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SC Administrative Law Court Decisions

MedQuest Associates, Inc vs. DHEC and InMed Diagnostic Services of SC, LLC

South Carolina Department of Health and Environmental Control

MedQuest Associates, Inc

South Carolina Department of Health and Environmental Control and InMed Diagnostic Services of SC, LLC

M. Elizabeth Crum, Esquire, for the Petitioner

Nancy L. Roberts, Esquire, for DHEC

James Y. Becker, Esquire, for the Respondent




This matter comes before me pursuant to the South Carolina Department of Health and Environmental Control’s (DHEC or Department) Motion to Remand. The Department filed its motion on the grounds that during discovery “the Department learned from depositions and from the final Completion Report that several aspects of the project had changed from those originally envisioned in the documentation submitted to the department.” Further, the Department intends to void NA-02-53 upon remand by the Administrative Law Judge Division (ALJD or Division). Neither Petitioner MedQuest Associates, Inc. (MedQuest) nor Respondent InMed Diagnostic Services of SC, LLC (InMed) object to this case being remanded. Nevertheless, MedQuest asserts that this case should be remanded with instructions that InMed cease its operations until the operation of its facility is authorized by the Department.


In this contested case, MedQuest seeks administrative review by the Division of DHEC’s decision to issue a non-applicability determination (NAD) pursuant to the CON Act and Regulations to InMed for the acquisition of a MRI unit in a free-standing imaging center providing MRI services only to be located in Myrtle Beach, South Carolina. MedQuest operates an imaging center, Open MRI of Myrtle Beach, in Myrtle Beach and provides, inter alia, services to MRI patients in the same service area as InMed. On October 1, 2002, InMed filed a NAD application with DHEC to purchase the assets, including an MRI unit, Footnote of Grand Strand Imaging Center, an imaging facility in Horry County that had already gone out of business and was no longer operating. On December 13, 2002, DHEC issued NA-02-53 to InMed approving the acquisition of the MRI. Based upon the information provided by InMed, DHEC determined that the total project cost associated with the acquisition of the MRI unit was $547,956. NA-02-53 provided for ongoing oversight of the project by the Department, requiring InMed to notify the Department when the proposed project was begun and to submit a final Completion Report including an audited cost report showing “all expenditures on the approved project” and an equipment listing and inventory for the project. Further, in NA-02-53, DHEC notified InMed that “the total project cost must remain under $600,000, and if this proposal should change from the information presented to the Department, this determination is no longer valid.” Pursuant to NA-02-53, InMed started providing MRI services on December 20, 2002. DISCUSSION

MedQuest contends that once DHEC voids NA-02-53, there is neither statutory nor regulatory authority upon which DHEC can rely to allow InMed to continue to operate the MRI and to do so exceeds DHEC’s statutory authority under the “State Certificate of Need and Health Facility Licensure Act,” S.C. Code Ann. §§ 44-7-110, et seq. (2002) (CON Act) and 24A S.C. Code Ann. Regs. 61-15 (Supp. 2002) (CON Regs.). MedQuest further contents that after NA-02-53 is voided, InMed may not legally operate the MRI equipment unless and until it has complied with the requirements of the CON Act and Regs. The Department and InMed argue that there is no statutory authority requiring InMed to shut down during the time between the voiding of NA-02-53 and the Department’s decision on whether InMed is entitled to a NAD or is required to obtain a CON to operate its MRI in Horry County.

The CON Act provides that “[t]he department is designated the sole state agency for control and administration of the granting of Certificates of Need . . . and other activities necessary to be carried out under this article.” S.C. Code Ann. §44-7-140 (2002) (emphasis added). The Department is a creature of statute and, as such, can only exercise such authority as is expressly delegated or delegated by necessary implication. E.g., Fowler v. Beasley, 322 S.C. 463, 472 S.E.2d 630 (1996); Brooks v. S. C. Bd. of Funeral Serv., 271 S.C. 457, 461, 247 S.E.2d 820, 822 (1978). The CON Act regulates a “person’s” acquisition and operation of medical equipment used for treatment and diagnosis in South Carolina. The purposes of the CON Act are:

The purpose of this article is to promote cost containment, prevent unnecessary duplication of health care facilities and services, guide the establishment of health facilities and services which will best serve public needs, and ensure that high quality services are provided in health facilities in this State. To achieve these purposes, this article requires:

(1) the issuance of a Certificate of Need before undertaking a project prescribed by this article;

(2) adoption of procedures and criteria for submittal of an application and appropriate review before issuance of a Certificate of Need;

(3) preparation and publication of a State Health Plan; … .

S.C. Code Ann. § 44-7-120 (2002) (Emphasis added).

The CON Act and Regs. require that a person Footnote obtain a CON for a capital expenditure in excess of $600,000 for the acquisition of medical equipment which is to be used for diagnosis and treatment. S.C. Code Ann. § 44-7-160(6) (2002); 25A S.C. Code Ann. Regs. 61-15 §§ 102.1(f) and 103(25) (Supp. 2002). Reg. 61-15 § 102.3 provides:

When any question exists, 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 a particular project. Such a letter shall contain a detailed description of the project including the extent of modifications, changes in services and total costs. Additional information may be requested as may be reasonably necessary to make such applicability determination. The Department shall respond within sixty days of receipt of the necessary information.

25A S.C. Code Ann. Reg. 61-15 § 102.3 (Supp. 2002) (Emphasis added). Therefore, if there is any question as to whether an MRI project cost is in excess of $600,000, a potential applicant of a MRI facility is required to obtain a determination from DHEC as to the applicability of the CON Act so that the Department can make a formal determination as to whether the CON Act is applicable to a particular health care project.

The cardinal rule of statutory construction is that the legislative intent must be ascertained and prevail. Gardner v. Biggart, 308 S.C. 331, 417 S.E.2d 858 (1992). Furthermore, an act is to be read as a whole and not section by section. “A statute is passed as a whole and not in parts or sections and is animated by one general purpose and intent. Consequently, each part or section should be construed in connection with every other part or section so as to produce a harmonious whole.” Statutes and Statutory Construction, 6th Edition, (2000), § 46.05, p. 154. See Koenig. v. South Carolina Dept. of Pub. Safety, 325 S.C. 400, 480 S.E.2d 98 (Ct. App. 1996). Finally, it is well established that the construction given a statute should be rational and reasonable and not lead to an absurd result. Bolton v. Doe, 266 S.C. 344, 223 S.E.2d 187 (1976).

The clear legislative intent behind the CON Act and Regs. is to prevent unnecessary duplication of services and ensure the provision of high quality services that best meet the public need. While the CON Act and Regs. prohibit a person from acquiring medical equipment used for diagnosis or treatment, the Act does not expressly prohibit the operation of the equipment. Nevertheless, the provision of MRI services is accomplished through the operation of the MRI unit, not its acquisition. The prohibition of the acquisition of medical equipment and not to the operation of medical equipment without either a CON or NAD would be irrational and lead to an absurd result. Therefore, reading the CON Act and Regs. as a whole, the only rational, reasonable conclusion that can be reached as to the legislative intent is that the Act prohibits both the acquisition and operation of the MRI unit in this matter without either a valid NAD or CON. Accordingly, an owner of a MRI unit may not operate a MRI if a question exists concerning to legitimacy of its operation.

Here, InMed sought a NAD under Section 120.3 claiming that the total project cost associated with the acquisition of the MRI was less than $600,000. The Myrtle Beach facility has been open and operating since December of 2002 and is currently providing MRI services to the public. At no time has the facility operated without a valid non-applicability determination. However, if the Department voids the NAD-02-53, InMed will have neither a CON nor a NAD. Moreover, if there is a legitimate dispute concerning the operation of a facility, there is simply no statutory basis to allow InMed to operate the MRI after NA-02-53 has been voided.

Based upon my view of this case as developed before me, the CON Act requires that InMed have either a CON or a NAD in order to operate the Myrtle Beach MRI. Moreover, InMed knew on December 13, 2002 that if it changed the project from what it had presented to the Department, it was proceeding at its own risk. Therefore, if the NA-02-53 is voided, the Department is obligated by the requirements of the CON Act and Regs. to require that InMed cease and desist operating the MRI if it believes that there is a legitimate question concerning the operation of a facility. On the other hand, I find that closure of the facility at this time is premature. Accordingly, in the absence of any finding that the MRI project exceeds $600,000, I decline to close the facility.

IT IS ORDERED THAT this matter is remanded to DHEC with the following instructions:

1.The Division will retain subject matter jurisdiction of all proceedings challenging the issuance of NA-02-53 for thirty (30) days from the date of this Order.

2.NA-02-53 shall remain in place for thirty (30) days from the date of this Order. During that time, InMed must comply with the Department’s requests for any additional information within fifteen (15) days from the date of this Order. Should the Department encounter any difficulties in obtaining necessary information in a timely manner from InMed, it will inform the Division.

3.The Department shall review the information it receives from InMed and issue its decision in this matter. At the end of the review period the Department shall uphold NA-02-53 (or reissue NA-02-53 if it has expired per the terms of this Order)or void NA 02-53 and require InMed to seek a CON. Any person adversely affected by the decision may request a contested case hearing in accordance with the South Carolina Administrative Procedures Act.

4.At the expiration of the thirty (30) day period, NA-02-53 shall be void. Once NA-02-53 is voided, if a NAD is not issued, there is no authority for InMed to continue operating the MRI and the Department shall require InMed to cease and desist operating the MRI.



Ralph King Anderson, III

Administrative Law Judge

August 21, 2003

Columbia, South Carolina

Brown Bldg.






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