South Carolina              
Administrative Law Court
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SC Administrative Law Court Decisions

CAPTION:
Choices, Inc. vs. SCDHEC, et al

AGENCY:
South Carolina Department of Health and Environmental Control

PARTIES:
Petitioner:
Choices

Respondents:
South Carolina Department of Health and Environmental Control and Recovery Concepts, LLC
 
DOCKET NUMBER:
04-ALJ-07-0314-CC

APPEARANCES:
James G. Long, III, Esquire
For Petitioner

Nancy S. Layman, Esquire
Ashley C. Biggers, Esquire
For Respondent South Carolina Department of Health and Environmental Control

M. Elizabeth Crum, Esquire
Ariail B. Kirk, Esquire
For Respondent Recovery Concepts, LLC
 

ORDERS:

ORDER GRANTING PETITIONER’S MOTION FOR SUMMARY JUDGMENT

STATEMENT OF THE CASE

The above-captioned matter is before this Court on two requests for contested case hearings filed by Petitioner Choices, Inc. (Choices) on September 10, 2004, to challenge the August 31, 2004 decision of Respondent South Carolina Department of Health and Environmental Control (DHEC or Department) to deny its Certificate of Need (CON) application for the establishment of a methadone treatment facility in Beaufort County, South Carolina, and to grant a CON application to Respondent Recovery Concepts, LLC (Recovery) for the establishment of such a facility in Jasper County, South Carolina. By an Order dated November 10, 2004, these two cases were consolidated for hearing pursuant to ALC Rule 19(D).

On February 16, 2005, Choices filed a Motion for Summary Judgment in which it argued that, as a matter of law, the Department improperly deemed its application and Recovery’s application as competing CON applications, and thus improperly reviewed the applications in that context. Footnote Accordingly, Choices requested that both applications be remanded to the Department for consideration as separate, non-competing applications. In addition to filing a memorandum in opposition to Choices’ motion for summary judgment on February 25, 2005, Respondents DHEC and Recovery filed a Cross-Motion for Partial Summary Judgment on March 2, 2005, in which they contend that the Department properly considered Choices’ and Recovery’s applications to be competing CON applications. On March 10, 2005, a hearing on these cross-motions for summary judgment was held before the undersigned at the South Carolina Administrative Law Court in Columbia, South Carolina. Having carefully considered the motions and the supporting memoranda and documents filed by the parties, the arguments of counsel, and the applicable law, I find that Choices’ and Recovery’s applications are not competing CON applications. Therefore, Choices’ motion for summary judgment should be granted and its CON application remanded to the Department for further consideration.

BACKGROUND

On March 31, 2004, Petitioner Choices, Inc., submitted a CON application to the Department for the establishment and operation of an outpatient narcotic treatment program in Beaufort County, South Carolina. In its application, Choices identified the area to be served by its treatment facility as a five-county area consisting of Beaufort, Jasper, Hampton, Allendale, and Colleton Counties. On April 27, 2004, Respondent Recovery Concepts, LLC, submitted a CON application to the Department for the establishment of an outpatient narcotic treatment program in Jasper County, South Carolina. Recovery identified its service area as including Beaufort, Jasper, Hampton, and Allendale Counties. Recovery does not propose to serve Colleton County. The service areas identified by the applicants are those areas from which the applicants expect to draw the majority of their patients.

On August 31, 2004, the Department issued a decision with regard to both Choices’ and Recovery’s CON applications. In its decision, the Department first determined that the two applications were competing applications as defined by Regulation 61-15. Having concluded that only one of the applications could be granted, the Department then found that the CON for an outpatient narcotic treatment program should be issued to Recovery, because it most fully complied with the requirements, goals and purposes of the CON statute, State Health Plan, Project Review Criteria, and DHEC regulations. In particular, the Department concluded that Recovery better met the regulatory guidelines regarding projected expenses and financial feasibility than Choices. See Pet’r Mot. for Summ. J., Ex. A (letter from Grice to Choices, Inc. of Aug. 31, 2004).

Choices challenged the Department’s decision on these two CON applications before this Court, and all parties now seek summary judgment on the issue of whether the Department properly reviewed Choices’ and Recovery’s CON applications as competing applications.

DISCUSSION

The State Certification of Need and Health Facility Licensure Act creates a Certificate of Need program that, among other things, requires health care facilities to apply for, and receive, a Certificate of Need (CON) before undertaking certain projects. See S.C. Code Ann. §§ 44-7-110 to 44-7-240 (2002). The CON program is administered by DHEC, S.C. Code Ann. § 44-7-140, and is governed by the policies and requirements found in the CON Act, S.C. Code Ann. §§ 44-7-110 to 44-7-240; the Department’s CON regulation, 24A S.C. Code Ann. Regs. 61-15 (Supp. 2004); and the State Health Plan, see S.C. Code Ann. § 44-7-180; 24A S.C. Code Ann. Regs. 61-15, § 106. The establishment of a new methadone treatment facility is a health care facility project that requires approval by the issuance of a Certificate of Need from the Department after review pursuant to the CON Act, Regulation 61-15, and the State Health Plan. S.C. Code Ann. §§ 44-7-130(10), 44-7-160(1).

In reviewing an application for a particular project under the CON program, such as the methadone treatment facilities at issue in this matter, the Department is guided most directly by the relevant Project Review Criteria set out in Section 802 of Regulation 61-15 and the applicable portions of the State Health Plan. See S.C. Code Ann. 44-7-210(C); 24A S.C. Code Ann. Regs. 61-15, § 307(1). The State Health Plan is a document prepared by the Department biennially that inventories existing health care facilities and services, projects the need for additional health care facilities and services, sets standards for the distribution of health care facilities and services, and itemizes the project review criteria most relevant in evaluating CON applications for each type of facility or service. S.C. Code Ann. § 44-7-180(B), (C). The State Health Plan is the starting point for the consideration of a CON application. No matter how well a project satisfies the project review criteria, the project may not be approved if it is inconsistent with the State Health Plan, see 24A S.C. Code Ann. Regs. 61-15, § 801(3); and, the fundamental project review criterion of whether there is a “need” for the proposed project is evaluated solely by reference to the State Health Plan, see 24A S.C. Code Ann. Regs. 61-15, § 802(1) (providing, under the criterion labeled “Need,” that “[t]he proposal shall not be approved unless it is in compliance with the State Health Plan”). The project review criteria themselves are a list of thirty-three criteria set out in Section 802 of Regulation 61-15 for the evaluation of CON applications, the relative importance of which is specifically established for each project. See 24A S.C. Code Ann. Regs. 61-15, § 801(1), (2). These criteria address various matters including the need for a proposed project, economic considerations, health system resources, site suitability, and other factors. 24A S.C. Code Ann. Regs. 61-15, § 801(1).

The CON Act and Regulation 61-15 also contain specific provisions regarding the evaluation of competing CON applications. The CON Act defines competing CON applicants as

two or more persons or health care facilities as defined in this article who apply for Certificates of Need to provide similar services or facilities in the same service area within a time frame as established by departmental regulations and whose applications, if approved, would exceed the need for services or facilities.

S.C. Code Ann. § 44-7-130(5); see also 24A S.C. Code Ann. Regs. 61-15, § 103(6). As required by the statute, the Department’s regulatory definition of competing applications provides that an application is considered to be competing with another application if the second application is received by the Department within fifteen days of the publication of notice of the first application in the State Register. 24A S.C. Code Ann. Regs. 61-15, § 103(6). When two or more CON applicants are deemed competing, the Department may only grant one of the competing applications, as approving more than one would, by definition, exceed the need for the proposed facility or service. See S.C. Code Ann. § 44-7-130(5); 24A S.C. Code Ann. Regs. 61-15, § 103(6). Accordingly, in the case of competing applications,

the department shall award a Certificate of Need, if appropriate, on the basis of which, if any, most fully complies with the requirements, goals, and purposes of this article and the State Health Plan, Project Review Criteria, and the regulations adopted by the department.

S.C. Code Ann. § 44-7-210(C); 24A S.C. Code Ann. Regs. 61-15, § 307(2).

Therefore, the determination of whether two CON applicants are “competing” depends upon a three-pronged inquiry. First, whether the applicants are seeking to provide similar services or facilities in the same service area. Second, whether the second applicant filed its application within fifteen days of the publication of notice of the first-filed application. And, third, whether approval of both applications would exceed the need for the facility or service. In the instant case, the parties agree that the applications were filed within the requisite time period of each other to fall within the regulatory requirements for competing applications. However, Choices contends that the Department improperly determined that its application was competing with Recovery’s application because (1) Choices and Recovery do not intend to provide their treatment services in the “same” service area, as Choices proposes to serve an additional county not served by Recovery, and (2) the approval of both Choices’ and Recovery’s CON applications would not exceed the need for methadone treatment facilities as outlined in the State Health Plan. The Department and Recovery argue that Choices and Recovery will provide treatment services in the “same” service area, and that, if both applications are approved, the need for methadone treatment services in the Lowcountry will be exceeded. Each prong in dispute will be addressed in turn.

Same Service Area

Choices contends that, because it intends to serve five Lowcountry counties, while Recovery only proposes to serve four of those counties, the two facilities will not have the “same” service area and thus their applications cannot be considered competing. However, I find that, given the great extent to which the proposed service areas of the two facilities overlap, Choices and Recovery do intend to serve the same, if not absolutely identical, service area.

The appropriate service area to be used in evaluating a CON application for a proposed health care facility or service is found in the State Health Plan. See S.C. Code Ann. § 44-7-180(B)(3) (requiring the Plan to set out “standards for distribution” for health care facilities and services for “the proper placement of services, and proper planning of health care facilities”); 24A S.C. Code Ann. Regs. 61-15, § 106(1)(c) (same). Depending upon the type of facility or service in question, the relevant service area may be a county, a region of the state, the entire state, or a cross-jurisdictional service area specifically tailored to the particular health care facility or service under consideration. See Pet’r Choices, Inc.’s Reply to Recovery Concepts, LLC’s Mem. in Opp’n to Choices, Inc.’s Mot. for Summ. J., Ex. B (page II-2 of the 2003 State Health Plan).

Curiously, the State Health Plan does not clearly define a service area for methadone treatment facilities. The Plan does state that “[t]he needs for acute psychiatric services, alcohol and drug abuse services, comprehensive rehabilitation services, and residential treatment centers for children and adolescents are based on various service areas and utilization methodologies specified herein.” Id. However, the portion of the State Health Plan discussing methadone treatment facilities does not define the relevant service area for such facilities. See Pet’r Mot. for Summ. J., Ex. B (pages II-101 and II-102 of the 2003 State Health Plan). Nevertheless, the Plan does appear to address the areas served by methadone treatment facilities by reference to counties. See id. (“Until these centers are developed throughout the state, additional Methadone Treatment Centers are not needed in counties where an existing clinic exists, but should be developed in counties where none exists to improve accessibility.”) (emphasis added). Therefore, while there is no defined service area for methadone clinics in the State Health Plan, I find that, by proposing to establish methadone treatment facilities that serve patients from four of the same counties, Choices and Recovery are seeking to provide similar services in the same service area, such that their CON applications meet the first prong of the definition of competing applications.

Need for Methadone Treatment Facilities

Choices further contends that granting both its application and Recovery’s application would not exceed the need for methadone treatment facilities because the State Health Plan finds that methadone clinics are needed in each county of the state. I agree.

As noted above, the determination of whether a particular health care facility or service is needed under the regulatory project review criteria, depends upon the projections of need set forth in the State Health Plan. See 24A S.C. Code Ann. Regs. 61-15, § 802(1) (providing, under the project review criterion of “Need,” that “[t]he proposal shall not be approved unless it is in compliance with the State Health Plan”). With regard to methadone treatment facilities, the State Health Plan states that:

[b]ecause clients must usually attend a Methadone Treatment Center 6 days per week to receive their dose of methadone, these centers should be located throughout the state. Until these clinics are developed throughout the state, additional Methadone Treatment Centers are not needed in counties where an existing clinic exists, but should be developed in counties where none exists to improve accessibility.

Pet’r Mot. for Summ. J., Ex. B (pages II-101 and II-102 of the 2003 State Health Plan) (emphasis added). The State Health Plan clearly focuses its assessment of the need for methadone treatment facilities on a county-by-county basis. Under the plain terms of the Plan, a county that has a methadone clinic does not have a need for another clinic, and a county that does not have a methadone clinic, like Beaufort County or Jasper County, has a need for such a clinic. Id. The Plan makes no reference to population centers, market considerations, or other geographical, economic, or social factors in determining where methadone clinics are needed. Rather, the overriding emphasis of the current State Health Plan is to increase accessibility to methadone treatment facilities by placing one facility in each county, and thereby spreading such facilities throughout the state, instead of concentrating facilities in heavily populated areas. Moreover, such a county-by-country approach to providing maximum accessibility for methadone treatment facilities is consistent with the Plan’s conclusion that “[t]he benefits of improved accessibility [to methadone clinics] may outweigh the adverse effects of the duplication of this existing service.” Id. (page II-102 of the 2003 State Health Plan).

Therefore, based upon the State Health Plan’s determination that methadone treatment facilities are needed in each county of the state, I can only conclude that approving two CON applications for methadone treatment facilities in two different counties that do not currently have methadone clinics cannot, by definition, exceed the need for such facilities. Accordingly, I conclude that the CON applications of Choices and Recovery do not meet the final prong of the definition of competing applications, as granting Choices application for Beaufort County and Recovery’s application for Jasper County would not exceed the need for methadone treatment facilities. Thus, I further conclude that DHEC improperly determined that Choices and Recovery were competing applicants and improperly reviewed Choices’ CON application in competition with Recovery’s application.

ORDER

For the reasons set forth above,

IT IS HEREBY ORDERED that Choices’ Motion for Summary Judgment is GRANTED.

IT IS FURTHER ORDERED that, because the Department improperly reviewed Choices’ CON application in competition with Recovery’s application, the matter of Choices’ application for a methadone treatment facility in Beaufort County is hereby REMANDED to the Department for an independent consideration of its merits. Accordingly, the contested case docketed as number 04-ALJ-07-0314-CC, in which Choices challenges the denial of its CON application, is DISMISSED.

However, the grant of Choices’ motion for summary judgment does not require the remand of Recovery’s CON application. The Department has already determined that Recovery’s application satisfies the appropriate criteria for a Certificate of Need to establish a methadone treatment facility. Nevertheless, as a result of the decision to grant its motion for summary judgment, Choices has withdrawn its challenge to Recovery’s CON application. Therefore,

IT IS FURTHER ORDERED that the contested case docketed as number 04-ALJ-07-0313-CC, in which Choices challenges the issuance of Recovery’s CON, is hereby DISMISSED with prejudice. DHEC is hereby authorized to proceed with issuing a CON to Recovery to establish a methadone treatment facility in Jasper County.

AND IT IS SO ORDERED.

______________________________

JOHN D. GEATHERS

Administrative Law Judge

Post Office Box 11667

Columbia, South Carolina 29211-1667

April 19, 2005

Columbia, South Carolina


Brown Bldg.

 

 

 

 

 

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