Health Law Daily Judge upholds certificate of need but urges legislature to drop requirement
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Tuesday, January 26, 2016

Judge upholds certificate of need but urges legislature to drop requirement

By Mary Damitio, J.D.

A health care provider met Alabama’s requirements for a Certificate of Need (CON) to develop a comprehensive cancer center on its new hospital campus, an appeals court ruled. Alabama’s less stringent Replacement Rule applied to the cancer center’s CON application because the evidence demonstrated that the new cancer center was merely replacing oncology services that were previously located in two buildings on the old hospital campus (Brookwood Health Services, Inc. v. State Health Planning and Development Agency, January 22, 2016, Thomas, T.).

CON application. In June 2014, Affinity Hospital, LLC, d/b/a/ Trinity Medical Center of Birmingham (Trinity) notified the State Health Planning and Development Agency (SHPDA) that it was proposing to relocate its radiation-oncology services and two linear accelerators to a new building on its new hospital campus. Trinity subsequently filed an application for a CON to construct a new comprehensive cancer center on the site of its new campus. Brookwood Health Services, Inc., d/b/a Brookwood Medical Center (Brookwood) filed an opposition to Trinity’s relocation plans and requested a contested case hearing on the issue, which was assigned to an administrative law judge (ALJ).

At the conclusion of the contested case hearing, the ALJ determined that Trinity’s request met all the requirements for approval of a replacement facility under the Alabama Administrative Code, Rule 410-2-4-.14 (Replacement Rule). The SHPDA Certificate of Need Review Board (CONRB) held a hearing and approved the requested CON. Brookwood appealed the order issuing the CON to Trinity.

Replacement rule. The ALJ and the CONRB properly found that the Replacement Rule applied to Trinity’s CON application and that it was not required to meet the standards for new radiation-oncology services under Ala. Admin. Code (SHPDA), Rule 410-2-3-.04. The new center would replace radiation-oncology services and linear accelerators that were previously housed in two separate, existing buildings on the old hospital campus. Additionally, there is nothing in the Replacement Rule that prohibits the owner of a health care facility from replacing various portions of its operations at different times.

Public need. The record contained abundant evidence to support the ALJ and the CONRB’s finding that there existed a substantial public need for the new cancer center. Trinity presented evidence that its radiation-oncology services would grow 3.2 percent from 2015 to 2020 and that the senior population was expected to increase by 13.4 percent. Additionally, it also presented evidence that the national incidence rate of cancer is expected to increase by 45 percent over the next 15 years.

Financial feasibility. Trinity presented sufficient evidence indicating that the new cancer center would be profitable. While other witnesses disputed its calculations and assumptions, the ALJ and the CONRB accepted those projections. The court of appeals’ standard of review of factual findings is limited, and therefore it could not reweigh the financial evidence.

Concurring opinion. Judge Thomas wrote a special concurring opinion urging the legislature to repeal the CON requirements and instead allow free enterprise competition to control health care provider decisions about facilities and services, which would prevent a “huge waste of time and resources” spent by competing CON applicants in court battles.

Judge Thomas’ concurrence comes at a time when state CON laws face increased scrutiny by the federal government and legal attacks by health care providers (see Virginia’s Certificate of Need program constitutional even if not perfect, January 25, 2016; Agencies’ joint CON laws statement oversteps, FTC Commissioner says, January 12, 2016; and Federal government urging Virginia to reform certificate of need laws, October 27, 2015).

The case is No. 2140766.

Attorneys: C. Mark Bain (Melton, Espy & Williams PC) for Brookwood Health Services, Inc. Mark D. Wilkerson (Brantley & Wilkerson PC) for the Alabama State Health Planning and Development Agency. Mark Ayers (Bradley Arant Boult Cummings LLP) for Affinity Hospital, LLC.

Companies: Brookwood Health Services, Inc., d/b/a/ Brookwood Medical Center; Affinity Hospital, LLC, d/b/a Trinity Medical Center of Birmingham; Alabama State Health Planning and Development Agency

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