SC Administrative Law Court Decisions

STATEMENT OF THE CASE

The above-captioned matter comes before this Court upon the request of Petitioner Lexington County Health Services District, Inc., d/b/a Lexington Medical Center (“LMC”), for a contested case hearing to challenge the decision of Respondent South Carolina Department of Health and Environmental Control (“DHEC” or “Department”) to deny its application for a Certificate of Need (CON) for the development of an open-heart surgery program and therapeutic cardiac catheterization program at its hospital in West Columbia, South Carolina. The Department denied LMC’s CON application based upon its finding that the implementation of LMC’s proposed cardiac program would result in an unnecessary duplication of such services in the Midlands and would have an undue adverse impact upon existing providers of cardiac services in the area. Two of those existing providers, Respondents Sisters of Charity Providence Hospital (“Providence”) and Palmetto Health Alliance, Palmetto Health Richland (“Palmetto”), intervened in this matter in support of the Department’s decision to deny LMC’s CON application.

Prior to a hearing on the merits of this matter, the parties conducted extensive discovery, generating some 30,000 pages of documents and deposing over 40 individuals, and this Court heard a number of motions on discovery issues and other preliminary matters. After timely notice to the parties, a contested case hearing on the merits of this case was held from February 13, 2006, through March 10, 2006, for a total of sixteen days of trial. During the hearing, all four parties presented witnesses and offered exhibits in support of their respective positions. A total of twenty-two witnesses testified at the hearing, and the Court admitted seventy-seven exhibits into evidence, in addition to receiving two proffers of evidence. The following witnesses were designated as experts in the following areas of specialization: Dr. James Morris and Dr. Reid Tribble in the area of Cardiovascular and Open-Heart Surgery; Dr. Edward Leppard in the area of Cardiovascular Surgery; Dr. Leon Khoury, Dr. Stan Juk, Dr. Barry Feldman, and Dr. Myron Bell in the field of Cardiology; Dr. Richard Boyer in the area of Emergency Medicine; Richard Baehr and David Levitt in the field of Healthcare Planning and Finance; Martin Brown in the area of Healthcare Finance; and Joel Grice in the field of Healthcare Planning.

Having reviewed all of the documentary and testimonial evidence presented at the hearing, having considered the arguments of the parties made at the hearing and in their post-trial filings, and having followed the applicable law, I find that DHEC properly denied LMC’s CON application for an open-heart surgery program at its West Columbia hospital because the implementation of the proposed program would conflict with the policies regarding the establishment of such programs set forth in the 2003 State Health Plan, would constitute an unnecessary duplication of cardiac services in the Midlands, and would have a materially adverse impact upon existing open-heart surgery providers in the market.

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:

I. The Parties

1. Petitioner LMC is a not-for-profit, governmental incorporated health services district that operates a vertically integrated health care system primarily serving the citizens of Lexington County, South Carolina. This system consists of a 346-bed acute care hospital located in West Columbia, South Carolina, a 388-bed nursing home and Alzheimer center, 6 community medical centers providing urgent care services throughout Lexington County, and a network of 36 physician practices employing approximately 115 primary care and specialty physicians. In its CON application, LMC proposes to provide open-heart surgery and therapeutic cardiac catheterization services at its main hospital campus in West Columbia, which is located near the intersection of Interstate 26 and Highway 378.

2. Respondent South Carolina Department of Health and Environmental Control is a state agency charged with, among other things, implementing South Carolina’s Certificate of Need regulatory program, which includes licensing standards for the provision of open-heart surgery services and certain other cardiac care services.

3. Respondent Providence Hospital is a private charitable hospital that operates two hospital facilities in Columbia, including its main hospital and heart institute located on Forest Drive in downtown Columbia. Providence has provided open-heart surgery services since 1974 and is the second oldest open-heart surgery provider in South Carolina.

4. Respondent Palmetto Health Richland is a non-profit 579-bed general acute care hospital located in downtown Columbia near the intersection of Sunset Drive and South Carolina Route 277. Palmetto is the major teaching hospital in the Midlands and operates the area’s only Level 1 trauma center. Palmetto has provided open-heart surgery services for twenty-five years and has recently opened a “heart hospital” specifically dedicated to providing cardiac services.

II. Regulatory Background

A. Generally

5. This matter arises under South Carolina’s comprehensive Certificate of Need (CON) regulatory program for health care facilities and services, which consists of the State Certification of Need and Health Facility Licensure Act found at S.C. Code Ann. §§ 44-7-110 to 44-7-370 (2002 & Supp. 2005), the accompanying CON regulations found at 24A S.C. Code Ann. Regs. 61-15 (Supp. 2005), and a State Health Plan which is revised at least biennially. The purpose of this regulatory scheme 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.” See S.C. Code Ann. § 44-7-120 (2002).

6. The primary vehicle by which this regulatory program is implemented and its stated goals achieved is the requirement that a health care facility apply for, and receive, a CON from DHEC prior to undertaking certain major projects or providing certain new services. See S.C. Code Ann. §§ 44-7-120, 44-7-160 (2002). In determining whether to grant or deny an application for a CON, the Department evaluates the proposed project under the review criteria found in the CON regulations and under the policies and standards set out in the State Health Plan. See S.C. Code Ann. § 44-7-210(C) (2002). The project review criteria set forth in Regulation 61-15 include thirty-three separate criteria that fall into five general categories: (1) criteria related to the need for the proposed project, (2) criteria related to the economic considerations of the project, (3) criteria related to the project’s impact on the resources of the health care system, (4) criteria related to the suitability of the site of the project, and (5) criteria related to certain special considerations, such as the project’s ability to serve medically underserved groups. See 24A S.C. Code Ann. Regs. 61-15, §§ 801, 802. As required by the CON Act, the State Health Plan contains the following statistics, standards, and findings with regard to the various facilities and services regulated by the CON Act:

(1) an inventory of existing health care facilities, beds, specified health services, and equipment;

(2) projections of need for additional health care facilities, beds, health services, and equipment;

(3) standards for distribution of health care facilities, beds, specified health services, and equipment including scope of services to be provided, utilization, and occupancy rates, travel time, regionalization, other factors relating to proper placement of services, and proper planning of health care facilities; and

(4) a general statement as to the project review criteria considered most important in evaluating certificate of need applications for each type of facility, service, and equipment, including a finding as to whether the benefits of improved accessibility to each such type of facility, service, and equipment may outweigh the adverse affects caused by the duplication of any existing facility, service, or equipment.

S.C. Code Ann. § 44-7-180(B) (2002).

7. The 2003 State Health Plan was in effect at the time LMC filed its application for a CON to establish open-heart surgical services and therapeutic cardiac catheterization services and, therefore, the standards, findings, and policies set forth in the 2003 Plan are applicable to the review of LMC’s CON application. See 24A S.C. Code Ann. Regs. 61-15, § 504. With regard to cardiovascular services, the 2003 State Health Plan sets forth separate definitions, standards, and review criteria for CONs for open-heart surgery and for cardiac catheterizations.

B. Standards and Definitions

8. Under the Plan, open-heart surgery is defined as “an operation performed on the heart or intrathoracic great vessels.” See DHEC Ex. #2, at II-46. The most common open-heart surgery is coronary artery bypass grafting, or CABG, which is a highly invasive operation that entails harvesting a blood vessel from another area of the body and using it to bypass a blocked section of the coronary artery. These procedures are often done with the temporary use of a heart-lung bypass machine, although surgeons are increasingly performing CABGs while the patient’s heart is still beating. Other open-heart surgeries include operations to repair congenital heart defects and surgeries to repair defects in the heart valves.

9. The Plan sets the capacity of an open-heart surgery program at 500 open-heart procedures per year for each open-heart operating room, and defines the service area for open-heart surgery services as the area within a 60-minute one-way automobile drive of the facility. See DHEC Ex. #2, at II-48. The Plan further emphasizes that an open-heart surgery program should perform a minimum of 200 open-heart surgeries per unit each year to maintain its proficiency, and that improved results in the quality of care are found when a program performs at least 350 open-heart surgeries per unit annually. See DHEC Ex. #2, at II-35, II-36.

10. A cardiac catheterization is an invasive medical procedure performed within a cardiac catheterization laboratory, also known as a “cath lab,” during which a thin, flexible catheter is inserted into a blood vessel as a diagnostic or therapeutic tool for heart and circulatory conditions. See DHEC Ex. #2, at II-37. Diagnostic catheterizations involve the use of a catheter to inject dye in the blood vessel to determine the amount of blockage in an artery; the most common therapeutic catheterizations, also known as angioplasties, involve the use of an inflatable balloon to unblock a clogged artery, often with the insertion of a stent into the artery to keep the artery open. That is, as their names imply, diagnostic catheterizations simply diagnose the extent of blockage in an artery, while therapeutic catheterizations actually treat the blockage itself.

11. The 2003 State Health Plan sets out different standards for CON approval of diagnostic cath labs and “comprehensive” cath labs that perform both diagnostic and therapeutic catheterizations. See DHEC Ex. #2, at II-38 to II-41. For example, the service area for a diagnostic cath lab is the area within a 45-minute one-way automobile drive of the lab, while the service area for a comprehensive cath lab reaches to a 60-minute one-way drive from the lab. Further, given the risks associated with therapeutic cardiac catheterization, comprehensive cath labs may only be located in hospitals that provide open-heart surgery services, whereas diagnostic cath labs may be located in facilities that do not offer open-heart surgery services. The capacity of a cath lab is also weighted according to the type of catheterization performed; specifically, under the 2003 State Health Plan, the capacity of a cath lab is defined to be 1,200 procedures annually, with diagnostic catheterizations each counting as one procedure and therapeutic catheterizations each counting as two procedures toward the total.

III. Application Process

12. On April 21, 2004, Petitioner LMC submitted an application to the Department for a CON for the development of a comprehensive cardiac program at its West Columbia hospital, to include both open-heart surgical capabilities and therapeutic cardiac catheterization capabilities. Specifically, LMC proposed the addition of two dedicated open-heart surgery suites—one of which would be designated as a “back-up” surgery suite—and a second cardiac catheterization laboratory to complement its existing diagnostic catheterization laboratory. As part of the project, LMC would also develop additional services to support the proposed open-heart surgery program, including the creation of a separate, dedicated intensive care unit for cardiac patients. If approved, the proposed project would authorize LMC to perform open-heart surgery and provide comprehensive cardiac catheterization services.

13. By a letter dated May 21, 2004, the Department deemed LMC’s CON application to be complete and set forth the most relevant project review criteria for the evaluation of LMC’s application. These criteria, ranked in order of their importance, were as follows:

1. Compliance with the Need as outlined in the 2003 South Carolina Health Plan-1

2. Community Need Documentation-2a, 2b, 2c, 2e

Distribution (Accessibility)-3a, 3b, 3c, 3d, 3e, 3f, 3g, 3h

Adverse Effects on Other Facilities-23a, 23b

3. Projected Revenues-6a, 6b, 6c

Projected Expenses-7

Financial Feasibility-15

Cost Containment-16c

4. Staff Resources-20a, 20b

5. Acceptability-4a, 4b

DHEC Ex. #1, at 524.

14. On August 10, 2004, the Department held a project review meeting concerning LMC’s CON application. At the meeting, presentations were made by LMC in support of the project and by Providence and Palmetto in opposition to the proposed project.

15. Based upon LMC’s CON application and the information collected during the project review process, the Department issued a decision denying LMC’s application on October 22, 2004. In the decision, the Department concluded that, while LMC’s project met the technical standards for adult open-heart surgical services set forth in the 2003 State Health Plan, the project was ultimately inconsistent with Sections 802(3)(a), 802(3)(b), and 802(23)(a) of Regulation 61-15, which address the unnecessary duplication of health care services and the adverse impact of proposed services upon existing providers. In particular, the Department found that

this proposal would unnecessarily duplicate existing open-heart surgical services performed at Palmetto Health Richland Memorial Hospital and Providence Hospital because their services are geographically accessible to Lexington Medical Center’s target population. Such duplication of services is not justifiable due to the reduction in the growth of open-heart surgical services that is occurring at this time. As a result, the proposed project would have an adverse impact on the current and projected use rates of these existing open-heart surgery providers. In addition, as documented in the 2003 State Health Plan, the State Health Planning Committee, recognizing the important correlation between volume and proficiency, further acknowledges that the number of open-heart surgery cases is decreasing and that maintaining volume in programs is very important to the provision of quality care to the community.

DHEC Ex. #1, at 846.

16. Petitioner LMC timely requested a contested case hearing before this Court to challenge the Department’s denial of its CON application. Respondents Providence and Palmetto were subsequently granted leave to intervene in this matter in opposition to Petitioner’s CON application.

IV. Availability and Use of Open-Heart Surgery Services in the Midlands

A. Generally

17. There are three existing open-heart surgery programs within LMC’s service area—that is, within a 60-minute one-way drive of LMC. These programs are located at Providence Hospital and Palmetto Health Richland Hospital in downtown Columbia and Aiken Regional Medical Center in Aiken, South Carolina. While there are three open-heart surgery providers within LMC’s service area, there are no open-heart surgery programs located within the boundaries of Lexington County.

18. Providence Hospital currently has four open-heart surgery suites. With a stated capacity of 500 open-heart procedures per year for each operating room, Providence has a total annual capacity of 2,000 open-heart surgeries at the hospital. In fiscal year 2005, Providence performed 939 open-heart surgeries, leaving the hospital with an excess capacity of 1,061 heart surgeries, or over 50% excess capacity, for the year.

19. Palmetto Health Richland Hospital has two open-heart surgery units, for an annual capacity of 1,000 open-heart procedures at the hospital. In fiscal year 2005, Palmetto performed 410 open-heart surgeries at its hospital. Therefore, for 2005, Palmetto had an excess capacity of 590 open-heart surgeries, or 59% excess capacity.

20. Aiken Regional Medical Center is likewise well below its capacity for open-heart surgeries. With one open-heart surgical suite, Aiken Regional Medical Center has the capacity to perform 500 open-heart surgeries per year. However, in fiscal year 2004, Aiken only performed 107 open-heart surgical procedures, leaving the hospital with an excess capacity of 383 surgeries, or 78% excess capacity. In fact, this excess capacity for open-heart surgeries exists statewide, with few, if any, of South Carolina’s open-heart surgery providers utilizing more than 50% of their capacity to perform open-heart surgeries in recent years.

21. Much of this excess capacity is the result of a state and national trend away from open-heart surgery toward other treatments for coronary artery disease, including the use of therapeutic catheterization to place stents in blocked vessels. During the 1980s and 1990s, both the number of open-heart surgeries performed and the use rate for such surgeries increased dramatically in South Carolina, leading to a proliferation of open-heart surgery programs in the state. However, with developments in the use of therapeutic catheterization to treat heart problems in the late 1990s and early 2000s, and, in particular, with the development of the drug-eluting stent to open blocked vessels in 2003, the number of open-heart surgeries performed in South Carolina has declined dramatically since the year 2000, reflecting a similar trend throughout the nation.

22. After peaking at 6,473 surgeries in 2000, the number of open-heart surgeries performed in South Carolina has steadily declined, falling to 5,850 surgeries in 2004 despite an increase in the state’s population during that time. Accordingly, the use rate for open-heart surgery in South Carolina has also shown a dramatic decline in the past several years, dropping from 164 surgeries per 100,000 residents in 2000 to 139 surgeries per 100,000 residents in 2004.

23. These statewide numbers are reflected in the data for the open-heart surgeries performed at Providence and Palmetto. The volume of open-heart surgeries performed at Providence has declined from a peak of around 1,100 surgeries per year in 1998 and 1999 to the 939 surgeries performed in 2005, and the number of open-heart surgeries at Palmetto has fallen from a peak of 499 surgeries performed in 2002 to the 410 open-heart procedures performed in 2005 at the hospital.

24. I find that, based upon the evidence presented at the hearing, the use rate for open-heart surgery will continue to decline in South Carolina, such that, even with an increasing population in LMC’s service area, the number of open-heart surgery procedures performed in the Midlands in the future will, at best, be stagnant and, in all likelihood, will continue to decline.[1]

B. Lexington County Residents

25. Providence and Palmetto Hospitals are located in downtown Columbia, less than seven miles from LMC’s main hospital campus in West Columbia—the location of LMC’s proposed open-heart surgery program—and approximately sixteen miles from downtown Lexington. Specifically, LMC is located approximately 6.4 miles from Providence and 6.7 miles from Palmetto. 26. In 2004, residents of Lexington County constituted approximately 20% of Providence’s open-heart surgery patients and approximately 29% of Palmetto’s open-heart surgery patients. And, the three largest cardiology groups in Richland County have offices in Lexington County and treat patients from Lexington County.

27. In fact, the overall use rate for open-heart surgery is significantly higher for residents of Lexington County than it is for Richland County residents, which would suggest that Lexington County residents have equal, if not greater, access to open-heart surgical services than residents of Richland County.

28. I find that there are no geographic, social, or economic barriers restricting the ability of Lexington County residents to access open-heart surgical services at either Providence or Palmetto.

C. Transfers of Open-Heart Surgery Patients

29. One of the primary concerns raised by LMC with regard to the accessibility of open-heart surgery to Lexington County residents is the time and inconvenience required to transfer patients from LMC to Providence or Richland for open-heart surgery, particularly in emergency situations.

30. However, according to the testimony of the medical experts presented at the hearing, emergency open-heart surgery is very rarely performed, and the vast majority of open-heart surgery procedures are elective procedures performed on stable patients, scheduled at the convenience of the surgeon and the patient.[2] For such scheduled surgeries on stable patients, the short transfer from LMC to Providence or Palmetto does not deny Lexington County residents access to open-heart surgical services.

31. Further, the evidence presented at the hearing suggests that even these transfers of stable patients are fairly rare. As a result of the 1,532 diagnostic catheterizations performed at LMC in 2005, only 189 patients—or approximately 12% of the total number of catheterizations—were transferred from LMC’s cath lab to either Providence or Palmetto for open-heart surgery.

32. Therefore, although some patients must be transferred from LMC to Providence or Palmetto for open-heart surgery, this fact alone does not demonstrate a need for an open-heart surgery program at LMC.

V. Availability and Use of Therapeutic Cardiac Catheterizations in the Midlands

A. Generally

33. There are three existing comprehensive cardiac catheterization programs—that is, programs performing both diagnostic and therapeutic catheterizations—within a 60-minute one-way drive of LMC. These programs are located at Providence Hospital and Palmetto Health Richland Hospital in downtown Columbia and Aiken Regional Medical Center in Aiken, South Carolina. Given the risks associated with performing therapeutic cardiac catheterizations, these comprehensive cardiac catheterization laboratories are only authorized for hospitals that are approved for, and provide, open-heart surgical services. LMC currently is approved for, and provides, diagnostic cardiac catheterization services in one cardiac catheterization laboratory at its West Columbia hospital.

34. In these programs, Providence Hospital has six cardiac catheterization laboratories, Palmetto Health Richland has three cardiac catheterization laboratories (with a fourth cath lab approved, but not yet constructed), and Aiken Regional Medical Center has one cardiac catheterization laboratory, for a total of ten existing and one forthcoming comprehensive cardiac cath labs in LMC’s service area. In 2004, Providence performed 2,749 therapeutic catheterizations in its six cath labs and Palmetto performed 791 therapeutic catheterizations in its three cath labs; in 2003, Aiken Regional Medical Center performed 323 therapeutic catheterizations in its cath lab.

35. With the increased preference for the use of therapeutic catheterization to treat common cardiac conditions, such as coronary artery disease, rather than open-heart surgery, I find that the use rate for therapeutic cardiac catheterizations in the Midlands will likely increase modestly over the next several years, resulting in modest increases in the number of therapeutic catheterizations performed during that time.

B. Lexington County Residents

36. As noted above, the comprehensive cardiac catheterization laboratories at Providence and Palmetto Hospitals are located less than seven miles from LMC’s main hospital campus in West Columbia, the location from which it proposes to provide therapeutic cardiac catheterization services.

37. In 2004, residents of Lexington County constituted approximately 23% of Providence’s therapeutic cardiac catheterization patients and approximately 31% of Palmetto’s therapeutic cardiac catheterization patients. And, the three largest cardiology groups in Richland County have offices in Lexington County and treat patients from Lexington County.

38. The use rate for therapeutic cardiac catheterization services is significantly higher for residents of Lexington County than it is for Richland County residents, which would suggest that Lexington County residents have equal, if not greater, access to therapeutic cardiac catheterization services than residents of Richland County.[3]

39. I find that, based upon the evidence presented at the hearing, there are no geographic, social, or economic barriers restricting the ability of Lexington County residents to access therapeutic cardiac catheterization services at either Providence or Palmetto.

C. Emergent Cardiac Catheterization Services

40. One of the primary concerns raised by LMC with regard to the accessibility of therapeutic cardiac catheterization services to Lexington County residents is the time and difficulty required to transfer patients from LMC to Providence or Richland for therapeutic cardiac catheterizations, particularly in emergency situations.

41. In 2005, LMC had 73,000 emergency room visits at the main emergency room in its West Columbia hospital, with 7,242 of those emergency room patients presenting with a cardiac diagnosis. Of those 7,242 emergency cardiac patients in 2005, 69 patients—or less than 1% of the patients presenting with cardiac complaints—were transferred to either Providence or Palmetto for emergency cardiac treatment for an acute myocardial infarction, i.e., heart attack. There was no concrete evidence presented at the hearing of this matter suggesting that the health of these transferred emergency patients, or the health of any other cardiac transferees from LMC to Providence and Palmetto, was compromised in any way by the transfers.

42. Further, the consensus of the clinical witnesses presented at the hearing is that the overwhelming majority of therapeutic cardiac catheterizations are scheduled procedures performed on stable patients and that only somewhere between 5% and 10% of cardiac patients require emergency cardiac intervention procedures such as therapeutic catheterizations.

VI. Impact of Lexington’s Proposed Program upon Existing Providers in the Midlands

43. Based upon the likely referral patterns of LMC’s county-wide network of employed physicians and upon LMC’s existing high market share in the county for medical services—and, in particular, its high market share for diagnostic cardiac catheterization services and other cardiovascular services—I find that a comprehensive cardiac services program at LMC will likely capture much, if not most, of the market for open-heart surgery and therapeutic catheterization in Lexington County. In particular, I find that, with such a program, LMC is likely to capture 65% or more of the market in these cardiac services for residents of Lexington County.

44. As noted above, Providence Hospital draws approximately one-fifth of its open-heart surgery and therapeutic cardiac catheterization patients from Lexington County and Palmetto Health Richland draws nearly one-third of its open-heart surgery and therapeutic catheterization patients from Lexington County. By capturing some two-thirds of these patients, a comprehensive cardiac program located at LMC will jeopardize these substantial patient bases for the programs at Providence and Palmetto and significantly reduce the number of open-heart and therapeutic catheterization procedures performed at those hospitals. Such reductions in the number of open-heart surgeries and therapeutic cardiac catheterizations will have several, serious adverse consequences for the cardiac programs at Providence and Palmetto.

45. The potential reductions in the number of open-heart surgeries performed at Providence and Palmetto would adversely affect the quality of care provided in those programs. With the loss of the open-heart surgery cases captured by LMC, the annual volume of open-heart surgeries performed at both Providence and Palmetto would fall below 200 open-heart surgeries per suite, and thus both programs would fall below the minimum number of surgeries the Department considers necessary to maintain a program’s proficiency and overall quality of care.

46. The potential reductions in the number of open-heart surgeries and therapeutic catheterizations performed at Providence and Palmetto would also have a substantial adverse financial impact upon the cardiac programs at those hospitals. Based upon the expert testimony presented at the hearing, the financial impact of these lost procedures would likely be a total annual loss of approximately eight million dollars for Providence and between 3.2 million and 4.5 million dollars for Palmetto. These financial losses would be magnified by the significant capital expenditures that both facilities have made in recent years to expand their cardiac services, including, most notably, the 77-million-dollar heart hospital opened by Palmetto in January 2006.

47. Further, the establishment of an open-heart surgery and therapeutic catheterization program at LMC would adversely impact the quality of care at existing programs in the Midlands by drawing highly trained, specialized medical staff, such as cardiovascular anesthesiologists and cardiac surgery nurses, away from those programs. Such highly qualified and highly skilled staff are critical to the provision of quality cardiac care in these programs, and the loss of such personnel would have an adverse effect on the existing providers’ ability to maintain the quality of their programs.

CONCLUSIONS OF LAW

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

I. Jurisdiction, Burden of Proof, and the Weight and Sufficiency of Evidence

1. This Court has jurisdiction over this contested case proceeding pursuant to S.C. Code Ann. §§ 1-23-310 et seq. (2005), S.C. Code Ann. § 1-23-600(B) (Supp. 2005), S.C. Code Ann. § 44-7-210(E) (2002), and 24A S.C. Code Ann. Regs. 61-15, § 403 (Supp. 2005).

2. 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).

3. LMC, as the moving party in this matter, bears the burden of proof in this contested case. S.C. Code Ann. § 44-7-210(E) (2002); 24A S.C. Code Ann. Regs. 61-15, § 403(1) (Supp. 2005); 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) (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 § 354 (2004) (same). Therefore, LMC must prove, by a preponderance of the evidence, that the Department improperly denied its application for a CON to establish an open-heart surgery and therapeutic cardiac catheterization program at its West Columbia hospital. 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).

4. 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)).

5. 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) (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).

6. 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).

7. The South Carolina Rules of Evidence are applicable to this contested case proceeding. See S.C. Code Ann. § 1-23-330(1) (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).

8. “[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).

9. 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).

II. Certificate of Need Program

10. As referenced in the Findings of Fact, South Carolina regulates the distribution of certain major health care facilities and services throughout the state under a Certificate of Need program administered by DHEC. See S.C. Code Ann. §§ 44-7-110 through 44-7-370 (2002 & Supp. 2005) (setting out the “State Certification of Need and Health Facility Licensure Act”). The purpose of this regulatory scheme 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.” S.C. Code Ann. § 44-7-120 (2002).

11. Under this regulatory program, a health care facility is required to obtain a Certificate of Need (CON) from DHEC prior to undertaking, among other things, “a capital expenditure by or on behalf of a health care facility which is associated with the addition or substantial expansion of a health service for which specific standards or criteria are prescribed in the State Health Plan.” S.C. Code Ann. § 44-7-160(4) (2002); 24A S.C. Code Ann. Regs. 61-15, § 102(1)(d) (Supp. 2005). Open-heart surgery and therapeutic cardiac catheterization are services for which the 2003 State Health Plan contains specific standards and criteria and, therefore, a health care facility is required to obtain a CON from the Department prior to establishing or substantially expanding such services. See DHEC Ex. #2, at II-33 through II-53 (setting forth standards, definitions, and licensing criteria for cardiac catheterization and open-heart surgery services); see also DHEC Ex. #2, at II-48 (“The establishment or addition of an open heart surgery unit requires Certificate of Need review, as this is considered a substantial expansion of a health service.”).

12. In determining whether to issue a CON to an applicant, the Department evaluates the proposed health care service or facility under the licensure standards and criteria set out in the State Health Plan for the particular service or facility and under the general project review criteria set out in Section 802 of Regulation 61-15. See S.C. Code Ann. § 44-7-210(C) (2002); 24A S.C. Code Ann. Regs. 61-15, § 307(1) (Supp. 2005). Accordingly, the Department may not issue a CON unless the application for the proposed project complies with both the State Health Plan and the regulatory project review criteria. See S.C. Code Ann. § 44-7-210(C) (2002); 24A S.C. Code Ann. Regs. 61-15, § 307(1) (Supp. 2005). Therefore, while “no project may be approved unless it is consistent with the State Health Plan,” 24A S.C. Code Ann. Regs. 61-15, § 801(3) (Supp. 2005), such compliance is not sufficient in itself for the issuance of a CON, and “[t]he Department may refuse to issue a Certificate of Need even if an application is in compliance with the State Health Plan but is inconsistent with project review criteria or departmental regulations,” 24A S.C. Code Ann. Regs. 61-15, § 307(1); see also S.C. Code Ann. § 44-7-210(C). Whether LMC’s proposed comprehensive cardiac program complies with these two sets of licensing standards will be discussed, in turn, below.

III. LMC’s Compliance with the 2003 State Health Plan

A. State Health Plan Standards for Open-Heart Surgery

13. The 2003 State Health Plan contains detailed definitions, standards, and Departmental findings governing the issuance of Certificates of Need for open-heart surgery and for cardiac catheterization services. See DHEC Ex. #2, at II-33 to II-53. With regard to open-heart surgical services, the Plan sets out ten technical requirements an applicant must satisfy in order to be granted a CON to provide such services. See DHEC Ex. #2, at II-48 to II-50.

14. The first two of these standards reiterate that the establishment or addition of an open-heart surgery unit is a substantial expansion of a health service that requires CON review and that comprehensive cardiac catheterization laboratories, which perform therapeutic cardiac catheterizations, may only be located in hospitals that provide open-heart surgery. DHEC Ex. #2, at II-48 (Standards 1 and 2). In the case at hand, LMC has applied for a CON for its proposed open-heart surgery program and seeks to provide therapeutic cardiac catheterization services only as part of a comprehensive cardiac care program, which includes the proposed open-heart surgery services.

15. Subsequent standards state that the capacity of an open-heart surgery operating room is 500 open-heart surgeries per year and require a hospital to perform a minimum of 200 open-heart surgeries annually in each open-heart surgery unit by its third year of operation. DHEC Ex. #2, at II-48 (Standards 3, 4, and 5.B). Similarly, a hospital may only expand an existing open-heart surgery program if it has operated at 70% capacity for the two years prior to its CON application and can project a minimum of 200 open-heart procedures per year in the new open-heart surgery unit. DHEC Ex. #2, at II-49 (Standard 7). In the instant case, LMC projects that it will perform just over 200 open-heart surgeries in its program by its third year of operation; Respondents project that the number of open-heart surgeries performed at LMC by its third year of operation will be closer to 300 surgeries. In either case, LMC satisfies these standards, although only for one dedicated open-heart surgery operating room.[4]

16. Additional standards provide that a new open-heart surgery program may only be approved if all existing open-heart surgery providers in the service area, i.e., within a 60-minute one-way drive of the proposed program, are performing an annual minimum of 350 open-heart surgery procedures per open-heart surgery unit and the new program will not cause any of the existing programs to drop below 350 procedures per year for each open-heart surgery unit. See DHEC Ex. #2, at II-48, II-49 (Standards 5.A and 6). However, there is a narrow exception to this requirement, commonly known as the “single county” exception, that allows the establishment of a new open-heart surgery program at a hospital regardless of the number of open-heart surgeries being performed at other programs in the service area, so long as (1) there are no other open-heart surgery programs located in the same county as the proposed program and (2) the proposed facility currently offers cardiac catheterization services and provided a minimum of 1,200 catheterizations in the prior year. DHEC Ex. #2, at II-48 (Standard 5.A).[5] Here, LMC satisfies this single-county exception, and thus satisfies Standards 5.A and 6, because there are no other open-heart surgery providers in Lexington County and LMC performed over 1,200 diagnostic catheterizations in the year preceding its CON application.

17. The remaining standards require open-heart programs to adopt standards for treating high-risk patients, to have appropriate physician staffing, both in terms of numbers and proficiency, and to provide the capability to perform emergency coronary artery surgery. DHEC Ex. #2, at II-49 to II-50 (Standards 8, 9, and 10). While LMC’s application may not have been as detailed as other applications for open-heart surgery programs with regard to these standards, LMC did provide sufficient information in its application to demonstrate that its program would be able to satisfy these operational standards.

B. State Health Plan Findings and Policies with regard to Open-Heart Surgery

18. In addition to setting forth the technical standards discussed above, the 2003 State Health Plan also contains six specific findings made by the Department regarding the need for open-heart surgery services in South Carolina and a general discussion of the appropriate distribution of open-heart surgery services in the state. See DHEC Ex. #2, at II-35 (general discussion), II-51 to II-52 (specific findings).

19. The six specific findings regarding the need for open-heart surgery services note that “[o]pen-heart surgery services are available within sixty (60) minutes travel time for the majority of residents of South Carolina” and that “most of the open heart surgery providers are currently utilizing less than the functional capability (i.e. 70% of maximum capacity) of their existing surgical suites.” DHEC Ex. #2, at II-51 to II-52 (Findings 1 and 2). These findings further recognize that clinical research has shown that “a minimum number of procedures is recommended per year in order to develop and maintain physician and staff competency in performing these procedures” and that “a positive relationship [exists] between the volume of open heart surgeries performed annually at a facility and patient outcomes.” DHEC Ex. #2, at II-52 (Findings 3 and 5).

20. Two further findings speak most directly to the issues raised in this case and are particularly relevant to the resolution of this matter. The Department’s fourth finding states, in full:

Increasing geographic access may create lower volumes in existing programs causing a potential reduction in quality and efficiency, exacerbate existing problems regarding the availability of nursing staff and other personnel, and not necessarily reduce waiting time since other factors (such as the referring physician’s preference) would still need to be addressed.

DHEC Ex. #2, at II-52 (Finding 4). In a similar vein, the sixth finding reads, as follows:

The State Health Planning Committee recognizes the important correlation between volume and proficiency. The Committee further recognizes that the number of open heart surgery cases is decreasing and that maintaining volume in programs is very important to the provision of quality care to the community.

DHEC Ex. #2, at II-52 (Finding 6).

21. These findings are echoed in the general discussion of the distribution of open-heart surgical services found in the overview discussion for the Plan’s section on cardiac services:

Both cardiac catheterization and open heart surgery programs require highly skilled staffs and expensive equipment. Appropriately equipped and staffed programs serving larger populations are preferable to multiple, minimum population programs. Underutilized programs are a less efficient use of an expensive resource and often reflect unnecessary duplication of services in an area. This may seriously compromise quality and safety of procedures and increase cost of care. Optimal performance requires a caseload of adequate size to maintain the skills and efficiency of the staff. . . . There should be a minimum of 200 adult open heart surgery procedures performed annually per open heart surgery unit; improved results appear to increase in hospitals that perform a minimum of 350 cases annually.

DHEC Ex. #2, at II-35; see also DHEC Ex. #2, at II-36 (emphasizing that the CON standard of 200 open-heart surgeries per year per surgical suite “should not be interpreted as an optimal level of operation,” because such a volume “amounts to less than 5 procedures per week and clearly does not fully utilize the resources required to staff a cardiac surgery program”).

22. I find that LMC’s proposed open-heart surgery program conflicts with these findings and policies set out in the 2003 State Health Plan. It cannot be overemphasized that, while the establishment of an open-heart surgery program at LMC would minimally increase geographic access for such services, a program at LMC would also significantly reduce volumes in existing providers and exacerbate staffing problems in the area, thus causing a potential reduction in the quality of care in the existing open-heart surgery programs in the Midlands. Crucially, the establishment of an open-heart program at LMC would likely reduce the open-heart surgery volumes at Providence and Palmetto to at or below the minimum threshold for competency in such procedures, i.e., below 200 open-heart surgeries per year per open-heart surgical suite, and would put LMC only marginally above that threshold. As a result, the Midlands would have “multiple, minimum population programs,” rather than fewer, larger, and more competent programs as recommended by the State Health Plan.

23. Therefore, while LMC’s CON application generally complies with certain technical standards for open-heart surgical services put forth in the State Health Plan, the project as a whole conflicts with the findings and policies expressed in the Plan regarding the distribution of open-heart surgery services and must ultimately be deemed to be inconsistent with the Plan.

IV. LMC’s Compliance with Regulatory Project Review Criteria

24. Section 802 of Regulation 61-15 sets out thirty-three project review criteria that are used to review all projects requiring CON approval. Of particular relevance to the case at hand are the project review criteria related to the unnecessary duplication of services and the adverse impact of a project upon existing providers. See 24A S.C. Code Ann. Regs. 61-15, § 802(3)(a), (b) (Supp. 2005) (unnecessary duplication of services), § 802(23)(a), (b) (Supp. 2005) (adverse effects on other facilities).

A. Unnecessary Duplication of Existing Services

25. Criteria 3(a) and 3(b) in Section 802 of Regulation 61-15 provide that the “[u]nnecessary duplication of services and unnecessary modernization of services will not be approved” and that a “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.” 24A S.C. Code Ann. Regs. 61-15, § 802(3)(a), (b). In its denial of LMC’s application, the Department found that LMC’s proposed open-heart surgery program would violate these project review criteria by unnecessarily duplicating existing open-heart surgical services provided at Providence and Palmetto. See DHEC Ex. #1, at 846. This determination must be sustained. With three existing open-heart surgery providers within LMC’s service area, each of which has greater than 50% excess capacity for open-heart surgery procedures, and with the overall use rate for open-heart surgery declining, LMC’s proposed open-heart surgery program would constitute an unnecessary duplication of those services and is, therefore, inconsistent with Section 802(3)(a) and (3)(b) of Regulation 61-15. Further, given the number of Lexington County residents that receive open-heart surgical services at Providence and Palmetto and the high overall use rate for open-heart surgery among Lexington County residents, LMC’s proposed open-heart surgery program will not serve a medically underserved area, but rather, will constitute an unnecessary duplication of existing open-heart surgery services in the Midlands. Accordingly, LMC’s proposed project is further inconsistent with Section 802(3)(b).

B. Adverse Impact upon Existing Providers

26. Criterion 23(a) of Section 802 addresses the adverse impact of a proposed project upon existing facilities in the area and requires 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.” 24A S.C. Code Ann. Regs. 61-15, § 802(23)(a). In its denial of LMC’s application, the Department found that LMC’s proposed open-heart surgery program would violate this project review criterion by having an adverse impact on the current and projected use rates of the existing open-heart surgery programs at Providence and Palmetto. See DHEC Ex. #1, at 846. This determination must be sustained. The establishment of an open-heart surgery program at LMC would draw a significant number of patients from existing providers and drive open-heart surgery volumes at those providers below the recommended level to maintain quality of care, while only providing a minimal increase in geographic accessibility for open-heart surgical services in the Midlands.

27. Further, criterion 23(b) of Section 802 states 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.” 24A S.C. Code Ann. Regs. 61-15 § 802(23)(b). While the Department did not cite to Section 802(23)(b) in its denial of LMC’s application, the competition for staffing created by the establishment of an open-heart surgery program at LMC would have an adverse impact upon existing open-heart surgery providers in the Midlands. This new program would likely draw critical staff away from existing programs and, at the very least, increase the staffing costs of existing providers as they seek to replace and retain the highly skilled and specialized staff necessary for the operation of an open-heart surgery program.

28. Therefore, LMC’s proposed open-heart surgery program is also inconsistent with the adverse impact project review criteria found at Section 802(23) of Regulation 61-15.

29. In sum, regardless of whether or not LMC complies with the State Health Plan, these inconsistencies with the regulatory project review criteria related to the unnecessary duplication of services and the adverse impact upon existing providers are grounds, in and of themselves, upon which to deny LMC’s CON application. See S.C. Code Ann. § 44-7-210(C); 24A S.C. Code Ann. Regs. 61-15, § 307(1).

V. Conclusion

30. While LMC’s proposed open-heart surgery program satisfies certain technical standards for such services set out in the 2003 State Health Plan (at least for a single open-heart surgery unit), the proposed program is inconsistent both with the findings and policies for the distribution of open-heart surgery programs set out in the Plan and with the regulatory project review criteria regarding the unnecessary duplication of existing services and the adverse impact of a proposed service upon existing providers. Accordingly, the Department’s decision to deny LMC’s CON application to provide open-heart surgery at its West Columbia hospital must be sustained.

31. Further, because LMC does not qualify for a CON to perform open-heart surgery, its joint CON application to perform therapeutic cardiac catheterizations must also be denied, as such services may only be provided in a hospital that has an open-heart surgery program. See DHEC Ex. #2, at II-39, II-48 (providing under the 2003 State Health Plan, in Standard 7 for cardiac catheterization services and Standard 2 for open-heart surgical services, that the lack of a formal open-heart surgery program at a hospital is an “absolute contraindication” for the hospital to perform therapeutic cardiac catheterizations).

32. Finally, it must be noted that this Court does not operate in a vacuum and is well aware of the social and political wrangling that has occurred regarding LMC’s application for a CON to provide comprehensive cardiac services. However, while I am sensitive to the concerns raised by interested parties on both sides of this issue, I do not possess unfettered discretion such that I can, by judicial fiat, decide whether LMC should be authorized to perform open-heart surgery. Rather, in reaching a decision in this matter, I am constrained by the evidentiary record presented through the conduct of the trial in this case and by the applicable law. In particular, it must be emphasized that the South Carolina General Assembly has chosen to closely regulate the distribution of certain health care facilities and services, including open-heart surgery and cardiac catheterization, under a comprehensive Certificate of Need program consisting of the CON Act, its accompanying regulations, and the State Health Plan. It is the standards set forth under that regulatory program that I am bound to apply in this matter. And, under those standards, the conclusion is inescapable that LMC’s proposed open-heart surgery services, if authorized, would constitute an unnecessary duplication of existing open-heart surgical services in the Midlands and would have an unduly adverse impact upon existing providers of open-heart surgery in the area.

Never has it been more true in an administrative case that a judge “ought to live an eagle’s flight beyond the reach of fear or favor, praise or blame, profit or loss.” William S. McFeely, Frederick Douglass 318 (1991) (quoting Douglass’s disappointed response to the United States Supreme Court’s 1883 decision in The Civil Rights Cases). When this case is viewed in such an impartial light, the Department’s decision to deny LMC’s CON application 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 deny Petitioner Lexington Medical Center’s CON application for the development of an open-heart surgery program and therapeutic cardiac catheterization program at its hospital in West Columbia, 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

September 15, 2006

Columbia, South Carolina