SC Administrative Law Court Decisions

This matter arises from a request for a contested case hearing by Providence Hospital (Providence) filed on April 15, 2002, contesting three separate decisions issued on April 9, 2002 by Respondent South Carolina Department of Health and Environmental Control (DHEC or Department) relating to Palmetto Richland Memorial Hospital's (Palmetto) Certificate of Need (CON), SC-99-44, for the construction of a Heart Center (the Project). First, Providence contests the Department's decision that Palmetto's redesign of its proposed Heart Center is not a substantial change from the Project as originally approved by the Department on November 5, 1999. Second, Providence contests the Department's decision that Palmetto achieved implementation of the CON prior to the CON's expiration on May 5, 2002. Third, Providence contests the Department's decision not to void the CON based upon the disclosure that Palmetto submitted inaccurate catheterization (cath) lab volumes in its CON application in support of its request for a fourth cath lab. Palmetto moved to dismiss each of the three causes of action. By Order dated June 24, 2002, Palmetto's motion to dismiss Providence's cause of action regarding Palmetto providing the Department with inaccurate information in support of the fourth cath lab was granted, but the motions to dismiss the remaining causes of action were denied. A hearing on the merits was conducted on July 23, 2002 and July 24, 2002 at the offices of the Administrative Law Judge Division (ALJD or Division) in Columbia, South Carolina.

Providence asserted three causes of action in its request for a contested case hearing. As stated above, Providence's third cause of action was dismissed by Order dated June 24, 2002. The remaining issues are:

1. Has Providence proven that the Department was incorrect in finding that Palmetto achieved Project implementation prior to the expiration of the CON on May 5, 2002?

2. Has Providence proven that the Department was incorrect in finding that Palmetto's April 9, 2002 redesign of its Heart Center Project was not a substantial change, and, therefore, not a new Project as described under 24A S.C. Code Ann. Regs. 61-15 § 605 (Supp. 2001)?

Providence, in what appears to be a case of first impression before the Division, has sought contested case review of the Department's application of its oversight regulations monitoring the implementation of an approved CON. The State Certificate on Need and Health Licensure Act (the Act), S.C. Code Ann. §§ 44-7-110 et seq. (Supp. 2001), requires that after the issuance of a CON, the Department monitor and enforce the applicant's implementation of the CON to assure that the Project is within the scope of the approved CON and is effectuated in a timely fashion.

DHEC issued a CON to Palmetto on October 22, 1999, finding that: (1) there was a need for the Project; (2) the Project would increase accessibility to cardiovascular services in the ten county Midlands area of South Carolina; and (3) the Project had physician and community support. After obtaining a CON for an addition or major renovation to an acute care hospital such as Palmetto, the applicant must have negotiated a valid construction contract for the Project within one year of the issuance of the CON or within the time frame specified by any extensions granted by the DHEC staff or Board pursuant to 24A S.C. Code Ann. Reg. 61-15 § 601 (Supp. 2001). Regulation 61-15 § 202 (2)(d)(10) also imposes a requirement on a CON applicant to "notify the Department in writing that the contractual agreement has been completed. For a construction project, the letter shall indicate that a construction contract specifying the beginning and completion dates of the project, has been signed by both parties." Under Regulation 61-15 § 601 (1), a "Certificate of Need becomes void if a valid construction contract . . . is not properly negotiated."

Regulation 61-15 § 605 further requires that "[i]f an applicant amends or alters his project after receipt of a CON, the Department will decide whether or not the amendment is substantial and thereby constitutes a new project." The applicable statutes and regulations are silent as to the definitions for "valid," as it relates to a construction contract, and "substantial," as it relates to the degree of change to a project.

Having observed the witnesses and exhibits presented at the hearing and closely passed upon their credibility, and considering the burden of persuasion by the parties, I make the following findings of fact by a preponderance of the evidence:

1. Palmetto is a nonprofit hospital in Columbia, South Carolina. On March 17, 1999, Palmetto filed an application under the 1998 South Carolina Health Plan for a Certificate of Need to construct a Heart Center adjacent to the existing hospital in order to consolidate all heart services at Palmetto Richland Memorial Hospital. ⁽¹⁾ The Project called for the construction of a building on the northwest portion of the Palmetto campus, consolidation of the cardiovascular services (excluding surgical suites and cardiac rehabilitation) consisting of the relocation of 124 existing acute care beds, cardiac diagnostics, and the addition of a fourth cardiac cath lab and one electrophysiology lab. The new building would contain 257,017 square feet within five levels for a total Project cost of $77,266,057.00 It was to consist of one underground floor with four floors above ground.

2. On October 22, 1999, DHEC notified Palmetto of its decision to issue the CON for the Heart Center. The Department formally issued the Certificate of Need on November 5, 1999. The CON was valid for one year because it was a major hospital construction Project. Afterwards, the Department granted two six-month extensions on Palmetto's CON and the DHEC Board subsequently granted a third six-month extension. Palmetto notified the DHEC Board that it would be seeking a fourth extension, but withdrew that request when Palmetto signed a construction contract prior to the Board's April 2002 meeting.

3. During the DHEC review process of Palmetto's CON, Providence, as an "affected person" under the Act, had the right to be informed of the status of Palmetto's CON and to oppose Palmetto's application. However, Providence did not oppose Palmetto's CON application and did not request a contested case hearing to challenge DHEC's determination to approve Palmetto's Certificate of Need for the Heart Center.

4. In a letter dated April 9, 2002, Palmetto advised the Department that it had entered into a valid contract for the construction of the Heart Center with a commencement date of April 3, 2002. Attached to this letter were American Institute of Architects (AIA) Forms A111 and A201, with exhibits, which had been executed by Palmetto and Rodgers Builders, Inc. (Rodgers) on April 3, 2002. The Department determined the contract contained the signatures of the applicant and the contractor, described the Project, had commencement and termination dates, and a guaranteed maximum price (GMP). ⁽²⁾ The letter further stated that Palmetto had obtained a building permit from the City of Columbia for the Heart Center's foundation and parking and that "[t]he construction contract is in the amount of $110,420.00 for preconstruction services and $62,555,000.00 for construction." A copy of the building permit was also attached to this April 9, 2002 letter.

5. On April 2, 2002, Palmetto entered into a construction contract with Rodgers for construction of the Heart Center. Both parties signed the contract -- Kester Freeman for Palmetto and Patricia Rodgers for Rodgers. The parties utilized two AIA forms to create the contract - AIA documents A111 and A201, 1997 versions. Forms A111 and A201, issued by The American Institute of Architects, are approved and endorsed by The Associated General Contractors of America. AIA forms are used extensively in construction projects. Form A111 is the standard form of agreement between the owner and the contractor to determine the method of construction and payments. It also establishes the basics for any given project. Form A201 delineates the general terms and conditions of the contract for construction.

The A111 contract is defined as a "cost of work with a guaranteed maximum price" contract and is very commonly used in major medical construction projects. The A111 is normally used for "fast track" or "phased" construction contracts. "Phased" construction contracts are prevalent in hospital construction. According to Patricia Rodgers, President of Rodgers Builders, the contract between Palmetto and Rodgers is a "phased construction contract with a guaranteed maximum price of $62,555,000.00."

Under a "phased" or "fast-track" contract, the design team releases the project design schematics in phases under an agreed upon time schedule. The benefit of a phased contract is that work can proceed while the architect is still in the design phase. Therefore, the contract allows the design team to work slightly ahead of the contractors rather than wait sixteen months for the design team to plan an entire project before starting a two year construction process. Consequently, such a contract theoretically permits the contractor to complete the project early and to assist the design team in making decisions that will keep the project within budget.

6. Since the project design schematics are released as the project progresses, phased construction contracts commonly utilize a guaranteed maximum price. The GMP protects the parties by setting an upper limit for construction costs even though the design specifications have not been released. However, Providence contends that the contract does not contain a definite price or a definite method for determining the GMP. In Article 5.2.1 of the A111 Form, the parties agreed as follows:

The sum of the Cost of the Work and the Contractor's Fee is guaranteed by the Contractor not to exceed ($) This amount shall be established no later than six weeks after the completion of schematic documents and drawings. The project construction budget is $62,555,000 and the GMP shall not exceed this amount. See Exhibit "A" for a description of the Construction Budget. If Contractor's proposed GMP based on schematic drawings is greater than the Construction Budget, the owner shall either increase the Construction Budget or redesign the Project as required to meet the Construction Budget. All redesign costs shall be at Owner's expense, subject to additions and deductions by Change Order as provided in the Contract Documents. Such maximum sum is referred to in the Contract Documents as the Guaranteed Maximum Price. Costs which would cause the Guaranteed Maximum Price to be exceeded shall be paid by the Contractor without reimbursement by the Owner.

(emphasis in original). Additionally, Exhibit B to the A111 Form lists the items included in the General Conditions Costs. Exhibit B further sets forth a "qualification" to the General Conditions Costs as follows:

Should the total project duration extend beyond 35 months from the Date of Commencement April 3, 2002, then the General Conditions shall be renegotiated to accommodate any increased costs to Contractor . . . .

As set forth above, Article 5.2.1 of the A111 Form states that the final GMP will be "established no later than six weeks after the completion of schematic documents and drawings." However, that article further states that "[t]he project construction budget is $62,555,000 and the GMP shall not exceed this amount." While the final GMP may be lower, the parties have agreed that the contractor's GMP cannot exceed $62,555,000.00. If, upon completion of the schematics, the contractor's construction budget exceeds the GMP, then the owner must either increase the GMP or redesign the Project to keep it within budget.

Furthermore, under Article 5.2.1 of the contract, if the contractor, through its own fault, incurs additional expenses or exceeds the 35-month schedule in completing the Project as designed, the contractor may not obtain reimbursement for more than the GMP. On the other hand, if the owner changes the Project from that described in the contract, the owner must bear any additional costs resulting from the design changes. Ms. Rodgers explained that Article 5.2.1 of the contract is not an "escape clause." Rather, it is applicable when an owner makes design changes outside of the scope of the work defined by the contract, and permits the contractor to seek reimbursement for additional costs resulting from those changes. Therefore, though Article 5.2.1 provides a mechanism for increasing the GMP should the scope of the Project change, this type of contract clause is usual and customary in the construction industry and in other long term service contracts.

7. Article 4.1 of the A111 Form provides that the date of commencement of the Project was April 3, 2002.

8. The substantial completion date of the Project is established by Article 4.3 of the A111 Form. In the contract, the parties inserted the underlined portion:

The contractor shall achieve Substantial Completion of the entire Work not later than _____ days from the date of commencement, or as follows: to be determined no later than at completion of schematic drawings . . . .

Therefore, a date for substantial completion has not been set. However, for DHEC purposes, final completion, not substantial completion, is the end date of the contract so that Palmetto will have all of the Project costs in order to submit the audited cost report. In that regard, Section 7.1 and Exhibit B of the A111 Form provides for a Project duration of 35 months or less.

9. As of May 5, 2002, the City of Columbia had not issued a building permit for the construction of the CON Project. However, Rodgers has obtained permits from the City of Columbia for the demolition of the existing Ambulatory Care Clinic and for the foundation of the Heart Center.

10. Therefore, I find that the contract has a start date of April 3, 2002 with the completion date being 35 months from the start date. Though it is subject to change, the price of the Project set forth in the contract is $62,555,000.00.

11. Between February 2002 and April 2002, Palmetto redesigned its Heart Center. The stated reasons for the new design were to provide additional parking to the Palmetto campus and to streamline the Heart Center to flow more efficiently. On April 9, 2002, Palmetto requested the Department's approval of the design changes to the Project. The proposed changes were as follows:

- The original CON was for 257,017 gross square feet, which included 29,296 gross square feet of physician office space, or 227,721 square feet of CON-reviewable space. The proposed design is 180,000 gross square feet of CON-reviewable space and does not include physician office space.

- The proposed design has roughly 10,000 square feet less public space and 14,000 square feet less shell space than that approved in the original CON.

- Rather than move the three existing cath labs to the Heart Center, the proposed design has a 24,000 square foot reduction of new cath lab space resulting from keeping the three existing cath labs in the main hospital. This will leave the cath labs adjacent to surgery suites and will benefit patients with complications who need to be transported quickly to surgery.

- The new fourth cath lab will be built in renovated space in the main hospital.

- The revised site plan of the Heart Center will remain in the northwest corner of the campus but will not require the relocation of the Family Practice Clinic although the clinic is being relocated in a separate project due to its own needs.

After reviewing the proposed changes in light of the CON Act and the 2001 South

Carolina Health Plan, the Department concluded the changes were not substantial under Sections 605 and 606 of Regulation 61-15. The Department, however, reserved the right to review any future changes.

12. The revised plan structurally retained the original concept of two floors of 124 patient beds and added a below-grade parking area. ⁽³⁾ However, the revised plan eliminated conversion of all semi-private rooms to private rooms, eliminated conversion of medical surgical beds to ICU and CCU beds, and eliminated clinical centers on each floor of the Heart Center and the accompanying clinical support space. The elimination of these architectural components resulted in a reduction from approximately 247,000 square feet to 198,000 square feet. Additionally, the physician offices that were originally in the new structure were removed from the plan. Palmetto decided to keep the three existing cath labs in their present location in the main hospital and to move the proposed fourth cath lab adjacent to them. The stated rationale for keeping the cath labs in their present location as well as placing an additional cath lab next to them was their proximity to existing surgery suites. These changes would make the Project more cost-effective, provide additional parking and enable Palmetto to stay within the budget originally proposed.

13. L.G. "Skip" Lewis, Jr., a licensed engineer in South Carolina with more than 35 years of experience in preparing plans and specifications, along with building, managing, and administering construction projects, testified on behalf of Providence. Based upon his examination of Palmetto's original CON application as well as Palmetto's proposed April 9, 2002 redesign, he found that the changes in the Project were "substantial" from both a construction and design standpoint. I agree with Mr. Lewis' assessment from a construction and design standpoint. Nevertheless, he did not testify that the design changes to the Project amounted to a substantial change under the CON Act.

14. Changes in projects are common. When changes occur, the Department must determine whether changes are so substantial as to constitute a new project. ⁽⁴⁾ Here, the changes may indeed result in an increase in the cost-per-square-foot-per-bed. At the time the CON is reviewed, that cost has been used as an indicator in determining whether those costs-per-bed and costs-per-square-foot are comparable with other types of projects the Department has reviewed. Nevertheless, in this case, the Project did not alter the scope of the CON as it was originally approved by the Department. The number of beds and the types of cardiac services being provided before and after the building reconfiguration were identical to what was originally approved. The relocated cardiac cath labs are providing the same services and the change of the physical location of the cath lab from that conceptually approved in the CON does not constitute a substantial change to the Project. Furthermore, though the design changes resulted in a modification of the building footprint and floor plan, the Heart Center is still located in basically the same place within the northwest corner of the Palmetto campus. Consequently, the change in the footprint of the building did not constitute a relocation of the Heart Center but rather a simple repositioning at the same location. Finally, the total Project cost projected by Palmetto for construction of this Heart Center did not increase as a result of the revised design. Therefore, I find that the changes to this Project were not substantial.

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

1. The Division has jurisdiction to hear this matter. The ALJD has been statutorily authorized to preside over cases appealing the Department's decisions. See S.C. Code Ann. § 1-23-600(B) (1986 & Supp. 2001). The Administrative Procedures Act (APA) provides that all parties must be afforded an opportunity for a contested hearing after proper notice. S.C. Code Ann. § 1-23-320 (1986 & Supp. 2001). The APA defines a contested case as "a proceeding, including but not restricted to . . . licensing, in which the legal rights, duties or privileges of a party are required by law to be determined by an agency after an opportunity for hearing." S.C. Code Ann. § 1-23-310(2) (1986 & Supp. 2001). Furthermore, a party is a person "named or admitted as a party, or properly seeking and entitled as of right to be admitted as a party." S.C. Code Ann. § 1-23-310(5) (1986 & Supp. 2001).

The State Certificate on Need and Health Licensure Act, S.C. Code Ann. Section 44-7-110, et seq. (Supp. 2001), requires that a person or a health care facility obtain a CON from the Department prior to, inter alia, the construction or establishment of a new health care facility. 25 S.C. Code Ann. Regs. 61-72 § 201 (A) (Supp. 2001) provides that "[a]ny person may request an adjudicatory hearing . . . following actual or constructive notice of a final staff decision on a licensing matter as defined above, or following receipt of an administrative order." (emphasis added). An Order is "[a] written document, other than a license, which embodies a final staff decision imposing sanctions or requirements. It may be, but need not be, denominated an 'Order.' It includes, but is not limited to, administrative orders so denominated; a staff decision to deny a license; or any decision from which appeal may be taken pursuant to other applicable law or regulation." 25 S.C. Code Ann. Regs. 61-72 § 101(I) (Supp. 2001).

The Department's April 9 letter(s) constitute an Order pursuant to Regulation 61-72 § 201 (A). Additionally, since Providence is an affected person under the CON Act, it had "legal rights, duties or privileges" conferred upon it pursuant to the Act. Those "legal rights" were affected by an Order (the April 9 letters) which entitled Providence to request administrative review of the Department's decisions under the APA. Moreover, the determination of whether or not an amendment to a CON is substantial involves a "licensing matter."

Furthermore, the conclusion that a case is not an APA "contested case" does not automatically negate the necessity for an administrative hearing. "[D]ue process is flexible and calls for such procedural protections as the particular situation demands." Stono River Envtl. Protection Ass'n v. S.C. Dep't of Health and Envtl. Control, 305 S.C. 90, 94, 406 S.E.2d 340, 342 (1991). The South Carolina Constitution provides that:

No person shall be finally bound by a judicial or quasi judicial decision of an administrative agency affecting private rights except on due notice and an opportunity to be heard . . . and he shall have in all such instances the right to judicial review.

S.C. Const., Art. I, Section 22. In Ross v. Medical Univ. of South Carolina, 328 S.C. 51, 492 S.E.2d 62 (1997), the Supreme Court held that although an adjudicatory hearing may not be required pursuant to the APA, the constitutional due process provision of Section 22, apart from the APA, is sufficient to require the right to notice and an opportunity to be heard by an administrative agency prior to a final determination that affects "private rights." Therefore, under certain circumstances, an administrative hearing may be mandated by Article I, Section 22 of the South Carolina Constitution, even where there is no statute or regulation providing for such a hearing.

2. The Administrative Law Judge is the fact finder in this matter for purposes of administrative and judicial review and does not sit in an appellate capacity. Brown v. S.C. Dep't of Health and Envtl. Control, 348 S.C. 507, 560 S.E.2d 410 (2002). Furthermore, the burden of proof in a contested case hearing is upon the moving party. S.C. Code Ann. § 44-7-210(E) (Supp. 2001); See also 2 Am. Jur. 2d Administrative Law § 360 (1994); Alex Sanders, et al., South Carolina Trial Handbook § 9:3 Party With Burden, Civil Cases (1999) (In civil cases, generally, the burden of proof rests upon the party who asserts the affirmative of an issue.). In the present case, the Petitioner has the burden of proving that DHEC erred in affirming that Palmetto had timely negotiated a valid construction contract for the Project and that the changes to Palmetto's CON Project did not constitute a substantial change contrary to the Act and CON regulations.

3. The purposes of the CON Act are "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. Section 44-7-120 (Supp. 2001). S.C. Code Ann. Section 44-7-140 designates the Department of Health and Environmental Control as the sole agency for control and administration of the granting of Certificates of Need and licensure of health facilities and other activities necessary to be carried out under the Act. Furthermore, S.C. Code Ann. § 44-7-150(3) (Supp. 2001) mandates that the Department shall adopt substantive and procedural regulations considered necessary by the Department to carry out its duties under the CON Act.

4. An Administrative Law Judge's review of a DHEC administrative decision to grant a CON application is governed by S.C. Code Ann. § 44-7-210(E) (Supp. 2001), which provides, in pertinent part:

The department's proposed decision is not final until the completion of reconsideration or contested case proceedings. . . . The contested case hearing before the board or its designee is conducted as a contested case under the Administrative Procedures Act. The issues considered at the contested case hearing are limited to those presented or considered during the staff review and decision process.

(emphasis added).

5. It is appropriate to give due consideration to the Department's CON staff's utilization of its specialized knowledge and expertise in the application of the Act and CON regulations. See S.C. Code Ann. § 1-23-330(4) (1986 & Supp. 2001). However, the Department's Board, and not the Department's CON staff, is the policymaker for the Department and thus possesses the authority to establish its interpretation of its regulatory and statutory provisions. Consequently, I find that neither the construction of the Act and CON regulations regarding what constitutes a substantial change from the approved CON nor what is a valid contract for CON implementation purposes by individual members of the Department's staff is entitled to "most" respectful consideration.

6. "The cardinal rule of statutory construction is to ascertain and effectuate the intent of the legislature." Hodges v. Rainey, 341 S.C. 79, 85, 533 S.E.2d 578, 581 (2000). The best evidence of legislative intent is the statute's actual language. Id. Therefore, where a statute's language is clear and unambiguous, conveying a clear and definite meaning, no other meaning may be imposed. Id. However, if a statute is ambiguous, courts must ascertain legislative intent through statutory construction. See Abell v. Bell, 229 S.C. 1, 91 S.E.2d 548 (1956). An ambiguity arises when the language of a statute is capable of being understood by reasonably well-informed persons in either of two or more senses. Southeastern Fire Ins. Co. v. South Carolina Tax Comm'n, 253 S.C. 407, 171 S.E.2d 355 (1969).

Another cardinal rule of statutory construction is that the statutory provisions do not stand alone but must be read in the context of the Code as a whole. "A statute is passed as a whole and not in parts or sections and is animated by one general purpose and intent. Consequently, each part or section should be construed in connection with every other part or section so as to produce a harmonious whole." Sutherland Statutory Construction, 5^th Ed., § 46.05, p. 103 (1992). See also Keonig v. SC Dep't of Public Safety, 325 S.C. 400, 480 S.E.2d 98 (Ct. App. 1996). Furthermore, the statutory language in question must also "be read in a sense which harmonizes with its subject matter and accords with its general purposes." Hitachi Data Systems Corp. v. Leatherman, 309 S.C. 174, 420 S.E.2d 843, 846 (citing Multi-Cinema, Ltd. v. SC Tax Comm'n, 292 S.C. 411, 357 S.E.2d 6 (1987)).

7. The Petitioner contends that neither the price of construction nor time for completion of the Project are established in Palmetto's contract, and therefore, there is no valid contract. "Contract" is not defined in either the Act or the CON regulations. For purposes of Regulation 61-15 § 601 (1), the Department's staff has interpreted a "valid contract" to be one that is signed by the parties, describes the Project, has a beginning and ending date, and a GMP. I find that a "valid construction contract" is more aptly defined by case law and legal resources.

A contract exists where there is an agreement between two or more persons upon sufficient consideration either to do or not to do a particular act. Carolina Amusement Co., Inc. v. Connecticut Nat'l Life Insurance Co., 313 S.C. 215, 437 S.E.2d 122 (Ct. App. 1993). Essential terms include price, time of performance, and place of performance. McPeters vs. Yeargin Construction Co., Inc., 290 S.C. 327, 350 S.E.2d 208 (Ct. App. 1986). Furthermore, a "valid contract" is defined as "a contract that is fully operative in accordance with the parties' intent." Black's Law Dictionary 326 (7th ed. 1999). That definition recognizes the general principle of contracts that a contract is sufficiently definite and certain if a court using the proper rules of construction can ascertain the terms and conditions on which the parties intended to be bound. Am. Jur. 2d Contracts § 197 (2000). Reasonable, not absolute, certainty as to its terms is required. "A contract will not be held unenforceable for indefiniteness because its performance is, as to particular details, left open to subsequent agreement of the parties. Aperm of South Carolina v. Roof, 290 S.C. 442, 447, 351 S.E.2d 171, 173 (Ct. App. 1986) (citing Touche Ross & Co. v. DASD Corp., 162 Ga. App. 438, 292 S.E.2d 84 (1982)). "This is especially true where the contract provides the guidelines for the subsequent agreement." Aperm at 173.

Here, Palmetto and Rodgers executed a written contract agreeing, in part, to: 1) construct the Heart Center and 800-car parking garage; 2) using phased construction with the architect releasing the schematic, design and construction drawings to the contractor in phases so that construction can begin on the initial phases without waiting on the drawings for the entire Project to be completed; and 3) a fee of 2.3% of the cost of the work.

8. Providence contends that the contract is not valid because the A111 and A201 Forms do not establish a GMP, or any price, for which Rodgers has agreed to construct the Heart Center. The contract provides that if after completion of the design and development documents, the GMP is set by Rodgers at an amount exceeding Palmetto's $62,555,000.00 construction budget, Palmetto will either have to increase its construction budget to accommodate the GMP or downsize the Project. If it chooses to do neither, it may abandon the Project without further obligation. As of May 5, 2002, neither the schematic documents nor the design development documents had been completed, nor had a definite GMP been established.

If a contract does not set a definite price, it must fix a definite method for determining the price in order for it to be valid. Prestwick Golf Club, Inc. vs. Prestwick Ltd. Partnership, 331 S.C. 385, 503 S.E.2d 184 (Ct. App. 1998). Here, the beginning date of the contract was on April 3, 2002 and the ending date is 35 months from that date. The contract also clearly sets a fee for Rodgers at 2.3% of the cost of the work. Therefore, Rodgers has a contract that clearly pays it for the work it performs even if the contract is ultimately voided. Furthermore, if after completion of design and development documents, Rodgers can perform the contract for no more than $62,555,000.00, the contract is clearly binding. These provisions of the contract therefore set a definite method for determining the price for the contract.

Nevertheless, if Rodgers determines that the GMP will exceed $62,555,000.00 and Palmetto will not either increase its construction budget or downsize the Project, the contract is voidable. However, there is a significant distinction between "void" and "voidable" contracts. "A void contract is no contract at all; it binds no one and is a mere nullity." Am. Jur. 2d Contracts § 7 (2000). On the other hand, a voidable contract is a contract:

where one or more parties have the power, by a manifestation of election to do so, to avoid the legal relations created by the contract, or by ratification of the contract to extinguish the power of avoidance. Accordingly, a voidable contract is valid and binding until it is avoided by the party entitled to avoid it.

Id. Applying the above reasoning, the contract for the construction of Palmetto's Heart Center on its face has language that grants the parties the authority to void the contract under certain conditions. Nevertheless, that language does not result in a "void" contract, but simply a "voidable contract." The contract is nevertheless a binding and valid contract until a party exercises its right to void the contract under the terms allowing that right.

9. The Petitioner also argues that the "substantial completion" date in the A111 Form was expressly left to be determined at a later date by Palmetto and Rodgers. Contracts that do not set an express duration or definite time for performance are unenforceable by the courts. Carolina Cable Network vs. Alert Cable TV, Inc., 316 S.C. 98, 447 S.E.2d 199 (1994). "Duration" is defined as "[a] period of existence or persistence." The American Heritage College Dictionary, 3^rd Edition, p. 427 (1993). Accordingly, the duration of a contract is the time period it is in existence or its beginning and end. Therefore, Providence contends that since the "substantial completion" date is an essential term and is missing from the contract, the contract meets neither the requirements of basic contract law nor the express requirement of 24A S.C. Code Ann. Regs. 61-15 § 202(2)(d)(10) (Supp. 2001).

A valid construction contract for major additions to an acute care hospital, such as the Palmetto CON, must be properly negotiated within one year from the date of issuance of the CON or such later time approved through extension of the CON by the Department or the Board pursuant to the provisions of Regulation 61-15 § 601. The Board granted Palmetto an extension until May 5, 2002 to negotiate a construction contract for the Heart Center. Regulation 61-15

§ 202(2)(d)(10) requires an applicant to "notify the Department in writing that the contractual agreement has been completed. For a construction project, the letter shall indicate that a construction contract specifying the beginning and completion dates of the project, has been signed by both parties." On April 9, 2002, Palmetto advised the Department that it had entered into a valid contract for the construction of Palmetto's Heart Center.

In the present case, the parties do not disagree on the terms of their agreement or in their interpretation of those terms. In fact, the parties concur that Article 7.1 and Exhibit B to the A111 Form establish a 35 month completion date. Though these two provisions deal with establishing the "Costs of the Works," the parties interpreted those provisions as establishing a definite time period for the completion of the Project.

"Moreover, this court must consider the contract in its entirety and employ a construction that gives effect 'to the whole instrument and to each of its various parts and provisions....'. " Hardee v. Hardee, 348 S.C. 84, 92, 558 S.E. 2d 264, 267 (Ct. App. 2001) (quoting Yarborough v. Phoenix Mut. Life Ins. Co., 266 S.C. 584, 592, 225 S.E.2d 344, 349 (1976)). The fact that the exact meaning of the contract language cannot be ascertained by the reading of the agreement does not render it unenforceable. Am. Jur. 2d Contracts § 197 (2000). Where the parties have reduced their agreement to writing and the words used by the parties to express their agreement are susceptible to more than one reasonable interpretation, the court will examine evidence extrinsic to the written agreement to discover the intent of the parties in an effort to ascertain which of the parties' interpretations should prevail. Jordan v. Security Group, Inc., 311 S.C. 227, 428 S.E.2d 705 (1993). "The intention of the parties should be determined from the surrounding circumstances, as well as from the testimony of all witnesses; and subsequent acts are relevant to show whether a contract was intended." Caulder v. Knox, 251 S.C. 337, 345, 162 S.E.2d 262, 266 (1968).

Though the contract does not set forth a date for substantial completion, it does set forth a construction time period starting on April 3, 2002 and ending after 35 months. I do not find that a "substantial completion" date is an essential term of a contract. Rather, "substantial completion" is a term of convenience for the parties in seeking a date when the building may be occupied. Here, even though the 35-month term of construction is set forth in an unusual section of the contract, the parties interpret that term as the binding construction time period of the contract. Consequently, since Palmetto timely implemented the Heart Center Project by executing a valid construction contract with Rodgers Builders, I find that Palmetto complied with the provisions of Sections 202(2)(d)(10) and 601.

10. Providence contends that the changes to the Heart Center as presented to the Department on April 9, 2002 by Palmetto are substantial and, therefore, the Department erred in not determining that the changes constituted a new Project requiring further CON approval. 24A S.C. Code Ann. Regs. 61-15 § 605 (Supp. 2001) provides "[i]f an applicant amends or alters his project after receipt of a Certificate of Need, the department will decide whether or not the amendment is substantial and thereby constitutes a new project." (emphasis added). Therefore, in analyzing whether a substantial change has occurred, the court must first determine the nature of the Project. S.C. Code Ann. § 44-7-230(A) (Supp. 2001) provides that the CON "is valid only for the project described in the application including location, beds and services to be offered, physical plant, capital or operating costs, or other factors as set forth in the application, except as may be modified in accordance with regulations." See also Regulation 61-15 § 605. The legislative purpose of the Act is that a CON sets the upper limit of a project based upon the number of beds, the addition of health services regulated by the applicable State Health Plan, the square footage of new construction and the maximum estimated total project cost.

In awarding the CON for the Heart Center, the Department determined that the Heart Center would provide increased access to cardiovascular services in the ten county Midlands Area and the Project had physician and community support. The Department also necessarily determined that the Heart Center would not be an unnecessary duplication or have a negative effect upon the existing cardiovascular services at Providence. The Department's historic application of the law has been to define the "project" to encompass the location, number of beds, types of health services covered by the applicable State Health Plan, maximum square footage approved and total project costs of a proposed new health service or facility.

I find that in determining whether or not changes to an approved project are substantial, the Administrative Law Judge should consider:

a. Whether the total project cost has increased;

b. Whether there is an increase in the number of beds;

c. whether additional services for which criteria are proscribed in the State Health Plan have been added to the project;

d. Whether there has been an increase in square footage of the project; and

e. Whether there is a change in the location of the project so as to impact the Department's assessment of the area being served by the project and any negative effects of affected persons.

Here, though the cost-per-square-foot may have increased, the total Project cost and the number of beds has not increased. Furthermore, considering the Findings of Fact set forth above, the changes in design, space allocation, and repositioning of the Heart Center do not constitute a substantial change. Moreover, the downsizing of the Project did not alter its character or essential services upon which the original CON was based. Therefore, I find that Providence has not proven that there has been a substantial change within the meaning of 24A S.C. Code Ann. Regs. 61-15 § 605 (Supp. 2001).

11. The Petitioner contends that on the May 5, 2002 CON expiration date, Palmetto had not obtained a building permit for the CON Project, and the Department had not given Rodgers notice to proceed with the construction. Hence, Palmetto's Heart Center Project had not been implemented and, thus, the CON expired by its terms on May 5, 2002. 24A S.C. Code Ann. Regs. 61-15 § 202 (7) (Supp. 2001) requires that a CON application "[p]rovide a . . . date that all necessary permits (grading, building, sewer, etc.) will be obtained. . . ." The Department determined on April 9, 2002 that the building permit provided by Palmetto complied with its approved application.

At the time that DHEC determined to issue the CON for Palmetto's Heart Center, ALJD Rule 11 stated: "The request for a contested case hearing shall be filed with the affected agency within the time frame authorized by that agency." ALJD Rule 11 (2000). ⁽⁵⁾ S.C. Code Ann. § 44-7-210(D) (Supp. 2001) provides that a decision of the Department's staff concerning a CON becomes final unless:

(1) a reconsideration by the staff of the department is requested in writing within the ten-day period by an affected person showing good cause for reconsideration of the proposed decision; or

(2) a contested case hearing before the board, or its designee, regarding the grant or denial of the Certificate of Need is requested in writing within the ten-day period by the applicant or other affected person with standing to contest the grant or denial of the application.

Therefore, Providence was required to appeal the granting of the CON within ten (10) days of the Department's determination of whether or not to grant the CON if Providence objected to the language of the approved application. Accordingly, I find that since the Petitioner did not seek a contested case within those time limits, that issue is moot.

More importantly, upon the granting of the CON, the Department is the agency charged with the enforcement of the permit. In that regard, once a CON has been issued, it is the duty and responsibility of the Department to ensure that the permittee adheres to the provisions of the CON Act, and to bring an enforcement action if necessary. See S.C. Code Ann. § 44-7-140 (Supp. 2001). This Division does not have jurisdiction to oversee the Department's ministerial responsibility of insuring that the necessary permits are obtained.

12. On May 30, 2002, I imposed a stay on the construction of the Heart Center Building, therapeutic cardiac cath lab, and any portion of the parking garage structure which may be subsequently utilized for patient and administrative offices. Having determined that the Decisions were properly made by the Department, I find that the stay should be lifted.

IT IS HEREBY ORDERED that DHEC's decisions that Palmetto had timely implemented its CON and that Palmetto's modifications were not substantial are affirmed.

IT IS FURTHER ORDERED that the Stay issued May 30, 2002 is lifted.

AND IT IS SO ORDERED.

________________________________

Ralph King Anderson, III

Administrative Law Judge

September 11, 2002

Columbia, South Carolina

1. Palmetto's proposed Heart Center is an expansion of an existing "health care facility" as defined in S.C. Code Ann. Section 44-7-130(10) (Supp. 2001) and therefore required CON approval.

2. For purposes of Regulation 61-15, the Department's staff considers a construction contract to be valid if it describes the Project, is signed by both parties, has a commencement date, has a guaranteed maximum price, and has a projected completion date.

3. A below-grade parking garage is a nonmedical project and is therefore exempt from CON review in accordance with S. C. Code Ann. § 44-7-170(B)(1) (Supp. 2001).

4. "If an applicant amends or alters his project after receipt of a Certificate of Need, the department will decide whether or not the amendment is substantial and thereby constitutes a new project." 24A S.C. Code Ann. Regs. 61-15 § 605 (Supp. 2001).

5. This is the language of Rule 11 that was in effect when DHEC originally granted Palmetto's CON. ALJD Rule 11 has subsequently been amended twice. The most recent amendment to Rule 11 was effective May 6, 2002. See ALJD Rule 11 (2002).