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

SC Administrative Law Court Decisions

CAPTION:
F.B.P., L.L.C. vs. SCDHEC et al.

AGENCY:
South Carolina Department of Health and Environmental Control

PARTIES:
Petitioner:
F.B.P., L.L.C.

Respondent:
South Carolina Department of Health and Environmental Control, Georgetown Memorial Hospital, and R. Steven Bass, M.D., P.A., d/b/a Myrtle Beach Radiation Therapy Center
 
DOCKET NUMBER:
00-ALJ-07-0033-CC

APPEARANCES:
Daryl G. Hawkins, Esquire, for the Petitioner

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

Daniel J. Westbrook, Esquire, and Stuart M. Andrews, Jr., Esquire,

for the Respondent Georgetown Memorial Hospital

Robert B. Varnado, Esquire, for the Respondent R. Steven Bass, M.D., P.A., d/b/a Myrtle Beach Radiation Therapy Center
 

ORDERS:

ORDER

STATEMENT OF THE CASE



The Petitioner, F.B.P., L.L.C., ("FBP") filed a request for a contested case hearing to review a decision by the Respondent, South Carolina Department of Health and Environmental Control ("DHEC"), refusing to issue an x-ray facility registration for FBP's radiation therapy facility at Conway, South Carolina. This matter is now before me pursuant to several motions filed by various parties: Motions to Intervene, filed by Georgetown Memorial Hospital ("GMH") and R. Steven Bass, M.D., P.A., d/b/a Myrtle Beach Radiation Therapy Center ("MBRTC"); Motions for Summary Judgment, filed by GMH, MBRTC and DHEC; a Motion to Consolidate this case with Docket No. 99-ALJ-07-0625-CC, filed by MBRTC; and a Motion for Stay, filed by DHEC. A hearing on all outstanding motions was held at the offices of the Administrative Law Judge Division in Columbia, South Carolina, on February 10, 2000. For the following reasons, the Motions for Summary Judgment are hereby granted, and the remaining motions are disposed of as set forth herein.



FACTUAL BACKGROUND

FBP is an Ohio limited liability company which seeks to establish two radiation therapy centers with linear accelerators for the treatment of cancer patients, one in Conway, South Carolina, and the other in Georgetown, South Carolina. On July 10, 1998, FBP wrote DHEC requesting a determination that the South Carolina Certificate of Need ("CON") requirements did not apply to its proposed facilities. This request was based upon FBP's assertion that the total project costs for each facility did not exceed the then existing threshold limit of $600,000. See 24A S.C. Code Ann. Regs. 61-15 § 102(1)(f) (Supp. 1998) (requiring a person or health care facility to obtain a CON prior to acquiring medical equipment which is to be used for diagnosis or treatment if the total project cost is in excess of $600,000); see also 24A S.C. Code Ann. Regs. 61-15 § 102 (3) (Supp. 1998) (requiring a potential applicant to apply to DHEC for a formal determination as to the applicability of the CON requirements to a particular project if there is "any question" as to such applicability). Following FBP's request to DHEC for a letter of non-applicability, several interested parties, including GMH (which has applied for and received approval of a CON from DHEC to build its own radiation therapy center in Georgetown)(1), MBRTC (which currently operates a radiation therapy center in Myrtle Beach), the Medical University of South Carolina, Conway Hospital, and the South Carolina Oncology Society, submitted letters of concern about the proposed project to DHEC. These letters questioned whether FBP was seriously understating its costs in order to circumvent the CON requirements, and raised concerns about the "antiquated" equipment FBP proposed to use in its facilities. Subsequently, on November 20, 1998, while FBP's request was still under consideration by DHEC, FBP wrote DHEC another letter "formally revoking" its request for a determination of non-applicability. Thereafter, FBP neither renewed its request for a determination of non-applicability, nor did it apply for a CON. Nevertheless, FBP proceeded with the establishment of its facilities. In December of 1998, it executed a letter of commitment for a construction loan for the Conway facility, and closed on the construction loan on or about February 5, 1999. Likewise, FBP executed a letter of commitment for a loan for the Georgetown facility on or about February 9, 1999, and closed on that loan on or about March 26, 1999. Finally, on March 17, 1999, FBP entered into construction contracts for both facilities.

In the meantime, the South Carolina General Assembly passed an amendment to the definition of "health care facility" in the CON statute to specifically include radiation therapy facilities. See 1999 S.C. Acts 10 (effective March 23, 1999)(amending S.C. Code Ann. § 44-7-130(10) (Supp. 1998)). The effect of this amendment was to require compliance with CON requirements for all radiation therapy facilities, regardless of project cost, since all "health care facilities" are required to obtain a CON. See S.C. Code Ann. § 44-7-160(1) (Supp. 1998); 24A S.C. Code Ann. Regs. 61-15 § 102(1) (Supp. 1998). DHEC advised FBP of the change in the law by letter dated March 25, 1999, and informed FBP that, if it wished to proceed with the establishment of its facilities, it would have to obtain a CON. Despite DHEC's admonition, FBP obtained construction permits and proceeded with the construction of both facilities. On July 28, 1999, DHEC filed a complaint in the Richland County Court of Common Pleas, requesting that the court enjoin FBP from taking further steps to establish its facilities. That action is still pending.(2)

Finally, on January 5, 2000, DHEC informed FBP that it would not grant FBP's request for an x-ray facility registration at the Conway facility until FBP complied with the CON statutes. It is this decision by DHEC that is the subject of FBP's request for a contested case hearing in the present case.



DISCUSSION



A. Motions to Intervene

At the motions hearing, counsel for FBP stipulated that FBP had no objection to GMH's and MBRTC's motions to intervene as Respondents in this matter. Accordingly, those motions are hereby granted, and the caption of this case is hereby amended as set forth above.





B. Motions for Summary Judgment

GMH, MBRTC, and DHEC have all filed motions for summary judgment in this matter. Both sides agree that the crux of these motions is whether Act 10 of 1999, amending the CON statute to include radiation therapy facilities within the definition of "health care facilities," thus subjecting all radiation therapy facilities to the CON requirements, regardless of project cost, applies to FBP. The Respondents argue that, since FBP formally withdrew its request for a determination of non-applicability prior to the effective date of the amendment of the statute and did not renew that request, the amendment to the CON statute applies to FBP and it cannot now proceed to establish its facilities without first applying for a CON. FBP, on the other hand, contends that the amended definition is inapplicable to it because it had already "undertaken the construction or other establishment" of its facilities by engaging in pre-construction activities, including the obtaining of construction loans, prior to the effective date of the amendment. FBP further argues that, by expending funds and entering into contracts prior to the amendment, it has a vested right to construct its facilities which cannot be divested by the amendment.



1. DHEC's Powers and Duties

The State Certification of Need and Health Facility Licensure Act ("CON Act") is found at S.C. Code Ann. §§44-7-110 et seq. (Supp. 1998). The stated purpose of the CON Act 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 (Supp. 1998). The CON process was promulgated as the method by which this stated legislative purpose would be achieved. Id. DHEC, as the agency of the State of South Carolina which is "invested with all the rights and charged with all the duties pertaining to organizations of like character and is the sole advisor of the State in all questions involving the protection of the public health within its limits," S.C. Code Ann. § 44-1-110 (Supp. 1998), is specifically charged with administering and carrying out the policies of the CON Act. See S.C. Code Ann. § 44-7-140 (DHEC is the sole state agency for control and administration of the granting of Certificates of Need and licensure of health facilities). DHEC was also required to promulgate regulations necessary to carry out its duties under the CON Act. S.C. Code Ann. § 44-7-150(3) (Supp. 1998). Pursuant to this requirement, DHEC promulgated 24A S.C. Code Ann. Regs. 61-15 (Supp. 1998). Under its statutory grant of authority, any action taken by DHEC pursuant to the Act is an exercise of the State's police power. See S.C. Dep't of Health and Envtl. Control v. Armstrong, 293 S.C. 209, 359 S.E.2d 302 (Ct. App. 1987) (referring to DHEC's authority under the Pollution Control Act); 1976-77 Op. S.C. Att'y Gen. No. 77-98 (referring to DHEC's authority under the predecessor to the CON Act).



2. Applicability of the 1999 Amendment to FBP

S.C. Code Ann. § 44-7-160 (1) (Supp. 1998) provides that "[a] person or health care facility as defined in this article is required to obtain a Certificate of Need from [DHEC] before undertaking. . . the construction or other establishment of a new health care facility." (Emphasis added). The amendment of March 23, 1999 did not change this language. It merely expanded the definition of "health care facility" in S.C. Code Ann. § 44-7-130(10) to include radiation therapy facilities. See 1999 S.C. Acts 10 (March 23, 1999). It is undisputed that, if the amendment is applicable to FBP, it cannot lawfully proceed to establish its facilities without first obtaining a CON, and thus would not be entitled to the facility registration it seeks in this case as a matter of law.

FBP first contends that the amendment on its face is inapplicable because, as of the date of the amendment, FBP had already "undertaken the construction or other establishment" of its facilities by entering into pre-construction contracts and incurring financial obligations. However, this argument is without merit.

In interpreting a statute, its words must be given their plain and ordinary meaning without resorting to subtle or forced construction to limit or expand the statute's operation. Durham v. United Companies Financial Corp., 331 S.C. 600, 503 S.E.2d 465 (1998). In this case, the plain meaning of the word "construction" is the specific act of constructing, i.e., the breaking of ground for a project and the process by which the project is brought to completion. See American Heritage College Dictionary at 299 (3d ed. 1993). In this case, FBP did not obtain construction permits or break ground for either of its facilities until after the amendment had been enacted (June 7, 1999 for



the Conway facility and July 27, 1999 for the Georgetown facility). I therefore find that FBP had not "undertaken the construction" of its facilities prior to the effective date of the amendment.

Nor can FBP's pre-construction activities be construed as the "establishment" of its facilities. It is well settled that, when construing statutory or regulatory language, the entire statute or regulation must be read as a whole, and sections which are part of the same general law must be construed together and each one given effect. See, e.g., TNS Mills, Inc. v. S.C. Dep't of Revenue, 331 S.C. 611, 503 S.E.2d 471 (1998). Applying this general principle, when reading Section 44-7-160 as a whole, it is clear that the statute distinguishes between the "construction or establishment" of a facility and expenditures or financial obligations "made in preparation for the offering or developing of a project. . . ." S.C. Code Ann. § 44-7-160(1) and (9) (Supp. 1998). A person or health care facility is required to obtain a CON prior to either the "construction or establishment of a new health care facility" or "an expenditure or financial obligation made in preparation for the offering or developing of a project which requires certification of need," in excess of a certain threshold amount. Id.; see also 24A S.C. Code Ann. Regs. 61-15 § 102 (1)(a) and (i) (Supp. 1998); 24A S.C. Code Ann. Regs. 61-15 § 701 (Supp. 1998) (stating that "expenditures in preparation for the offering or development of a health service" shall include such expenditures as those incurred for studies, surveys, designs, plans, working drawings, and specifications). The fact that the statute and regulations make this distinction mandates the conclusion that the "construction or establishment" of a health care facility cannot include expenditures or financial obligations made in preparation for the development of that facility. Therefore, FBP had not "undertaken" the "construction or establishment" of its facilities by engaging in pre-construction activities prior to the effective date of the amendment.

FBP further contends that the amendment cannot lawfully be applied to it because to do so would be an impermissible retroactive application which would deprive it of vested rights and impair the contracts it had already entered into prior to March 23, 1999. Since I have concluded that FBP had not undertaken the construction or establishment of its facilities prior to that date, there can be no retroactive application of the amendment to FBP in this case. However, for the sake of argument, I will address FBP's contention.



In general, statutes are not to be applied retroactively unless that result is so clearly compelled as to leave no room for doubt. However, an exception to the general rule exists for statutes effecting changes in remedies or procedure. American Nat. Fire Ins. Co. v. Smith Grading and Paving, Inc., 317 S.C. 445, 454 S.E.2d 897 (1995). Since Act 10 of 1999 changes the procedure which a radiation therapy center must follow in order to begin operation, it is a remedial or procedural statute. However, even if a statute is remedial or procedural, it cannot be retroactively applied if it violates a contractual obligation, creates a new right, or divests a vested right. Hooks v. Southern Bell Tel. & Tel. Co., 291 S.C. 41, 351 S.E.2d 900 (Ct. App. 1986); Superior Motors, Inc. v. Winnebago Industries, Inc., 359 F. Supp. 773 (D.S.C. 1973). The question, therefore, is whether FBP's activities prior to March 23, 1999 created a vested right to operate a radiation therapy facility.

Rights are vested "only when they are absolute, complete and unconditional, and not dependent upon any future act, contingency or decision." United States Rubber Co. v. McManus, 211 S.C. 342, 45 S.E.2d 335, 338 (1947). In this case, FBP has no absolute or unconditional right to construct a radiation therapy facility in reliance upon the law as it existed prior to March 23, 1999. The operation of a radiation therapy facility is not a "right," but rather a privilege which is subject to conditions imposed by the State in the exercise of its police power. Vested rights cannot arise from an assumption that public regulatory requirements will remain fixed. In Dantzler v. Callison, 230 S.C. 75, 94 S.E.2d 177, 188 (1956), the South Carolina Supreme Court noted:

No person can acquire a vested right to continue, when once licensed, in a business, trade, or profession which is subject to legislative control and regulation under the police power, as regulations prescribed for such may be changed or modified by the legislature, in the public interest, without subjecting the action to the charge of interfering with contract or vested rights.



See also S.C. Dep't of Revenue and Taxation v. Rosemary Coin Machines, Inc., 331 S.C. 234, 500 S.E.2d 176 (Ct. App. 1998) (noting that licenses and permits granted by the state are privileges rather than contracts and are subject to change by the state law at any time for the public good). Moreover, the South Carolina Supreme Court has specifically held that there can be "no substantial impairment of a contract where the subject of the contract is a highly regulated business whose history makes further regulation foreseeable." Mibbs v. S.C. Dep't of Revenue, No. 25024, slip op. at 13-14 (S.C. Dec. 6, 1999).

FBP further contends that DHEC waived its position with respect to the applicability of the amendment, because, subsequent to March 23, 1999, it approved a shielding plan for one of the FBP facilities and otherwise dealt with FBP as if the CON requirements did not apply. This argument is in the nature of estoppel. In effect, FBP is arguing that DHEC should be estopped from raising any issues with respect to the applicability of the amendment. However, the doctrine of estoppel may not be applied to deprive the government of the due exercise of its police power, or to frustrate the purpose of its laws or thwart its public policy. Carman v. S.C. Alcoholic Beverage Control Comm'n, 315 S.C. 320, 433 S.E.2d 885 (Ct. App. 1993). Moreover, the government cannot be estopped by erroneous conduct or statements of its officers or agents which have been relied upon by a third party to his detriment. Goodwine v. Dorchester Dept. of Social Services, ___ S.C. ___, 519 S.E.2d 116 (Ct. App. 1999). For all the foregoing reasons, I conclude that the March 23, 1999 amendment to the CON Act may validly be applied to FBP.(3) Accordingly, the Motions for Summary Judgment must be granted.



3. FBP's Noncompliance with the Former CON Statutes

Moreover, even under the law as it existed prior to the March 23, 1999 amendment, FBP would not be entitled to the facility registration it seeks. Prior to the amendment, a radiation therapy facility was required to obtain a CON only if its project costs exceeded $600,000. 24A S.C. Code Ann. Regs. 61-15 § 102 (1)(f) (Supp. 1998). However, if any question existed as to the applicability of the CON requirements to a particular project, a potential applicant was required to request a formal determination by DHEC as to whether the project had to comply with the CON requirements. 24A S.C. Code Ann. Regs. 61-15 § 102 (3) (Supp. 1998) ("When any question exists, a potential applicant shall forward a letter requesting a determination by the Department as to the applicability of the certificate of need requirements to a particular project." (emphasis added)). The regulation does not indicate that a potential applicant may unilaterally decide that no question exists as to the applicability of the CON requirements. Rather, if any question exists, either in the mind of the applicant or in the mind of DHEC, a determination of non-applicability is mandated before the applicant can proceed. Such a question certainly existed in this case, as evidenced by the letters received by DHEC from third parties expressing concern about the proposed project, as well as the correspondence between DHEC and FBP. In this case, FBP did request a letter of non-applicability, but formally withdrew that request prior to any determination by DHEC. Thereafter, it proceeded to construct its facilities without either renewing that request or applying for a CON. By doing so, FBP proceeded at its own risk and was in violation of the requirements of the CON Act. Therefore, as a matter of law, FBP is not entitled to an x-ray facility registration. The Motions for Summary Judgment filed by GMH, MBRTC, and DHEC are, accordingly, hereby granted.



C. Motion to Consolidate and Motion to Stay

Because I have granted the Motions for Summary Judgment, thus disposing of this case, MBRTC's Motion to Consolidate and DHEC's Motion to Stay are now moot.



ORDER

For all the foregoing reasons, GMH's and MBRTC's Motions to Intervene and GMH's, MBRTC's, and DHEC's Motions for Summary Judgment are hereby GRANTED and this case is hereby dismissed.

AND IT IS SO ORDERED.





_________________________________

Marvin F. Kittrell

Chief Judge



Columbia, South Carolina

February 16, 2000



1. GMH's application for a CON is the subject of Myrtle Beach Radiation Therapy Center and F.B.P., L.L.C. v. DHEC and Georgetown County Memorial Hospital, Docket No. 99-ALJ-07-0625-CC. This case is the subject of MBRTC's pending Motion to Consolidate.

2. DHEC's pending Motion for Stay requests that these proceedings be stayed pending the outcome of the injunctive relief action in Circuit Court, in the event that the motions for summary judgment are denied.

3. FBP also contends that the application of the amendment to it would deny it due process and equal protection under the law. FBP's due process argument is based upon the assertion that it had a vested property right to continue with the establishment of its facilities. Since I have found that FBP had no such vested rights, this argument must of necessity fail. Furthermore, FBP conceded at the hearing that its equal protection argument goes to the merits of the case rather than the summary judgment motion. Therefore, it is not necessary to address this argument for purposes of the summary judgment motion.


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