A that hospices in the State of Florida should be run as nonprofits," Horn argues. "It's a philosophical difference. I think it's important that the dollars that are received by hospice programs -- and the majority of them are tax dollars from Medicare and Medicaid -- that those dollars be put back into those programs in those local communities rather than be given to private investors and shareholders."

If Westbrook believes that having one for-profit hospice in the state is a good idea, why not just open up the law to allow any nonprofit hospice to become for-profit? Or for that matter, allow outside for-profit companies to come in and compete? "If it ain't broke, don't fix it," he responds.

"The Florida hospice licensing law has worked very well. There have not been abuses. There have not been rip-off artists getting into it."

The legislation Representative Abrams introduced for his friend also happens to work very well as a barrier to potential competitors in the spectacularly lucrative South Florida market. Today Westbrook enjoys a legal monopoly that guarantees his company will be the only for-profit hospice operating in Dade and Broward counties. Says Abrams today: "If that's what we did and there are others that would care to change it, then okay A there is nothing wrong with leveling the playing field. But nobody has come to me to change that. We could certainly look at it if someone was interested."

Having accomplished his goal, Westbrook made his move on Hospice Inc., the South Florida nonprofit he founded. He told the board of directors (from which he had recently resigned) that his company was no longer interested in managing the hospice programs in Dade and Broward. "We made it clear to the nonprofit people here that the future really wasn't going to be with us," he recalls. "We were interested in building [new for-profit hospices]. Management was not the business we were in."

He made an offer to the board members: sell him the nonprofit company or look for another firm to run the business. In June 1990, the board consented and sold the Dade and Broward hospice programs. Price: $4.5 million.

But it was not Westbrook's for-profit company, HCI, that purchased the hospices. It was Westbrook and Esther Colliflower personally. Westbrook explains that he and Colliflower did not control a majority of HCI's privately held stock at the time. As a result the nonprofit's board members A the people Westbrook had invited to serve on that board A didn't want to entrust the hospices to HCI. "So we bought it," Westbrook says flatly. "The two of us."

About a year and a half later Westbrook regained control of his for-profit business after buying out several investors. He and Colliflower then decided to sell the former nonprofit hospices to their own company, HCI. An independent appraiser was brought in to determine how much Westbrook and Colliflower should pay themselves. The value was set at ten million dollars.

But the appraiser also determined that in 1989 and 1990, HCI had overcharged the nonprofit more than a million dollars in management fees. Faced with this report, Westbrook and Colliflower voluntarily agreed to refund $1.5 million to the old nonprofit company. (The nonprofit's board donated all the money to the Dade Community Foundation.)

With that settled, Westbrook and Colliflower then sold the Dade and Broward hospice programs to HCI for ten million dollars. Even with the refund as compensation for overcharging, the two nonprofit founders earned four million dollars in personal profit from a company they owned for just eighteen months.

As Westbrook and Colliflower were dramatically rearranging the hospice landscape in South Florida, a number of employment opportunities sprang up for individuals outside the HCI circle. The Hospice Foundation -- the nonprofit fundraising group created by Westbrook and Colliflower in 1982 -- was also being rearranged. Broader, more ambitious goals were outlined, and new leadership was needed.

In 1990 the foundation's board of directors (Westbrook was serving as chairman) hired two people to achieve those goals. The first was Westbrook's long-time friend and ally, then-State Senator Jack Gordon, as the foundation's new chairman and president; the second was David Abrams, brother of State Rep. Mike Abrams, to be the foundation's executive director.

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Jim DeFede
Contact: Jim DeFede