SC Administrative Law Court Decisions

STATEMENT OF THE CASE

This matter comes before me upon Petition for Administrative Review and Request for Contested Case Hearing filed by First American Home Care of South Carolina, Inc. ("First American") pursuant to S.C. Code Ann. §§ 44-7-110 et seq. (Supp. 1995), regarding the proposed decision of the South Carolina Department of Health and Environmental Control ("Department" or "DHEC") to award a Certificate of Need to Home Health of South Carolina, Inc. ("Home Health") for a home health agency in Lexington County, South Carolina, and to deny the application of First American.

Originally, seven applicants, including Petitioner First American and Respondent Home Health, filed applications with the Department for one Certificate of Need ("CON") available in Lexington County under the 1994 State Health Plan. After DHEC staff review of these applications, public hearing, and project review, the Department determined that the Home Health application most fully complied with the requirements, goals and purposes of the CON statutes, the State Health Plan, Project Review Criteria, and Regulation 61-15.

On June 23, 1995, DHEC notified all applicants of its proposed decision to grant the Certificate of Need to Home Health and deny all other competing applications. St. Joseph Hospital Home Care, Professional Home Nursing, Inc. ("PHN"), Mediforce, and First American contested the Department's decision, each timely filing requests for a contested case hearing. First American filed its Petition for Administrative Review on July 10, 1995.

St. Joseph Hospital Home Care subsequently withdrew its petition and was removed as a party by Order dated September 11, 1995. A contested case hearing was held January 8-12, 1996, to determine which, if any, home health agency should be approved for a CON in Lexington County, South Carolina. Upon consent, the Petition of Mediforce was dismissed with prejudice by Order filed January 10, 1996. PHN participated in the full hearing but consented to dismissal as a party on March 20, 1996. The two competing applications of Home Health and First American remain the subject of this proceeding.

Based upon the following findings and conclusions, approval of the Home Health of South Carolina, Inc. application is granted for the provision of home health services in Lexington County, and the application of First American Home Care of South Carolina is denied.

OUTSTANDING MOTIONS

I. Home Health's Motion to Amend

Home Health moved to amend its application to reflect a change in ownership that occurred subsequent to filing of its application. At the time of filing, Home Health had three shareholders, holding 52%, 24% and 24% of the total shares. In November of 1995, the stock was redistributed so that each of the original shareholders now holds 30.6% each, with the remaining 8% equally divided between two new shareholders. The reissuance of stock certificates resulted in no increase in costs to Home Health, no increase in government-sponsored reimbursement, no change in revenue, no additional expenses, no effect on indigent care or other services, no effect on profits, and no effect on Home Health's proposed budget. This motion is hereby granted pursuant to S.C. Code Ann. Regs. 61-15 § 310 (Supp. 1995) as being an insubstantial change made during the review process.

II. First American's Motion for Fees and Costs

In the course of prehearing preparation, a deposition of Home Health's expert witness, Mr. Richard L. DeVita, was taken on December 29, 1995. An additional deposition of Mr. DeVita was taken on January 5, 1996, at the request of the moving party. First American moved for fees and costs associated with the January 5, 1996 deposition on the ground that this deposition was conducted beyond the discovery deadline of December 29, 1995. Because no evidence of intentional or negligent abuse of the discovery process was established and no material prejudice or harm was demonstrated, the motion for fees and costs is denied.

FINDINGS OF FACT

By a preponderance of the evidence, I make the following findings of fact:

1. Notice of the date, time, place and nature of the hearing was timely given to all parties.
2. There are currently eight (8) licensed home health agencies operating in Lexington County.
3. The 1994 South Carolina Health Plan identified Lexington County as one of 13 counties in which an additional home health agency CON could be approved.
4. Petitioner First American and Respondent Home Health filed applications with the Department for the one additional CON available in Lexington County under the 1994 State Health Plan.
5. On June, 23, 1995, the Department issued a proposed decision approving Home Health's application for the Certificate of Need for home health services in Lexington County and denying the remaining CON applications.
6. First American filed its Petition for Administrative Review on July 10, 1995.
7. Of seven original applicants seeking the new home health CON in Lexington County, only the two competing applications of Home Health and First American remain the subject of this proceeding, with all other applicants either not seeking review of the DHEC proposed decision or withdrawing as a party prior to the issuance of this Order.
8. First American Home Care of South Carolina, Inc. is a wholly-owned subsidiary of First American Health Care of Georgia, Inc., comprised of over 400 locations in 21 states.
9. First American does not currently operate a home health agency in South Carolina.
10. Home Health of South Carolina, Inc. is a South Carolina corporation.
11. Home Health currently operates a home health agency in York County, South Carolina.
12. Home Health's principals previously operated a home health agency in five counties in the Florence area, which was sold in 1995 to McLeod Regional Medical Center.
13. Home Health's original response to Section 8(e) of its CON application listed its shareholders and their ownership interests as:

Chris J. Yahnis - 52%

James A. Brown - 24%

J. Frank Chisholm - 24%

1. Pursuant to motion granted, Home Health amended the first sentence of Section 8(e) of its original application to reflect the reissuance of stock certificates subsequent to the filing of its CON application. The current shareholders and their ownership interests are as follows:

Chris J. Yahnis - 30.6%

James A. Brown -30.6%

J. Frank Chisholm -30.6%

Daniel L. Hyler - 4%

Lloyd C. Miller - 4%

1. On April 10, 1995, the Department deemed the competing CON applications complete, and notified the competing applicants pursuant to S.C. Code Ann. Reg. 61-15 § 304 (Supp. 1995) that the applicants had thirty (30) days to provide the Department with any additional information.
2. The Department accepted all additional information submitted by applicants beyond the thirty-day period, up until the date of its proposed staff decision.
3. All applicants were notified of the project review criteria, with the Department listing in the order of importance, the project review criteria it considered most significant in evaluating the applications.
4. The Department accepted letters of support from physicians inside the service area of Lexington County, as well as physician support letters from Richland County physicians who specifically indicated they served Lexington County patients.
5. The Department reviewed the applications of First American and Home Health in a manner consistent with other applications for a Certificate of Need for home health agencies which the Department receives.
6. Through its June, 23, 1995 letter, DHEC issued a proposed decision approving Home Health's application for the Certificate of Need for home health services in Lexington County and denying the remaining CON applications, stating the following reasons for Home Health's CON application approval:

a. The proposed project is consistent with the 1994 South Carolina Health Plan in that there is sufficient documentation from physicians and hospital discharge planners indicating the number of Lexington County patients they will refer to the proposed agency.

b. The proposed project best meets the criteria for home health agencies as outlined in the 1994 South Carolina Health Plan, as it has acceptable letters of support from as many Lexington County physicians as any of the other competing Certificate of Need applications for home health services in Lexington County. Local physicians and discharge planner letters are given priority in the review because the geographical area of a county is the service area indicated in the [S]tate Health Plan from which such letters should originate. In addition, Home Health of South Carolina, Inc. has significantly more letters of support from physicians in other counties which are adjacent to Lexington County which meet the criteria in the State Health Plan than other competing Certificate of Need applications for home health services in Lexington County.

1. Home Health's application contained 58 letters from physicians and discharge planners which serve home health patients in Lexington County, each of which indicated a commitment to refer home health patients to the proposed agency.
2. Thirteen of the 58 letters in Home Health's application were dated before May 10.
3. The letters submitted on behalf of Home Health by physicians and discharge planners indicate that approximately 698-759 home health patients in the service area will be referred to Home Health each year.
4. In addition to the physician and discharge planner letters, Home Health submitted three community support letters which were considered in support of its application, but which did not specifically indicate a commitment by a physician or hospital discharge planner to refer home health patients to the proposed agency.
5. First American's application contained 13 letters from physicians and discharge planners which serve home health patients in Lexington County, none of which specifically indicated the number of home health patients to be referred to the proposed agency, with several of the letters making reference to the Richland County service area.
6. All 13 letters submitted on First American's behalf were dated before May 10, 1995.
7. First American did not submit community support letters.
8. First American filed a Petition for Administrative Review on July 10, 1995, alleging that the Department had erred in its approval of Home Health's application and its denial of First American's application.
9. Home Health's projected charges comply with the financial feasibility aspect of the review criteria. Home Health's projected patient charges, although only projections, are generally comparable to those of existing Lexington County agencies.
10. Home Health's application more fully complies with the requirements, goals, and purposes of the CON Act, applicable regulations, Project Review Criteria, and the 1994 State Health Plan than the application of First American.

CONCLUSIONS OF LAW

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

1. This matter is a contested case proceeding, governed by the Administrative Procedures Act. S.C. Const. art. I, § 22; see League of Women Voters of Georgetown County v. Litchfield by the Sea, 305 S.C. 424, 409 S.E.2d 378 (1991).
2. The Administrative Law Judge Division has jurisdiction over this matter and is authorized to hear this contested case pursuant to S.C. Const. art. I, § 22; Chapter 23 of Title 1 of the 1976 Code, as amended; and S.C. Code Ann. § 44-7-210(D) (Supp. 1995).
3. First American timely filed a Petition for Administrative Review. S.C. Code Ann. §44-7-210(D) (Supp. 1995); S.C. Code Regs. 61-15 (Supp. 1995).
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 judicial review. Lindsey v. S.C. Tax Comm'n, 320 S.C. 504, 397 S.E.2d 95 (1990).
5. First American has the burden of proof to establish by a preponderance of the evidence that Home Health's CON application to provide home health services in Lexington County should be denied and First American's application should be approved. S.C. Code Ann. §§ 44-7-110 through 340 (Supp. 1995); S.C. Code Ann. Regs. 61-15, § 403(1); National Health Corp. V. S.C. Dep't of Health and Environmental Control, 298 S.C. 373, 380 S.E.2d 841 (1989).
6. 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).
7. 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.
8. The CON program is administered under the guidelines of S.C. Code Ann. Regs. 61-15 (Supp. 1995).
9. 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).
10. 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).
11. The 1994 State Health Plan indicates that a sufficient need exists to allow for approval of one new home health agency in Lexington County. 1994 State Health Plan at p. II-126.
12. All CON applications for Lexington County home health services were accepted and considered under the 1994 State Health Plan.
13. In the case of competing applications, a Certificate of Need must be issued, if appropriate, on the basis of which, if any, most fully complies with the requirements, goals, and purposes of the State Health Plan, Project Review Criteria, and Department regulations. S.C. Code Ann. § 44-7-210; S.C. Code Regs. 61-15, § 802(1).
14. The competing CON applications in this case are subject to the following project review criteria considered in the review process, ranked according to their relative importance:

(1) Need, compliance with the State Health Plan -(identified in S.C. Code Ann. Regs. 61-15, § 802(1)

(2) Acceptability - (identified in S.C. Code Regs. 61-15, § 802(4a)

(3) Distribution, accessibility - (identified in S.C. Code Ann. Regs. 61-15, § 802(3b), (3f), (3g) Medically Underserved Groups - (identified in S.C. Code Ann. Regs. 61-15, § 802(31a), (31d)

(4) Record of the Applicant - (identified in S.C. Code Ann. Regs. 61-15, § 802(13a), (13d)

(5) Projected Revenues - (identified in S.C. Code Ann. Regs. 61-15, § 802(6a)

(6) Net Income - (identified in S.C. Code Ann. Regs. 61-15, § 802(9) Financial Feasibility - (identified in S.C. Code Regs. 61-15, § 802(15) S.C. Code Ann. Regs. 61-15, § 304 (Supp. 1995).

1. Upon determination by the Department that a CON application is complete for purposes of Department review, the Department must notify each applicant of the relative importance of the project review criteria to be used in reviewing the application. S.C. Code Ann. Regs. 61-15, § 304.
2. Once an applicant receives notice that its application is complete for purposes of review, it has a minimum of 30 days to submit additional information, but DHEC may continue to accept and consider material up until the date of its decision. S.C. Code Ann. Regs. 61-15, § 304.
3. The CON application review process is not complete until a final decision is rendered. The Department's proposed decision is not final until the completion of reconsideration or contested case proceedings. S.C. Code Ann. Regs. 61-15, §§ 307 and 308(2); S.C. Code Ann. § 44-7-210(E).

18.Amendment to a CON application by an applicant during the review process is allowed if the amendment is not substantial and does not constitute a new application. S.C. Code Ann. Regs. 61-15, § 310. The amendments proposed by Home Health relative to the number of shares held by each of the stockholders is not substantial enough to constitute a new application, but rather is a minor amendment to Home Health's original application.

19. S.C. Code Ann. Regs. 61-15, § 801(3) (Supp. 1995) provides that "a project does not have to satisfy every criterion in order to be approved, but no project may be approved unless it is in compliance with the State Health Plan."

20. The Department acted in accordance with applicable statutory and regulatory requirements of the CON review process.

21. Of the remaining applications before this tribunal, only Home Health's CON application complies with the 1994 State Health Plan.

22. Standard 3 of the 1994 State Health Plan of the home health agency section, at p. II-123, provides that there should be documentation from physicians and hospital discharge planners in the proposed service area indicating the number of patients that they currently refer to home health agencies and the number of additional patients that they will refer to the proposed agency.

23. First American's CON application does not comply with the 1994 State Health Plan in that it contains no letters of support from physicians or discharge planners which indicate a commitment to refer home health patients to the proposed agency as required by Standard 3 of the Home Health Agency section of the 1994 State Health Plan at p. II-123.

24. Home Health's CON application complies with the 1994 State Health Plan.

25. Home Health best meets the criteria set forth in the 1994 State Health Plan and S.C. Code Ann. Regs. 61-15, § 802 for issuance of a CON to operate a home health agency in Lexington County.

26. Any issues raised in the proceedings or hearing of this case but not addressed in this Order are deemed denied. ALJD Rule 29(B).

ORDER

IT IS HEREBY ORDERED that the South Carolina Department of Health and Environmental Control grant the Certificate of Need applied for by Home Health of South Carolina, Inc. and deny the application of First American Home Care of South Carolina, Inc.

AND IT IS SO ORDERED.

_____________________________

STEPHEN P. BATES

ADMINISTRATIVE LAW JUDGE

May 10, 1996

Columbia, South Carolina