SC Administrative Law Court Decisions

STATEMENT OF THE CASE

This matter comes before me on Petitioner Colonial Management Group's ("Colonial") request for a contested case hearing to challenge Respondent South Carolina Department of Health and Environmental Control's (DHEC or "Department") decision, dated December 13, 2001, to issue a Certificate of Need (CON) to Respondent Spartanburg Treatment Associates, Inc. (STA) for the establishment of a methadone treatment center in Spartanburg, South Carolina. Specifically, Petitioner contends that DHEC's decision to award the CON must be reversed because DHEC lacked adequate documentation of community need, failed to consider the impact of the proposed methadone clinic on existing facilities, and relied upon faulty financial documentation when it decided to issue the CON to STA. Intervenor Piedmont Treatment Center ("Piedmont") intervened in this matter to likewise oppose the issuance of the CON for STA's methadone clinic.

After timely notice to the parties, a hearing of this matter was held on July 16, 2002, at the Administrative Law Judge Division in Columbia, South Carolina. Having weighed the evidence and arguments presented at the hearing and having considered the law applicable to this case, I find that STA's proposed methadone clinic meets the criteria for the issuance of a CON and that the Department's decision to issue the CON to STA was, therefore, proper.

STIPULATIONS OF LAW AND FACT

At the hearing of this matter, the parties stipulated and agreed to the following findings of fact and conclusions of law, which were submitted into evidence in writing as Petitioner's Exhibits #1 and 2:

1. On July 6, 2001, Spartanburg Treatment Associates, Inc. ("STA") filed its application for a Certificate of Need ("CON") to develop a methadone treatment facility in Spartanburg, South Carolina.

2. A methadone treatment facility is a "health care facility" as defined by S.C. Code Ann. § 44-7-130(10).

3. A person or health care facility is required to obtain a CON from the South Carolina Department of Health and Environmental Control before undertaking the construction or other establishment of a new health care facility, including a methadone treatment facility.

4. Petitioner Colonial Management Group owns and operates Greenville Metro Treatment Center, a methadone treatment facility located in Greenville, South Carolina. Intervenor Piedmont Treatment Center is also a methadone treatment center located in Greenville, South Carolina.

5. Petitioner Colonial Management Group and Intervenor Piedmont Treatment Center are "affected persons" as defined by S.C. Code Ann. § 44-7-130(1), in that they provide the same services as STA proposes to provide in upstate South Carolina.

6. On September 17, 2001, Petitioner Colonial Management Group notified DHEC that as an "affected person," it wished to be notified of any decision or other information concerning STA's application.

7. On December 3, 2001, Petitioner Colonial Management notified DHEC in writing that it opposed STA's application for a CON.

8. Also, on December 3, 2001, DHEC conducted a public hearing on STA's application, at which Petitioner Colonial Management Group appeared and voiced opposition to the proposed facility.

9. On December 13, 2001, DHEC recommended approval of STA's application for a CON.

10. On December 19, 2001, Petitioner Colonial Management Group timely filed a request for a contested case hearing, pursuant to S.C. Code Ann. § 44-7-210(D)(2), on DHEC's decision to award a CON to STA.

11. Sherry S. Howell ("Howell") reviewed the financial documentation presented to DHEC in Spartanburg Treatment Associates' CON application, including the documentation relating to start-up capitalization, start-up forecast, and the cash flow forecast for years one through three contained in the DHEC record at pages 12 through 16 (the "financial documentation").

12. Howell is a certified public accountant, licensed in North Carolina and South Carolina; however, her licensure is on inactive status due to her decision to stay at home with her young children.

13. Howell's work experience includes:

1997-1999 Brigman, Holcomb, Weeks & Co., P.A.

Greenville, SC

Staff accountant

1995-1997 The Associates

Dallas, TX

Assistant Vice President of Credit Administration

1992-1995 Transamerica

Charlotte, NC

Credit Analyst

14. At the time she reviewed the financial documentation in Spartanburg Treatment Associates' application, Howell was, and still is, unemployed.

15. Spartanburg Treatment Associates did not pay or otherwise compensate Howell for reviewing the financial documentation contained in its CON application, nor has Howell asked to be paid or compensated.

16. Howell spent a total of approximately forty-five minutes reviewing the financial information contained in Spartanburg Treatment Associates' CON application.

17. Howell has never worked for a methadone treatment facility, never performed accounting functions for a methadone treatment facility, and has no previous experience with methadone treatment facilities.

18. Howell did not prepare or provide the financial documentation contained in Spartanburg Treatment Associates' CON application.

19. Howell did not review any documentation or records to verify the accuracy of the financial documentation contained in Spartanburg Treatment Associates' CON application. Similarly, Howell did not review any financial information, including financial statements, balance sheets, or other books of account, relating to other methadone treatment facilities, including those owned and operated by Brent Brady, the sponsor of Spartanburg Treatment Associates' CON application.

20. Other than verifying that the mathematical computations were correct, Howell did not and has not attempted to verify the accuracy and/or reliability of the financial documentation and information contained in Spartanburg Treatment Associates' CON application and, therefore, does not have an opinion as to the reliability of the financial documents and information contained in Spartanburg Treatment Associates' CON application.

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:

1. Methadone is a synthetic narcotic medication used to treat individuals who are addicted to heroin or other opiates. Methadone maintenance is a course of treatment in which methadone is typically administered on a daily basis over a period of time to relieve withdrawal symptoms, reduce craving, and permit normal functioning in opiate-addicted individuals. Methadone treatment is often directed toward detoxification, which is a medically-supervised, gradual reduction or tapering of the methadone dose over time to achieve the elimination of tolerance and physical dependence on methadone. These treatment programs are generally conducted on an outpatient basis from methadone clinics. See 25A S.C. Code Ann. Regs. 61-93 §§ 101(LL) and 101(OO) (Supp. 2001).

2. On July 6, 2001, Brent Brady, the owner of Respondent Spartanburg Treatment Associates, Inc., submitted a CON application to DHEC for the development of a methadone treatment facility in Spartanburg, South Carolina. STA proposes to establish a methadone clinic at 930 South Pine Street in downtown Spartanburg from which it will provide methadone maintenance and detoxification programs for individuals with heroin or opiate-related addictions. STA's proposed clinic will serve the population of Spartanburg County, as well as the populations in surrounding counties, such as Cherokee, Union, and Laurens Counties, that are not currently served by a methadone clinic. The clinic will not be located within 500 feet of a church, an elementary or secondary school, a boundary of a residential district, a public park adjacent to a residential district, or the property line of a lot devoted to residential use.

3. STA's proposed methadone clinic is consistent with the characteristics of Narcotic Treatment Programs as described in the 2001 State Health Plan and meets the requirements for the licensure of such facilities as set forth in the State Health Plan.

4. Mr. Brady, a registered pharmacist, has a total of four and one-half years of experience in the field of methadone treatment. Mr. Brady was employed as a pharmacist at the Piedmont Treatment Center in Greenville, South Carolina, for two years, and has operated the Queen City Treatment Center in Charlotte, North Carolina, and the Rowan Treatment Center in Salisbury, North Carolina, since 2000 and 2001, respectively.

5. DHEC received STA's CON application on July 10, 2001. After requesting and receiving additional information regarding the proposed location of the clinic, DHEC deemed STA's application complete by letter dated August 29, 2001. In that letter, DHEC identified the project review criteria that would be considered most important in evaluating STA's application. These criteria were: (1) compliance with the State Health Plan (citing 24A S.C. Code Ann. Regs. 61-15 § 802(1) (Supp. 2001)), (2) documentation of community need (citing Sections 802(2)(a) and 802(2)(c) of Regulation 61-15), and (3) accessibility (citing Sections 802(3)(b) and 802(3)(c) of Regulation 61-15). DHEC considered STA's application and a CON application for a methadone clinic to be located in Duncan, South Carolina, filed by Right Choice Treatment Center, Inc., ⁽¹⁾ to be competing applications. DHEC held a public hearing on the two competing CON applications on December 3, 2001, in Spartanburg, South Carolina. By letter dated December 13, 2001, DHEC approved STA's application and issued a CON to STA for the establishment of an outpatient methadone clinic in Spartanburg. The Department primarily based this decision on the following facts:

[STA] has the support of the Spartanburg County Health Planning Commission and the proposed site would be more centrally located to serve the overall needs of the residents of Spartanburg County, which will make this service more accessible to Spartanburg County residents. In addition, this site is further away from the existing Narcotic Treatment Programs in Greenville County and will have less of an impact on the existing providers in Greenville County.

(Resp't DHEC Ex. #1, at 121.) On December 19, 2001, Petitioner Colonial Management Group filed with DHEC a request for a contested case to challenge the decision to issue the CON to STA.

6. According to 1999 estimates from the United States Census Bureau, Spartanburg County has a population of approximately 250,000, making it the fourth largest county in South Carolina behind Greenville, Charleston, and Richland counties. (Resp't DHEC Ex. #1, at 17.) However, there are no methadone treatment facilities currently located in Spartanburg County. ⁽²⁾ At the time of its CON application, STA estimated, rather speculatively, that some 200 patients from the Spartanburg area were traveling to Greenville on a daily basis for methadone treatment. ⁽³⁾ Data included in the portion of the 2001 State Health Plan pertaining to Narcotic Treatment Programs indicates that, as of December 31, 1999, at least 100 individuals were traveling from Spartanburg County to seek methadone treatment in other counties. (Pet'r Ex. #3, at Tab 1.) At the hearing of this case, Trent Reece, the Regional Director of Colonial Management Group, testified that 103 of Colonial's 335 patients currently travel from the Spartanburg area to receive treatment at Colonial's Greenville clinic. In addition, Larry Worley testified that his methadone clinic in Greenville was currently treating some seventy to eighty patients from the Spartanburg area, and that he saw a need for a methadone clinic in Spartanburg County. This testimony suggests that, at present, approximately 175 to 180 individuals from Spartanburg County receive methadone treatment in Greenville. ⁽⁴⁾

7. In addition to the information provided by interested parties at the public hearing, DHEC reviewed a September 28, 2001 article from the Spartanburg Herald-Journal in evaluating STA's CON application. (Resp't DHEC Ex. #1, at 76-78.) This article contains information on the scope of the problem of opiate-related addiction in Spartanburg County gathered from David Forrester, the executive director of the Spartanburg Alcohol and Drug Abuse Commission, and Lieutenant Ron Gahagan in the Spartanburg County Sheriff's Office. The article also contains an estimate from Mr. Worley that 125 patients travel from Spartanburg to Greenville on a daily basis for methadone treatment.

8. The Spartanburg County Health Planning Commission reviewed the competing CON applications and, by letter dated November 8, 2001, recommended to DHEC that STA's application be approved. In making this recommendation, the Commission informed DHEC that it found that "there is a legitimate need for such a center and that a central location might best suit the overall needs of the residents in the county who desire this service." (Resp't DHEC Ex. #1, at 106.) Therefore, the Commission determined that STA's proposed location in downtown Spartanburg would be a more appropriate site for a methadone clinic than the Duncan area location planned for the Right Choice Treatment Center. (Resp't STA Ex. #1, at 30.)

9. Greenville, South Carolina, is approximately thirty-five miles from Spartanburg, South Carolina. By locating in downtown Spartanburg, STA's methadone clinic will dramatically increase the accessibility of methadone treatment services for individuals in Spartanburg County and in neighboring counties to the south and east.

10. The financial documentation submitted by STA in its CON application is of marginal reliability. Both the forecast of the start-up costs for the facility and the budget projections for the first three years of its operations were produced by Todd Alan Jamieson, the Program Director of Mr. Brady's methadone clinics in North Carolina. Mr. Jamieson is not an accountant and he testified at the hearing that he did not know, and therefore did not use, generally recognized accounting principles in producing the financial information for the CON application. ⁽⁵⁾ However, as stipulated to above, STA did have an accountant review the accuracy of the mathematical calculations in the budget projections, but did not have that accountant review the accuracy and reliability of the underlying financial data. Consequently, the financial documentation provided by STA in its application contains some inaccurate and unreliable information. For example, the projection of start-up costs provided by STA in its application appears to understate rent costs by nearly $1500 per month and to underestimate costs associated with preparing the clinic for business. Also, the cash-flow forecast fails to account for a salary to Mr. Brady and for rent costs beyond start-up. Further, the number of patients estimated in the three-year budget projection was not developed according to a recognized methodology. ⁽⁶⁾

11. Despite the inaccuracies and inconsistencies in the budget projections in STA's application, I find that STA's proposed methadone clinic is financially viable. Mr. Brady testified that, from his experience in operating two other methadone clinics, STA's clinic in Spartanburg will reach its break-even point with only seventy to eighty patients. Further, as a small, owner-operated clinic, STA will be able to effectively control costs. Mr. Brady testified that he would waive his salary at STA until the clinic becomes profitable, as he has done when starting his other clinics. Also, Mr. Brady will be able to serve as the pharmacist of STA's new clinic, and STA is leasing the space for its clinic, rather than constructing a new facility. Moreover, STA's patient projections are not necessarily unreasonable. As noted above, testimony has established that nearly 200 individuals from Spartanburg currently receive methadone treatment, and, according to figures in the 2001 State Health Plan, the total number of methadone patients in other large counties in South Carolina exceeds 400 patients per county. ⁽⁷⁾ These numbers are consistent with STA's estimate that it will serve 275 patients in its first year of operation and at least 400 patients by its third year.

12. Colonial's Greenville methadone clinic, the Greenville Metro Treatment Clinic ("Greenville Metro") , failed to make a profit in 1999, 2000, and 2001, having net losses of $11,000, $22,460, and $30,939 in those years, respectively. These income figures include significant expenses for "corporate services and support"-i.e., Greenville Metro's portion of the costs associated with operating Colonial Management Group. Despite these expenses, the Greenville Metro Treatment Clinic is currently showing a profit for 2002, and Colonial has made a profit with its clinic in York County, South Carolina. However, Colonial estimates that if a methadone clinic is opened in Spartanburg, the Greenville Metro Treatment Center will lose the 103 patients who currently travel to the facility from Spartanburg to receive treatment, and that this nearly one-third reduction in its patient load will return Greenville Metro to a position of net loss.

CONCLUSIONS OF LAW

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

1. This tribunal has jurisdiction over this contested case pursuant to S.C. Code Ann. § 44-7-210(E) (Supp. 2000) and S.C. Code Ann. §§ 1-23-310 et seq. (1986 & Supp. 2001).

2. A methadone treatment facility is defined as a "health care facility" under S.C. Code Ann. § 44-7-130(10) (Supp. 2000), and therefore, under S.C. Code Ann. § 44-7-160(1) (Supp. 2000), a person must obtain a Certificate of Need from the Department before constructing a new methadone treatment facility. 24A S.C. Code Ann. Regs. 61-15 § 202 (Supp. 2001) sets forth the requirements for CON applications, including applications for methadone clinics. Among the twenty-seven categories of information required in a CON application under Section 202 is the requirement that a new facility provide a projected annual budget for not less than three fiscal years following the completion of the proposed project; this projection must be "developed" by an accountant. Id. § 202(16).

3. Upon accepting a CON application and the appropriate fee, the Department may request additional information from the applicant until the application can be deemed complete. Id. § 302. When the Department has determined that the CON application is complete, the Department must then inform the applicant of the relative importance of the project review criteria to be used in reviewing the application. ⁽⁸⁾ Id. § 304, § 801(2). The relative importance of these review criteria must be tailored to suit the specific project under review. Id. § 801(2). A project does not have to satisfy every criterion in order to be approved, id. § 801(3), but no project may be approved unless it is consistent with the State Health Plan and a project may be denied if the Department determines that the project does not sufficiently meet one or more of the review criteria, even if the project complies with the State Health Plan. See 24A S.C. Code Ann. Regs. § 307(1), § 801(3) (Supp. 2001); see also S.C. Code Ann. § 44-7-210(C) (Supp. 2000).

4. With regard to the instant application, DHEC determined that the most important project review criteria were: (1) compliance with the State Health Plan, see 24A S.C. Code Ann. Regs. 61-15 § 802(1); (2) community need documentation, including the identification of the target population and a demonstration of how the project meets an identified, documented need of the target population, see id. § 802(2)(a), (2)(c); and (3) the accessibility or distribution of the proposed service, including evidence that the location of the service will serve medically underserved areas and will not unnecessarily duplicate existing services and a showing that the location of the service will allow for the delivery of necessary support services in an acceptable period of time and at a reasonable cost. See id. § 802(3)(b), (3)(c). In reaching a decision on a CON application under the relevant criteria, DHEC staff must review the entire record established by the Department, "including but not limited to, the application, comments from affected persons and other persons concerning the application, data, studies, literature and other information available to the Department." Id. § 308(1).

5. Petitioner and Intervenor are "affected persons" for the purposes of bringing a contested case to challenge DHEC's decision to issue a CON to Respondent STA. See S.C. Code Ann. § 44-7-130(1) (Supp. 2000); 24A S.C. Code Ann. Regs. 61-15 § 103(1) (Supp. 2001). In bringing such a challenge, Petitioner and Intervenor, as the moving parties, bear the burden of proof in this contested case. See S.C. Code Ann. § 44-7-210(E) (Supp. 2000); 24A S.C. Code Ann. Regs. 61-15 § 403(1) (Supp. 2001); 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 § 360 (1994) (same). Therefore, Petitioner Colonial and Intervenor Piedmont must prove by a preponderance of the evidence that STA's proposed methadone clinic does not meet the criteria necessary for approval under the applicable statues and regulations. 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); 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). ⁽⁹⁾

6. The issues to be considered at the contested case hearing on a CON application are limited to those presented or considered during the staff review and decision process. S.C. Code Ann. § 44-7-210(E) (Supp. 2000); 24A S.C. Code Ann. Regs. 61-15 § 403(1) (Supp. 2001). However, this limitation of the issues does not preclude the use of any information pertinent to the issues considered by Department staff, as long as that information was available to the Department during the project review. See 24A S.C. Code Ann. Regs. 61-15 § 308(1) (Supp. 2001).

7. 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).

8. Here, Petitioner contends that DHEC improperly granted a CON to STA because, in reaching the decision to issue the CON, DHEC: (1) lacked adequate documentation of community need for the proposed clinic, (2) relied upon inaccurate and unreliable financial documentation regarding the proposed facility, and (3) failed to consider the adverse impact the establishment of the proposed clinic would have on Petitioner's methadone treatment facility in Greenville.

9. I find, however, that DHEC properly issued a CON to STA for the establishment of a methadone clinic in Spartanburg, South Carolina. DHEC properly determined that the proposed clinic was consistent with the 2001 State Health Plan and met the project review criteria the Department found to be most important in deciding whether to issue a CON for the clinic.

10. First, STA's proposed methadone treatment facility is consistent with the 2001 State Health Plan. As the 2001 State Health Plan was authored before the Department could promulgate regulations for the licensure of methadone treatment facilities, ⁽¹⁰⁾ the Plan contains only a minimal discussion of the requirements a methadone clinic must meet to receive a CON. Nevertheless, STA's proposed clinic is consistent with the State Health Plan's description of narcotic treatment programs and does satisfy the location requirements that, while promulgated subsequent to the issuance of the 2001 State Health Plan, are specifically referenced in the Plan. ⁽¹¹⁾

11. Second, DHEC had sufficient documentation of a community need for STA's proposed methadone clinic when it issued the CON. As Petitioner recognizes, STA's CON application does not contain adequate documentation of community need. Beyond a reference to statistics from the Spartanburg County Sheriff's Office indicating a rise in all drug crimes and a speculative estimate of 200 current methadone patients in Spartanburg County, the CON application is devoid of any documentation of need for the proposed clinic. However, before it reached its final decision to issue a CON to STA, DHEC had acquired adequate documentation of such a need. Among the documentation of need DHEC relied upon in granting the CON were: statistics from the 2001 State Health Plan indicating that at least 100 individuals from Spartanburg County traveled outside the county for methadone treatment in 1999, a letter from the Spartanburg County Health Planning Commission recognizing a need for a methadone clinic in Spartanburg and recommending the approval of STA's application, information gathered at a public hearing including testimony from Larry Worley that a documented need for a methadone clinic exists in Spartanburg and a statement from Petitioner that approximately one-third of the patients at its Greenville clinic travel from Spartanburg to receive treatment, population statistics for Spartanburg County and neighboring counties, and statistics regarding the scope of the problem of opiate addiction in Spartanburg County taken from a newspaper article in the Spartanburg Herald-Journal. This information, taken as a whole, clearly constitutes sufficient documentation of need upon which the Department could base its decision to approve STA's CON application.

12. Further, testimony taken at the hearing of this contested case demonstrated a need for the proposed methadone clinic in Spartanburg. Testimony from representatives of Petitioner and Intervenor established that nearly 200 patients currently travel from Spartanburg County on a daily basis to receive methadone treatment in Greenville. And, Mr. Worley affirmatively testified that a need for a methadone clinic currently exists in Spartanburg County.

13. Third, DHEC correctly determined that the establishment of STA's proposed clinic in downtown Spartanburg would dramatically increase the accessibility of methadone treatment services for opiate-addicted individuals in Spartanburg County. As noted above, there are no methadone treatment facilities currently located in Spartanburg County. Therefore, individuals residing in Spartanburg County who are addicted to heroin or other opiates must now travel out of the county to receive treatment for their addictions. And, as methadone treatment requires the administration of methadone on a daily basis, these individuals must make this trip every day. For most methadone patients in Spartanburg, this means making a daily trip to one of the two treatment facilities in Greenville; this trip, on average, covers a round-trip distance of nearly seventy miles and takes well over an hour to make. This required travel presents a significant hurdle to individuals in Spartanburg needing treatment: patients must coordinate the travel to Greenville with their work schedules, patients who do not have their own automobiles must somehow arrange for transportation to Greenville, and patients must find the funds to cover the costs of making the daily trip to Greenville. The placement of a methadone clinic in downtown Spartanburg would remove, or significantly decrease, these obstacles to treatment. The removal of these obstacles would not only make it easier for current methadone patients from Spartanburg to receive treatment, but also make it more likely that addicted individuals in Spartanburg who had not yet sought methadone treatment would now do so.

14. DHEC properly concluded that STA's proposed methadone clinic in Spartanburg is consistent with the 2001 State Health Plan and meets the need and accessibility concerns DHEC determined to be most important in reviewing the CON application. In particular, DHEC had adequate documentation of a community need for the proposed clinic when it issued the CON to STA.

15. Petitioner's remaining arguments must also fail. First, while it is clear that STA provided unreliable financial information to DHEC in its CON application and that DHEC did not require STA to provide more reliable information at any point during the review process, this reliance upon unreliable financial documentation, standing alone, does not require the reversal of DHEC's decision to grant the CON. As Petitioner correctly identifies, Section 202(16) of Regulation 61-15 requires the budget projections in CON applications to be "developed by an accountant" and Section 802(5) of that Regulation requires that "all financial entries and assumptions contained in [CON applications] must be provided by an accountant who stands behind the reliability of this financial information." However, these provisions must be read in conjunction with, and in the context of, Section 801(3) of Regulation 61-15, which specifies that a project need not satisfy every project review criterion to be approved, and Section 308(1) of that Regulation, which provides that the CON application is only one of many sources of information the Department may rely upon in making its final decision on a CON request. In the instant case, the Department did not establish the "economic considerations" project review criteria, i.e., Section 802(5) through Section 802(19) of Regulation 61-15, as important criteria under Section 304 and 801(2) of Regulation 61-15 for the review of STA's CON application. Rather, DHEC placed greater weight upon community need and treatment accessibility concerns than on economic factors in evaluating, and eventually granting, a CON for STA's proposed methadone clinic.

16. The Department's decision to place lesser weight on the financial aspects of STA's application was entirely proper. While the financial documentation supporting STA's application is not irrelevant and could not be disregarded by the Department, the Department was required to weight the importance of such documentation in the CON review process with regard to the particular project in question. Here, in the context of an application for a methadone treatment facility, with low start-up and operating costs, questions of financial viability are not as important as they would be in reviewing, for example, a CON application for a hospital, nursing home, or ambulatory surgical facility, with capital expenditures and operating expenses significantly greater than those at hand. Therefore, the Department rationally placed lesser importance on the financial aspects of STA's application in its review process and properly found that the community need and accessibility benefits to be provided by the proposed clinic outweighed the weaknesses in the financial documentation provided by STA. Futhermore, whatever the reliability of the financial projections in the CON application, the evidence and testimony presented at the hearing suggests that STA's clinic will be financially viable. See Finding of Fact #11, supra.

17. Second, despite Petitioner's argument to the contrary, the Department did consider the adverse impact of the establishment of STA's methadone clinic on the methadone treatment facilities in Greenville when it granted STA's application. At the public hearing regarding STA's application, DHEC received information from Colonial regarding the potential impact the establishment of STA's clinic would have on Colonial's clinic in Greenville. Further, DHEC specifically addressed the question of adverse impact in making its decision to grant a CON to STA rather than to the Right Choice Treatment Center. See Resp't DHEC Ex. #1, at 121 ("In addition, this site [STA's location in downtown Spartanburg] is further away from the existing Narcotic Treatment Programs in Greenville County and will have less of an impact on the existing providers in Greenville County.") (emphasis added). Moreover, as with the financial criteria, DHEC did not identify the adverse impact project review criteria, see 24A S.C. Code Ann. Regs. 61-15 § 802(3)(h), § 802(23) (Supp. 2001), as important criteria for the review of STA's CON application. That is, in its review of the proposed project, DHEC found that the community need and accessibility concerns satisfied by the clinic were more important than the adverse impact of the proposed clinic on other facilities. The Department fully considered the potential adverse impact the establishment of STA's clinic would have on the existing clinics in Greenville, including Petitioner's clinic, and found that the benefits of locating a methadone clinic in Spartanburg outweighed the potential negative impact of that clinic on the facilities in Greenville.

18. DHEC properly awarded a CON to STA for the establishment of a methadone clinic in Spartanburg. At the hearing, Petitioner methodically and adeptly pointed out certain deficiencies in STA's CON application; however, these flaws are not fatal to the application. In particular, Petitioner is correct that STA did not provide adequate documentation of community need for its clinic either in its original CON application or at the hearing of this matter. Further, Petitioner is correct that STA did not provide reliable financial documentation regarding its clinic either in its original application or at the hearing of this matter. Nevertheless, DHEC properly granted a CON to STA. For, while STA did not provide documentation of community need in its application, and presented virtually no evidence in this regard at trial, DHEC had such documentation before it when it made the decision, based on the entire CON file, to award the CON. And, while STA did not provide DHEC with reliable financial information prepared by an accountant, DHEC was within its discretion to place less weight on the financial aspects of the project and more weight on the community need and accessibility factors in reaching its decision. The CON review process involves the consideration of a variety of information from a variety of sources and the balancing of thirty-three separate project review criteria. A deficiency in one source of information or a failure to satisfy one review criteria does not, in itself, require the denial of a CON application. Here, the Department, considering such an array of information and weighing the relative importance of the review criteria, determined that STA's CON application fulfilled the requirements of the 2001 State Health Plan, met a documented community need, and satisfied concerns regarding the accessibility of such services. Further, the Department determined that the benefits of the proposed project under those criteria outweighed other concerns, such as the unreliability of the financial documentation or the potential negative impact of the facility on other clinics. I find that these determinations were correctly made.

ORDER ⁽¹²⁾

Based upon the Stipulations, Findings of Fact, and Conclusions of Law stated above,

IT IS HEREBY ORDERED that DHEC's decision to grant Respondent Spartanburg Treatment Associates' application for a Certificate of Need for the establishment of an outpatient methadone treatment facility in Spartanburg, South Carolina, is SUSTAINED.

AND IT IS SO ORDERED. ______________________________

JOHN D. GEATHERS

Administrative Law Judge

August 7, 2002

Columbia, South Carolina

1. The CON application for Right Choice Treatment Center was sponsored by Larry Worley, the owner and operator of Intervenor Piedmont Treatment Center in Greenville, South Carolina.

2. Further, there are no such facilities presently located in Cherokee, Union, or Laurens Counties. In fact, there are only seven methadone treatment facilities currently operating in South Carolina; these clinics are located in Charleston, North Charleston, West Columbia, Greenville, Anderson, and Fort Mill. (Pet'r Ex. #3, at Tab 1.)

3. The only statistics cited by STA in its application regarding the number of opiate-addicted individuals needing treatment in the Spartanburg area are drug crime statistics provided by the Spartanburg County Sheriff's Office. However, these figures do not break down the crimes by the type of illegal drug involved, and therefore do not provide an accurate estimate of the number of individuals in the Spartanburg area needing treatment for addiction to opiates.

4. This testimony is consistent with the evidence presented to DHEC by Colonial and Mr. Worley at the public hearing on December 3, 2001. In a written statement, Colonial stated that, as of September 2001, eighty-two of its 239 patients were from the Spartanburg area. (Resp't DHEC Ex. #1, at 110.) Further, at the public hearing, Mr. Worley indicated that a documented need of 217 patients existed in Spartanburg County. (Resp't DHEC Ex. #1, at 114.)

5. Further, Mr. Jamieson testified that he prepared the three-year budget projection on a computer program with which he was only minimally familiar.

6. STA estimates that it will have 275 patients by the end of its first year of operation, 350 patients by the end of the second year, and at least 400 patients by the end of the third year. Mr. Jamieson arrived at this high-end estimate by taking an estimate of the percentage of the United States population addicted to opiates from a study known as the "Dawn Report," doubling the number to compensate for underreporting, rounding that percentage up to 1%, assuming that 10 to 15% of that 1% will seek methadone treatment, and then applying that resulting percentage to the combined populations of Spartanburg, Cherokee, Union, and Laurens counties to reach an estimate of 446 potential patients for STA's methadone clinic.

7. The two methadone facilities in Charleston County treated approximately 430 patients and the two facilities in Greenville County treated some 575 patients in 2001. (Pet'r Ex. #3, at Tab 1.)

8. These thirty-three project review criteria are listed in Section 802 of Regulation 61-15. The fifth through nineteenth criteria relate to economic considerations, such as projected revenues and expenses, net income, methods of financing, and cost containment. Other criteria pertain to the need for the proposed project, health system resources, site suitability, and other special considerations. See 24A S.C. Code Ann. Regs. 61-15 § 801, § 802 (Supp. 2001).

9. The preponderance of the evidence is "[t]he greater weight of the evidence" or "superior evidentiary weight that, though not sufficient to free the mind wholly from all reasonable doubt, is still sufficient to incline a fair and impartial mind to one side of the issue rather than the other." Black's Law Dictionary 1201 (7th ed. 1999). "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 Frazier v. Frazier, 228 S.C. 149, 89 S.E.2d 225 (1955)).

10. Methadone treatment facilities were first included in the CON Act in 1998. See 1998 Act No. 303 §§ 1, 4 (codified at S.C. Code Ann. § 44-7-130(10) and § 44-7-210(F), respectively). Pursuant to that enactment, the Department promulgated regulations for the licensure of methadone clinics in 2001. These regulations can be found at 25A S.C. Code Ann. Regs. 61-93 (Supp. 2001).

11. 25A S.C. Code Ann. Regs. 61-93 § 2618 (Supp. 2001) requires methadone clinics, as well as other narcotic treatment programs, to be located at least 500 feet away from churches, elementary and secondary schools, residential districts, public parks adjacent to residential districts, and any lots devoted to residential use. The proposed location for STA's clinic satisfies these distance requirements.

12. The final decision of an Administrative Law Judge in cases involving an agency that is governed by a board or commission authorized to exercise the sovereignty of the state is initially appealed back to the board or commission of the agency from which the case arose. S.C. Code Ann. § 1-23-610(A) (Supp. 2001). Therefore, a party wishing to file an appeal of this case must do so with the DHEC Board. On appeal, the scope of review is limited as follows:

The [DHEC] Board . . . sits as a quasi-judicial tribunal in reviewing the final decision of the [Administrative Law Judge]. As the "reviewing tribunal," the Board is not entitled to make findings of fact but:

may affirm the decision or remand the case for further proceedings; or it may reverse or modify the decision if the substantive rights of the petitioner ha[ve] been prejudiced because . . . the finding, conclusion, or decision is:

(a) in violation of constitutional or statutory provisions;

(b) in excess of the statutory authority of the agency;

(c) made upon unlawful procedure;

(d) affected by other error of law;

(e) clearly erroneous in view of the reliable, probative and substantial evidence on the whole record; or

(f) arbitrary and capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion.

Brown v. S.C. Dep't of Health & Envtl. Control, 348 S.C. 507, 520-21, 560 S.E.2d 410, 417 (2002) (citing to S.C. Code Ann. § 1-23-610(D) (Supp. 2001)) (citations omitted); see also Jean H. Toal et al., Appellate Practice in South Carolina 56-57 (1999).