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Administrative Law Court
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SC Administrative Law Court Decisions

Physician Imaging Centers, Inc. vs. SCDHEC

South Carolina Department of Health and Environmental Control

Physician Imaging Centers, Inc.

South Carolina Department of Health and Environmental Control and Tricounty Radiology Associates, P.A., Charleston, South Carolina

David B. Summer, Jr., Attorney for Petitioner

Mark T. Arden and W. Alex Weatherly, Jr., Attorneys for Respondent Tricounty Radiology Associates, P.A.

Cheryl H. Bullard, Attorney for Respondent DHEC



This matter comes before me upon a Motion to Dismiss filed by Respondent Tricounty Radiology Associates, P.A. ("Tricounty") and a Motion to Enforce a Stay filed by Petitioner Physician Imaging Centers, Inc. ("PIC"). The South Carolina Department of Health and Environmental Control ("DHEC") joins Tricounty in moving for dismissal and opposing the enforcement of a stay. A hearing was conducted September 11, 1995, at which counsel presented oral arguments on each of the motions. Additional pleadings, memoranda, and correspondence were received from counsel on September 12, 1995. Upon consideration of all of the above, the Motion to Dismiss is denied and the Motion to Enforce a Stay is granted. Additionally, a telephone scheduling conference is ordered for 11:00 a.m., Friday, September 15, 1995, to discuss and establish dates for completion of discovery and the commencement of the contested case hearing. Pursuant to Rule 29(B), ALJD Rules of Procedure, all issues raised in conjunction with the September 11, 1995 motions hearing not expressly addressed in this Order are deemed denied.


This case represents the very first instance in which one entity has attempted to challenge another entity's exemption from the Certificate of Need ("CON") process. While DHEC takes the position that its CON regulations are inapplicable in this situation, DHEC transmitted this case to the Administrative Law Judge Division for adjudication.

Tricounty, a group of practicing physicians in the Charleston area, requested written determination from DHEC that Tricounty was exempt from application for and issuance of a CON for acquisition and use of Magnetic Resonance Imaging ("MRI") equipment in Tricounty's existing private radiology practice. DHEC, based upon the information provided by Tricounty, determined that the proposed project did not require CON review, as the equipment being acquired would be used for diagnosis and total project cost is less than $600,000. Tricounty's projected budgeted costs submitted to DHEC indicates the total project cost is $551,049. Tricounty and DHEC contend that Tricounty was not obligated to seek DHEC's determination of CON exemption for the proposed project, asserting that the exemption request was a discretionary and precautionary measure only.

PIC wishes to contest Tricounty's $551,049 project cost figure submitted to DHEC and seeks an opportunity to prove that the project cost exceeds $600,000. In a related case, PIC is currently seeking CON approval for a freestanding MRI center in the Charleston area. PIC's CON application has been tentatively approved by DHEC; however, a contested case proceeding is pending before the Administrative Law Judge Division in that matter.


Respondents assert that PIC's petition must be dismissed for lack of standing, lack of jurisdiction, failure to state a claim upon which relief can be granted, and because a civil claim is currently pending and being litigated between the same parties in a circuit court action. Respondents rely upon the language contained in several sections of DHEC regulations, 24A S.C. Code Ann. Regs. 61-15 (Supp. 1994) and 25 S.C. Code Ann. Regs. 61-72 (Supp. 1994), in support of the Motion to Dismiss. Regs. 61-15 governs the application, evaluation, certification, and review process for DHEC's CON program. Regs. 61-72 provides the general procedural framework for all contested cases before DHEC.

Respondents' arguments are not persuasive. There is ample regulatory and statutory authority providing PIC with the right to a hearing on the contested issue. More importantly, constitutional due process safeguards mandate that PIC be afforded the opportunity to adjudicate DHEC's determination even in the absence of statutory or regulatory authority. I conclude that PIC has standing, the Administrative Law Judge Division has jurisdiction, and a claim is present for which relief can be granted. The civil action pending between the parties has no jurisdictional effect upon the present administrative matter. PIC is entitled to a hearing on the merits. Tricounty is entitled to a timely and expeditious resolution of the controversy.

PIC has an interest in Tricounty's proposed MRI project. By virtue of its pending CON application for a freestanding MRI facility in the same service area as Tricounty's offices, PIC is an affected person under Regs. 61-15, § 103.1. PIC properly filed and perfected a petition with DHEC pursuant to Regs. 61-72 for an adjudicatory hearing on the matter. DHEC properly transmitted the case to the Administrative Law Judge Division for disposition pursuant to S.C. Code Ann. § 1-23-600 (Supp. 1994).

Regs. 61-15, §102.1.f and § 104.2.e provide that a CON is required to be obtained by licensed private practitioners before acquisition of medical equipment to be used for diagnosis or treatment, if the total project cost is in excess of $600,000. A review of Tricounty's budgeted costs submitted to DHEC indicates the total project cost is $551,049. PIC wishes to contest that figure and seeks an opportunity to prove that the project cost exceeds $600,000.

DHEC and Tricounty assert that since Tricounty's proposed acquisition of MRI equipment is at a cost below $600,000, Tricounty was not obligated to seek DHEC approval of the project. The fact remains, however, that DHEC's determination that Tricounty's project met CON exemption criteria was requested, however. After receiving Tricounty's request, DHEC even required Tricounty to provide additional data in connection with the project before issuing its determination that Regs. 61-15 was inapplicable. DHEC's July 26, 1995 exemption letter to Tricounty's counsel states, in part: "[T]his exemption is valid for six months from the dater of this letter. If this equipment is not operational within this time period you will be required to apply to the Department for another determination. Please notify me when the project is implemented." Clearly, DHEC was acting in more than merely an advisory capacity.

DHEC asserts that it is under no statutory or regulatory requirement to consider Tricounty's exemption request. DHEC takes the position that the determination in question, reached as a result of the discretionary consideration, is not subject to challenge as a contested case pursuant to the APA. A request for CON exemption determination is, by definition, not a CON application. If a project is exempt from the CON process, the regulations governing the CON application and evaluation process would appear to be inapplicable. That position ignores the potential for injustice in a situation in which by mistake, inadvertence, surprise, neglect, fraud, or misrepresentation, DHEC's determination is erroneous and/or inequitable. Such a determination may prejudice the rights of not only the party requesting the determination, but other affected persons as well. There must be a procedural mechanism for oversight and review of agency decisions affecting the rights of third persons.

DHEC recognizes the right to a hearing in other CON exemption situations. As the governmental regulator of health services and facilities in South Carolina, DHEC has the authority to charge persons operating outside the scope of CON standards with a violation of Regs. 61-15 and seek penalties. The alleged offender has the right to an adjudicatory hearing. Likewise, a person seeking a DHEC determination regarding CON exemption, is entitled to a hearing in the event its exemption request is denied. Logically, a decision to approve an exemption must also be reviewable and subject to the same due process standards.

While Regs. 61-15 does not provide a procedure to challenge an exemption determination, Regs. 61-72 sets forth the contested case procedures generally for DHEC hearings. Regs. 61-72, § 102 provides:

The provisions of this regulation shall apply to all proceedings, except as modified by agreement of the parties or as otherwise provided by law or regulation, in which the right to hearing (a) is provided by the Administrative Procedures Act; (b) is specifically required by other statutes or regulations; or (c) is required by due process under the South Carolina or United States Constitutions. The provisions of this regulation shall not be construed to affect the availability of any other procedure consistent with applicable law.

In addition, the Administrative Procedures Act and the Administrative Law Judge Division Rules of Procedure provide a framwork for the disposition of contested cases.

Even if Regs. 61-72 and the APA are inapplicable, as Respondents argue, PIC is nonetheless entitled to due process protection. While it is recognized that DHEC generally operates in good faith and would attempt to correct an erroneous staff decision as a matter of professionalism and fairness, there must be a means of redress to protect against abuse or mistake. There must be a process by which an aggrieved party can seek protection of its substantive rights against action or inaction of the State. While the right to or means of such consideration might not be clearly stated in regulation or statute, superseding constitutional due process provisions confer the right to receive notice, have an opportunity to be heard, and obtain judicial review when private rights are affected. S.C. Const. art. I, § 22; League of Women Voters of Georgetown County v. Litchfield-By-The-Sea, 305 S.C. 424, 409 S.E.2d 378 (1991).

S.C. Const. art. I, § 22 specifically provides:

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.

As an administrative agency, DHEC must comply with due process standards set forth in Article I, § 22, of the South Carolina Constitution. Accordingly, as in League of Women Voters of Georgetown County v. Litchfield-By-The-Sea, it is appropriate to conclude in the present case that even if the issue Petitioner desires to be decided upon the merits is not a contested case under Regs. 61-72 or the APA, Petitioner must be afforded an opportunity to litigate the case at the administrative level. Judicial review of DHEC's decision is not available until an administrative hearing is first conducted. Constitutional due process standards, even in the absence of specific statutory or regulatory authority, dictate that affected persons be afforded the opportunity for an adjudicatory hearing. Stono River EPA v. DHEC, 305 S.C. 90, 406 S.E.2d 340 (1991).


PIC moves for enforcement of the automatic stay applicable to DHEC contested cases pursuant to Regs. 61-72, § 205(A) during the pendency of agency action regarding the issuance of a license. Consistent with the foregoing conclusion that PIC is entitled to an administrative hearing in this matter, a stay is in order to prevent Tricounty from implementing its proposed project prior to final adjudication of the exemption issue.

An administrative law judge is empowered to issue such remedial writs as necessary to give effect to its orders pursuant to S.C. Code Ann. §1-23-630 (Supp. 1994). Accordingly, a stay may be ordered to maintain the status quo during the pendency of a controversy. In the present situation, PIC is entitled to a stay to preserve it rights until the resolution of the administrative decision making process. It is the Court's intention, however, that the adjudication process be conducted as expeditiously as possible.


In order to establish a schedule for discovery and to ensure a speedy hearing, a scheduling conference shall be conducted via telephone conference call on Friday, September 15, 1995, at

11:00 a.m.


IT IS THEREFORE ORDERED that Respondents' Motion to Dismiss is denied.

IT IS FURTHER ORDERED that Petitioner's Motion to Enforce the automatic stay provided for in Regs. 61-72, § 205 is granted. The implementation of the proposed MRI project by Tricounty is stayed pending completion of administrative review or further order of this Court.

IT IS FURTHER ORDERED that a scheduling conference shall be conducted via telephone conference call, to commence at 11:00 a.m., Friday, September 15, 1995. Petitioner shall initiate the call and make sure that all parties are conferenced in before calling me at (803) 734-0550.

IT IS FURTHER ORDERED that a contested case hearing in this matter shall commence no later than ninety days from the date of this Order.




September 13, 1995

Columbia, South Carolina

Brown Bldg.






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