South Carolina              
Administrative Law Court
Edgar A. Brown building 1205 Pendleton St., Suite 224 Columbia, SC 29201 Voice: (803) 734-0550

SC Administrative Law Court Decisions

CAPTION:
GRAND STRAND REGIONAL MEDICAL CENTER vs. SCDHEC, et al

AGENCY:

PARTIES:
Petitioner:
GRAND STRAND REGIONAL MEDICAL CENTER

Respondents:
SOUTH CAROLINA DEPARTMENT OF HEATH AND ENVIRONMENTAL CONTROL and, LORIS HEALTHCARE SYSTEM
 
DOCKET NUMBER:
05-ALJ-07-0344-CC

APPEARANCES:
David B. Summer, Esquire; William R. Thomas, Esquire, for Petitioner

Nancy S. Layman, Esquire, for Respondent South Carolina Department of Health and Environmental Control

Henry L. Parr, Jr., Esquire; John C. Moylan III, Esquire; Hannah Rogers Metcalfe, Esquire, for Respondent Loris Healthcare System
 

ORDERS:

FINAL ORDER AND DECISION

For the reasons stated in this order, the decision of the South Carolina Department of Health and Environmental Control (“DHEC”) to grant the certificate of need requested by Loris Healthcare System (“LHS”) is affirmed.

STATEMENT OF THE CASE

This matter comes before this tribunal pursuant to S.C. Code Ann. § 44-7-210(D)(2) and (E) (2002) and S.C. Code Ann. § 1-23-600(B)(2002 & Supp. 2006) for a contested case hearing. On October 11, 2004, LHS applied for a Certificate of Need (“CON”) to add 50 hospital beds at the Seacoast Medical Center (“Seacoast”) location of the Loris Community Hospital (“LCH”).

On August 29, 2005, DHEC determined that the certificate of need should be granted. Specifically, DHEC determined that (a) “the application was consistent with Section G.1.(A)(4)(d) for General Acute Hospital Bed Need methodology as stated in the 2003 South Carolina Health Plan” (“2003 State Health Plan”); (b) LHS had “adequately documented the need for the project”; (c) the “proposed project appear[ed] to be financially feasible”; (d) the “project [had] substantial community and physician support”; (e) “the capital and operating costs of the proposal and their potential impact on patient charges [were] reasonable”; (f) “superior alternatives to such services in terms of cost, efficiency or appropriateness [did] not exist and the development of such alternatives [was] not practicable”; (g) “alternatives to new construction” had been considered; and (h) “[p]atients [would] experience serious problems in terms of costs, availability or accessibility …. in the absence of this project.” DHEC Exhibit 1, Bates 791-792.

In addition, DHEC specifically concluded that the “existing Seacoast Medical Center was designed and constructed as a hospital without beds where all required administrative, support, and ancillary departments are already in place, equipped and have available capacity to support the proposed inpatient beds with minimal modifications” and that “the proposed project represents the epitome of cost effective planning” and “will enable … LHS to increase accessibility to comprehensive inpatient … services for residents in the portion of Horry County that LHS has historically served.” DHEC Exhibit 1, Bates 791 (emphasis added).

Petitioner Grand Strand Regional Medical Center (“Grand Strand”) challenged DHEC’s decision by seeking a contested case hearing. Grand Strand contends that DHEC should have denied LHS’ application on a number of grounds, some of which are duplicative. Essentially, Grand Strand’s contentions are that (a) the project is inconsistent with the 2003 State Health Plan because, according to Grand Strand, the project proposes to move bed need generated by LCH to a new location, the Seacoast location of LCH; (b) LHS has not shown the requisite need for the project; (c) the increased accessibility provided by the project does not outweigh the adverse effects of duplication on Grand Strand; (d) the project will have an adverse impact on Grand Strand; (e) LHS has not shown that it can obtain the required staff for the proposed project; (f) the project is not financially feasible; (g) the project does not foster cost containment; and (h) the project will have an adverse impact on LHS.[1]

After due notice to all parties, the hearing on this matter was held July 10 -14, August 21-25 and October 31 – November 3, 2006 at the offices of the Administrative Law Court in Columbia, South Carolina. All parties appeared at the hearing and introduced evidence and testimony. Testimony from nineteen witnesses was received at the hearing either through live testimony or through submission of deposition testimony. Witnesses from Grand Strand were Doug White, chief executive officer of Grand Strand, Charles Briscoe, chief operating officer of Grand Strand, Turner Wortham, chief financial officer of Grand Strand, and Joyce Gardner, chief nursing officer of Grand Strand.[2] Expert witnesses offered by Grand Strand were Dr. Kenneth DeHart (physician staffing and delivery of medical services), Jesse J. Peterson (hospital design and construction costs), Rick Knapp (health care finance), Mark Richardson (health care planning), and Michael Ridgeway (traffic engineering). Witnesses from LHS were Tim Browne, chief executive officer of LHS, Arnold Green, chief operating officer of LHS, Fred Todd, chief financial officer of LHS, and Teresa Pougnaud, vice president human resources of LHS.[3] LHS offered the following expert witnesses: Percy M. (“Tripp”) Berry (hospital design and construction costs), Richard Rollins (health care finance including forecasting), Kathy Platt (health care planning), and Dr. James Wright (physician staffing and delivery of medical services). In addition, LHS offered the testimony of Marilyn Hatley, Mayor of North Myrtle Beach. Joel Grice, Director of the Certificate of Need Program of DHEC, testified for DHEC and was qualified as an expert in health care planning and DHEC’s application of the law in the certificate of need program.[4] One hundred and twenty exhibits were admitted. After hearing the testimony and weighing all evidence presented at the hearing, this Court finds, as explained below, that DHEC’s decision should be affirmed and that the requested certificate of need should be issued.

FINDINGS OF FACT

Having observed the witnesses and the exhibits presented at the duly noticed hearing and taking into consideration the burden of proof, the credibility of the witnesses and the accuracy of the evidence, I make the following findings of fact by a preponderance of evidence.

General Factual Background

The Parties

Loris Healthcare System, Loris Community Hospital, and Seacoast Medical Center

1.                  Loris Healthcare System, Loris Community Hospital, and Seacoast Medical Center are all business names of the same legal entity, the Loris Community Hospital District (the “District”). (I Grice 79:8-11; II Browne 699:11-24; Green 4/12 dep. 43:15-23). The District is the official owner of all of the land and buildings described as being associated with LHS, LCH and Seacoast. (II Browne 575:8-9, 969:20-24; 970:3-12; I Grice 79:8-11).

2.                  The District is a not-for-profit entity. (II Browne 681:3-14). It was created by Act 742 of the General Assembly of South Carolina on March 23, 1946. (II Browne 576:3-15; Act of March 23, 1946 (No.: 742). The boundaries of the District were expanded by Act 177 in 1997 so that the District now includes the townships of Little River, Floyds, Simpson Creek, Green Sea, and Bayboro in Horry County. (Act of June 17, 1997 (No.: 177)). The District is located in the northern portion of Horry County, extends from the Marion County line to the Atlantic Ocean and includes North Myrtle Beach and the Seacoast location. (II Browne 576:7 – 579:5; III Richardson 812:11-20). It is governed by a local board of commissioners appointed by the Governor. (II Browne 575:8-17). The District’s statutory purpose is to provide hospital services to the residents of the District, although it does not turn away patients from outside the District. (II Browne 580:14-18). All of the income of the District is reinvested in LHS for the purpose of providing health care services to the residents of the District. (II Browne 580:14-18).

3.                  LHS provides these services primarily from two locations, both of which operate under a single hospital license issued to Loris Community Hospital: (a) the town of Loris location, where LCH has 105 inpatient hospital beds, an emergency room, and associated ancillary hospital services; and (b) the Seacoast Medical Center location near North Myrtle Beach, where LCH also offers emergency room, diagnostic imaging, respiratory therapy, pharmacy, laboratory, physical therapy, occupational therapy, speech therapy, cardiac rehabilitation, speech therapy, pulmonary rehabilitation, admitting, medical records, housekeeping, and maintenance services. (I Grice 198:14-18, 397:1-24, 446:18-22, 447:3-11; II Browne 594:20-595:5, 1003:1-13; III Richardson 811:24-812:3).

4.                  Like the comparable services offered by LCH at its town of Loris location, the emergency room, diagnostic imaging, respiratory therapy, pharmacy, laboratory, and admitting services at the Seacoast location of LCH are available on an overnight basis. (I Grice 289:5-290:22; I DeHart 590:23-591:22; II Browne 591:23-592:1, 596:5-597:8, 967:25-968:4).

5.                  The town of Loris location and the Seacoast location of LCH are approximately 22 miles apart. (DHEC Exhibit 1, Bates 27, II Browne 716:1-2). The town of Loris is inland west of Seacoast in an area that has a lower income level than the rest of Horry County and has been designated a medically underserved area by the Office of Rural Health. (Loris Exhibits 4 and 138; II Browne 565:16-566:8). Seacoast is in the North Strand area, the fastest growing, highest income portion of the county, very near North Myrtle Beach. (DHEC Exhibit 1, Bates 685, Loris Exhibits 4,7, and 138; II Briscoe 190:5-21).

6.                  LHS added Seacoast in 2000, (DHEC Exhibit 1 Bates 10, II Browne 644:18, 584:16), in response to rapid growth in the North Strand area and interest from North Strand residents in having services of LHS available there. (II Browne 583:19-584:13, 589:6-15).

7.                  Seacoast was designed and built so that inpatient beds could be added easily. (II Browne 951:2-19; I White 934:9-11; II Berry 1057:15-22; I Grice 199:2-5; Green 4/12 dep. 34:21-25). The application for a certificate of need for Seacoast described it as “a hospital by all descriptions other than the presence of inpatient care beds, based on its size and the complexity of service lines.” (II Browne 957:9-12). The initial certificate of need for Seacoast described it as the “North Myrtle Beach Day Hospital.” (II Browne 953:17-21).

8.                  In addition to the services described above that are part of LCH, LHS also established an ambulatory surgery center at Seacoast that is not included under the LCH license, but is separately licensed as an ambulatory surgery center. (I Grice 82:16-22, 397:4-10, 448:17-18).

Grand Strand Regional Medical Center and HCA

9.                  Grand Strand is one of 183 hospitals “owned and operated” by HCA, Inc. (“HCA”). (Loris Exhibit 130, Bates 20, 65). It is located 14 miles south of Seacoast toward Myrtle Beach. (DHEC Exhibit 1, Bates 26).

10.              At the time of the hearing, HCA was a publicly-held, for-profit company headquartered in Nashville, Tennessee. (I White 942:13-19; Loris Exhibit 130, Bates 20).

11.              The funding to make major capital improvements at Grand Strand comes from HCA’s total earnings as a company and is allocated by HCA corporate management. (I White 646:17-18, 1143:13–1144:4, 1166:13–1166:1; II Knapp 423:1-5). HCA does not necessarily increase the amount of capital invested in Grand Strand when Grand Strand’s earnings increase. (I White 770:5–14, 771:4-22, 776:22–777:4, 1022:20–1023:22, 1166:13–1168:1). In allocating its capital, HCA expects a reasonable return on its investments. (I White 1168:5-7). HCA’s own performance also affects the amount of capital allocated to Grand Strand. (I White 1143:13–1144:4). In 2005, HCA’s net income was approximately $1.4 billion. (II Knapp 421:17 – 422:14).

12.              Like LCH, Grand Strand’s hospital license covers services offered at two different locations: (a) Grand Strand’s primary hospital location at 809 82nd Parkway in Myrtle Beach, and (b) Grand Strand’s South Strand Ambulatory Care Center, 5 or 6 miles south on Highway 17 bypass. The South Strand Ambulatory Care Center is similar to Seacoast and also provides emergency services and related ancillary services such as diagnostic imaging. (Loris Exhibit 130, Bates 19; I DeHart 601:24 – 602:12; II Briscoe 265:20 – 268:6; I White 979:16 – 22). Grand Strand’s South Strand Ambulatory Care Center is actually considered “part of” Grand Strand Regional Medical Center even though it is 5 or 6 miles away from the location of Grand Strand’s Hospital beds. (II Briscoe 266:22 – 268:8).

13.              Grand Strand’s current 219 beds are all located at its 82nd street location in Myrtle Beach. Grand Strand is a regional tertiary hospital. It is the only hospital in Horry County offering certain tertiary services such as open heart surgery and therapeutic catheterizations that LHS does not offer and is not proposing to offer at the beds proposed for the Seacoast location. (I Grice 478:23 – 480:11; II Briscoe 313:15 – 314:20; II Knapp 413:13 – 414:3; II Browne 602:3 – 603:17).

Horry County and Service Areas

14.              Horry County is one of the faster growing areas in the nation. (Loris Exhibit 1, Bates 526). With projected growth of 21.5% over ten years, the county leads South Carolina in rate of population growth and is second only to Greenville County in projected number of new residents. (Loris Exhibit 130, Bates 24-25; Hatley 476:16 – 24, 548:23 – 549:1. The rate of growth is greatest among the higher age groups who are the heaviest users of hospital beds. (DHEC Exhibit 1, Bates 525; Platt prefiled 10:13-15).

15.              Within Horry County, the northeastern corner of the county or North Strand area where Seacoast is located, which includes the communities of North Myrtle Beach, Little River and Longs, has the highest projected rate of growth of resident population. (Loris Exhibit 130, Bates 27; Loris Exhibit 7, Bates GS 02932; III Richardson 771:25 -773:22). There are at least twelve major housing developments representing 10,700 additional residential units, in varying stages of construction or approval in the city limits of North Myrtle Beach alone, (II Hatley 491 – 501; III Richardson 775:13-18), including a development that will add 2,000 units and 5,000 people directly across the street from Seacoast. (II Hatley 495:5 - 496:3; Wright prefiled 7:18 - 25). In addition to experiencing growth in full-time residents, the North Strand, as well as other parts of the county, is expected to experience dramatic growth in its non-resident population of seasonal residents and tourists. (Platt prefiled 6:5-18, 34:19 – 35:2, Loris Exhibit 1, Bates 527, 531, 610, 637-638, 644; II Hatley 504:10 – 13; I DeHart 569:23 -570:3).

16.              The service area of the proposed project, as shown on Loris Exhibit 19, includes the high growth areas where Seacoast is located. (Rollins prefiled 11:3-8, 11:19-20). The service area for LCH’s town of Loris location, as shown on Loris Exhibit 20, is larger that that of the Seacoast location, including the entire Seacoast service area plus additional zip codes. (Rollins prefiled 11:22 – 12:1).

2003 State Health Plan

17.              LHS filed its application for a certificate of need to add 50 beds at Seacoast on October 11, 2004, while the 2003 South Carolina Health Plan was in effect. (II Browne 689:8 – 692:1, 693:6-8). The 2003 State Health Plan is the Plan applicable to LHS’ application. (I Grice 112:14-25, 300:5-7).

18.              The 2003 State Health Plan’s general bed need methodology calculated a need for five additional beds associated with LCH and also made it possible for LCH to receive up to 50 total additional beds if LHS could show a need for them outside of the Plan’s general bed need methodology. (DHEC Exhibit 1 II-7 (d) and II-15; I Grice 297:23 – 299:9).

Location of Proposed Beds

19.              The Seacoast location proposed for the 50 additional beds is actually an existing location of LCH, operating under the LCH hospital license, and part of LCH, not a new location. (I Grice 198:15-21, 290:14 – 291:5; 397:21 – 398:12; II Browne 594:15 – 595:24, 694:4-21, 1002:25 – 1003:13).

20.              Patients who come to the emergency room at the Seacoast location of LCH and need admission to LCH as inpatients are admitted to LCH while they are at the Seacoast location and then transported at no charge to a bed at LCH’s Loris location. (II Browne 584:22-585:1, 590:20-592:5, 780:15-17, 815:12-16). In 2006, 20% of the patients admitted to LCH were admitted at its Seacoast location. (II Browne 592:19-593:2). Patient days from patients admitted at the Seacoast location made a significant contribution to the need for beds associated with LCH shown in the 2003 State Health Plan. (II Browne 593: 3-7). More than 50% of the net revenue of the entire LHS system comes from Seacoast. (I White 932:24-933:12; GS Exhibit 47 L5911-5912, Loris Exhibit 133 L 10218, L10221, L10233)

21.              At Seacoast, LCH offers an array of hospital services 24 hours a day, 7 days a week, i.e. on an “overnight” basis: emergency room, laboratory, pharmacy, diagnostic imaging, and respiratory therapy. (I Grice 289:5 - 290:20; I DeHart 590:17 -591:14; II Browne 591:23 – 592:11, 596:5 – 597:8, 967:25 – 968:4, 1002:25 – 1003:13). LCH patients admitted at Seacoast may receive tests at Seacoast while they are inpatients of LCH, before being transported to Loris. (II Browne 592:2–18). At times, LCH patients have stayed overnight at the Seacoast location after being admitted while waiting for an appropriate bed to become available at the Loris location. (I Grice 289:5 – 290:24, 457:10-12; II Browne 582:11– 19). The services LCH offers at the Seacoast location of LCH are provided under the same hospital license as the Loris location of LCH. (I Grice 85:11-18, 198:15–21, 290:14 – 291:5, 396:21- 398:12, 446:18 - 447:5, 457:12-17; II Browne 594:15 – 595:24, 597:9-17; III Platt 70:25 – 71:5). Now that it has approved adding beds at LCH’s Seacoast location, DHEC will combine the bed need of both the Loris and Seacoast locations for purposes of calculating future bed need under the State Health Plan. (I Grice 398:13-20). LHS has not attempted to move bed need associated with LCH to a new location not already part of LCH.

22.              In applying for the Certificate of Need to add beds at Seacoast, LHS mistakenly gave the impression that it was applying to expand the ambulatory surgery center located at Seacoast. (DHEC Exhibit 1, Bates 4, 10). The DHEC staff included this error in an internal summary of contents of the application. (DHEC Exhibit 1, Bates 708). But in making the final decision to grant the application, Mr. Grice of DHEC understood and treated the application as an expansion of the LCH services at LCH’ Seacoast location. (I Grice 81:5 – 82:1, 198:15 -199:21, 447:12 – 450:19).

23.              I find that DHEC correctly determined that the proposed location of the project is actually a part of an existing hospital, LCH, a location where, as stated above, LCH already provides a variety of hospital services on an overnight basis, 24 hours a day, 7 days a week and, in regard to location, complies with Section G.1.(A)(4)(d) of the 2003 State Health Plan. [5]

Need

24.              LHS demonstrated the need for the proposed project in great detail as required by paragraph (d) on page II-7 of the 2003 State Health Plan and the applicable portions of Criteria 2 by, among other things, submitting two separate assessments of the community need. (Platt prefiled 22:19 – 24:18; DHEC Exhibit 1, Bates 25-46, 152-169, 518–548, 553-733).

25.              LHS’ need assessments documented the need for the proposed beds in detail. They demonstrated need based on many relevant factors including zip code specific data showing population projections by age group, historical utilization of inpatient services of the type to be provided at the proposed beds, and patient origin for LCH, as well as zip code specific market share analysis, tourist population data, non-resident population data, and seasonal fluctuations in emergency room visits. (DHEC Exhibit 1, Bates 25-46, 152-169, 518–548, 553-733; Platt prefiled 23:1 – 29:6, 31:20 – 35:4; Rollins prefiled 10:17 -14:7, 15:1-21, 18:4-7; III Richardson 816:5-16).

26.              LHS’ assessments of need are conservative (Platt prefiled 29:8-10) for several reasons: (a) the Claritas, Inc. population projections[6] LHS used are conservative compared to those of the State Budget and Control Board, especially in the older population segment which is a heavy user of hospital beds, (Platt prefiled 25:16 – 26:2, 29:12-16); (b) more recent discharge data for the service area shows an even higher overall use rate for hospital beds and a more rapid increase in the use rate than used in LHS’ projections, (Platt prefiled 20:7-21); (c) LHS used a conservative in-migration figure compared to the data showing that 20% of the patients at the Seacoast ER come from outside the service area, (Platt prefiled 32:21 – 33:5); (d) LHS’ projection did not anticipate the extent that market share will shift and greater volume will be directed to the Loris and Seacoast locations once Grand Strand’s beds fill to capacity. (Loris Exhibit II, Bates 537, 541; II Browne 641:3-22; See finding 27); and (e) more recent population projections show that the target population is growing at a greater rate than LHS’ assessment assumed. (III Richardson 771:25 – 773:22)[7].

27.              The need for the 50 beds proposed for Seacoast is also supported by the fact that Grand Strand’s existing beds will not be adequate to fill the need for beds in the area in the future.[8] Although Grand Strand has not yet had to turn patients away, there have already been times when it has been “close to capacity.” (I White 851:16-17). At times Grand Strand must hold patients in its emergency room longer than it would like and is beginning to experience other capacity challenges. (Loris Exhibit 7, GS 2932-2933; I White 673:11-14, 830:7 – 833:8; 881:23 – 882:9; Loris Exhibit 130, Bates 40 – 41). By 2009 or 2010 Grand Strand’s existing 219 beds are expected to fill. They will not be adequate to meet the need for hospital beds in the area. (I White 847:11-23, 849:16 – 850:10; II Richardson 384:3-5). Once Grand Strand’s existing beds are full, patients will have to go elsewhere. (I White 852:2-13, 853:4-6; II Richardson 350:18-22, 351:23 – 352:2). There is no assurance that the existing beds at Loris could handle the increase in volume that will occur once Grand Strand’s existing beds reach capacity.[9] (II Richardson 351:5-22).

28.              During the hearing in this case, Grand Strand further acknowledged the insufficiency of its existing beds when it submitted an application to add 50 additional beds at its main hospital location. (Loris Exhibit 130, Bates 3-5). Grand Strand filed this application because it did not expect that its current beds would be sufficient to meet demand and is confident that more beds will be needed in 2009 or 2010. (I White 727:7-15, 853:13-18; II Briscoe 162:16 -164:23,165:17-25). Grand Strand’s application adds no new services, but requests additional beds for general medical-surgical patients as well as cardiovascular patients. (I White 854:12 - 857:20; II Briscoe 74:6-13, 157:11 -160:10).

29.              Grand Strand’s application for more beds supports the need for the beds proposed for the Seacoast location because Grand Strand’s application notes (a) growth of the Grand Strand area due to tourism and growth in residents relocating to the area (I White 858:21-25); (b) that Horry County is projected to be the fastest growing county in the state, with a growth rate twice that of the state as a whole (Loris Exhibit 130, Bates 24); (c) that older age groups are growing faster than other age groups in Horry County (Loris Exhibit 130, Bates 26); (d) that Grand Strand is currently operating just below or at the 70% occupancy threshold established by the State Health Plan (Loris Exhibit 130, Bates 41; I White 881:23 – 882:9, 886:14-19); and (e) the “projections of growth in this market require additional capacity.” (Loris Exhibit 130, Bates 41).

30.              In addition, LHS has also pointed to a number of other factors that support its demonstration of need for the proposed beds, some of which are covered more fully in other findings. They include (a) the need to accommodate seasonal peaks in inpatient volume (Platt prefiled 34:1 – 35:2); (b) the current and projected problems that people in the northeastern portion of Horry County face accessing hospital beds (See findings 36-41); (c) the need to attract more physicians to a medically underserved area (See finding 42 & 84); (d) the need to ensure the long term viability of LHS as a system that provides important services to a medically underserved area. (See finding 44).

31.              Although LHS experienced a decline in inpatient volume in 2004 and 2005[10] due to the departure of a number of admitting physicians, LHS’ volume is growing again (for example, an increase in October 2006 patient days of 18% over the prior October) now that LHS’ ongoing physician recruiting effort has begun to succeed. (III Platt 174:25 – 179:7; II Browne 626:21-640:17, 809:9-21, 960:21 – 961:14, 961:22 – 962:5; Rollins prefiled 26:1-19; III Rollins 324:16-325:20, 336:14 -337:17; III Platt 182:18- 183:2; Loris Exhibit 133, Bates L10224; Loris Exhibit 137; III Knapp 657:24 – 658:3). As LHS continues its recruitment efforts, its inpatient volume is expected to continue to grow. (II Browne 630:14-20, 961:22-962:5; I White 976:20 – 977:1). The decline in LHS’ volume in 2004 and 2005 following the physician departure does not undermine the reliability of LHS’ demand forecast. (Rollins prefiled 26:1-19; III Rollins 320:16 - 321:22, 324:16 -325:20, 336:14 -337:17; III Platt 182:18- 183:2, 188:2-25; Loris Exhibit 133, Bates L10224; Loris Exhibit 137).

32.              It would be impossible to determine the number of beds needed to meet the needs of South Carolina residents without considering the extent to which residents from other states would occupy beds in the service area. (I Grice 322:14 -325:22).

33.              The lack of capacity at Grand Strand and the access problems described in findings 27 & 43, demonstrate that the proposed project is needed to meet the needs of its service area and, therefore, does not unnecessarily duplicate existing services and that DHEC’s factual determination in this regard was correct. (DHEC Exhibit 1, Bates 792; I Grice 384:1-6, 418:21 - 419:8; Platt prefiled 35:14 -38:5; III Platt 46:3 – 47:1, 48:9-22, 54:16-24).

34.              The evidence shows that the project is supported by both people and physicians in the Seacoast area, that DHEC’s determination in that regard was correct and that DHEC considered the opposition to the project. (DHEC Exhibit 1, Bates 185-192, 431-432, 444-456, 469-489, 492-517, 737-766, 768-777, 789; II Browne 609:12 – 610:1; I Grice 247:10-15, 413:4 – 418:3).

35.              I find that DHEC’s determination that LHS has shown a need for 50 additional beds proposed to be located at the Seacoast location of LCH is proper and correct. (I Grice 302:12 – 303:4).

Accessibility

36.              The proposed project will increase accessibility to comprehensive healthcare services, avoiding access issues that might otherwise occur. (I Grice 421:3-12, 423:4-19; DHEC Exhibit 1, Bates 791, 792). This increased accessibility will benefit the growing population, many of whom are elderly, including full-time residents, part-time residents, and tourists in the area. (Platt prefiled 7:4-8, 38:10 – 41:2; Loris Exhibit 1, Bates 525; I White 663:21-24; 979:4 -15, 979:23-25; I DeHart 569:20 - 571:12; Loris Exhibit 130, Bates 23; II Briscoe 156:1-21).

37.              Patients coming from the northeast corner of Horry County may experience problems accessing hospital beds. Traffic conditions can make it difficult for patients coming from the northeastern corner of Horry County to reach Grand Strand within thirty minutes. (Platt prefiled 40:17-21; I Grice 179:11-14, 240:24 -241:6, 264:2-3, 403:15 – 405:10, 406:11- 407:1, 415:7 – 416:5; DHEC Exhibit 1, Bates 455; II Browne 754:17-22, 757:3-8; I White 982:8 – 983:5). Patients who are admitted to LCH at the Seacoast emergency room must be transported 22 miles to LCH’s Loris location. (II Browne 591:2-6). Some patients with severe trauma transported via ambulance must currently bypass the Seacoast location because it does not have operating rooms open 24 hours a day, seven days a week. (Wright prefiled 8:13–16). Physicians on call at Grand Strand sometimes refuse to accept patients from the Seacoast emergency room who seek to be transferred to Grand Strand. (Green 4/12 dep. 63:7-12).

38.              Speed of delivery can be critical in health care. (I White 981:6-24). Ease of access is especially important to elderly patients, who are more likely to need hospital beds. (I White 979:4-15; I Grice 380:10-20; Platt prefiled 10:13-15). It is desirable for patients to be able to reach a hospital within thirty minutes driving time. (Platt prefiled 39:20 – 40:10; Loris Exhibit 2 II-9; I Grice 265:1-2). There is already a portion of northeastern Horry County where one cannot drive to an acute care hospital other than the Seacoast location within thirty minutes. (I Ridgeway 1077:4 -20; Platt prefiled 39:7-9).

39.              The underserved portion of Horry County becomes larger when one accounts for the increased growth that is expected in the area and the conditions that occur during peak travel times. (I Ridgeway 1055:16 – 22, 1079:6 – 1080:3; I Grice 302:12-24; Platt prefiled 39:3-12; III Platt 157:16-24, 159:1 – 160:8). As the population continues to grow, this underserved portion will grow between now and 2010, meaning that an even greater number of patients will not be able to access a hospital bed within a 30 minute drive time, unless additional hospital beds are added in this area of Horry County. (I Grice 403:15 – 404:11; II Hatley 503:12 – 504:2; Wright prefiled 7:19 -25). The underserved portion includes at least 10,500 full time residents plus a significant number of tourists and seasonal residents. (III Richardson 804:19 – 805:9)

40.              The number of people who are unable to get to a hospital within thirty minutes increases during the summer tourist season, which runs from May through August. (I Ridgeway 1082:1 – 1083:20, 1050:1-18, 1046:21–24, 1115:8–21, 1049:7–10; II Hatley 479:4-14).

41.              The proposed project is located so that it will enhance access by ensuring that people in the underserved portions of Horry County will be able to drive to a location with hospital beds within thirty minutes. (Platt prefiled 39:23 – 41:2).

42.              The proposed project will also enhance access to health care in other ways. The project will allow patients admitted at Seacoast to avoid having to be transported 22 miles to Loris. Residents of the Seacoast service area will have better and quicker access to inpatient hospital services. (I DeHart, 570:17 – 571:2, 602:4-13). The project will enhance access to health care also by increasing the number of physicians, including specialists, who will be available to patients at Seacoast or close by, allowing more patients to get to the physician they need more quickly and easily. (I DeHart 579:8-25).

43.              Grand Strand currently serves approximately 64% of the patients in the Seacoast area. (I White 658:9-11). But, as noted in more detail in finding 27, Grand Strand is beginning to experience capacity problems and expects its 219 beds to be full sometime in 2009 or 2010. Without the proposed project, Horry County residents will also face problems accessing comprehensive inpatient services due to a lack of beds. (I Grice 424:21- 425:8; I White 852:2-13, 853:4-6; II Richardson 350:18-22, 351:23 – 352:2). The proposed additional beds at Seacoast will enhance access by helping to ensure that there will be enough beds for the patients when Grand Strand may not have beds available. (I Grice 424:21 – 425:8; Platt prefiled 45:5-13).

44.              In addition, by enhancing the long-range profitability of the LHS as a whole and ensuring its long-term survival (II Browne 611:24 – 613:18; Richardson prefiled 36:6 – 37:19; I White 931:21 – 933:24, 1170:4 – 1171:3), the proposed project enhances access by assuring that LHS will continue to be able to provide services that may not be profitable such as its stand alone nursing home, health and fitness center in the town of Loris, and family health centers in Green Sea and Loris, all of which provide care for medically underserved populations in the District. (I Grice 515:3-5; II Browne 571:15-575:4).

45.              The evidence shows that the proposed beds will be available to all patients without regard to sex, race, religion, national origin or their ability to pay through physician referral, self-admission, hospital transfer and the emergency room and that DHEC’s determination in this regard was correct. (DHEC Exhibit 1, Bates 24, 224-225; II Browne 580:3-11, 923:12-13, 1020:5-10).

46.              I find that the proposed project will provide a necessary increase in accessibility to hospital beds and other related services avoiding access issues that might otherwise occur and that DHEC’s determination in this regard is correct.

Cost Containment

47.              Adding beds at Seacoast is the most efficient and least expensive way to provide the people of the northeastern portion of Horry County with the best access to the hospital beds they will need. Seacoast was designed and built to make the addition of beds easy and relatively inexpensive. (DHEC Exhibit 1, 791, II Browne 951:2-19; I White 934:9-10; II Berry 1057:15-22; I Grice 199:2-5; Green 4/12 dep. 34:21-25). LHS invested over $20 million building Seacoast in this way. (II Browne 585:3-7, 950:24-951:5). The beds will be added as an addition to an existing building on a site already purchased and prepared for construction. (I Peterson 1278:7 – 1279:19; Berry prefiled 7:6 – 19; II Berry 1077:16 – 1078:15, 1169:21 – 1171:16). The most expensive parts of a hospital are already in place at Seacoast. (I Peterson 1269:19–21, 1268:22 – 1270:17, 1273:7 – 18; Berry prefiled 2:1 – 18, 5:19 – 6:3; II Berry 1171:17 – 1172:19). The Seacoast laboratory, imaging, physical therapy and surgical departments will not need to be expanded. (II Browne 951:7-15). Important ancillary hospital services such as emergency room, diagnostic imaging, respiratory therapy, pharmacy, laboratory, physical therapy, occupational therapy, speech therapy, cardiac rehabilitation, speech therapy, pulmonary rehabilitation, admitting, medical records, housekeeping, and maintenance services are already staffed and operational at Seacoast. (I Grice 198:14-21 397:1-24, 446:18-22, 447:3-11; II Browne 594:20-595:5, 1003:1-13).

48.              Adding beds at other hospital locations, such as the Loris location of LCH or Grand Strand, is not an effective solution to the access problems of the residents of the area, which are described more fully in findings 36 - 41. In addition, adding beds at Seacoast will allow LHS to avoid the cost of transferring patients admitted at Seacoast 22 miles to Loris after admission. (II Browne 988:8-15). Currently, about 20% of the patients of LCH are admitted at Seacoast. (II Browne 592:19-593:2).

49.              Transferring beds from the Loris location of LCH is not a preferable alternative because a bed transfer would essentially abandon the investment in beds already made at the Loris location, would not be any less expensive, could negatively impact the amount of federal financial assistance provided to that location, and would leave the Loris location without sufficient beds to handle peaks in demand and potential new services at that location. (I Grice 340:12 – 342:19; Platt prefiled 37:11-16; II Browne 613:19 – 617:18, 620:3 - 622:5).

50.              Adding beds at Seacoast as opposed to Grand Strand also contains costs because charges at Seacoast are projected to increase at a rate that is 20% to 60% lower than the rate of charge increases projected by Grand Strand. (I Grice 342:20 – 345:17; II Browne 680:14-20; Loris Exhibit 130, Bates 68; Wortham 4/5 dep. 20:2-14). Grand Strand’s charges are set to achieve a level of income acceptable to the expectations of HCA. (Wortham 4/5 dep. 25:4 – 26:4).

51.              I find that the proposed project “represents the epitome of cost effective planning,” and, therefore, will have a beneficial impact on patient charges and that DHEC’s determination in that regard is correct. (DHEC Exhibit 1, Bates 791 -792).

Adverse Impact on Grand Strand’s Occupancy

52.              24A S.C. Code Ann. Regs. 61-15, § 802(23)(a) (Supp. 2006) requires that the project’s “impact on the current and projected occupancy rates … of existing facilities and services … be weighed against the increased accessibility offered” by the project.[11] Id.

53.              Here, Grand Strand has failed to prove that the proposed project will have any significant adverse impact on the current or projected occupancy of Grand Strand’s existing facilities and services. The proposed project is not expected to be available to patients until approximately three years after final approval of the certificate of need. (DHEC Exhibit 1, Bates 93). As noted earlier, the demand for inpatient beds is expected to exceed the capacity of Grand Strand’s existing 219 beds in 2009 or 2010. (I White 847:11-23, 849:16 – 850:10; II Richardson 384:3-5; II Briscoe 286:13-18; Rollins prefiled 30:17 – 31:19; III Knapp 638:7 -639:20). The projected growth in patient volume is so great that it is unlikely that Grand Strand’s existing services and facilities will be able to accommodate any of the patients expected to use the proposed 50 beds. (Platt prefiled 7:9-12, 41:7 - 45:13, 46:1-10, 46:19-22). Grand Strand’s inpatient volume is more likely to be limited by its own lack of capacity than by any impact from the proposed beds at Seacoast. (Platt prefiled 7:17-18; III Knapp 636:10 - 640:6).

54.              Because there is no significant adverse impact on Grand Strand’s occupancy, the increased accessibility provided by the project clearly outweighs any potential adverse impact on the occupancy of Grand Strand and DHEC’s determination in this regard is correct. (Platt prefiled 46:11-18).

55.              To the extent that it has any available capacity in its existing beds, Grand Strand will continue to grow its patient volume, remain profitable, and deliver first-class care once the proposed project is implemented. (I White 691:9-10, 768:20 -769:13; Rollins prefiled 29:10-18, 32:4-17; Platt prefiled 41:20 -42:6; III Knapp 612:14 – 613:6).

56.              Even if Grand Strand were to lose the volume that it claims it will lose and would, as Grand Strand claims, suffer a $3.3 to $4.6 million reduction of pre-tax net income as a result of the proposed project, (Knapp prefiled 12:21-23), this loss in income would not outweigh the benefits of the increased accessibility provided by the project or justify denial of the certificate of need. To the extent that Grand Strand’s pre-tax profits affect its ability to obtain capital from HCA, annual pre-tax incomes ranging from $18.4 in 2005 to $25.4 million in 2009, as projected by Grand Strand in its September 2005 Certificate of Need application, would be sufficient to ensure that Grand Strand obtains the capital it needs to remains a “first class hospital.” (I White 753:8 – 754:17). Grand Strand’s pre-tax income is growing so fast, that even if it were to suffer a $3.3 to $4.6 million reduction in income, its pre-tax income is now projected to exceed $26 million from 2006 through 2011. (Loris Exhibit 130, Bates 69). In fact, based on Grand Strand’s $28.4 million pre-tax income as of September 30, 2006, its 2006 pre-tax income appears to have exceeded its 2005 pre-tax income by 35% and would be at least $37 million on an annual basis, even after paying a management fee to HCA in excess of $10 million, which is another source of revenue for HCA.[12] (Loris Exhibit 132; II Knapp 445:12-15; III Knapp 622:20 – 625:8, 627:4-17; Wortham 4/5 dep. 89:4 -7, 90:14 - 21). Grand Strand’s income is projected to grow even more through 2011. (III Knapp 625:16 – 626:25). Under these circumstances, Grand Strand’s income would exceed the $25.4 million needed to remain first class, even if Grand Strand’s income were reduced by $3.3 to $4.6 million, as it claims. Even if Grand Strand were to sustain the reduction that it claims, the evidence shows that Grand Strand would not diminish its current level of service to those who cannot afford to pay and that DHEC’s determination in this regard was correct. (I White 714:15-18).

57.              If there were an adverse impact on Grand Strand, the most appropriate way to evaluate the financial significance of the impact would be to look at the significance of the impact on HCA. Grand Strand is not permitted to retain earnings and decide how to use them. HCA provides and controls the funds to meet Grand Strand’s capital needs. (I White 765:19 – 766:23, 1166:13 -1167:1). The amount of capital available to Grand Strand is affected by HCA’s overall performance and the return HCA can expect to receive by allocating capital to any project Grand Strand might propose. (I White 1142:24 – 1143:4, 1168:2-7).

58.              When viewed from the perspective of HCA, a $3.3 to $4.6 million reduction in income would not be significant, even if it were to occur. (II Knapp 422:9-22).

59.              I find that Grand Strand has failed to prove that the proposed project will have any significant adverse impact on the current or projected occupancy rates of its existing facility.

Staffing

60.              LHS has reasonable plans to recruit any required additional staff for the project through traditional recruiting methods and has demonstrated that an adequate staff will be available. (I DeHart 570:17 – 571:2, 581:1-7; 590:1-3, DHEC Exhibit 1, Bates 57, 58, 60, 171-172, 173-184; II Browne 589:16 – 590:15, 594:3-14, 609:15 – 610:1, 610:17 – 611:4, 630:21 – 640:5, 644:2 – 645:12, 646:13 – 648:16, 1018:25 -1019:2; I Grice 252:3-16, 254:13-20, 418:6-15; Green dep. 4/19 58:1-7; Pougnaud dep. 27:8-14).

61.              24A S.C. Code Ann. Regs. 61-15, § 802(23)(b) (Supp. 2006) requires that “staffing of the proposed services should be provided without unnecessarily depleting the staff of existing facilities or services or causing an excessive rise in staffing costs due to increased competition.” LHS will not deplete the physician staff of Grand Strand in the course of staffing the proposed project. LHS has no plans to employ physicians to staff the proposed project and will not be recruiting physicians from the staff of Grand Strand. (I White 701:11-20; II Browne 667:19-24).

62.              Although there is currently a nursing shortage in South Carolina, LHS has always been able to recruit the nurses it needs, had no substitute nurses or “travelers” at the time of the hearing, and has made only minimal use of “travelers.” (Pougnaud dep. 26:23 – 27:14, 52:21 -53:1; II Browne 645:9- 646:4, 1018:7 – 1019:2). Grand Strand has made greater use of “travelers” than LHS, obtaining them from an HCA subsidiary. (Gardner 4/5 dep. 11:15-12:2, 13:5-14, 15:12-19, 18:21 - 19:1, 44:9-16). But, Grand Strand has been able to obtain the quality “travelers” it has needed, has had an adequate staff, and has not had to close any of its 219 beds or turn any patients away due to lack of staff, even though Grand Strand and other hospitals in the area have added beds. (Gardner 4/5 dep. 4:17-22, 5:9-14, 5:21-25, 6:1-3, 7:3-17, 7:22-24, 8:24 – 9:1-4, 11:15 – 12:2, 12:5 -19, 12: 22 – 16:2, 44:9-16, 64:1-21; Loris Exhibit 42, Gardner 5/8 dep. 14:20-22, 15:19 – 16:2; II Briscoe 243:21 – 244:9). If 50 more beds were to be added to Grand Strand, it expects that it would be able to staff them. (Gardner 4/5 dep. 16:2-16).

63. Despite the current nursing shortage, staffing the proposed project once it opens in a few years will not significantly deplete the staff of existing facilities or cause staffing costs to increase more than they would otherwise increase. Grand Strand, Loris, and other hospitals are working to increase the number of nursing graduates from South Carolina nursing programs. (II Browne 646:13 – 647:17; Gardner 4/8 dep. 49:16 – 50:22, 5/8 dep. 5:14-22, 5:25 – 6:18, 6:20 -7:7, 7:9-10, 7:15-17; II Briscoe 248:8 – 250:3). There will be a delay of several years before the hospitals in Horry County can benefit from increased enrollment in nursing training programs. (Gardner 4/5 dep. 50:17-22, 5/8 dep. 5:20-22, 7:2-11; II Browne 647:5-17). Grand Strand conceded that it is not possible to prove that the expected increase in the supply of nursing graduates will not be sufficient to staff 50 additional beds in Horry County or that Grand Strand would need to spend more on temporary replacements or “travelers”. (Gardner 5/8 dep. 6:10 – 18, 6:20 – 7:7, 7:15-17, 8:3-14, 8:19-23, 9:12-21, 9:23; II Briscoe 249:8-18). It is possible to staff 50 additional beds with the appropriate types of staff in Horry County by recruiting them from numerous different training programs in South Carolina within the budget that Grand Strand has proposed in its own application for beds. (Loris Exhibit 130, Bates 47; II Briscoe 156:1-21, 250:13 – 252:25, 253:15-21). Therefore, staffing the proposed project should not significantly deplete the resources of existing hospitals or cause an increase in salaries to an excessive level under the circumstances.

64. Even if the current shortage of staff were to continue after the proposed project is implemented, Grand Strand has failed to prove that the proposed project would cause unnecessary depletion of the staff of other facilities or increase staffing costs to a level that would be excessive under the circumstances. Any hospital seeking to provide needed beds or other services must take reasonable and appropriate steps to obtain the necessary staff. (I Grice 434:6 – 435:3; II Browne 1018:7-24; II Briscoe 254:16-21, 255:2-7; I White 896:12 -20). When there is a need for beds, health care providers provide them, even if it means incurring reasonable increases in staffing costs due to the increased competition.

65. I find that LHS’ plans for staffing the proposed project are reasonable and sufficient, that the proposed project will not unnecessarily deplete the staff of existing services or cause an excessive rise in staffing costs and that DHEC’s determination in that regard is correct.

Financial Feasibility

66. 24A S.C. Code Ann. Regs. 61-15, § 802(15) (Supp. 2006) requires that “[t]he the applicant must have projected both the immediate and long-term financial feasibility of the proposal. Such projection should be reasonable and based upon accepted accounting procedures.” DHEC’s determination that the project is “financially feasible” means that DHEC has determined that the applicant can afford the proposed project. (I Grice 362:15 – 367:4, 371:8-18, 420:2-7). DHEC’s understanding of financial feasibility is consistent with the use of the term by the accounting profession. To say that a project is “financially feasible,” as understood by the American Institute of Certified Public Accountants (the “AICPA”) and accountants who specialize in making financial projections, means that the applicant can afford the project. (Rollins prefiled 18:15-20, 19:1-3; III Rollins 240:7-15: III Knapp 634:22 – 635:10). The dictionary definition of “feasible,” meaning “capable of being done or carried out, practicable, possible”, (Rollins prefiled 19:4 -11) is also consistent with the understanding of the AICPA and DHEC.[13]

67. The financial projections LHS submitted in support of its application demonstrate that the project is financially feasible. (Loris Exhibits 21 and 22; Rollins prefiled 16:1 – 18:14, 19:12 – 20:14). Evidence in the record indicates that LHS’ projections are conservative and that LHS will have more than sufficient income to cover the costs of the proposed project. (Rollins prefiled 21:4-12; II Knapp 395:17 – 396:7; III Knapp 572:15 – 573:4, 573:21-25, 574:10-15)). The conservative nature of the forecasts is shown in a number of ways.

68. LHS’ actual financial results for 2006 demonstrate that LHS’ forecasts were conservative. (III Rollins 327:3 - 328:22). In 2006, LHS’ actual financial results exceeded the forecast results significantly. The forecast projected that LHS’ 2006 income would be $2.28 million, while the actual 2006 income was $7.85 million. (III Rollins 327:3-22). Even if the 2006 actual income is reduced to only $6 million to account for a one-time gain on a sale of an affiliated company, LHS’ income in 2006 is over 2.5 times the amount forecast. (III Rollins 328:1-22). The actual results for the Seacoast location also exceed the projection by a multiple of two. (III Rollins 328:23 – 329:14). The strong 2006 financial results for LHS and increase in patient volume in 2006 and 2007 also demonstrate that LHS is successfully addressing the decline in volume it experienced in 2004 and 2005 due to the loss of a number of physicians. (III Rollins 325:4-20, 336:19 – 337:17).

69. Despite the decline in inpatient volume at LCH in 2004 and 2005 due to the departure of a number of physicians in late 2004 (III Rollins 262:13-18), LHS’ actual results for 2004 exceeded the forecast by $600,000 and the 2005 results were just $100,000 below the forecast. (Rollins prefiled 24:15 – 25:2).

70. The estimate, used in LHS’ financial forecast, of the cost of uncompensated care for the project was reasonable and conservative. LHS projected a greater cost than LCH (at its Loris location) and Grand Strand had historically provided. (Rollins prefiled 22:8-14, 38:1-4; I Grice 358:10-18). If LCH had estimated the cost of uncompensated care based on an average of the historical cost of LCH at its Loris location and Grand Strand, as Grand Strand proposes, the net income for the proposed project would have increased by $1.4 million in the first three years of operation. (Rollins prefiled 22:15-19, 38:5 – 40:17, Loris Exhibit 26).

71. LHS’ financial forecast estimate of the income that LCH will receive in disproportionate share payments (“DSH payments”) is conservative because it underestimated the income that will be received. The actual income from DSH payments in 2006 was $3 million more than projected. Grand Strand has failed to prove that LHS cannot reasonably expect this extra DSH income to continue. (III Rollins 331:25 – 333:7; III Knapp 584:8 – 585:10).

72. LHS’ financial forecast is conservative also because it did not include any income for patients from outside the service area or from the additional patients that can be expected based on updated discharge data showing that volume will grow more than forecast. (Rollins prefiled 23:8 -22). Accounting for the additional expected growth and for patients from outside the service area would add an additional $880,000 in income for LHS in 2010. (Rollins prefiled 23: 8-22).

73. LHS’ forecasts have been conservative. Evidence in the record indicates that LHS will have sufficient income to cover the costs of the proposed project even if there are significant additional expenses above those included in the forecast. (III Rollins 329:15-20; II Knapp 395:17 – 396:7; III Knapp 651:8 -653:2, 572:15 – 573:4, 573:21-25, 574:10-15).

74. The proposed capital and operating costs of the project are reasonable. (DHEC Exhibit 1, Bates 53, 54, 131, Note 14, 133, Note 14; I Grice 422:1-3). The total estimated project costs submitted to DHEC (DHEC Exhibit 1, Bates 13) were reasonable and accurate. LHS properly relied on an executed, firm design-build price quotation from GMK, the reputable design-build firm which had constructed the initial Seacoast building ahead of time and under budget. (Rollins prefiled 17:3-5, 28:15 – 29:5; II Browne 585:22 – 586:17, 657:8-25, 663:11 – 665:25; II Knapp 407:13 - 408:2). The evidence shows that the assumptions used for employee fringe benefits, recruiting, and emergency room coverage were also reasonable, and Grand Strand has failed to prove otherwise. (III Rollins 335:16- 336:13, II Browne 628:11 – 629:18, 634:6-12, 637:22 -638:10, 649:11 – 650:3, 920:8 -921:11, 988:4 – 989:5, 1004:9 – 1005:9; III Knapp 642:9 -645:4, 660:18 – 664:10, 665:3-17). DHEC’s determination that the criteria listed in S.C. Code Ann. Regs. 61-15, § 7 & 16(c) (Supp. 2006) were satisfied was correct to the extent that those criteria relate to capital and operating costs of the project.

75. The parties agree that the correct method to use to calculate direct construction costs is to multiply cost per square foot times total square footage. (I Peterson 1218:12-16, 1234:1-24). GMK proposed to build the addition for $232 per square foot. (I Peterson 1235:4-6; II Berry 1175:16 - 20). This estimate is within 10% of the estimate proposed by Grand Strand’s own expert. (I Peterson 1262:15-18; II Berry 1166:6 - 13). This proposed cost per square foot falls squarely within the range Grand Strand’s expert testified should be expected. (I Peterson 1235:4 - 21, 1262:1 – 1263:10, 1267:5 – 1268:3).

76. The fact that the Seacoast location already has the ancillary departments constructed reduces the total project cost. (I Peterson 1276:17–21; II Berry 1167:1 - 12). GMK is able to construct the 50-bed addition at a reasonable cost because the most expensive parts of the Seacoast location, including the operating rooms and imaging facilities, are already constructed. (I Peterson 1269:19–21, 1268:22 -1270:17, 1273:7– 11; Berry prefiled 3:1 – 18; 5:19-6:3; II Berry 1171:17 – 1172:19).

77. The total project cost is also reduced because the proposed project will be an addition, rather than new construction, which will be built on land that has already been prepared at the time the original Seacoast structure was constructed. (I Peterson 1278:7 – 1279:19; Berry prefiled 7:6 – 19; II Berry 1077:16 – 1078:15, 1169:21 – 1171:16, 1173:2 – 1175:15).

78. GMK is one of the leading design-build firms in the country, having overseen the construction of approximately 15-20 design-build hospital or healthcare projects. (I Peterson 1196:25 – 1197:22; Berry prefiled 1:9–13, 6:7-10). Both Grand Strand and LHS’ experts agree that design-build saves money. (I Peterson 1196-25 – 1197:11, 1299:23 – 1301:23; Berry prefiled 6:3 – 5; II Berry 1084:20 – 1085:1, 1167:12 - 16).

79. GMK recently completed a South Carolina hospital project in Abbeville for $173 per square foot. (Berry prefiled 5:1-5; II Berry 1168:5 – 1169:10). And, even at that price, the Abbeville project, which was freestanding new construction, was a profitable construction project for GMK. (Berry prefiled 6:11 – 15).

80. GMK is very familiar with the Seacoast site. (II Berry 1167:15–16). GMK designed and built the original Seacoast project for $133 per square foot and made a profit on it. (II Berry 1169:15–20, 1172:20-24).

81. GMK, along with its president of the Design-Build Division, Percy M. (“Tripp”) Berry, had a considerable stake in getting this project right because GMK and Berry bore the risk, if their estimate was wrong. (I Peterson 1240:13 -15; II Berry 1163:6 – 1164:9). GMK was prepared to sign a contract and build the addition for a maximum price not to exceed $14,740,924. (II Berry, 1162:20–1164:6, 1175:16-23).

82. I find that the evidence demonstrates that the proposed project is financially feasible, and that DHEC’s determination (I Grice 420:2-7; DHEC Exhibit 1, Bates 791-792) that the proposed project is financially feasible is correct and Grand Strand has failed to prove otherwise. (Rollins prefiled 6:9-12, 18:13-14, 18:21-22, 21:4-7; II Knapp 397:11-18).

Adverse Impact on LHS

83. The proposed project is a financially sound strategic move for LHS. (Rollins prefiled 36:6-8; II Browne 611:24 -613:18). Seacoast provides over half of the revenue of LHS. (II Browne 593:8-11). If another entity were to provide beds in the Seacoast area instead of LHS, it could be financially devastating to Seacoast and LHS. (Rollins prefiled 37:1-13; II Browne 612:20 – 613:18). By making the necessary investment at Seacoast to provide the beds needed in this area, LHS will protect and enhance the revenues and volumes of LHS as a whole for many years. (Rollins prefiled 36:10 – 37:19; II Browne 611:24 - 613:18; Loris Exhibit 57 GS 2907, 2908; I White 788:12 – 790:4, 790:21 – 791:24, 931:9 -933:24, 1170:1 - 1171:4).


84. The proposed project will significantly enhance the ability of LHS to recruit physicians to serve at both locations of LCH. (II Browne 610:14 – 611:15; Rollins prefiled 37:15-19; Wright prefiled 7:1-5). Recruiting physicians is vital to the growth and success of LHS. (II Browne 630:14-20).

85. LHS as a whole will serve more patients as a result of the proposed project. (Rollins prefiled 36:9-14, 37:14-19; Platt prefiled 38:1-3). Evidence in the record shows that the proposed beds at Seacoast are likely to fill to capacity rapidly and the existing beds at the Loris location will likely have an occupancy that will exceed 37 - 40%. (Rollins prefiled 35:3-8, 36:11-14).

86. Finally, I find that Grand Strand has failed to prove that DHEC made any error in determining whether any of the disputed criteria had been satisfied.

CONCLUSIONS OF LAW

Based on the foregoing Findings of Fact, I conclude the following as a matter of law:

I. Jurisdiction and Burden of Proof

1. This Court has subject matter jurisdiction over this contested case proceeding pursuant to S.C. Code Ann. §§ 1-23-310 et seq. (Supp. 2006), S.C. Code Ann. § 1-23-600(B) (Supp. 2006), S.C. Code Ann. § 44-7-210(E) (2002), and 24A S.C. Code Ann. Regs. 61-15, § 403 (Supp. 2006).

2. Grand Strand, as the moving party in this matter, bears the burden of proof. S.C. Code Ann. § 44-7-210(E) (2002); 24A S.C. Code Ann. Regs. 61-15 § 403(1) (Supp. 2006); see also Leventis v. S.C. Dep’t of Health & Envtl. Control, 340 S.C. 118, 132-33, 530 S.E.2d 643, 651 (Ct. App. 2000). Therefore, Grand Strand must prove, by a preponderance of the evidence, that DHEC’s issuance of a CON for the addition of 50 beds at LHS’ Seacoast Medical Center location was in error under the relevant statutory and regulatory criteria. See Anonymous v. State Bd. of Med. Exam’rs, 329 S.C. 371, 375, 496 S.E.2d 17, 19 (1998).

3. The preponderance of evidence means evidence which is of greater weight, or is more convincing than that offered in opposition to it. Black’s Law Dictionary, 1201 (7th ed. 1999). Substantial evidence is evidence that a reasonable mind might accept as adequate to support a conclusion. Black’s Law Dictionary, 1428 (6th ed. 1990). Although substantial evidence consists of more than a mere scintilla of evidence, it is generally considered to be less than a preponderance. Id.

4. The contested case hearing conducted before this Court in a CON matter is a trial de novo, “in which the whole case is tried as if no trial whatsoever had been had in the first instance,” and the administrative law judge conducting the hearing is the sole fact-finder, who “must make sufficiently detailed findings supporting the denial or grant of a permit application.” Marlboro Park Hosp. v. S.C. Dep’t of Health and Envtl. Control, 358 S.C. 573, 579, 595 S.E.2d 851, 854 (Ct. App. 2004) (internal quotations and citations omitted).

5. Pursuant to ALC Rule 29(B), issues raised at the hearing not specifically addressed in this Order are deemed denied.

6. Grand Strand is an “affected person” with standing to request a contested case hearing and administrative review of DHEC’s decision to approve LHS’ CON application for 50 additional beds. S.C. Code Ann. § 44-7-130 (2002) and 24A S.C. Code Ann. Regs. 61-15 § 103.1 (Supp. 2006).

7. Grand Strand timely filed a Petition for Administrative Review for a Contested Case Hearing regarding DHEC’s approval of LHS’ CON application. S.C. Code Ann. § 44-7-210(D) (2002).

II. Certificate of Need Program

8. S.C. Code Ann. § 44-7-110 et seq. (2002 & Supp. 2006), the State Certification of Need and Health Facility Licensure Act, grants DHEC the authority to administer the State’s CON program.

9. S.C. Code Ann. §§ 44-7-180, et.seq, (2002 & Supp. 2006) provides for the application procedures, criteria, and standards for a Certificate of Need.

10. The CON program is administered under the guidelines of 24A S.C. Code Ann. Regs. 61-15 (Supp. 2006).

11. An application for a certificate of need is evaluated under the applicable criteria of the 2003 State Health Plan and the thirty-three general project review criteria set out in 24A S.C. Code Ann. Regs. 61-15, § 802 (Supp. 2006). See S.C. Code Ann. § 44-7-210(C) (2002); 24A S.C. Code Ann. Regs. 61-15, § 307(1) (Supp. 2006). Although it is not necessary that an application comply with every one of the project review criteria, no application may be approved unless it is in compliance with the State Health Plan. 24A S.C. Code Ann. Regs. 61-15, § 801(3) (Supp. 2006).

III. LHS’ Compliance with the 2003 State Health Plan

12. All CON applications must comply with the State Health Plan in effect at the time of the application. 24A S.C. Code Ann. Regs. 61-15 § 504 (Supp. 2006).

13. The 2003 State Health Plan, effective June 13, 2003, is the applicable Plan controlling this matter.

14. The 2003 State Health Plan determined need for beds as follows: First the Plan stated that “calculations of bed need are made for individual facilities” and that the calculations were made “to determine the number of beds needed to meet the area’s need.” 2003 State Health Plan, p. II-7 (a) and (b)(2). This calculation was based on the 2001 patient days of each hospital, the 2001 actual and 2008 projected county population of the appropriate county, and the occupancy standards stated in the Plan. The occupancy standards were as follows: for hospital less than 175 beds – 65%; for hospitals with 175 to 349 beds – 70%; and for hospitals with 350 beds or more – 75%. The Plan indicated that additional beds were needed whenever the projected average daily census of a hospital for 2008 exceeded the occupancy standard for that hospital. The 2003 State Health Plan showed a need for a total of 54 additional hospital beds in Horry County altogether: 5 beds based on the patient days at LCH, 19 beds based on patient days at Grand Strand, and 30 beds based on patient days at Conway Hospital, Inc. 2003 State Health Plan, p. II-15.

15. In addition, Section G.1.(A)(4)(d) on page II-7 of the 2003 State Health Plan provided that any hospital with a need for additional beds could be granted “up to the greater of 50 beds or the actual projected number of additional beds” in order “to provide for a cost-effective addition” if “the hospital [could] demonstrate the need for additional beds” (the “50 Bed Provision”).[14]

16. The 2003 State Health Plan’s general bed need methodology calculated a need for five additional beds associated with LCH and also made it possible for LCH to receive up to 50 total additional beds if LSH could show a need for them outside of the Plan’s general bed need methodology.

17. The 2003 State Health Plan defines a “hospital” as “a facility organized and administered to provide overnight medical or surgical or nursing care of illness, injury or infirmity … and in which all diagnoses, treatment, or care is administered by or under the direction of person currently licensed to practice medicine, surgery, or osteopathy.” 2003 State Health Plan, p. II-4. The definition of “hospital” does not refer to “hospital beds” or require that every part of a “hospital” contain a “hospital bed.”

18. The Seacoast location of LCH is part of a hospital because it is part of LCH. The Seacoast location of LCH operates under the LCH hospital license. Under that hospital license, LCH already offers emergency room, laboratory, pharmacy, diagnostic imaging, and respiratory therapy and admits patients at the Seacoast location 24 hours a day, i.e. on an “overnight” basis. Under the LCH hospital license, LCH at times keeps patients overnight in its emergency room at the Seacoast location.

19. LCH has not attempted to add beds at a new hospital location as Grand Strand contends. Here, DHEC has approved the addition by LHS of 50 beds at the Seacoast location of LCH, a location where, as stated above, LCH already provides a variety of hospital services on an overnight basis, 24 hours a day, 7 days a week. Having the Seacoast location of LCH as the location for the proposed beds is consistent with the 2003 State Health Plan. Even if LHS were attempting to add beds at a new location in Horry County as Grand Strand contends, Grand Strand has pointed to no language in the 2003 State Health Plan that would prohibit this or that would give any hospital exclusive rights to any portion of Horry County.

20. DHEC’s determination that the proposed location of the project is consistent with the 2003 State Health Plan is affirmed. The Seacoast location proposed for the 50 additional beds is actually an existing location of LCH and part of LCH, not a new location.

21. LHS has demonstrated a need in compliance with the 2003 State Health Plan for the 50 beds that it proposes to add at the Seacoast location of LCH. This need is based on the 5 beds shown as needed by the general bed need methodology of the Plan, plus the detailed showing of need presented by LHS based on resident population growth, utilization trends, and market share analysis. The need showing is further supported by the capacity limits of Grand Strand, seasonal resident population growth, tourism growth, access needs, physician recruiting needs, and the need to ensure the long term access to the services LHS provides.

22. The bed need section of the 2003 State Health Plan recognizes that, in determining the number of beds needed to serve the residents of South Carolina, it is appropriate to consider the extent to which residents of other states are expected to use beds in South Carolina. Section G.1.(A)(4)(e) specifically provides that beds should be provided for the “non-resident (tourist) population” of an area. 2003 State Health Plan, p. II-7. In addition, the patient days used by the Plan to calculate bed need include patient days from all patients without regard to their state of residence.

IV. LHS’ Compliance with Regulatory Project Review Criteria

23. While an application for a Certificate of Need is evaluated under the thirty-three criteria enumerated in 24A S.C. Code Ann. Regs. 61-15, § 802 (Supp. 2006), it is not necessary that an application comply with every one of the project review criteria. 24A S.C. Code Ann. Regs. 61-15, § 801(3) (Supp. 2006). According to the 2003 State Health Plan, p. II-9, the following project review criteria are considered the most important in evaluating an application for additional beds: (a) Compliance with the Need Outlined in th[e] Plan; (b) Community Need Documentation; (c) Distribution (Accessibility); (d) Acceptability; (e) Financial Feasibility; (f) Cost Containment; and (g) Adverse Effects on Other Facilities.

24. The 2003 State Health Plan requires DHEC to weigh the “benefits of improved accessibility … equally with the adverse affects of duplication in evaluating Certificate of Need applications” for additional beds. 2003 State Health Plan, p. II-9.

25. Pursuant to S.C. Code Ann. Regs. 61-15 § 304 (Supp. 2006), DHEC ranked the importance of the most important criteria for this application as follows: (1) Compliance with the State Health Plan (§ 802(1)); (2) Community Need Documentation (§ 802(2(a),(b),(c) & (e)); (3) Distribution (Accessibility) (§ 802(3)(a),(d),(e), & (f)); (4) Financial Feasibility (§ 802(15)); (5) Acceptability (§ 802(4)(a) & (b); (6) Cost Containment (§ 802(16)(c)); and (7) Adverse Effects on Other Facilities (§ 802(23)(a) & (b)). All other criteria are given equal relevance.

26. DHEC’s determination that LHS’ application satisfied all applicable criteria is affirmed as set forth below.

27. DHEC’s determination that the requirements of Criterion 2 (Community Need Documentation)[15] have been satisfied is affirmed based on LHS’ detailed demonstration of community need as discussed more fully in my findings of fact regarding need and adverse impact on LHS.

28. DHEC’s determination that the requirements of Criteria 3(a), (b) and (c) (Distribution (Accessibility))[16] have been satisfied is affirmed based on my findings regarding access and the detailed demonstration of need discussed more fully in my findings of fact regarding need, including the capacity limits of existing beds at Grand Strand and also findings 47 – 50 regarding cost containment.

29. DHEC’s determination that the requirements of Criteria 3(d),(e), (f) and (g) (Distribution (Accessibility))[17] have been satisfied is affirmed based on the evidence referenced in finding of fact 45 demonstrating that the proposed beds will be available to all patients without regard to sex, race, religion, national origin or their ability to pay through physician referral, self-admission, hospital transfer and the emergency room.

30. DHEC’s determination that the requirements of Criteria 3(h) (Distribution (Accessibility))[18] have been satisfied is affirmed based on the evidence showing that the proposed project will not have an adverse impact on Grand Strand as discussed in findings 53 & 56.

31. DHEC’s determination that the requirements of Criteria 4(a) and (b) (Acceptability)[19] have been satisfied is affirmed based on the evidence of support for the proposed project by residents and physicians and DHEC’s consideration of the opposition to the project referenced in findings 34.

32. DHEC’s determination that the requirements of Criteria 7 (Project Expense)[20] have been satisfied is affirmed based on findings 70 - 81 in my findings of fact regarding financial feasibility.

33. DHEC’s determination that Criteria 15 (Financial Feasibility)[21] has been satisfied is affirmed based on my findings of fact regarding financial feasibility and adverse impact on LHS. As set forth in finding 66, the requirement that an applicant demonstrate the “financial feasibility” of a proposed project obligates the applicant to demonstrate that the applicant can afford the project. This definition of “financial feasibility” is consistent with the common dictionary definition of “feasibility” as well as the understanding used by the accounting profession in making financial feasibility projections. Even if Grand Strand’s proposed definition of “financial feasibility” were controlling and the project did not satisfy criteria 15, this would not justify denying this Certificate of Need because of the need for the project and the applicant’s ability to afford it.

34. DHEC’s determination that the requirements of Criterion 16(c) (Cost Containment)[22] have been satisfied is affirmed based on my findings of fact regarding financial feasibility, adverse impact and cost containment, findings 47, 49, 50, 53, 55, 56, 63, 64, 74 – 81, 83 - 85.[23]

35. DHEC’s determination that the requirements of Criteria 20(a) and (b) (Staff Resources)[24] have been satisfied is affirmed based on findings of fact regarding staffing, findings 60 – 65.

36. DHEC’s determination that the requirements of Criterion 23(a) (Adverse Impact on Other Facilities)[25] have been satisfied is affirmed because Grand Strand has failed to show that the proposed project will have any adverse impact on current or projected occupancy of its existing facility as set forth more fully in findings 53, 55 – 57, 85. Even if Grand Strand had been able to prove the adverse impact that it claims, this would not justify denying the Certificate of Need. The increased accessibility provided by the proposed project would outweigh the claimed adverse impact when weighed equally as required by the 2003 State Health Plan.

37. DHEC’s determination that the requirements of Criterion 23(b) (Adverse Impact on Other Facilities)[26] have been satisfied is affirmed based on findings of fact regarding staffing, findings 42, 60 – 65. Even if the evidence regarding increased competition for staff was deemed sufficient to show that this criteria was not satisfied, this would not justify denying the certificate of need in this case. The need for this project is sufficiently strong to outweigh any increased staffing costs that may result from it.

CONCLUSION

The Petitioner failed to prove by a preponderance of the evidence that LHS’ Certificate of Need application for 50 additional beds at its Seacoast location was not in accordance with the 2003 State Health Plan, the project review criteria, and the applicable requirements under the CON Act and regulations.


ORDER

Based upon the Findings of Fact and Conclusions of Law stated above,

IT IS HEREBY ORDERED that the Department’s decision granting Respondent Loris Hospital System’s Certificate of Need application for the addition of 50 beds at the Seacoast Medical Center location is SUSTAINED.

AND IT IS SO ORDERED

_______________________________

John D. McLeod

Administrative Law Judge

March 30, 2007



[1] Each of the issues Grand Strand preserved in its December 16, 2005 third revised statement of issues falls generally into one or more of the categories listed above. More specifically, Grand Strand’s challenge is limited to DHEC’s determination that the proposed project is consistent with the need methodology of the 2003 State Health Plan, specifically Chapter II, Section G.1(A)(4)(d), whether DHEC weighed adverse impact and increased accessibility equally as instructed by the Plan on II-9 and whether LHS satisfied each of the following of the Criteria for Project Review from 24A S.C. Code Ann. Regs. 61-15, § 802 (Supp. 2006): 1 (Need), 2 (a), (b), (c), (e), (d) (Community Need); 3 (a), (b), (c), (d), (e), (f) (Distribution (Accessibility)); 4 (a) (b) (Acceptability); 7 (Projected Expenses); 15 (Financial Feasibility); 16 (Cost Containment); 20(a), (b) (Staff Resources); and 23 (Adverse Effects on Other Facilities).

[2] Wortham and Gardner did not offer live testimony. Portions of their deposition testimony were submitted.

[3] Todd, Green, and Pougnaud did not offer live testimony. Portions of their deposition testimony were submitted.

[4] References to the trial transcript will give the volume of the transcript, name of the witness and page and line of their testimony. For example Grice’s trial testimony is in volume I of the transcript. A reference to page 1 line 1 of Grice’s testimony would be I Grice 1:1. References to prefiled testimony or deposition testimony that was admitted will indicate whether the testimony is prefiled testimony or deposition testimony and will give the name of the witness as well as the page and line number of the testimony. For example, prefiled page 1 line 1 of the prefiled testimony of Kathy Platt would be indicated as Platt prefiled 1:1, a reference to page 1 line 1 of the deposition of Joyce Gardner would be indicated as Gardner dep. 1:1.

[5] Although LHS is not attempting to add beds at a new location, DHEC, using language in the 2001 South Carolina Health Plan that is very similar to that of the 2003 State Health Plan, prior to this application, granted an application by the Greenville Hospital System to use bed need associated with its Allen Bennett Hospital to provide beds for creating the Patewood hospital at an entirely new site. (I Grice 398:21 – 399:5). Following DHEC’s action, there was no change in the relevant language in the 2003 and 2004 Plans to require that new hospital beds be added at any particular location. (I Grice 398:21 – 400:16)

[6] This data is routinely relied upon by applicants and properly accepted by DHEC in certificate of need proceedings. (I Grice 374:3 -376:15).

[7] For example, the Loris zip code, which LHS’ projected to decline in population by 1.7% through 2010, is now expected to grow from 1 to 5%. (III Richardson 780:9 – 781:16). This is consistent with the testimony about new employers bringing approximately 800 new jobs to the Loris area. (II Browne 566:13-568:2).

[8] Grand Strand and LHS are the two primary providers of in-patient hospital services to the northeastern corner of Horry County area that includes, among others, the Loris, Longs, North Myrtle Beach and Little River areas. (DHEC Exhibit 1, Bates 537; Loris Exhibit 7; I White 955:6-13; III Richardson 795:19 – 796:14).

[9] When DHEC approved LHS’ application, no other hospital had applied to meet the need for additional beds in Horry County. (I Grice 299:18 – 300:15). There were no competing applications.

[10] LHS had a similar decline in inpatient volume in its fiscal year ending September, 2002, as a result of the impact of September 11, 2001. LHS’ patient days had begun to increase in 2003 before they dropped again in 2004 due to the loss of a number of physicians. (II Browne 959:21 - 960:20; III Platt 112:24-25).

[11] Grand Strand’s statement of issues challenges the proposed project as having “an adverse impact on EMS services”. See Grand Strand’s Third Revised Statement of Issues paragraph (k). Grand Strand, however, submitted no data showing adverse impact on “occupancy rates” of EMS as a result of the project. The evidence showed that the proposed project will actually reduce the strain on ambulances in Horry County in several ways and that there is no reason to deny this project because of any potential impact on EMS. (I DeHart 605:20 – 606:7, 607:19 -608:15, 609:4 -19; Wright prefiled 9:3 – 22).

[12] Grand Strand’s 2006 pre-tax income exceeds its 2005 pre-tax income by 35% even when the $3.7 million in disproportionate share payments Grand Strand received are deducted from the 2006 amount. (III Knapp: 622:25 – 623:23).

[13] If “financially feasible” were to be defined as Grand Strand suggests and to require a project to result in an increase in net income to the system as a whole by year three, failure to meet that criterion would not be a justification for denying needed services as long as the system as a whole can afford the proposed project. (III Knapp 589:21 – 591:25) Otherwise, needed but unprofitable projects (I Grice 499:17 – 500:1) could never be approved.

[14] The section G.1.(A)(4)(e) on page II-7 of the 2003 State Health Plan also allowed additional beds to be approved for a hospital based on “non-resident (tourist) population”. Although LCH relied on this section in applying to DHEC and in the hearing in this matter, I make no findings regarding this provision because DHEC did not rely on it in approving the certificate of need, and, as stated above, I have concluded that DHEC’s decision should be affirmed.

[15] 24A S.C. Code Ann. Regs. 61-15, § 802(2) (Supp. 2006) provides in pertinent part:

a. The target population should be clearly identified as to the size, location, distribution, and socioeconomic status (if applicable).

b. Projections of anticipated population changes should be reasonable and based upon accepted demographic or statistical methodologies, with assumptions and methodologies clearly presented in the application. The applicant must use population statistics consistent with those generated by the state demographer, State Budget and Control Board.

c. The proposed project should provide services that meet an identified (documented) need of the target population. The assumptions and methods used to determine the level of need should be specified in the application and based on a reasonable approach as judged by the reviewing body. Any deviation from the population projection used in the State Health Plan should be explained.

. . .

e. Current and/or projected utilization should be sufficient to justify the expansion or implementation of the proposed order.

[16] 24A S.C. Code Ann. Regs. 61-15, § 802(3)(a) – (c) (Supp. 2006) provides:

a. Duplication and modernization of services must be justified. Unnecessary duplication of services and unnecessary modernization of services will not be approved.

b. The proposed service should be located so that it may serve medically underserved areas (or an underserved population segment) and should not unnecessarily duplicate existing services or facilities in the proposed service area.

c. The location of the proposed service area should allow for the delivery of necessary support services in an acceptable period of time and at a reasonable cost.

[17] 24A S.C. Code Ann. Regs. 61-15, § 802(3)(d) – (g) (Supp. 2006) provides:

d. The proposed facility should not restrict admissions. If any restrictions are applied, their nature should be clearly explained.

e. The applicant must document the means by which a person will have access to its services (e.g. outpatient services, admission by house staff, admission by personal physician).

f. The applicant should address the extent to which all residents of the area, and in particular low income persons, racial and ethnic minorities, women, the elderly, handicapped persons, and other medically underserved groups, are likely to have access to those services being proposed.

g. The facility providing the proposed services should establish provisions to insure that individuals in need of treatment as determined by a physician have access to the appropriate services, regardless of ability to pay.

[18] 24A S.C. Code Ann. Regs. 61-15, § 802(3)(h) (Supp. 2006) provides:

h. Potential negative impact of the proposed project upon the ability and/or resources of existing providers to serve medically underserved groups must be considered.

[19] 24A S.C. Code Ann. Regs. 61-15, § 802(4)(a) & (b) (Supp. 2006) provides:

a. The proposal and applicant should have the support of “affected persons” (including local providers and the target population). The lack of opposition should not be considered support for the purposes of these criteria.

b. Where document opposition exists to a proposal, such opposition will be considered along with the application.

[20] 24A S.C. Code Ann. Regs. 61-15, § 802(7) (Supp. 2006) provides that “[p]rojections of construction costs, start-up costs, operating costs, debt service, depreciation, manpower costs, etc. should be consistent with those experienced by similar facilities offering a similar level and scope of services (with proper consideration given to such factors as inflation, cost of capital, etc.).”

[21] 24A S.C. Code Ann. Regs. 61-15, § 802(15) (Supp. 2006) provides that “[t]he applicant must have projected both the immediate and long-term financial feasibility of the proposal. Such projection should be reasonable and based upon accepted accounting procedures.”

[22] 24A S.C. Code Ann. Regs. 61-15, § 802(16)(c) (Supp. 2006) provides that “[t]he impact of the project upon the applicant’s cost to provide services and the applicant’s patient charges should be reasonable. The impact of the project upon the costs and charges of other providers of similar services should be considered if the data are available.”

[23] Grand Strand does not appear to have disputed Criteria 16(a) & (b) with any significant evidence during the hearing. DHEC’s determination that these criteria have been satisfied is affirmed to the extent that they were at issue.

[24]24A S.C. Code Ann. Regs. 61-15, § 802(20)(a) & (b) (Supp. 2006) provide:

a. The applicant should have a reasonable plan for the provision of all required staff (physicians, nursing, allied health and support staff, etc.).

b. The applicant should demonstrate that sufficient physicians are available to insure proper implementation (e.g. utilization and/or supervision of the project).

[25] 24A S.C. Code Ann. Regs. 61-15, § 802(23)(a) (Supp. 2006) provides that “[t[he impact on the current and projected occupancy rates or use rates of existing facilities and services should be weighed against the increased accessibility offered by the proposed services.”

[26] 24A S.C. Code Ann. Regs. 61-15, § 802(23)(b) (Supp. 2006) provides that “[t]he staffing of the proposed service should be provided without unnecessarily depleting the staff of existing facilities or services or causing an excessive rise in staffing costs due to increased competition.”


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