ORDERS:
FINAL ORDER AND DECISION
STATEMENT
OF THE CASE
The
above-captioned matter is before this Court pursuant to a request for a
contested case hearing filed by Petitioner Clarendon County Memorial Hospital
(Clarendon). In this matter, Clarendon challenges the decision of Respondent
South Carolina Department of Health and Environmental Control (DHEC or
Department) to issue a non-applicability determination (NAD), designated
NA-05-17, to Respondent Manning Diagnostics, LLC (Manning) to provide part-time
magnetic resonance imaging (MRI) services in Manning, South Carolina. In
particular, Clarendon contests the Department’s determination that Manning’s
MRI project does not require review under the Certificate of Need (CON) statutes
and regulations because the total project cost for Manning’s proposed part-time
MRI service does not exceed $600,000. Clarendon contends that, because of the
close relationship between Manning and two other companies involved in the
ownership and use of the MRI machine in question, and because of the length of
time Manning intends to use the MRI, the entire cost of the MRI machine should
be attributed to Manning, therefore subjecting Manning’s project to CON review
because its total project cost exceeds the $600,000 threshold. DHEC and
Manning maintain that DHEC appropriately allocated the costs of Manning’s
part-time MRI project and appropriately determined that, based upon those cost
allocations, the total project cost of Manning’s project fell below the
$600,000 CON threshold.
By
an Order dated November 15, 2005, this Court addressed several pre-trial
motions filed by the parties. The Order denied Clarendon’s motion to join a
second company, Pinnacle, LLC, as a necessary party to this case, denied
Clarendon’s motion for summary judgment and granted Manning’s summary judgment
motion regarding Clarendon’s contention that Pinnacle, rather than Manning, was
the appropriate party to request a CON or NAD in this matter, and denied both
Clarendon’s and Manning’s motions for summary judgment on the question of
whether DHEC properly treated Manning’s project as providing part-time, rather
than full-time, MRI services. After timely notice to the parties, a contested
case hearing was held in the above-captioned matter on December 13 and 14,
2005, at the South Carolina Administrative Law Court in Columbia, South
Carolina. Based upon the evidence and arguments presented at that hearing, and
upon the applicable law, I find that the Department properly issued NA-05-17 to
Manning because the total project cost of its MRI project does not exceed
$600,000.
ISSUE
AND BURDEN OF PROOF
Pursuant
to S.C. Code Ann. § 44-7-160(6) (2002) and 24A S.C. Code Ann. Regs. 61-15 §
102(1)(f) (Supp. 2005), a person or health care facility seeking to acquire
medical equipment that it intends to use for diagnosis or treatment in South
Carolina must obtain a Certificate of Need (CON) from the Department for the
acquisition if the “total project cost” of the acquisition exceeds $600,000.
This “total project cost” is the estimated total capital cost of a project as
calculated under generally-accepted accounting principles (GAAP), with the
exception that the cost of leased buildings and equipment is calculated based
upon the total value of the buildings or equipment, not the value of the
leases. 24A S.C. Code Ann. Regs. 61-15 § 103(25) (Supp. 2005). In the case at
hand, the Department determined that the total project cost of Manning’s MRI
project, as calculated under GAAP, did not exceed $600,000, and, therefore,
that the project does not require CON review.
Petitioner
Clarendon challenges the Department’s determination regarding the total project
cost of Manning’s project. As the moving party in this CON-related matter,
Clarendon bears the burden of proof in this contested case. See 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) (holding that the burden of proof in administrative
proceedings generally rests upon the party asserting the affirmative of an
issue); 2 Am. Jur. 2d Administrative Law § 360 (1994) (same); cf. S.C. Code Ann. § 44-7-210 (E) (2002); 24A S.C. Code Ann. Regs. 61-15 § 403(1)
(Supp. 2005). Therefore, Clarendon must prove, by a preponderance of the
evidence, that the total project cost for Manning’s MRI project exceeds
$600,000, and, therefore, that the Department improperly issued the
non-applicability determination to Manning for the project. See Anonymous
v. State Bd. of Med. Exam’rs, 329 S.C. 371, 375, 496 S.E.2d 17, 19 (1998)
(holding that the standard of proof in an administrative proceeding is
generally the preponderance of the evidence); see also Nat’l Health
Corp. v. S.C. Dep’t of Health & Envtl. Control, 298 S.C. 373, 379, 380
S.E.2d 841, 844 (Ct. App. 1989) (holding that the preponderance of the evidence
standard applies in CON disputes).
FINDINGS
OF FACT
Having
carefully considered all testimony, exhibits, and arguments presented at the
hearing of this matter, and taking into account the credibility and accuracy of
the evidence, I make the following Findings of Fact by a preponderance of the
evidence:
The MRI
Project
1. Manning
Diagnostics, LLC, is a South Carolina limited liability company that provides
MRI services in Manning, South Carolina, from a leased mobile MRI unit on a
biweekly basis. That is, Manning has access to the MRI unit and provides MRI
services in the town of Manning for five days a week, every other week, for a
total of twenty-six weeks of service per year. Manning obtained a
non-applicability determination (NAD) from the Department on May 11, 2005, for
these MRI services. In the alternate weeks,
the MRI machine leased by Manning is operated by Santhill Diagnostics, LLC
(Santhill), a South Carolina limited liability company that provides MRI
services in Holly Hill, South Carolina. Accordingly, Santhill provides MRI
services in Holly Hill for a total of twenty-six weeks per year. Santhill
obtained a non-applicability determination, NA-04-27, from the Department on
June 23, 2004, regarding its MRI services in Holly Hill.
2. Manning
and Santhill sublease the mobile MRI machine in question from Pinnacle, LLC
(Pinnacle), a Delaware limited liability company that leases medical diagnostic
equipment from manufacturers and then subleases that equipment to other
entities, which actually operate the equipment for diagnosis and treatment. In
the case at hand, Pinnacle leases the MRI in question from the General Electric
Capital Corporation (GE), and has, in turn, entered into separate subleases
with Manning and Santhill for the machine. Under these subleases, Manning and
Santhill lease the MRI machine for use in alternate weeks, giving each company
50% utilization of the machine, for a total of twenty-six weeks of use per year
for each company.
The
Relationship between Manning, Santhill, and Pinnacle
3. Manning
and Santhill are separate and distinct limited liability companies that do not
share a common parent or controlling organization and that do not have any
formal relationship with one another. While the two companies have had some
common employees in the past, and currently dually employ an MRI technician,
the operations of the two firms are distinct, both in form and in practice.
Manning and Santhill have separate Medicare provider numbers, billing
companies, and utilities, and do not share any supplies or equipment other than
the mobile MRI equipment that they use on an alternating basis. Santhill
operates in Holly Hill, South Carolina, and principally serves patients from
Orangeburg and Dorchester Counties, while Manning operates in Manning, South
Carolina, which is approximately thirty to forty miles from Holly Hill, and
principally serves patients from Clarendon County.
4. There
is some overlap in the ownership of the three companies. Five of Manning’s
members are also currently members of Pinnacle, which has fifteen members, each
of whom holds a 6.67% ownership share in the company. The only person with an
ownership interest in both Manning and Santhill is Dr. Marshall White, who
holds a 30% share of Manning and a 19% share of Santhill. Additionally, Dr.
White owns a 33.3% share of another entity, MAP Imaging, LLC, which, in turn,
holds a 21% interest in Manning. However, Dr. White does
not have a majority interest in either Manning or Santhill.
The
Department’s Review of Manning’s MRI Project
5. Victoria
Tibshrany, an analyst with DHEC’s Division of Planning and Certification of
Need in its Bureau of Health Facilities and Services Development, reviewed
Manning’s request for a non-applicability determination and issued a
non-applicability determination, NA-05-17, to Manning on May 11, 2005. In the
determination, Ms. Tibshrany found that the total project cost for Manning’s
MRI project was $478,998.30, and consequently concluded that the project did
not require CON review, because the total project cost did not exceed $600,000.
In calculating the total project cost of Manning’s part-time acquisition of the
MRI machine, Ms. Tibshrany apportioned the value of the machine and associated
costs, such as the cost of the truck used for transporting the MRI machine,
equally between Manning and Santhill, based upon their 50% utilization of the
machine. This equal apportionment of the machine’s costs based upon the equal
use of the machine by Manning and Santhill comports with generally-accepted
accounting principles, with the exception that, as required by Regulation 61-15
§ 103(25), the total value of the equipment, rather than the lease value, is
used to determine the cost of the equipment.
6. A
memorandum issued on January 10, 2000, by Leon Frishman, currently the
Department’s Deputy Commissioner for Health Regulation, addresses the
determination of total project costs for leased equipment. In addition to
recognizing the effect of Regulation 61-15 § 103(25), the memorandum also
stated that “[t]he Department considers any mobile equipment to be utilized
more than four days per week at a single site or which becomes stationary to be
the [full-time] acquisition of medical equipment.” Resp’t Manning Ex. #5C.
This memorandum has not been approved by the DHEC Board and is not Department
policy; rather, it merely provides Department staff with guidance in reviewing
non-applicability determinations for leased equipment. Furthermore, the
four-days-per-week test set out in the memorandum for determining whether the
acquisition of equipment is for part-time or full-time use was based upon the
assumption that the equipment would be used at a single site fifty-two weeks
per year, and not, for example, on a biweekly basis at different sites. The
test was designed to prevent an entity from claiming that it was only acquiring
equipment for part-time use by removing the equipment from the site for one or
two days per week; it was not intended to address situations in which mobile
equipment is used on a bona fide part-time basis by two distinct entities at
two separate locations.
7. In
sum, I find that Manning, Santhill, and Pinnacle are separate and distinct
entities under the law, that Manning and Santhill operate the MRI machine at
issue in this case on a bona fide part-time basis, and that the Department’s
determination to equally apportion the costs of the MRI machine between Manning
and Santhill based upon the equal usage of the machine comports with
generally-accepted accounting principles as modified by Regulation 61-15 §
103(25). Further, I find that, because such an apportionment of costs results
in a total project cost for Manning’s MRI project of less than $600,000, the
Department’s non-applicability determination in this matter must be sustained.
CONCLUSIONS
OF LAW
Based
upon the foregoing Findings of Fact, I conclude the following as a matter of
law:
Jurisdiction/Procedure
1. This
Court has jurisdiction over this contested case proceeding pursuant to S.C.
Const. art. I, § 22, S.C. Code Ann. § 1-23-600(B) (Supp. 2005), and S.C. Code
Ann. §§ 1-23-310 et seq. (2005). Cf. S.C. Code Ann. §
44-7-210(E) (2002); 24A S.C. Code Ann. Regs. 61-15 § 403 (Supp. 2005)
(providing for contested case hearings regarding Department decisions on CON
applications).
2. Pursuant
to Regulation 61-15 § 102(3), “when any question exists” as to whether a
proposed health care project requires CON review, “a potential applicant shall
forward a letter requesting a formal determination by the Department as to the
applicability of the certificate of need requirements to [the] particular
project.” 24A S.C. Code Ann. Regs. 61-15 § 102(3) (Supp. 2005). A formal
decision by the Department that the CON requirements do not apply to a project
is known as a “non-applicability determination” or NAD.
3. In
the case at hand, Respondent Manning obtained a non-applicability determination
from the Department, in which the Department found that Manning was not
required to obtain a CON for its project to acquire an MRI machine by sublease
and to provide part-time MRI services in Manning, South Carolina. Petitioner
Clarendon also offers MRI services in Manning, South Carolina, to persons who
reside in Manning’s proposed service area, and, as such, is an “affected
person” for the purposes of bringing a contested case to challenge the
Department’s decision to issue a non-applicability determination to Manning. See S.C. Code Ann. § 44-7-130(1) (2002); 24A S.C. Code Ann. Regs. 61-15 § 103(1)
(Supp. 2005). Clarendon timely filed a request for a contested case to
challenge Manning’s non-applicability determination, thereby initiating this
matter.
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 & Envtl. Control, 358 S.C. 573, 579, 595
S.E.2d 851, 854 (Ct. App. 2004) (quoting from Blizzard v. Miller, 306
S.C. 373, 412 S.E.2d 406 (1991) and Converse Power Corp. v. S.C. Dep’t of
Health & Envtl. Control, 350 S.C. 39, 564 S.E.2d 341 (Ct. App. 2002),
respectively).
5. Clarendon,
as the Petitioner and moving party in this matter, bears the burden of proof in
this contested case. See 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)
(holding that the burden of proof in administrative proceedings generally rests
upon the party asserting the affirmative of an issue); 2 Am. Jur. 2d Administrative
Law § 360 (1994) (same); cf. S.C. Code Ann. § 44-7-210 (E) (2002);
24A S.C. Code Ann. Regs. 61-15 § 403(1) (Supp. 2005). Therefore, Clarendon must
prove, by a preponderance of the evidence, that the Department improperly issued
a non-applicability determination to Manning for its proposed MRI project. See Anonymous v. State Bd. of Med. Exam’rs, 329 S.C. 371, 375, 496 S.E.2d
17, 19 (1998) (holding that the standard of proof in an administrative
proceeding is generally the preponderance of the evidence); see also Nat’l
Health Corp. v. S.C. Dep’t of Health & Envtl. Control, 298 S.C. 373,
379, 380 S.E.2d 841, 844 (Ct. App. 1989) (holding that the preponderance of the
evidence standard applies in CON disputes).
Weight and
Sufficiency of Evidence
6. The
preponderance of the evidence “is evidence which is of greater weight or more
convincing than the evidence which is offered in opposition to it; that is,
evidence which as a whole shows that the fact sought to be proved is more probable
than not.” Black’s Law Dictionary 1182 (6th ed. 1990). “The
preponderance of the evidence means such evidence, as when considered and
compared with that opposed to it, has more convincing force and produces in the
mind the belief that what is sought to be proved is more likely true than not
true.” Alex Sanders & John S. Nichols, Trial Handbook for South
Carolina Lawyers § 9.5, at 371 (2d ed. 2001) (citing to Frazier v.
Frazier, 228 S.C. 149, 89 S.E.2d 225 (1955)).
7. The
test for the sufficiency of a proffer of evidence to warrant a finding is as
follows:
A verdict or finding
must be based on the evidence and must be based on the facts proved. Under
this well established rule, although difficulty of proof does not prevent the
assertion of a legal right, the verdict or finding cannot rest on surmise,
speculation, or conjecture. Furthermore, a verdict of the jury or a finding of
the court cannot be supported only by guesswork. Also, it has been said that
the verdict or finding cannot rest on supposition, assumption, imagination,
suspicion, arbitrary action, whim, percentage, or conclusions that are in
conflict with undisputed fact.
The
evidence on which the verdict or finding is based must be competent, legal
evidence received in the course of the trial, credible, and of probative force,
and must support every material fact. The decision should be against the party
having the burden of proof where there is no evidence, or the evidence as to a
material issue is insufficient[.]
32A C.J.S. Evidence § 1339, at 757-58 (1996); see also S.C. Code Ann. § 1-23-320(i) (Supp.
2005) (“Findings of fact shall be based exclusively on the evidence and on
matters officially noticed.”). Probative evidence is “[e]vidence that tends to
prove or disprove a point in issue.” Black’s Law Dictionary 579 (7th
ed. 1999).
8. The
weight and credibility assigned to evidence presented at the hearing of a
matter is within the province of the trier of fact. See S.C. Cable
Television Ass’n v. S. Bell Tel. & Tel. Co., 308 S.C. 216, 222, 417
S.E.2d 586, 589 (1992). Furthermore, a trial judge who observes a witness is
in the best position to judge the witness’s demeanor and veracity and to
evaluate the credibility of his testimony. See, e.g., Woodall v.
Woodall, 322 S.C. 7, 10, 471 S.E.2d 154, 157 (1996); Wallace v. Milliken
& Co., 300 S.C. 553, 556, 389 S.E.2d 448, 450 (Ct. App. 1990).
9. The
South Carolina Rules of Evidence are applicable to this contested case
proceeding. See S.C. Code Ann. § 1-23-330(1) (Supp. 2005). Under those
rules, “[i]f scientific, technical, or other specialized knowledge will assist
the trier of fact to understand the evidence or to determine a fact in issue, a
witness qualified as an expert by knowledge, skill, experience, training, or
education, may testify thereto in the form of an opinion or otherwise.” Rule
702, SCRE. An expert is granted wide latitude in determining the basis of his
or her opinion, and where an expert’s testimony is based upon facts sufficient
to form an opinion, the trier of fact must weigh its probative value. Small
v. Pioneer Machinery, Inc., 329 S.C. 448, 470, 494 S.E.2d 835, 846 (Ct.
App. 1997).
10. “[E]xpert
testimony is essential in cases which involve a subject of special technical
science, skill, or occupation of which the members of the jury or the trial
court are not presumed to be specially informed.” 32A C.J.S. Evidence §
729, at 85 (1996). For example, the South Carolina Supreme Court has held
that, in medical malpractice cases, “the plaintiff must use expert testimony .
. . unless the subject matter lies within the ambit of common knowledge and
experience, so that no special learning is needed to evaluate the conduct of
the defendant.” Pederson v. Gould, 288 S.C. 141, 143, 341 S.E.2d 633,
634 (1986).
11. In
general, “expert opinion evidence is to be considered or weighed by the triers
of the facts like any other testimony or evidence . . . [;] the triers of fact
cannot, and are not required to, arbitrarily or lightly disregard, or
capriciously reject, the testimony of experts or skilled witnesses, and make an
unsupported finding to the contrary of the opinion.” 32A C.J.S. Evidence § 727, at 82-83 (1996). However, the trier of fact may give an expert’s
testimony the weight he or she determines it deserves. Florence County
Dep’t of Soc. Servs. v. Ward, 310 S.C. 69, 72-73, 425 S.E.2d 61, 63 (Ct.
App. 1992). Further, the trier of fact may accept the testimony of one expert
over that of another. See S.C. Cable Television Ass’n v. S. Bell
Tel. & Tel. Co., 308 S.C. 216, 417 S.E.2d 586 (1992).
Total
Project Cost
12. Pursuant
to the CON Act and its accompanying regulations, a person or health care
facility (1) that acquires medical equipment (2) which it intends to use for
diagnosis or treatment in South Carolina must obtain a CON from the Department
for the acquisition if (3) the “total project cost” of the acquisition exceeds
$600,000. See S.C. Code Ann. § 44-7-160(6) (2002); 24A S.C. Code Ann.
Regs. 61-15 § 102(1)(f) (Supp. 2005). The regulations define the “total project
cost” of a proposed health care project as
the estimated
total capital cost of a project including land cost, construction, fixed
and moveable equipment, architect’s fee, financing cost, and other capital
costs properly charged under generally accepted accounting principals [sic]
as a capital cost. The determination of project costs involving leased
equipment [or] buildings will be calculated based on the total value (purchase
price) of the equipment or building being leased.
24 S.C. Code
Ann. Regs. 61-15 § 103(25) (Supp. 2005) (emphasis added). Therefore, in
determining the “total project cost” of a proposed health care project, the
regulations require the application of generally-accepted accounting principles
(or GAAP), with the exception that leased equipment and buildings will be
charged at their total value, rather than the value of their leases.
13. The
CON regulations provide further guidance on determining whether two or more
proposed projects or expenditures should be considered a single project or
expenditure for the purpose of CON review:
Common practice and
common sense must govern in determining what is considered to be a single
expenditure. An applicant should not be allowed to split what is really one
expenditure into two or more for the purpose of avoiding review. The
Department should not be allowed to lump projects together arbitrarily to bring
them under review.
24A S.C. Code
Ann. Regs. 61-15 § 102(2) (Supp. 2005). However, neither the CON Act nor its
regulations provide a comprehensive definition of the term “project” for the
purposes of CON review.
14. In
the case at hand, there is no dispute that Manning has, through its sublease of
the MRI machine from Pinnacle, acquired medical equipment that it intends to
use for the diagnosis and treatment of patients in South Carolina. Therefore,
the sole remaining issue in this case is whether the total project cost of
Manning’s acquisition of the MRI machine exceeds $600,000, such that the
project should be required to undergo CON review. In issuing the
non-applicability determination to Manning, the Department found that, when the
total value of the MRI machine is properly apportioned between Manning and
Santhill based upon their part-time use of the machine, the total project cost
of Manning’s acquisition of the MRI machine fell well below the $600,000
threshold, such that the project did not require CON review. Clarendon,
however, contends that the full value of the MRI machine should be charged to
Manning on two grounds. First, Clarendon contends that, based upon a
Departmental memorandum, Manning’s use of the MRI machine for more than four
days in a week at a single site should be considered the full-time acquisition
of the machine, such that the entire value of the MRI machine should be
allocated to Manning’s project, regardless of Santhill’s use of the machine.
Second, Clarendon argues that, given the relationships between Manning,
Santhill, and Pinnacle, the MRI projects proposed by Manning and Santhill
should be considered a single project that cannot be artificially split to
avoid CON review. If the full value of the MRI machine is allocated to
Manning’s project, either because the project is considered a full-time
acquisition of the machine or because the project is joined with Santhill’s
project, the total project cost of Manning’s MRI acquisition would exceed the
$600,000 threshold and Manning would be required to obtain a CON from the
Department for the project. However, I find that
Manning has only acquired the MRI machine in question on a part-time basis and
that its operations are separate and distinct from those of Santhill.
Accordingly, I further find that the Department properly divided the costs of
the MRI machine between Manning and Santhill and appropriately concluded that
Manning’s MRI project does not require CON review.
Manning’s
Part-time Acquisition of the MRI Machine
15. Clarendon
contends that, because Manning seeks to use the MRI machine in question for
more than four days in a given week, Manning’s lease of the MRI machine should
be considered the full-time acquisition of the machine, even though Manning
will only use the machine on a biweekly basis, equally splitting use of the
machine with Santhill. This contention cannot be sustained.
16. Under
the CON regulations, the sole method for allocating the costs of the
acquisition of medical equipment to determine the “total project cost” of the
acquisition is the application of generally-accepted accounting principles.
24A S.C. Code Ann. Regs. 61-15 § 103(25). Neither the CON Act nor the
accompanying regulations distinguish between part-time and full-time use of
equipment or between fixed, modular, and mobile equipment to determine how the costs
of an acquisition should be allocated. And, neither the Act nor the
regulations provide any sort of mechanical, days-per-week test for determining
how the costs of equipment used on a part-time basis should be allocated for
calculating the total project cost of the acquisition of that equipment.
Rather, the appropriate test is simply how such costs would be allocated under
generally-accepted accounting principles.
17. Based
upon the testimony of the accounting experts in the instant case, I find that
the Department’s decision to equally apportion the cost of the MRI machine
between Manning and Santhill comports with generally-accepted accounting
principles, as modified by Regulation 61-15 § 103(25). Manning and Santhill share equally in their use of the MRI machine, using the
machine on a part-time basis in alternating weeks throughout the year. It is
therefore not only rational but also agreeable to generally-accepted accounting
principles to allocate 50% of the cost of the MRI machine to Manning’s project,
based upon its 50% pro rata share of the utilization of the machine. In
fact, it would be inconsistent with generally-accepted accounting principles to
allocate the full cost of the MRI machine to both Manning and Santhill
based upon their biweekly usage of the machine.
18. When
the cost of the MRI machine and associated equipment is apportioned equally
between Manning and Santhill consistent with generally-accepted accounting
principles, the total project cost of Manning’s acquisition of the MRI machine
falls well below $600,000, to approximately $478,998.
The
Relationship between Manning’s and Santhill’s Projects
19. Clarendon
also contends that Manning and Santhill split what should be considered one MRI
project into two separate MRI projects to avoid CON review in violation of
Regulation 61-15 § 102(2). Specifically, Clarendon argues that, given the
relationships between Manning, Santhill, and Pinnacle, the separate MRI
projects proposed by Manning and Santhill, in which they will alternate use of
a single MRI machine, should be considered one project to which the full cost
of the MRI machine should be allocated. This argument must also fail.
20. Regulation
61-15 § 102(2) requires that “common practice and common sense” be used to
determine whether two or more expenditures or projects should, in fact, be
considered one expenditure or project for the purposes of CON review. 24A S.C.
Code Ann. Regs. 61-15 § 102(2). And, while the regulation prohibits an
applicant from artificially splitting projects to escape CON review, it also
cautions the Department against arbitrarily lumping separate projects together
to bring them under CON review. Id.
21. In
the case at hand, common practice and common sense weigh in favor of treating
Manning’s and Santhill’s MRI services as separate projects. While Manning and
Santhill have coordinated leases under which they alternate use of a single MRI
machine and while there are certain relationships among the owners of Manning
and Santhill, the operations of the two companies are separate and distinct,
both under the law and in practice. Manning and Santhill are distinct legal
entities with separate ownership and they provide MRI services on a part-time
basis at separate facilities in different counties for distinct patient
populations. Therefore, the Department appropriate determined that, despite
their coordinated lease from Pinnacle, the services provided by Manning and
Santhill are separate projects for the purposes of CON review.
22. Further,
although Clarendon did not formally seek to pierce the corporate veil in this
case, it did rely upon the standards for piercing the corporate veil as support
for its contention that Manning’s and Santhill’s MRI projects should be
considered one project. Such an argument is unavailing. “It is settled
authority that the doctrine of piercing the corporate veil is not to be applied
without substantial reflection.” Sturkie v. Sifly, 280 S.C. 453, 457,
313 S.E.2d 316, 318 (Ct. App. 1984). Determining whether the corporate veil
has been pierced involves a two-prong analysis. “The first part of the test,
an eight-factor analysis, looks to observance of the corporate formalities by
the dominant shareholders[;] [t]he second part requires that there be an
element of injustice or fundamental unfairness if the acts of the corporation
be not regarded as the acts of the individuals.” Id. at 457-58, 313
S.E.2d at 318; see also Dumas v. InfoSafe Corp., 320 S.C. 188,
192, 463 S.E.2d 641, 643-44 (Ct. App. 1995) (same). In the case at hand,
Clarendon has not made a showing that Manning and Santhill have failed to
observe the requisite corporate formalities or otherwise acted inconsistently
with their status as separate legal entities. Moreover, it has not been
demonstrated that it would be fundamentally unfair to treat Manning and
Santhill as separate corporate entities.
23. In
sum, looking to common sense and common practice as required by Regulation
61-15 § 102(2), it is clear that Manning’s acquisition of the MRI machine from
Pinnacle for part-time use in Manning, South Carolina, is a separate and
distinct project from Santhill’s MRI services in Holly Hill and Pinnacle’s
medical equipment leasing business.
Conclusion
24. Therefore,
viewing Manning’s acquisition of the MRI machine as a separate and distinct
project from Santhill’s project, and allocating 50% of the value of the machine
to Manning based upon its pro rata use of the machine under
generally-accepted accounting principles, I find that the total project cost
for Manning’s MRI project does not exceed the $600,000 threshold for CON
review. Accordingly, the Department’s decision to issue a non-applicability
determination to Manning for its project must be sustained.
ORDER
Based
upon the Findings of Fact and Conclusions of Law stated above,
IT
IS HEREBY ORDERED that the Department’s decision to issue non-applicability
determination NA-05-17 to Respondent Manning Diagnostics, LLC, for its
acquisition of an MRI machine to provide part-time MRI services in Manning,
South Carolina, is SUSTAINED.
AND
IT IS SO ORDERED.
______________________________
JOHN D.
GEATHERS
Administrative
Law Judge
1205 Pendleton
Street, Suite 224
Columbia, South
Carolina 29201-3731
May 3, 2006
Columbia, South Carolina
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