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:
McLeod Regional Medical Center vs. SCDHEC et al.

AGENCY:
South Carolina Department of Health and Environmental Control

PARTIES:
Petitioner:
McLeod Regional Medical Center

Respondent:
South Carolina Department of Health and Environmental Control and QHG Of South Carolina, Inc., d/b/a Carolinas Hospital System
 
DOCKET NUMBER:
95-ALJ-07-0132-CC

APPEARANCES:
Harold W. Jacobs and Susan A. Lake, Attorneys for Petitioner

Carl F. Muller, Henry L. Parr, Jr., and John Moylan, Attorneys for Respondent Carolinas Hospital System

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

ORDERS:

DECISION AND ORDER

This matter arises from a request for a contested case hearing by McLeod Regional Medical Center (McLeod), pursuant to the South Carolina Administrative Procedures Act, the Certification of Need and Health Facilities Licensure Act, and the Rules of Procedure for the Administrative Law Judge Division, following the proposed decision of the South Carolina Department of Health and Environmental Control (DHEC/Department) to issue a Certificate of Need (CON) to QHG of South Carolina, Inc., d/b/a Carolinas Hospital System (Carolinas). Carolinas seeks to establish a radiation oncology unit in Florence, South Carolina, with the purchase and installation of a linear accelerator and related equipment. McLeod opposes issuance of the CON on the basis of lack of need for additional radiation oncology facilities in the service area. A contested case hearing was held November 1, 2, 3, and 15, 1995. All testimony, exhibits, and other evidence admitted was carefully reviewed and considered. Because existing radiation oncology facilities are adequate to meet the present and projected need for radiation therapy in the service area, Carolinas' CON application for a linear accelerator is denied.

STATEMENT OF THE CASE

Carolinas and McLeod are located in Florence, South Carolina, less than a mile apart. The two hospitals are the major health care providers in their nine-county service area and are direct competitors. Carolinas, formed by the January 1, 1994, merger of Florence General Hospital and Bruce Hospital System, is owned by Quorum Health Group, Inc., (QHG). McLeod is a not-for-profit regional medical center.

Carolinas seeks a CON to establish a radiation oncology unit with the purchase and installation of a linear accelerator and related equipment at 513 South Dargan Street in Florence. Carolinas filed its initial application with DHEC on July 14, 1994, under the 1993 South Carolina Health Plan. Carolinas withdrew that application on October 25, 1994, and submitted a new application under the 1994 South Carolina Health Plan on October 27, 1994, which DHEC deemed complete on December 1, 1994.

By letter dated December 1, 1994, and pursuant to S.C. Code Ann. § 44-7-210(A) (Supp. 1995), DHEC prioritized the list of criteria to be considered in evaluating the Carolinas CON application as follows:

1. Community Need Documentation;
2. Distribution (Accessibility);
3. Operating Budget;
4. Financial Feasibility;
5. Cost Containment; and
6. Relationship to the Health System.
(1994 State Health Plan, II-56).

On February 17, 1995, DHEC issued a proposed decision to approve a CON for Carolinas, citing the following reasons:

1. The applicant has adequately documented need for the project within the application;
2. The project appears to be financially feasible based on the information currently available; and
3. The proposed project has been determined to be consistent with criteria for radiation therapy services as outlined in the 1994 S.C. Health Plan.

On March 3, 1995, McLeod timely filed a request for a contested case hearing to challenge DHEC's proposed decision. Carolinas served its Answer on March 31, 1995, and DHEC transmitted the case to the Administrative Law Judge Division on March 9, 1995. A contested case hearing was conducted by the Administrative Law Judge Division on November 1, 2, 3, and 15, 1995.

For the reasons discussed below and specifically set forth in the following Findings of Facts and Conclusions of Law, Carolinas' CON application must be denied. McLeod has met its burden of proof in establishing that, under the requirements of the 1994 S.C. State Health Planand the Project Review Criteria contained in S.C. Code Ann. Regs. 61-15 § 802 (Supp. 1995) for licensure of a radiation oncology unit with the purchase and installation of a linear accelerator and related equipment, the service area has insufficient need for the proposed project.

DISCUSSION OF ISSUES

The ultimate issue in this case is whether to grant a CON to Carolinas to establish a radiation oncology unit with the purchase and installation of a linear accelerator and related equipment. Radiation therapy, along with surgery and chemotherapy, is an integral part of cancer treatment. Approximately one-half of all cancer patients receive radiation therapy provided by a megavoltage radiation unit, also known as a linear accelerator. McLeod operates the only four linear accelerators in the service area. Carolinas seeks to introduce a fifth linear accelerator to the service area. McLeod opposes the issuance of the CON to Carolinas.

While several secondary issues are in dispute, the question of need for the project underlies and affects all arguments in this case. Carolinas and DHEC assert that based upon the documented trends and projections of the service area's population, cancer incident rate, and radiation therapy treatments performed, an additional linear accelerator is needed in the Florence area. McLeod disputes many of Carolinas' projection figures and alleges that the project would amount to an unnecessary duplication of existing services in the service area. McLeod maintains that its oncology department is currently underutilized, with excess capacity sufficient to accommodate normal growth of cancer incidence and population of the service area for five to seven years.

McLeod also asserts that a fifth linear accelerator will adversely affect its market share, its revenues, and its ability to provide care to indigent and medically underserved groups. Respondents counter that the proposed project would allow Carolinas to better serve its existing patients and make radiation therapy treatment more accessible to medically underserved groups in the service area with a minimal negative impact on McLeod.

To determine need, utilization and capacity of existing facilities in the service area must be assessed and future demand calculated. Chapter II of the 1994 South Carolina Health Plan, pages II-54 through II-58, provides the criteria for consideration of utilization and capacity factors in assessing the need for an additional linear accelerator in a service area. The central focus of this Order is upon the methodology to calculate linear accelerator utilization and capacity and the application of that methodology to reasonably reliable data.

THE NEED FOR THE SERVICE

The determination of need is based on projections, with past and present use and demand statistics used as a guide. The 1994 State Health Plan, pp. II-54 - II-58, provides a formula for computing the use and need of megavoltage radiation therapy units. Decisions must be based upon sound methodology utilizing reasonably reliable and verifiable data. That data may include statistics compiled by the Budget and Control Board's Division of Research and Statistics and DHEC, data from other providers, and information verified and documented in previously reviewed applications.

In the present case, the primary data relied upon for the calculation of need are population estimates, new cancer case estimates, and existing linear accelerator utilization statistics for the service area. Population figures for the service area were obtained from the Budget and Control Board's Division of Research and Statistics, pursuant to Chapter II.C. of the 1994 State Health Plan, p. II-3. New cancer case estimates for the service area are based upon DHEC compilations, and linear accelerator utilization data for the service area is based upon McLeod's records, as accepted by DHEC. McLeod and Carolinas each offered additional evidence they considered relevant for calculating the utilization of and need for radiation therapy facilities in the service area.

In an attempt to deflate utilization and demand figures for the service area, McLeod points out that linear accelerators are operational in Laurinburg, North Carolina, Sumter, and Myrtle Beach. Each of those facilities, while outside of the proposed service area, has a service area which overlaps the McLeod service area. McLeod argues that its patient base is diminished by the intrusion of those facilities into its service area. The operation of radiation oncology units located outside of the subject service area, but with overlapping service areas, has and will have an impact on the utilization numbers of the Florence facilities, but to what extent is unclear.

Carolinas disputes McLeod's contention, asserting that DHEC's new cancer case figures and McLeod's utilization data actually understate the service area's need for radiation therapy facilities. Carolinas relies upon figures of inpatient discharges for malignant neoplasm, the cancer death rate, and the American Cancer Society formula to calculate cancer incidence to augment its need projections for the service area. Carolinas' further claims that potential patients from outside the nine-county service area and from underserved populations within the service area will significantly bolster the number of new cancer patients in the service area.

Many of the additional need factors presented by McLeod and Carolinas appear to have a reasonable basis; however, it is difficult to verify and quantify statistics based on those factors. The Radiation Therapy section of the 1994 State Health Plan, pp. II-54 - II-58, sets forth standards for assessing linear accelerator use and need, including service area population, number of new cancer cases, number of radiation treatments, number of Equivalent Simple Treatment Visits, and number of linear accelerators operating in the service area. The calculation adjustments proposed by McLeod and Carolinas (whether to increase or decrease the projected need) require too much assumption and conjecture for practical application. Additionally, the respective adjustments tend to offset one another so that the likely cumulative result of the suggested computations would be insignificant.

In light of the availability of McLeod's radiation therapy patient figures and the consistency of those numbers with the DHEC estimates for new cancer cases in the service area, I find and conclude that the actual and documented history of the service area is the most reliable indicator of future need. As the service area's sole radiation oncology care provider, McLeod's utilization data offers a clear and uncomplicated picture of the use and demand for radiation oncology services in the service area.

Service Area Population

According to the 1994 State Health Plan, p. II-55, each linear accelerator should serve a population of at least 120,000 persons. The South Carolina Division of Research and Statistics estimated the 1994 population of the service area to be 423,640 and projects a 3.5% growth in the region to result in a total population of 438,770 in the year 2000. Each of McLeod's four operational linear accelerators served approximately 105,910 persons in 1994, and each should serve approximately 109,693 persons in 2000. Based upon the projected service area population for the year 2000, if a new linear accelerator were approved for Carolinas, and McLeod continued operation of its four existing linear accelerators, the five accelerators would serve approximately 87,754 persons each, well below the 120,000 threshold. Under a pure service area population analysis, the four present linear accelerators are minimally justified. The projected 3.5% population increase does not justify the addition of a fifth linear accelerator.

New Cancer Cases

Even if the proposed service area meets the requisite population level for a new accelerator, each linear accelerator in the service area should also treat approximately 200-300 cancer cases annually, within three years after initiation of the additional accelerator. 1994 State Health Plan, at p. II-55. The total number of radiation cases treated should directly, but not precisely, affect the number of procedures a given accelerator may perform.

Based upon the 1994 State Health Plan, p. II-55, approximately 50% of cancer patients receive radiation therapy. DHEC estimated the total number of new cancer cases in 1994 in the service area to be 1,818 (50% of which is 909). It follows, then, that as the service area's sole provider of radiation therapy, McLeod should have treated around 909 radiation patients (or about 227 for each of the four operational accelerators) that year. McLeod's actual numbers, although slightly lower, illustrate that pattern. McLeod's radiation oncology unit treated 819 new cancer patients in 1994, averaging 205 new patients per linear accelerator.

DHEC estimates the number of new cancer cases in the service area will be 2,073 in 1999, an increase of 14% over five years. Based upon DHEC's 1999 new cancer cases estimates for the service area and the statement in the 1994 State Health Plan, p. II-55, that approximately 50% of cancer patients receive radiation therapy, each of McLeod's four existing linear accelerators should treat approximately 259 patients. If a new linear accelerator were approved for Carolinas and McLeod continued to operate its four existing linear accelerators, each of the five accelerators would treat approximately 207 patients.

Based purely upon DHEC's own cancer case numbers for the service area and McLeod's radiation patient data, the four accelerators at McLeod are adequate to address the modest increase in new radiation patients expected over the next few years. The addition of a fifth accelerator is not necessary to keep use below 300 patients per accelerator per year in the service area.

Number of Radiation Treatments

The 1994 State Health Plan does not specifically state the minimum, maximum, or optimum number of actual radiation treatments a linear accelerator should perform annually. The Plan speaks in terms of cancer cases/patients and ESTV's. The number of individual treatments is an important factor to consider in determining the number of patients a linear accelerator can accommodate (discussed above) and the number of ESTV's performed (discussed below).

As noted above, the 1994 State Health Plan, p. II-55, states that a linear accelerator should treat between 200-300 cancer cases per year. If attempting to calculate the number of annual cancer cases an accelerator can accommodate within that 200-300 case range, the type and mix of procedures performed is relevant. Radiation therapy has two basic functions: curative treatment and palliative treatment.(1) Because curative treatment is more time intensive, the percentage of patients treated for cure is a determinant in the treatment capacity of a linear accelerator. According to the 1994 State Health Plan, p. II-55, a linear accelerator with a 50% curative, 50% palliative treatment mix can be expected to treat about 250 patients annually. On the other hand, a linear accelerator with a 60% curative, 40% palliative treatment mix can be expected to treat about 200 patients annually.

McLeod's estimated radiation oncology mix is approximately 60% curative and 40% palliative. Consequently, 200 cases per machine load would be appropriate under the State Health Plan guidelines. If that curative/palliative mix is accurate and can reasonably be expected to continue in the service area, then the 1,037 radiation cases projected for the service area in 1999 (based upon 50% of the 2,073 total cancer cases projected), will require five linear accelerators for the service area. If, however, an ESTV analysis is used to determine capacity and need, then a unit's curative/palliative mix is irrelevant. DHEC chose to ignore McLeod's ESTV calculations.

ESTV's

The 1994 State Health Plan, p. II-56, provides that "no additional megavoltage units should be opened unless each linear accelerator in the service area is performing at least 6,500 ESTV's or treating 250 new patients per year." An "ESTV," or "Equivalent Simple Treatment Visit," is a unit of measure for radiation treatments performed by a linear accelerator. One ESTV is a fifteen-minute treatment increment. ESTV's are computed by classifying actual treatments as simple, intermediate or complex. Each classification is assigned a multiplier and refers to the complexity and duration of a radiation procedure. For example, a simple treatment of a single site which requires up to fifteen minutes on an accelerator is one ESTV. An intermediate treatment equals 1.1 ESTV's, and the most complex treatment equals 1.25 ESTV's. Total treatments in a given year are divided by classification, and the total of each classification is multiplied by the appropriate multiplier. The sum of these products is the number of ESTV's performed by that radiation oncology facility.

The impact of the curative-palliative mix is reflected in the number of ESTV's performed. Cure and palliation relate to the reason radiation is to be administered and to some extent the number of treatments to which the patient is subjected, not to the total utilization of an accelerator. The curative-palliative mix language in the Plan forms the basis for the establishment of a minimum benchmark of 6500 ESTV's per accelerator. There is no minimum utilization established in the 1994 State Health Plan on the basis of curative-palliative mix. With reliable ESTV data, the curative-palliative mix of a linear accelerator or a service area is immaterial.

In fiscal year 1992, using three linear accelerators, McLeod performed a total of 24,394.44 ESTV's, for an average of 8,131.48 ESTV's per accelerator. In fiscal year 1993, using three linear accelerators, McLeod performed a total of 22,896.06 ESTV's, for an average of 7,632.02 ESTV's per accelerator. In fiscal year 1994, using four linear accelerators, McLeod performed a total of 20,363 ESTV's, for an average of 5,091 ESTV's per linear accelerator.

It is reasonable to assume that the rate of increase of ESTV's performed in a service area will compare to the rate of increase of new cancer cases in the service area. DHEC estimates new cancer cases in the service area will increase approximately 14% from 1994 to 1999. Applying that same 14% increase to ESTV's for the same period, the 20,363 ESTV's performed in 1994 should increase to 23,212 in 1999. The resulting 5,803 ESTV's per existing accelerator is well below the 6,500 benchmark. Even using the higher 1992 McLeod count of 24,394.44 ESTV's, a 14% increase would result in only 27,810 ESTV's in 1999, or 6,952 per existing accelerator. That potential partial need is not sufficient to justify an additional accelerator in the service area. The 1994 State Health Plan, p. II-56, specifically states:

Additional megavoltage therapy equipment should be based on need which is sufficient to efficiently operate equipment rather than on partial need at some point in the future. Therefore, no additional megavoltage units should be opened unless each linear accelerator in the service area is performing at least 6,500 ESTV's or treating 250 new patients per year.

The 1994 State Health Plan is the first version of the State Health Plan to require ESTV calculations to access linear accelerator utilization by providers. Apparently, the Carolinas application is the first CON application for which this methodology is applicable. In response to Carolinas' application, Les Shelton, the DHEC program management specialist responsible for drafting the radiation oncology section of the 1994 State Health Plan, collected ESTV data from all linear accelerator providers in the State. Shelton's review of the statewide data revealed that ESTV data from various providers was inconsistent. Shelton then made personal visits to several providers, including McLeod, to review the data and methodology used in the providers' ESTV calculations. Upon investigation and analysis of McLeod's calculations, Shelton determined that McLeod's ESTV calculations were accurate. Shelton advised the CON review staff that McLeod's ESTV calculations were accurate, but the review staff refused to consider McLeod's ESTV numbers because of the inconsistent calculations of other providers, all of which operate outside of the service area. Deeming all ESTV data unreliable, the review staff chose not to use any type of ESTV analysis whatsoever in its decision on the Carolinas CON. Rather than use ESTV's, the Department used the number of patients being treated per year on existing linear accelerators as its standard to measure utilization. (Shelton, TR., 11/15/95, pp. 154-156.)

In the absence of specific evidence that the McLeod ESTV data was inaccurate, DHEC's disregard for the 1994 State Health Plan's requirement that linear accelerator utilization be measured in terms of ESTV is unwarranted. The existence of unreliable ESTV data from providers in other areas of the state does not prejudice or render untrustworthy the valid ESTV data from McLeod, the exclusive radiation therapy provider in the proposed service area.

Based upon McLeod's ESTV numbers and DHEC's projections, a fifth accelerator in the service area is not needed.

PROJECT'S BENEFIT TO CAROLINAS AND SERVICE AREA

Carolinas is a major health care provider with solid economic and medical resources. Its ability to professionally and efficiently operate a radiation oncology unit is not challenged. The addition of a radiation oncology unit at Carolinas would result in benefits to the hospital and its patients. From Carolinas' standpoint, the project is financially feasible and would result in reasonable patient rates.

The primary benefit of approving a linear accelerator at Carolinas would be that Carolinas' inpatients requiring radiation therapy would no longer have to be transferred to McLeod for treatment and then back to Carolinas. At present, Carolinas inpatients requiring radiation treatment are transported to McLeod for treatment. In 1993, a total of 42 inpatients from Carolinas received radiation treatment at McLeod. In 1994, 33 Carolinas inpatients received radiation treatment at McLeod. The addition of a fifth linear accelerator may also create slightly

better access to radiation therapy for underserved portions of the population in the service area as well as for those patients who might be expected to seek treatment.

Increased patient convenience and nominally improved accessibility, however, do not outweigh the adverse effects that duplication of existing services and equipment would create. S.C. Code Ann. Regs. 61-15 § 802.3a (Supp. 1995) of the Criteria for Project Review provides that "[D]uplication and modernization of services must be justified. Unnecessary duplication of services and modernization of services no longer needed should be avoided."

Carolinas' proposed rates for radiation therapy are reasonable; however, the proposed discounted rates offered to Carolinas by McLeod are less than the projected charges by Carolinas.

McLeod currently gives Carolinas a discount for radiation oncology treatments provided to its inpatients and has offered to enter into a contract to provide discounts for outpatients covered by any of Carolinas' managed care plans.

PROJECT'S ADVERSE IMPACT ON MCLEOD

Because of a lack of need for an additional linear accelerator in the service area, the establishment of a new radiation oncology unit at Carolinas would result in McLeod's radiation oncology department suffering an operating loss. In its application, Carolinas estimates that it will treat between 328 and 395 patients per year from 1997 to 1999. While a small portion of that future caseload may be attributed to classes of patients not currently served by McLeod's radiation oncology department (underserved populations within the service area; patients from outside the service area; and new cases resulting from population and incident rate increases), a substantial number of Carolinas' radiation patients would undeniably come from McLeod's existing patient base. McLeod is the only radiation oncology provider in the service area. Carolinas' entry into the field would necessarily and directly affect McLeod's patient load, causing a correlating reduction in the utilization of McLeod's linear accelerators. As a cost containment measure, McLeod would possibly be forced to eliminate one of its linear accelerators and reduce staff.

If Carolinas were granted a CON, McLeod's ability to provide care to indigent and medically underserved groups would also be affected, although not significantly. McLeod's share of indigent cases in the service area would probably increase if Carolinas' CON were granted, resulting in less revenue for McLeod; however, McLeod would still be able to continue to provide care to indigents and other underserved groups.

FINDINGS OF FACT

By a preponderance of the evidence, I find the following facts:

General

  1. Petitioner McLeod Regional Medical Center is a not-for-profit regional medical center located in Florence, South Carolina.
  2. Respondent Carolinas, owned by Quorum Health Group, Inc. (QHG), a for-profit Tennessee corporation, is located within seven/tenths of a mile from McLeod in Florence, South Carolina.
  3. Respondent DHEC is the State agency authorized to administer the Certificate of Need program.
  4. McLeod has an established radiation oncology department, consisting of four linear accelerators, a simulator, a block cutting facility, a dedicated CT scanner and a computerized treatment planning system.
  5. McLeod's radiation oncology department employs the services of a physicist, two dosimetrists, one simulator operator, seven radiation therapists, two radiological technologists, a block cutter, a supervisor, an assistant supervisor, and clerical staff.
  6. Carolinas does not currently have a radiation oncology unit.
  7. Carolinas seeks to establish a radiation oncology department with the purchase and operation of a linear accelerator.


Application Process

  1. In 1992, Carolinas and McLeod submitted competing CON applications under the 1991 State Health Plan for the purchase and operation of a linear accelerator in the Florence area.
  2. By decisions dated October 27, 1992, DHEC denied a CON to Carolinas for construction of freestanding radiation oncology center, which included the purchase of a linear accelerator and issued a CON to McLeod for expansion of its radiation therapy department by construction of a treatment room and purchase of a fourth linear accelerator.
  3. The fourth accelerator became operational at McLeod on December 5, 1994.
  4. Carolinas filed an application for a CON to establish a radiation oncology unit with the purchase and installation of a linear accelerator and related equipment on July 14, 1994, under the 1993 South Carolina Health Plan, but withdrew that application by letter dated October 25, 1994.
  5. On October 27, 1994, Carolinas submitted a new CON application to DHEC for the purchase and installation of a linear accelerator and related equipment for the purpose of establishing a radiation oncology service in its facility.
  6. McLeod opposed Carolinas' CON application throughout DHEC's review process.
  7. DHEC considered the application complete on December 1, 1994, and informed Carolinas of the applicable Project Review Criteria, ranked in order of importance first:
a. Need - 1
b. Community Need Documentation - 2a, 2b, 2c, 2e
Distribution (Accessibility) - 3a
Efficiency - 17
c. Distribution - 22
Adverse Effects on Other Facilities - 23a
d. Acceptability 4a
e. Record of the Applicant - 13a, 13d
f. Financial Feasibility - 15
  1. By letter dated February 17, 1995, DHEC approved Carolinas' CON application, after which McLeod requested a contested case hearing and administrative review of DHEC's decision by the Administrative Law Judge Division.


Need: Service Area Population

  1. According to the 1994 State Health Plan, p. II-55, each linear accelerator should serve a population of at least 120,000 persons and treat approximately 200-300 cancer cases annually within three years after initiation.
  2. The service area, common to both Carolinas and McLeod, consists of the following nine counties: Chesterfield, Marlboro, Lee, Dillon, Darlington, Marion, Florence, Clarendon, and Williamsburg.
  3. The South Carolina Division of Research and Statistics estimated the 1994 population of the service area to be 423,640.
  4. Based upon the 1994 service area population, each of McLeod's three operational linear accelerators served approximately 141,547 persons.
  5. The South Carolina Division of Research and Statistics estimates the population of the service area will be 438,770 in 2000, an increase of 3.5% in six years.
  6. Based upon the projected 2000 service area population, each of McLeod's four operational linear accelerators should serve approximately 109,693 persons.
  7. Based upon the projected 2000 service area population, if a new linear accelerator were approved for Carolinas and McLeod continued operation of its four existing linear accelerators, each of the five accelerators should serve approximately 87,754 persons.
  8. The projected modest increase in population of the service area does not justify the addition of a fifth linear accelerator.


Need: Number of New Cancer Cases

  1. Based upon the 1994 State Health Plan, p. II-55, approximately 50% of cancer patients receive radiation therapy.
  2. DHEC estimated the number of new cancer cases in 1994 in the service area to be 1,818.
  3. Based upon DHEC's 1994 new cancer cases estimates for the service area and the statement from the 1994 State Health Plan, p. II-55, that approximately 50% of cancer patients receive radiation therapy, each of McLeod's four linear accelerators should have treated approximately 228 new patients in 1994.
  4. McLeod's radiation oncology unit treated 819 new patients in 1994, an average of 205 new patients per linear accelerator.
  5. DHEC estimates the number of new cancer cases in 1999 in the service area will be 2,073, an increase of 14% in five years.
  6. Based upon DHEC's 1999 new cancer cases estimates for the service area and the statement from the 1994 State Health Plan, p. II-55, that approximately 50% of cancer patients receive radiation therapy, each of McLeod's four existing linear accelerators should treat approximately 259 patients.
  7. Based upon DHEC's 1999 new cancer cases estimates for the service area and the statement from the 1994 State Health Plan, p. II-55, that approximately 50% of cancer patients receive radiation therapy, if a new linear accelerator were approved for Carolinas, and McLeod continued operation of its four existing linear accelerators, each of the five accelerators should treat approximately 207 patients.


Need: Number of Radiation Treatments

  1. In fiscal year 1992, using three linear accelerators, McLeod performed a total of 21,588 treatments, for an average of 7,196 treatments per accelerator.
  2. In fiscal year 1993, using three linear accelerators, McLeod performed a total of 20,262 treatments, for an average of 6,754 treatments per accelerator.
  3. In fiscal year 1994, using three linear accelerators, McLeod performed an estimated total of 17,707 treatments, for an average of 5,902.33 treatments per accelerator. A total of four linear accelerators are presently located and operating in the service area, all of which are at McLeod.


Need: ESTV's

  1. The radiation oncology section of the 1994 version of the State Health Plan contains new language and methodology for determination of utilization, referring to ESTV's, not previously contained in earlier versions of the State Health Plan.
  2. In response to Carolinas' CON application, Les Shelton, the DHEC program management specialist responsible for drafting the radiation oncology section of the 1994 State Health Plan, collected ESTV data from all linear accelerator providers in the State.
  3. Because the ESTV data from the various providers was inconsistent, Shelton went to several providers, including McLeod to review numbers and methodology used in their ESTV calculations.
  4. Shelton concluded that McLeod's ESTV calculations were accurate and so advised the DHEC staff responsible for reviewing Carolinas' CON.
  5. DHEC did not use the ESTV statistics from McLeod in its review and decision of the Carolinas application, but rather used the projected number of patients as the indicator of need.
  6. McLeod's ESTV data is substantially accurate and is a reliable indicator of linear accelerator utilization and need in the service area.
  7. In fiscal year 1992, using three linear accelerators, McLeod performed a total of 24,394.44 ESTV'S, for an average of 8,131.48 ESTV'S per accelerator.
  8. In fiscal year 1993, using three linear accelerators, McLeod performed a total of 22,896.06 ESTV'S, for an average of 7,632.02 ESTV'S per accelerator.
  9. In fiscal year 1994, using four linear accelerators, McLeod performed a total of 20,363 ESTV'S, for an average of 5,091 ESTV'S per linear accelerator.

43. The total number of ESTV's performed in the service area from 1992 to 1994 declined.

Project's Benefits to Carolinas and Service Area

44. The establishment of a radiation oncology unit at Carolinas, would provide Carolinas with approximately 250-300 new patients per year.

45. At present, Carolinas inpatients requiring radiation treatment are transported to McLeod for treatment.

46. In 1993, a total of 42 inpatients from Carolinas received radiation treatment at McLeod.

47. In 1994, a total of 33 inpatients from Carolinas received radiation treatment at McLeod.

48. The primary benefit of approving a linear accelerator at Carolinas would be that Carolinas inpatients requiring radiation therapy would no longer have to be transferred to McLeod for treatment and then back to Carolinas; however, the benefits of such convenience do not outweigh the adverse effects which will be caused by duplication of existing services and equipment.

49. The addition of a fifth linear accelerator may create slightly better access to radiation therapy for underserved portions of the population as well as for those patients who might be expected to seek treatment; however, the benefits of such a minimal improvement to accessibility do not outweigh the adverse effects which will be caused by duplication of existing services and equipment.

50. McLeod currently gives Carolinas a discount for radiation oncology treatments provided to its inpatients and has offered to enter into a contract to provide discounts for outpatients covered by any of Carolinas' managed care plans.

51. Carolinas' proposed rates for radiation therapy are reasonable; however, the proposed discounted rates offered to Carolinas by McLeod are less than the projected charges by Carolinas.

Project's Adverse Impact on McLeod

52. In its application, Carolinas made the following projections for patients to be treated if the project is approved:

Year Number of Patients
1994 262
1997 328
1998 351
1999 373
2000 395

53. McLeod's radiation oncology department provides a high quality of care.

54. Establishment of a new radiation oncology department and operation of the proposed linear accelerator at Carolinas would directly affect McLeod's patient load, causing a correlating reduction in the utilization of McLeod's linear accelerators.

55. The establishment of a radiation oncology unit at Carolinas would result in McLeod's radiation oncology department suffering an operating loss. As a cost containment measure, McLeod would possibly be forced to cease operation of one of its linear accelerators and reduce staff.

56. McLeod's ability to continue to provide services to indigent patients would be hampered by future operating losses by McLeod's radiation oncology department, although McLeod would be able to continue to provide care to indigents and other underserved groups.

57. The capital and operating costs of the proposed linear accelerator and their potential impact on patient charges at Carolinas are reasonable; however the benefits which may be realized by Carolinas do not outweigh the adverse effects which will be caused by duplication of the existing services and equipment at McLeod.

CONCLUSIONS OF LAW

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

  1. The Administrative Law Judge Division has jurisdiction over this matter and is authorized to hear it as a contested case pursuant to S.C. Const. art. I, § 22; Chapter 23 of Title 1 of the 1976 Code, as amended; S.C. Code Ann. § 1-23-600(B) (Supp. 1995); S.C. Code Ann. §§ 1-23-310, 320 (Supp. 1995); § 44-7-210(D)(2) (Supp. 1995); S.C. Code Ann. Regs. 61-15 § 403 (Supp. 1995) and S.C. Code Ann. Regs. 61-72 § 201 (Supp. 1995).
  2. The issues considered at the contested case hearing are limited to those presented, or considered, during the staff review and decision process. S.C. Code Ann. § 44-7-210(E) (Supp. 1995).

3. Pursuant to ALJD Rule 29(B), issues raised at the hearing not specifically addressed in this Order are deemed denied.

4. As a state-wide administrative tribunal authorized to take evidence and determine contested case hearings, the Administrative Law Judge Division is the fact finder in this matter for purposes of administrative and judicial review. See Lindsey v. S.C. Tax Comm'n, 320 S.C. 504, 397 S.E.2d 95 (1990).

5. McLeod is an "affected person" with standing to request a contested case hearing and administrative review of DHEC's decision to approve Carolinas' CON application for the establishment of a radiation oncology unit. S.C. Code Ann. § 44-7-130 (Supp. 1995) and S.C. Code Ann. Regs. 61-15, § 103.1 (Supp. 1994).

6. McLeod timely filed a Petition for Administrative Review for a Contested Case Hearing regarding DHEC's approval of Carolinas' CON application. S.C. Code Ann. § 44-7-210(D) (Supp. 1995); S.C. Code Ann. Regs. 61-15 (Supp. 1995).

7. The burden of proof in weighing the evidence and making a decision on the merits in a contested case hearing is a preponderance of the evidence, with the burden being upon the Petitioner. McLeod has the burden of proof to establish by a preponderance of the evidence that Carolinas' CON application should be denied. S.C. Code Ann. §§ 44-7-110 through 44-7-340 (Supp. 1995); S.C. Code Ann. Regs. 61-15, § 403(1) (Supp. 1995); National Health Corp. V. S.C. Dep't of Health and Environmental Control, 298 S.C. 373, 380 S.E.2d 841 (1989).

8. The preponderance of the evidence means evidence which is of greater weight, or is more convincing than that offered in opposition to it. Black's Law Dictionary 1182 (6th ed. 1990).

9. S.C. Code Ann. §§ 44-7-110, et seq. (Supp. 1995), the State Certification of Need and Health Facility Licensure Act, grants DHEC the authority to administer the State's CON program.

10. S.C. Code Ann. §§ 44-7-180, et seq. (Supp. 1995) provides for the application procedures, criteria, and standards for a Certificate of Need.

11. The CON program is administered under the guidelines of S.C. Code Ann. Regs. 61-15 (Supp. 1995).

12. A Certificate of Need must not be awarded to an applicant unless the application complies with the State Health Plan, Project Review Criteria, and other regulations. Based on project review criteria and other regulations, which must be identified by the Department, a Certificate of Need may be denied even if an application complies with the State Health Plan. S.C. Code Ann. § 44-7-210 (Supp. 1995); S.C. Code Ann. Regs. 61-15, § 802.1 (Supp. 1995).

13. All CON applications must be consistent with the State Health Plan in effect at the time of application. S.C. Code Ann. Regs. 61-15, § 504 (Supp. 1995).

14. The 1994 State Health Plan, effective October 14, 1994, is the applicable Plan controlling this matter.

15. According to the 1994 South Carolina Health Plan, p. II-56, the following project review criteria are considered most important in evaluating a CON for a linear accelerator radiation unit:

a. Compliance with the Need Outlined in this Plan;
b. Community Need Documentation;
c. Distribution (Accessibility);
d. Operating Budget;
e. Financial Feasibility;
f. Cost Containment; and
g. Relationship to the Health System.

16. DHEC considered Carolinas' application with the following Project Review Criteria contained in S.C. Code Ann. Regs. 61-15, § 802, ranked in order of importance by DHEC:

a. Need - (§ 802.1)
b. Community Need Documentation - (§ 802.2a, 2b, 2c, 2e)
Distribution (Accessibility) - (§ 802.3a)
Efficiency - (§ 802.17)
c. Distribution - (§ 802.22)
Adverse Effects on Other Facilities - (§ 802.23a)
d. Acceptability (§ 802.4a)
e. Record of the Applicant - (§ 802.13.a, & 13d)
f. Financial Feasibility - (§ 802.15)

17. The project does not meet the requirements of S.C. Code Ann. Regs. 61-15, § 802.2c, in that the proposed project does not meet an identified (documented) need.

18. Carolinas' application is not consistent with nor in compliance with the 1994 South Carolina Health Plan.

19. The Section of the 1994 State Health Plan relating to Radiation Therapy (pp. II-54-58) utilizes the Equivalent Simple Treatment Visits ("ESTV'S") methodology as set forth in a report of the Intersociety Council of Radiation Oncology entitled Radiation Oncology and Integrated Case Management for determining the need for additional accelerators within a service area. It also measures need based upon the service area population and the number of new patients per year per accelerator.

20. The 1994 State Health Plan, p. II-56, provides that "no additional megavoltage units should be opened unless each linear accelerator in the service area is performing at least 6,500 ESTV's or treating 250 new patients per year."

21. Reliable, documented ESTV from providers in the proposed service area must be considered in the determination of need of the proposed project.

22. The existence of unreliable ESTV data from providers in other areas of the state does not necessarily prejudice or render untrustworthy the valid ESTV data from McLeod. Because DHEC verified the methodology used by McLeod in its ESTV calculations, it is reasonable to consider and give weight to McLeod's ESTV data.

23. McLeod's accelerators are underutilized and possess excess capacity to accommodate anticipated patient growth in its service area for the next five years.

24. Based upon McLeod's ESTV numbers and DHEC's cancer case projections, a fifth accelerator in the service area is not needed.

25. In light of the availability of reliable ESTV data for McLeod, the curative-palliative mix information for radiation oncology patients treated at McLeod is immaterial.

26. Potential partial need is not sufficient to justify an additional accelerator in the service area. The 1994 State Health Plan, p. II-56, specifically states:

Additional megavoltage therapy equipment should be based on need which is sufficient to efficiently operate equipment rather than on partial need at some point in the future. Therefore, no additional megavoltage units should be opened unless each linear accelerator in the service area is performing at least 6,500 ESTV's or treating 250 new patients per year.

27. The project does not meet the requirements of S.C. Code Ann. Regs. 61-15, § 802.2e, in that current and projected utilization is not sufficient to justify the implementation of the proposed service.

28. The project does not meet the requirements of S.C. Code Ann. Regs. 61-15, § 802.3a, in that the proposed project will unnecessarily duplicate existing services.

29. The project does not meet the requirements of S.C. Code Ann. Regs. 61-15, § 802.17, in that the proposed project will not promote shared services or foster economies of scale.

30. The capital and operating costs of the proposal and their potential impact on patient charges are reasonable; however, patients will not experience serious problems in terms of costs, availability, or accessibility, in obtaining care of the type proposed in the absence of the project.

31. The project does not meet the requirements of S.C. Code Ann. Regs. 61-15, § 802.23a, in that the adverse impact on the current and projected use rates of the existing facilities at McLeod outweighs the increased accessibility offered by the proposed project.

32. Patients will not suffer availability or accessibility problems if Carolinas does not get an accelerator.

33. McLeod is not currently experiencing any problems relating to radiation oncology accessibility or quality of care.

34. Carolinas does not sufficiently meet the cumulative criteria set forth in the 1994 S.C. State Health Plan for issuance of a CON for a radiation oncology unit with the purchase and installation of a linear accelerator and related equipment. S.C. Code Ann. Regs. 61-15, § 801.3.



ORDER

IT IS HEREBY ORDERED that the Certificate of Need application of Carolinas Hospital System to establish a radiation oncology unit with the purchase and installation of a linear accelerator and related equipment is denied.



_______________________________

STEPHEN P. BATES

ADMINISTRATIVE LAW JUDGE



June 7, 1996

Columbia, South Carolina

__________________

Fn. 1. Curative treatment is administered in an attempt to cure cancer. Palliative treatment is provided, not for cure, but to relieve pain and other symptoms. Based upon a patient's condition, the radiation oncologist prescribes a treatment regimen. There is no distinction (so far as a radiation oncology department is concerned) between administration of radiation for cure versus palliation. Whether treatment is for cure or palliation generally affects the number of procedures administered, rather than the type of treatment.


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