SC Administrative Law Court Decisions

By letter received April 22, 1996, by the South Carolina Department of Health and Environmental Control (DHEC), Oncology Therapies of Greenville, Inc. (OCTI) requested a contested case hearing to dispute DHEC's intention to grant Certificates of Need (CON) to the Greenville Cancer Center (GCC) and the Greenville Hospital System, d/b/a Eastside Cancer Treatment Center (ECC). The Administrative Law Judge Division (ALJD) has subject matter jurisdiction over contested cases arising from CON disputes. See S.C. Code Ann. §§ 44-7-210(D)(2), 1-23-310(2), and 1-23-600(B) (Supp. 1996). A hearing was held in this matter on January 22, 23 and 24, 1997.

GCC and ECC each seek a CON to construct separate freestanding radiation oncology centers in Greenville. Each center will house a linear accelerator used to provide radiation therapy to cancer patients with each applicant asserting it satisfies a need identified in the State Health Plan (SHP). The GCC application, filed on October 27, 1995, was reviewed by DHEC under the 1994 SHP while the ECC application, filed on January 5, 1996, was examined under the 1995 SHP. Since for radiation therapy services the 1995 SHP is virtually identical to the 1994 plan, reference will be made to the language of the 1995 SHP.

DHEC determined the criteria for examining the applications of GCC and ECC, ranked the criteria in order of importance, and applied the criteria to the information provided. Through this process, DHEC approved both applications since, in DHEC's view, each applicant documented the need for the project, established the project's financial feasibility, complied with the SHP, and documented physician and community support from Greenville County. The dispute arises since OCTI challenges DHEC's proposed action. After considering all of the evidence and arguments, CONs are proper for both GCC and ECC.

1. What is the standard of review in a contested case involving an application for a CON?

2. Is a CON proper for GCC and ECC?

1. Positions of Parties:

OCTI asserts the standard of review is whether the administrative record before the DHEC staff provides substantial evidence to grant the CONs to GCC and ECC and, if not, (which is the case here in OCTI's view) does the DHEC administrative record and the information and testimony presented at the ALJ hearing provide evidence sufficient to grant the CONs. The respondents have a different view. GCC and ECC assert the ALJ exercises a de novo standard of review while DHEC asserts the Administrative Law Judge (ALJ) exercises a quasi-appellate and quasi-de novo standard. In DHEC's view, the ALJ does not make factual findings but only recommends factual findings that the DHEC Board may choose to adopt or dismiss as it wishes. DHEC further maintains that the ALJ makes recommended findings derived from an independent review of the evidence presented at the ALJ hearing.

2. Findings of Fact:

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

-- GCC Application

On October 27, 1995, GCC applied to DHEC for a CON to construct a freestanding radiation oncology center with one linear accelerator to service inpatients and outpatients in the Greenville area.

On November 12, 1995, OCTI, through its attorney, contacted DHEC to request materials related to GCC's CON application.

Subsequently, all related materials were sent to OCTI's attorney.

OCTI did not request a public hearing or object to GCC's CON application before DHEC's proposed decision to grant the GCC CON.

DHEC reviewed the GCC application under the 1994 SHP.

On December 4, 1995, DHEC notified GCC that the project had been deemed "complete" for purposes of review and that DHEC would be notifying "affected persons" of its review.

The December 4, 1995 notice listed in order of importance the relevant project review criteria DHEC used to evaluate the application.

On April 12, 1996, DHEC notified GCC that the GCC application was approved to allow construction of a freestanding radiation oncology center with one linear accelerator to be located on the east side of Greenville in the proposed St. Francis Women's Hospital medical office building.

The issuance of the CON to GCC was subject to a ten-day period during which affected parties could request a contested case hearing.

On July 18, 1996, GCC proposed to amend its request for a CON by altering the site of the original building to a new site near the former one.

On July 23, 1996, DHEC determined the site and building relocation were acceptable and did not represent a substantial change to the proposed project.

-- ECC Application

On January 5, 1996, ECC applied to DHEC for a CON to construct a cancer center on the east side of Greenville with the center housing one linear accelerator.

On January 31, 1996, OCTI, through its attorney, contacted DHEC to request materials related to ECC's CON application.

Subsequently, all related materials were sent to OCTI's attorney.

OCTI did not request a public hearing or object to ECC's CON application before DHEC's issuance of a proposed decision.

DHEC reviewed the application under the 1995 SHP.

On February 8, 1996, DHEC notified ECC that its project was complete for purposes of review.

On April 12, 1996, DHEC issued a proposed decision stating it intended to issue a CON to ECC for the construction of a cancer center on the east side of Greenville with one linear accelerator.

The issuance of the CON to ECC was subject to a ten-day period during which affected parties could request a contested case hearing.

-- Both Applications

On April 22, 1996, DHEC received a request from OCTI requesting a contested case hearing on both the GCC and ECC CONs.

On April 29, 1996, DHEC transmitted the request for a contested case hearing to the Administrative Law Judge Division.

On May 3, 1996, the contested case was assigned to an Administrative Law Judge.

On May 22, 1996, the two cases were consolidated for hearing purposes with each case retaining separate captions and docket numbers.

The consolidated contested case hearing for the GCC and ECC disputes was held by the ALJD on January 22, 23 and 24, 1997.

3. Discussion

The related but different concepts of standard of proof and standard of review are relevant here.

A. Standard of Proof

The ALJD, as the agency conducting the contested case, is the fact-finder.⁽¹⁾ Lindsey v. S.C. Tax Comm'n, 320 S.C. 504, 397 S.E.2d 95 (1990). Since the APA is silent on the standard of proof, the ALJ must employ the standard set elsewhere by statute or regulation. Anonymous v. State Bd. Of Medical Examiners, S.C. , 473 S.E.2d 870 (1996). In a CON controversy, the standard of proof is the preponderance of evidence and the burden of proof is upon the moving party. See S.C. Code Regs. 61-15, § 403 (burden on moving party with preponderance of evidence standard implied); See National Health Corp. v. S.C. Dept. of Health and Envtl. Control, 298 S.C. 373, 380 S.E.2d 841 (1989) (preponderance of evidence employed in CON dispute). Thus, OCTI bears the burden of proof and must carry that burden by a preponderance of the evidence.

B. Standard of Review

GCC and ECC assert the ALJ exercises a de novo standard of review while DHEC and OCTI seem to assert the ALJ exercises a quasi-appellate and quasi-de novo standard. The term de novo is not an accurate label since a rehearing cannot be held if no hearing has been held in the first instance.⁽²⁾

1. Statutory Background

Under the Administrative Procedures Act as amended by the Restructuring Act, to attempt to apply a standard of review to a contested case hearing creates an anomaly.⁽³⁾ In an ALJ contested case, the issue is what standard of proof applies to the fact-finder's determination of the facts of the dispute. S. C. Code Ann. § 1-23-600(B) (Supp. 1996). On the other hand, the DHEC Board, as the appellate body, is not a fact-finder but instead exercises appellate review authority. S. C. Code Ann. § 1-23-610(A) (Supp. 1996). Thus, only at the appellate level does the issue become one of determining the appropriate standard of review. This statutory scheme (fact-finder applies standard of proof and appellate body applies standard of review) is one result of the Restructuring Act's creation of the ALJD.

2. Application to Instant Case

Here, DHEC made no final decision to grant or deny CONs to GCC and ECC. Instead, DHEC's intention to issue CONs did not become final since OCTI requested a contested case. That action prevented a final decision. S.C. Code Ann. § 44-7-210(D)(2) (Supp. 1996). Simply put, a review of a decision cannot occur until a decision has been made; a proposed decision (which is all DHEC made) expresses an intent to act but is not itself a decision; no decision having been made, no review can be made by the ALJ. Rather than a review, the ALJ conducted a contested case hearing. This order is a final decision, and an appeal, if one follows, requires the DHEC Board to review the ALJ decision according to the substantial evidence standard of review. S.C. Code Ann. § 1-23-610(D)(e) (Supp. 1996).

Further, the statute granting the contested case does not designate the matter as a review at the contested case level. Rather, the contested case is limited only by a requirement that the issues considered at the ALJ hearing be limited to the issues "presented or considered during the staff review and decision process." S.C. Code Ann. § 44-7-210(E) (Supp. 1996). Except for that stipulation, no limit exists on facts to be presented, what weight to give any fact, or what impact to accord any facts proven. Accordingly, in the instant case, the ALJ makes no "review," but instead holds a contested case hearing evaluating the issues under the preponderance of evidence standard of proof.

4. Conclusions of Law

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

The ALJD, as the agency conducting the contested case, is the fact-finder. Lindsey v. S.C. Tax Comm'n, 320 S.C. 504, 397 S.E.2d 95 (1990).

The APA is silent on the standard of proof. Anonymous v. State Board of Medical Examiners, S.C. , 473 SE 2nd 870 (1996).

In a CON controversy, the standard of proof is the preponderance of evidence with the burden of proof upon the moving party. See S.C. Code Regs. 61-15, § 403; See also National Health Corp. v. S.C. Dept. of Health and Envtl. Control, 298 S.C. 373, 380 S.E.2d 841 (1989)

OCTI bears the burden of proof and must do so by a preponderance of the evidence.

De novo means to rehear or hear for a second time. Black's Law Dictionary, 721 (6th ed. 1990).

OCTI has a statutory right to a contested case "before the board or its designee." S.C. Code Ann. § 44-7-210(D)(2) (Supp. 1996).

The statute's authorization of a hearing officer (as opposed to the literal act of naming a designee) removes all contested case authority from DHEC and places contested case jurisdiction in the Administrative Law Judge Division (ALJD). See S.C. Code § 1-23-600(B) (Supp. 1996).

DHEC acts as an appellate body and not as a fact-finder. See S.C. Code Ann. § 1-23-610(D) (Supp. 1996)

DHEC, having investigated but having not held any hearing on the applications of GCC and ECC, leaves the ALJD as the fact-finder conducting a contested case hearing rather than conducting a rehearing. See S. C. Code Ann. § 1-23-600(B) (Supp. 1996).

10. To the extent the label de novo implies an independent hearing held by a fact-finder not bound by previous decisions, the label of de novo may have some relevance to the GCC and ECC applications. Black's Law Dictionary, 721 (6th ed. 1990).

To the extent National Health Corp. v. S.C. Dept. of Health and Envtl. Control, 298 S.C. 373, 380 S.E.2d 841 (1989) applies a standard of review at the contested case level, that case is not persuasive here since it was decided before restructuring and examines the Board's pre-restructuring deliberation process rather than the newly created jurisdiction of an ALJ in a contested case hearing.

Since the ALJ holds the contested case, the issue at the ALJ fact-finder level is what standard of proof applies in determining the facts. S.C. Code Ann. § 1-23-600(B) (Supp. 1996).

Since the appeal of an ALJ decision in a CON dispute is to the governing board of DHEC, the DHEC Board, as the appellate body, does not find facts but exercises appellate review authority. S.C. Code Ann. § 1-23-610(A) (Supp. 1996).

A standard of review imposes upon the Board the appellate duty to review the record made by the ALJ and allows the Board to affirm, remand, reverse, or modify the ALJ for a variety of reasons. S.C. Code Ann. § 1-23-610(D) (Supp. 1996).

On factual issues, however, the Board may not make its own findings of fact but must uphold the ALJ decision if substantial evidence supports the decision. S.C. Code Ann. § 1-23-610(D)(e) (Supp. 1996).

The Board, as the appellate body, may not substitute its judgment for that of the fact-finder. Grant v. S.C. Coastal Council, ___ S.C. ___, 461 S.E.2d 388 (1995).

For a CON dispute at the contested case level before an ALJ, the issue is not what standard of review applies but rather the standard of review is relevant at the appellate level. S.C. Code Ann. § 1-23-610(D) (Supp. 1996).

DHEC announced its intention to grant CONs to GCC and ECC but made no final decision due to OCTI's request for a contested case. S.C. Code Ann. § 44-7-210(D)(2) (Supp. 1996).

A review cannot occur until a final decision has been made.

A proposed decision such as the one made by DHEC in this matter expresses an intent to act but is not itself a final decision.

Where no final decision has been made, the ALJD can make no review.

The ALJ decision is a final decision in this matter, and on appeal, if one follows, the DHEC Board must review the ALJ decision according to the substantial evidence standard of review.

The statute granting the contested case does not designate the matter as a review but instead places a single limitation on the contested case hearing so that the issues considered at the hearing must be limited to the issues presented or considered at the staff review level. S.C. Code Ann. § 44-7-210(E) (Supp. 1996).

Accordingly, the ALJ makes no "review," but instead holds a contested case hearing with all issues evaluated under the preponderance of evidence standard of proof.

1. Positions of Parties:

OCTI's position is that DHEC's proposed decision fails to consider the criteria of need properly, distribution (accessibility), projected revenue, and projected expenses for a CON being granted to either applicant. In addition OCTI argues that GCC's change of location and change of ownership requires DHEC to reexamine GCC's application. OCTI specifically asserts it does not argue the SHP is inconsistent with the law nor does it argue the applications of GCC and ECC are inaccurate. Rather, OCTI argues DHEC's failure to apply a comparative analysis makes the applications suspect. On the other hand, DHEC, GCC and ECC argue the DHEC review was proper and that in any event the evidence produced during the hearing shows the CONs should be granted.

As the result of an Order following a pre-trial hearing, four issues emerged. Do the CONs fail for lack of meeting the criteria of 1) need, 2) distribution (accessibility), 3) projected revenue, and 4) projected expenses? Subsequently, OCTI raised a fifth issue asserting that GCC's change of location and change of ownership requires DHEC to reexamine GCC's application.

2. Findings of Fact:

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

a. General

The December 4, 1995 notice to GCC and the February 8, 1996 notice to ECC listed in order of importance the relevant project review criteria by which DHEC would evaluate the GCC and ECC applications.

The criteria were ranked as follows:

Compliance with the Need Outlined in the Plan,

Community Need documentation,

Distribution (Accessibility)

Acceptability

Financial Feasibility

Cost Containment

Relationship to the Health System

Record of the Applicant

Ability of the Applicant to Complete the Project

b. Need Under the SHP

-- Need Measured by Population

For several years, DHEC has applied a population standard as a measure of the need for radiation therapy services only when determining if a new service is warranted in an area, but has not applied a population standard when existing services are already provided in the area.

DHEC considered the population standard of 120,000 but found it inappropriate for the GCC and ECC applications.

The most meaningful measure of need in the instant case is the ESTV standard of 6,500.

DHEC did not fail to consider the population standard of 120,000.

DHEC found the population standard of 120,000 to be unrepresentative of need.

-- Need Measured by ESTVs

An ESTV is a unit of measure for radiation treatments performed by a linear accelerator.

One ESTV is a fifteen-minute treatment increment.

ESTVs 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.

A simple treatment of a single site that requires up to fifteen minutes on an accelerator is one ESTV, an intermediate treatment equals 1.1 ESTVs, and the most complex treatment equals 1.25 ESTVs.

Total treatments in a given year are categorized by classification, and the total of each classification is multiplied by the appropriate multiplier to derive the number of ESTVs performed by that facility.

A realistic load for a megavoltage unit is approximately 6,500 ESTVs per year.

Region I consists of Anderson, Cherokee, Greenville, Oconee, Pickens, Spartanburg, and Union Counties.

Region I is not the service area for radiation therapy for the applications sought by GCC and ECC.

In identifying the service area, DHEC employees physically drove the distance by automobile from Greenville to the Spartanburg and Anderson radiation therapy sites.

The Spartanburg site is outside the service area.

The Anderson site is within the service area.

Circles on maps of the upper portion of South Carolina allegedly depicting forty-five minute radii from Greenville and Spartanburg and Anderson do not represent the service area for the GCC and ECC applications.

Computer generated drive times limited to Greenville County do not provide data on Anderson or Spartanburg Counties and do not represent the service area for the GCC and ECC applications.

The Anderson - Greenville area is the radiation therapy service area for the applications filed by GCC and ECC.

During 1995, ESTVs performed in the Anderson - Greenville service area were 55,996.

The need for radiation therapy services in the Anderson - Greenville service area is 8.6 linear accelerator units based upon a total ESTV history for 1995 of 55,996 ESTVs divided by 6,500 ESTVs.

Five units currently operate in the service area.

A need exists in the Anderson - Greenville service area for the additional two units sought by GCC and ECC.

The GCC and ECC applications were correctly examined by investigating the need for radiation therapy in the Anderson - Greenville service area.

Linear accelerator units can generate a significantly higher number of ESTVs than 6,500.

A level of 6,500 ESTVs is consistent with the planning nature of the SHP's need criteria.

The SHP does not rely upon 6,500 ESTVs per year as an optimum use of a unit.

The SHP identifies 6,500 as a realistic utilization.

Several years may be required to place a linear accelerator in use.

6,500 ESTVs is a practical base for planning purposes to decide when additional units are needed.

-- GCC and ECC As Competing Applications

The GCC and ECC applications are not competing applications.

Approving both GCC's and ECC's applications will not exceed the need for services in the service area.

The need in the service area is 8.6 units.

The current five units plus the two units from GCC and ECC will not exceed the 8.6 units of need.

c. Need Criteria -- Documentation

GCC and ECC documented the need for additional radiation therapy services in the Anderson - Greenville service area.

-- GCC's Documentation of Need

GCC approximated the service area by extrapolating from Region I.

GCC first divided the population of Region I by 120,000 to determine the number of radiation therapy centers necessary to serve the population of Region I.

GCC quantified the population in Region I by age cohorts, using official State data.

GCC applied age-specific incidence rates obtained from the National Cancer Institute's SEER Program from which GCC estimated the number of cancer cases requiring radiation therapy and estimated the utilization by ESTVs of the existing units.

GCC translated the number of projected cancer cases to projected ESTVs.

GCC predicted the number of radiation therapy units needed in the year 2000, based on current ESTV usage and potential population growth.

For 1995, GCC's methodology documents a need for 8 radiation therapy units considering population and radiation therapy cases and as many as 10 units considering ESTVs and annual treatments.

By the year 2000, GCC's methodology, based on population, documents 9 units needed, 10 units based on radiation therapy cases, 13 units based on ESTVs, and 11 units based on annual treatments.

-- ECC's Documentation of Need

ECC approximated the service area by extrapolating from zip code areas.

ECC approximated the service area by examining the distance from selected zip code areas to (other than their proposed facility) the nearest facility offering radiation therapy services.

ECC separated population projections based on zip codes into age groupings using population statistics obtained from an independent source, Claritas, Inc.

ECC used information obtained from SEER Cancer Statistics Review to identify age-specific cancer incidence rates.

ECC applied the incidence rates to the population estimates by age grouping and determined the expected number of newly diagnosed cancer cases from 1996 to 2000.

ECC then projected how many of the newly diagnosed cancer cases would receive radiation therapy.

ECC projected the number of patients it intended to treat at the proposed center based on patients from the identified zip codes that it was currently treating at the radiation therapy unit at the Greenville Memorial Hospital.

ECC then applied that portion of the market share to the projected number of radiation therapy patients in years 1997-1999.

ECC calculated that it would serve 364 patients in 1997, 372 patients in 1998 and 381 patients in 1999.

ECC converted the number of projected cases into a projection of ESTVs for the same periods of 1997, 1998, and 1999.

These calculations documented ECC's proposed center would perform 9,357 ESTVs in 1997, 9,560 ESTVs in 1998 and 9,792 ESTVs in 1999.

ECC then determined the number of linear accelerators needed in the service area by dividing the current number of ESTVs in Region I by the 6,500 ESTV standard set forth in the SHP.

ECC projected a need for 10.2 machines.

In the alternative, ECC approximated the service area based upon the population of Region I and divided that population by 120,000 (a possible measure of need) to determine 9.2 linear accelerators needed in the region.

-- Need Documentation Examined

The methodologies used by GCC and ECC reasonably document need for areas that approximate the service area of Anderson - Greenville.

The methodologies of GCC and ECC identify a population, project population changes, document a need within the target population, and determine that the utilization of the project justifies its implementation.

GCC and ECC have documented how the services they seek to provide will meet a need of the service area in a fashion that justifies the service sought to be offered.

OCTI failed to prove a lack of documentation.

OCTI did not contest the majority of the content of the applications.

OCTI asserted the data in the applications become suspect only when a comparative analysis is used.

A comparative analysis was not used by DHEC.

The GCC and ECC applications are not competing applications.

A comparative analysis is not warranted for applications that are not competing.

The number of ESTVs is the standard that best indicates the presence of unmet need in the Anderson - Greenville service area.

OCTI's data which analyzes cases by zip code do not demonstrate a redistribution of cases but rather suggests the SHP's standard of 6,500 ESTVs will initially adversely impact its patient base.

The SHP sets the standard at 6,500 ESTVs.

OCTI does not challenge the SHP.

OCTI does not assert that the SHP is inconsistent with law.

GCC and ECC documented a need for two linear accelerators.

d. Distribution / Accessibility

The east side of the Anderson - Greenville service area is the least served of the population in the service area.

The western side of the service area is served by Anderson Area Medical Center in Anderson.

The central portion of the service area is served by OCTI's location and Greenville Memorial Hospital near the downtown section of the City of Greenville.

The east side of the service area, which does not have a facility, will obtain services by the issuance of CON's to GCC and ECC.

The location of the GCC and ECC facilities will serve an under-served area (east side of the service area) with radiation therapy services.

Accessibility is enhanced by the GCC and ECC services.

The GCC CON will allow the consolidation of GCC's smaller offices and will increase accessibility to the east side of Greenville.

The medical community extensively supports an east side location.

Extensive growth is expected for the east side of Greenville.

Beyond the five current units, the need for additional service is established as being 3.6 linear accelerators.

The partial fulfillment of the unmet need by adding the GCC and ECC units will at most create only a temporary duplication of services for existing providers during the startup of the new services.

e. Projected Revenue and Projected Expenses

Prior to the hearing on the merits, the parties stipulated that only projected revenues and projected expenses were in dispute.

OCTI argued that projected revenues were too high given the change in location contemplated by GCC and that the market capture expectations of GCC and ECC are incorrect since more than 100% of the market was being covered.

OCTI did not sufficiently present evidence of charges for radiation therapy made by other providers.

No persuasive evidence shows that GCC and ECC will not charge fees comparable to other providers.

GCC's and ECC's proposed charges for services are comparable to each other as well as to existing services.

GCC's costs are not unusual and no persuasive evidence identifies the costs experienced by similar service providers.

The ECC project is cost effective.

OCTI failed to identify a comparable provider with costs different from those of GCC or ECC.

OCTI failed to establish its required proof of the costs experienced by similar service providers.

g. Change in Location and Ownership

The GCC application was amended twice after DHEC decided in a proposed decision to approve the GCC application.

GCC's movement of its location away from St. Francis Women's Hospital diminishes the ability to service inpatients from St. Francis.

GCC's movement of its location away from St. Francis Women's Hospital potentially diminishes the revenue GCC may receive due to the loss of inpatients and potentially increases the cost to inpatients who must reach GCC by ambulance.

Even assuming the revenue is lost and patient costs increases, such matters taken together do not amount to a change so substantial as to constitute a new project.

GCC obtained DHEC's approval for the new location and the ownership changes.

The cost of the new GCC site will be $4,385,000 including land and financing costs.

The portion of the building representing the radiation therapy area is $1,337,425 which represents less than a 5% increase over the cost included in the original CON application.

Costs used in the original CON application did not include land costs and further reduces the 5% increase.

Operating costs at the new location will decline at least $60,000 per year.

DHEC examined the changes related to changed ownership, approved the application with the changes, and concluded no substantial change occurred.

3. Discussion

A. Introduction

The State Certification of Need and Health Facility Licensure Act (Licensure Act) provides the framework for obtaining a CON. See S.C. Code Ann. § 44-7-110 et seq. (Supp. 1996). To assure proper compliance with the Lincensure Act, DHEC is charged with "control and administration of the granting of [CONs.]." To carry out its duty, DHEC is mandated to accomplish at least two tasks. First, DHEC must promulate Project Review Criteria. S.C. Code Ann. § 44-7-190. The Project Review Criteria are found in S.C. Code Regs. 61-15, Chapter 8, with those criteria used to review all projects seeking a CON. § 801, et. seq. Second, DHEC is also mandated to prepare a SHP which, upon approval by the Health Planning Committee and final adoption by the Board of DHEC, must be used "in the administration of the [CON] Program provided for in [Article 3 of Chapter 7 of Title 44]." Thus, S.C. Code Regs. 61-15 and the SHP provide the bedrock upon which DHEC bases its decision to grant or deny a CON application. See S.C. Code Ann. § 44-7-210 (Supp. 1996) (DHEC may not issue a CON unless an application complies with the SHP, Project Review Criteria, and other regulations). Even more accurately, since S.C. Code Regs. 61-15 at § 802.1 holds that an application will not be approved unless "it is in compliance with the [SHP]," S.C. Code Regs. 61-15 forms the all-encompassing umbrella for judging whether a CON is proper.

B. S.C. Code Reg. 61-15 Project Review Criteria

S.C. Code Regs. 61-15, § 801, et. seq. establishes five categories of review criteria:

Need for the Proposed Project § 802.1 - 802.4

Economic Considerations § 802.5 - 802.19

Health System Resources § 802.20 - 802.25

Site Suitability § 802.26 - 802.30

Special Consideration § 802.31 - 802.33

While thirty-three criteria are available for consideration, approval does not require that every criteria be satisfied. S.C. Code Regs. 61-15, § 801.3. Most pertinent here is the fact that the parties have narrowed their disagreement to four areas eliminating a need to examine all criteria. OCTI argues the approval of GCC's and ECC's applications are improper since the criteria of need, distribution (accessibility), projected revenue, and projected expenses are not satisfied. Need is addressed in §§ 802.1 and 802.2; distribution in § 802.3; projected revenue in § 802.6; and projected expenses in § 802.7.

Further, even within these four disputed areas, not every criteria of §§ 802.1, 802.2, 802.3, 802.6, and 802.7 is relevant to this controversy. Rather, since DHEC sets the relative importance of the criteria to be used (See S.C. Code Regs. 61-15, § 801.2) one need examine only the factors within the disputed criteria which DHEC chose to evaluate the applications. Such an approach is consistent with the admonition that the contested case may only address those issues "presented or considered during the staff review and decision process." S.C. Code Ann. § 44-7-210(E) (Supp. 1996). For the factors in dispute, DHEC examined the following ranked in order of importance:

A. Compliance with the Need Outlined in the Plan - §802.1

B. Community Need Documentation - §802.2a, 2b, 2c, 2e

Distribution (Accessibility) - §802.3b, 3c, 3f, 3g, 3l

C. Financial Feasibility - §802.6a, 7

In examining the factors DHEC has found relevant, if one or more criteria are not met or if the project is not consistent with the SHP, the application may be denied. S.C. Code Regs. 61-15, § 801.3 Additionally, even if an application complies with the SHP, a CON may still be denied if pertinent Project Review Criteria are not satisfied. S.C. Code Ann. § 44-7-210(C) (Supp. 1996). Thus, the inquiry is whether compliance with the SHP is shown and, if so, have the pertinent review criteria been satisfied.

1. Compliance With Need In the SHP

S.C. Code Regs. 61-15, § 802.1 holds that a failure to comply with the SHP results in an application being disapproved. In deciding compliance with the SHP, demonstration of need is critical since the purpose of the SHP is to "outline the need for medical facilities and services in the State." SHP, I-2, Court's Exh. 3. Need is established by standards with this controversy placing two standards in dispute: first, the population standard⁽⁴⁾ and second, the ESTVs standard.⁽⁵⁾ OCTI argues three predominate concerns related to these standards: need has not been established under the population standard, sole or primary reliance upon 6,500 ESTVs as a threshold for need is unwarranted, and need cannot be evaluated without treating the GCC and ECC applications as competing.

a. Population Standard

OCTI asserts no application should be approved without considering the population standard and that DHEC, when it approved the applications of GCC and ECC, intended to issue the CONs without considering that standard. As the party with the burden of proof, to prevail on this issue, OCTI must demonstrate that consideration of the population standard is required and that DHEC did not consider the standard.

-- Lack of Mandatory Duty To Apply Population Standard

No mandatory duty exists to apply the population standard where other measures of need are more persuasive. The SHP is a planning tool with the purpose to "outline the need for medical facilities and services in the State." SHP, I-2, Court's Exh. 3. An "outline of need" does not convey a mandatory duty to consider all standards mentioned in the plan. Instead, an application must be reviewed in light of all relevant standards with need established from a review of the totality of the circumstances. In particular, the actual language of the SHP states that the standard for a megavoltage radiation unit "should" serve a population of at least 120,000 persons. Such language, when read as part of a guide for planning, carries the meaning of "may" and is thus precatory rather than mandatory. See 80 C.J.S. Shall (1953).

-- DHEC Consideration of Population Standard

The evidence establishes that DHEC gave consideration to the population standard but found it inappropriate for the GCC and ECC applications. For several years the agency position has been that the population standard is not an appropriate indicator of need when existing radiation therapy services are already provided in the area. Rather, the standard is applied to decide when a new service is warranted. Administrative interpretations of a provision by an agency charged with administration of that provision are entitled to great weight. Marchant v. Hamilton, 279 S.C. 497, 309 S.E.2d 781 (1983). I find no reason to disregard DHEC's prior consistent position. Such is especially true since I find the most meaningful measure of need is the ESTV standard of 6,500. Accordingly, DHEC did not fail to consider the population standard but rather merely found that standard to be unrepresentative of need.

b. Need Based Upon Reliance on Threshold of 6,500 ESTVs

One standard utilized by the SHP to measure need is the number of ESTVs performed. An ESTV is a unit of measure for radiation treatments performed by a linear accelerator. One ESTV is a fifteen-minute treatment increment. ESTVs 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 ESTVs, and the most complex treatment equals 1.25 ESTVs. Total treatments in a given year are categorized by classification, and the total of each classification is multiplied by the appropriate multiplier. The sum of these products is the number of ESTVs performed by that facility. A realistic load for a megavoltage unit is approximately 6,500 standard treatments per year. SHP, II-62, Court's Exh. 3.

In deciding whether the need criteria of the SHP is met, primary reliance should be placed upon the number of ESTVs performed by the five units in the Anderson - Greenville service area. During 1995, ESTVs performed in the service area were 55,996. When divided by 6,500 ESTVs, the realistic load for a megavoltage unit, the need within the service area is 8.6 units. With five units currently in the area, a need is established for at least the two units sought by GCC and ECC.

OCTI argues that reliance upon 6,500 ESTVs is improper. First, it argues DHEC applied the standard to an improperly identified service area. Second, it asserts a utilization of 6,500 ESTVs is too low.

-- Service Area

The service area for radiation therapy is found by examining the "service standard" since the "service standard constitutes the service area." SHP, II-2, Court's Exh. 3. The SHP explains that the service standard is a "combination of utilization criteria and travel time requirements." SHP, II-2, Court's Exh. 3.⁽⁶⁾

The service area for radiation therapy is an area in which 90 percent of the population is within 45 minutes one way automobile travel time of the radiation service. SHP, II-62, Court's Exh. 3.

Here, conflicting methodologies and conclusions were generated by the parties in an attempt to identify the service area (use of circle depicting 45 minute radius from proposed location, use of actual driving time from proposed location to Anderson and Spartanburg facilities, use of computer generated driving times). Considering all of the evidence, I find the most persuasive evidence supports a service area consisting of populations within Anderson and Greenville counties while excluding Spartanburg county.

DHEC employees physically drove the distance by automobile to the Spartanburg and Anderson radiation therapy sites. The Spartanburg site was outside the service area while the Anderson site was within the area. I do not find circles allegedly depicting a 45 minute radius from Greenville or from Spartanburg or from Anderson to be persuasive. Such circles, at best, depict distances measured "as the crow flies" rather than the drive time required by the SHP. Finally, the computer generated drive times are limited to Greenville County and provide no data on Anderson or Spartanburg County. Accordingly, while the DHEC drive report may lack scientific exactness, I find the drive more persuasive than unsupported circles or limited computer produced drive times. Thus, the applications were correctly examined by investigating the need for radiation therapy in the Anderson - Greenville service area.

-- Utilization of 6,500 ESTVs

OCTI argues the use of 6,500 ESTVs as a base for establishing need fails to consider the fact that the units commonly generate a significantly higher number of ESTVs. I find this argument unpersuasive.

The 6,500 ESTVs is consistent with the planning nature of the SHP's need criteria. No pretense is made that the 6,500 ESTVs per year is an optimum use of a unit. Rather the SHP identifies 6,500 as a realistic utilization. Such a number is a practical one for purposes of planning. When current services reach the 6,500 level, additional units should be authorized since several years may be required to make an accelerator operational. DHEC Exh. 2, Frishman Prefiled Testimony at 6-7 and Frishman Ex. B. Thus, OCTI's arguments seeking to show 6,500 ESTVs is an ineffective utilization level are not persuasive.

c. GCC and ECC As Competing Applications

OCTI also argues the CONs should not be issued since the GCC and ECC applications should be treated as competing applications. The Licensure Act defines competing applications as two or more persons or health care facilities who apply for a CON to provide similar services or facilities

in the same service area within a time frame as established by DHEC regulations and whose applications, if approved, would exceed the need for services or facilities. S.C. Code Ann. §44-7-130(5). When confronted with competing applications, DHEC will award a CON to the applicant that most fully complies with the State Health Plan, Project Review Criteria, and DHEC regulations. S.C. Code Ann. § 44-7-210(C).

Here, the applications are not competing. Approving both GCC's and ECC's applications will not exceed the need for services in the service area. As explained above, the planning tool of 6,500 ESTVs establishes a need for 8.6 units. The current five plus two from GCC and ECC will not exceed the 8.6 units of need. Accordingly, OCTI is incorrect in asserting the GCC and ECC applications should be treated as competing.

2. Compliance With Need Documentation

Since the applications comply with the SHP and correspondingly with § 802.1, the next inquiry is whether the specific criteria of § 802 are properly applied. Section 802.2 requires community need documentation based upon a target population (802.2a), a reasonable projection for anticipated population changes, (802.2b), a documented need within that target population (802.2c) and a determination that the projected utilization of the project will justify the implementation of the service offered. (802.2e). In short the applicant must document how its services will meet a need of the service area population in a fashion that will justify the service sought to be offered.

In deciding whether GCC and ECC have documented the need they seek to service, GCC's and ECC's documentation must be viewed in light of the factual finding that the SHP, when applied to the Anderson - Greenville service area, establishes a need exists. The duty of GCC and ECC is to present a means for documenting that need and the burden of OCTI is to prove the need is not documented. From the evidence before me, GCC and ECC documented the need and OCTI has failed to prove the documentation is inadequate.

a. GCC's Documentation of Need

GCC concluded additional radiation therapy units are necessary in the service area. To approximate the service area, GCC first divided the population of Region I by 120,000 to determine the number of radiation therapy centers necessary to serve that population. Next, GCC quantified the population in Region I by age cohorts, using official State data. GCC then applied age-specific incidence rates obtained from the National Cancer Institute's SEER Program. GCC estimated the number of cancer cases requiring radiation therapy and then estimated the utilization by ESTVs of the existing units. GCC translated the number of projected cancer cases to projected ESTVs. GCC predicted the number of radiation therapy units needed in the year 2000, based on current ESTV usage and potential population growth. Court's Exh. 2.Vol-II, pages 420-424.

For 1995, GCC's methodology documents a need for 8 radiation therapy units considering population and radiation therapy cases and as many as 10 units considering ESTVs and annual treatments. By the year 2000, based on population, 9 units would be needed, 10 units based on radiation therapy cases, 13 units based on ESTVs, and 11 units based on annual treatments. Court's Exh. 2 (GCCAR, V-II, page 421).

b. ECC's Documentation of Need

In documenting need, ECC approximated the service area by examining the distance from selected zip code areas to (other than their proposed facility) the nearest facility offering radiation therapy services. Court's Exh. 1, V-I, page 112. ECC separated population projections based on zip codes into age groupings using population statistics obtained from an independent source, Claritas, Inc. ECC then used information obtained from SEER Cancer Statistics Review to identify age-specific cancer incidence rates. ECC applied the incidence rates to the population estimates by age grouping and determined the expected number of newly diagnosed cancer cases from 1996 to 2000. ECC then projected how many of the newly diagnosed cancer cases would receive radiation therapy. ECC projected the number of patients it intended to treat at the proposed center based on patients from the identified zip codes that it was currently treating at the radiation therapy unit at the Greenville Memorial Hospital. It then applied that portion of the market share to the projected number of radiation therapy patients in years 1997-1999. ECC calculated that it would serve 364 patients in 1997, 372 patients in 1998 and 381 patients in 1999. Court's Exh. 1, V-I, page 110-112.

Next, ECC converted the number of projected cases into a projection of ESTVs for the same time period. Under these calculations, ECC's documentation projected the proposed center would perform 9,357 ESTVs in 1997, 9,560 ESTVs in 1998 and 9,792 ESTVs in 1999. Court's Exh. 1, V-I, page 109. ECC then determined the number of linear accelerators needed in the service area by dividing the current number of ESTVs in Region I by the 6,500 ESTV standard set forth in the SHP. ECC projected a need for 10.2 machines.

Finally, in the alternative, ECC approximated the service area by using the entire population of Region I. By dividing the population of Region I by 120,000 (a possible measure of need) ECC calculated the number of linear accelerators appropriate for the region to be 9.2. Court's Exh. 1, Vol-I, page 108.

c. Need Documentation Examined

OCTI's expert, Ms. O'Brien, testified that OCTI is not contesting most of the content of the applications. Instead, Ms. O'Brien testified, the data in the applications become suspect because of a failure to employ a comparative analysis. Instead of meeting an unmet need, she explained that a comparative analysis shows that the result of granting two additional CON's will only create a redistribution of existing cases currently served by OCTI and the currently operating linear accelerators of the Greenville Hospital System.

-- Argument of Lack of Unmet Need

OCTI supports its view by explaining that ECC's 8 zipcode service area overlaps with GCC's service area. Correspondingly, totaling the market capture for each demonstrates a capture rate in excess of 100%. OCTI bolsters its view by demonstrating that the number of cases projected by GCC and ECC is not consistent with the number of cases actually originating in 1995 from the 8 zipcode areas. In short, OCTI argues the "need" documentation is flawed and that in reality the granting of two new CON's will not meet unmet need but will redistribute existing cases from current providers to new providers.

-- Basis for Disagreeing with Argument

I disagree with OCTI's argument for two principal reasons. First, rather than an argument that GCC and ECC have not properly documented need, OCTI's objection is essentially an indirect and improper attack on the SHP's use of a 6,500 ESTV standard. Second, GCC and ECC have presented data identifying a need and documenting how they will meet that need while OCTI has failed to carry its burden of proving the data is insufficient to demonstrate a servicing of an identified need.

While the 6,500 ESTV measure is one of several measures, the number of ESTVs is the standard I find to be the best indicator of the presence of unmet need in the Anderson - Greenville service area. OCTI's data allegedly demonstrating a redistribution of cases, at best, suggests the 6,500 ESTV measure is too low. However, the SHP sets the standard at 6,500 ESTVs and OCTI, through its expert, Ms. O'Brien, agrees OCTI does not challenge the SHP nor assert that the SHP is inconsistent with the law. Accordingly, the 6,500 ESTV measure of need is applicable to the dispute before me. The fact that it produces a degree of need unsatisfactory to OCTI is not a basis for finding a lack of documented need. I find OCTI's argument that the granting of two new CONs is an unwarranted redistribution of existing cases is essentially an indirect and improper attack on the SHP's use of a 6,500 ESTV standard and I accordingly dismiss the assertion.

Further, and in any event, both GCC and ECC documented the need in issue. The degree to which documentation of need is required must be measured against the fact that the SHP, for the matter here in dispute, demonstrates a need for 8.6 units in the Anderson - Greenville service area. While the methodologies used by GCC and ECC approximate the need based upon areas not precisely congruent with the Anderson - Greenville service area, both methods reasonably document need for areas that approximate the service area. Both methodologies identify a population, project population changes, document a need within the target population, and determine that the utilization of the project justifies its implementation. Accordingly, GCC and ECC have documented how the services they seek to provide will meet a need of the service area in a fashion that will justify the service sought to be offered. On the other hand, OCTI has failed to prove a lack of documented need.

3. Distribution (Accessibility)

The projects should locate so as to serve medically underserved areas without unnecessarily duplicating existing services in the service area (802.3b) and to provide its services at an acceptable time and reasonable cost. (802.3c). The applicant should address the extent to which all residents of the area, including medically underserved groups, will have access to the services (802.3f, 31) and establish provisions to treat patients unable to pay. (802.3g).

OCTI has the burden of establishing a lack of compliance with the distribution / accessibility criteria.

S.C. Code Ann. § 44-7-210(E) (Supp. 1996). OCTI essentially asserts and therefore must prove that the GCC and ECC services will not be located so as to serve a medically underserved area or that the granting of the CON will unnecessarily duplicate existing services in the service area. ⁽⁷⁾ I find OCTI has not met its burden of proof.

The issue here is not whether a need exists. Rather the question is whether the established need is satisfied by serving a "medically under-served area or an under-served population segment." S.C. Code Regs. 61-15, § 803.3b. The evidence demonstrates that the east side of the Anderson - Greenville service district is the least served of the population in the service area. For example, the western side of the service area is apparently adequately served by Anderson Area Medical Center in Anderson. The central portion of the service area is served by OCTI's location and Greenville Memorial Hospital near the downtown section of the City of Greenville. The east side of the service area, which does not have a facility, will obtain services by the issuance of CON's to GCC and ECC. While obviously all facilities will serve and are capable of serving any portion of the population within the service area, the location of the GCC and ECC facilities will serve an under-served area (east side of the service area) with radiation therapy services. Thus, OCTI has not demonstrated an improper location.

In addition to proper distribution, accessibility is enhanced by the GCC and ECC services. GCC will consolidate some of their smaller offices to provide service on the east side of Greenville to increase accessibility to that area. Likewise, support from the medical community for an east side location is extensive. Such support combined with the anticipated growth expected for the Greenville east side demonstrates accessibility will be enhanced for the area. Again, OCTI has not proven a failure of accessibility.

Finally, since the benefits of improved accessibility cannot outweigh the adverse effects caused by a duplication of existing service (SHP, II-63), the issue is whether a duplication occurs and, if so, is the duplication unnecessary. I find the distribution of the services by the addition of the GCC and ECC CONs does not unnecessarily duplicate services in the service area.

Here, the need for additional service is established as 3.6 linear accelerators since the area currently has five where a need of 8.6 exists. Once determining that unmet need exists, the fulfilling of that need will at most only create a temporary duplication of services for existing providers during startup of the new services. Such a duplication is not an unnecessary duplication. Accordingly, OCTI has not established the GCC and ECC CONs will create an unnecessary duplication of services.

4. Projected Revenues and Expenses

S.C. Code Regs. 61-15, §§ 802.5 through 802.19 contain the economic criteria for reviewing an application. Of the economic criteria, long before the hearing on the merits, the parties stipulated that only projected revenues and project expenses were in dispute. The criteria of projected revenues is addressed at § 803.6 and projected expenses at § 803.7. However, not all of § 803.6 is in dispute here since DHEC only applied §803.6a to the evaluation. No issue may be raised at the contested case that was not considered by the review below. S.C. Code Ann. § 44-7-210(E) (Supp. 1996). Thus, only § 803.6a and § 803. 7 are in dispute.

Under projected revenues, the applicant should document how the charges are calculated and establish that its fees will be comparable to those charged by other providers in the service area. 802.6a. As for expenses, projections of costs should be consistent with the costs experienced by similar service providers. 802.7. Again, as with all issues in this case, OCTI bears the burden of proof. S.C. Code Ann. § 44-7-210(E) (Supp. 1996). To prevail, it must establish that GCC's and ECC's fees will not be comparable to those charged by other providers in the service area and establish that the projections of costs are inconsistent with those costs experienced by similar service providers.

a. Projected Revenues

To prevail, OCTI must establish that GCC and ECC have not documented how their charges are calculated and must establish that their fees are not comparable to those charged by other providers in the service area. § 802.6a. To meet this obligation, OCTI argued two primary positions. First, projected revenues were too high given the change in location contemplated by GCC. Second, the market capture expectations of GCC and ECC are incorrect since more than 100% of the market was being covered. Considering all of the evidence, OCTI has simply not carried its burden of proving the factors imposed by the DHEC criteria.

Neither of OCTI's arguments sufficiently present evidence of charges made by other providers. Thus, no persuasive evidence shows how GCC and ECC will not charge fees comparable to other providers. On the other hand, however, DHEC's witnesses specifically testified that GCC's and ECC's proposed charges for services were comparable to each other as well as to existing services. GCC's witnesses testified its charges were competitive and ECC's witnesses asserted their revenues were reasonable. Given OCTI's lack of presentation of charges made by other providers and given the evidence supporting the reasonableness of GCC's and ECC's charges, OCTI has failed to prove a violation of the projected revenue criteria.

b. Projected Expenses

On the projected expenses criteria, projections of costs should be consistent with the costs experienced by similar service providers. § 802.7. Just as with revenues, OCTI bears the burden of proof. S.C. Code Ann. § 44-7-210(E) (Supp. 1996). To prevail, OCTI must establish that GCC's and ECC's projections of costs are inconsistent with those costs experienced by similar service providers. Some evidence is presented by OCTI to suggest that GCC's cost is higher than it should be but no persuasive evidence identifies the costs experienced by similar service providers. Accordingly, OCTI failed to present the required comparables. ECC's witnesses testified the ECC project was cost effective and OCTI failed to identify a comparable provider with different costs than that of ECC. Again, OCTI failed to establish its required proof.

5. GCC's Change of Location and Change of Ownership

The GCC application was amended twice after DHEC decided in a proposed decision to approve the GCC application. CONs are valid only for the project as described in the application, and if an applicant proposes a change that would substantially alter the original application, the change must be approved by DHEC. S.C. Code Ann. § 44-7-230(C) (Supp. 1996). Also, once a CON is issued, the regulations require DHEC to determine whether an amendment or alteration to a project "is substantial and thereby constitutes a new project." S.C. Code Regs. 61-15, § 605. The issue here is the extent to which either of these provisions affect the GCC application.

a. General

First, I note that S.C. Code Regs. 61-15, § 605 is not literally applicable to either of the GCC amendments. The plain language of the regulation declares the regulation applies only where the applicant has received his CON. Here, no CON has been issued and no CON can be issued until "the completion of ... contested case proceedings." S.C. Code Ann. § 44-7-210(E) (Supp. 1996). At the conclusion of the contested case, the decision on the CON becomes final and GCC is then able to seek DHEC approval for changes it wishes to make. Likewise, S.C. Code Ann. § 44-7-230 (Supp. 1996) contemplates seeking approval of a change that substantially alters a project for which a CON has already been issued.

However, since I have decided the CON is proper for GCC and since the parties have all reviewed GCC's documentation and had the ability to examine and present witnesses and evidence on the issue, judicial economy dictates that the matter be decided here rather than forcing the parties to litigate the matter further. Accordingly, I address the matter.

b. Change in Location and Ownership

-- Regulatory Standard

The standard under S.C. Code Regs. 61-15, § 605 is whether the change is so substantial as to "constitute a new project." I find nothing in the change of ownership or change of location that transforms the GCC project into a new project. OCTI argues the movement of the location away from St. Francis Women's Hospital diminishes the ability to service inpatients from St. Francis thereby potentially diminishing the revenue to GCC from the loss of inpatients and fails to consider the increased cost to the inpatients who must reach GCC by ambulance. Even assuming the concerns of OCTI are true, those matters taken together do not amount to a change so substantial as to constitute a new project.

-- Statutory Standard

Further, a change in ownership and a change in location do not offend the standard established by S.C. Code Ann. § 44-7-230(C). That section requires DHEC's prior approval for any changes that "substantially alter the scope of work, function of construction, or major items of equipment, safety, or cost of the facility during construction." The statute, when read as a whole, addresses changes in construction. A change in ownership does not present a substantial alteration within the meaning of S.C. Code Ann. § 44-7-230(C) (Supp. 1996). Further, the change in construction resulting from a new building layout, is not forbidden. Rather, if GCC intends to "substantially alter the scope of work" GCC must obtain DHEC's approval. Here, GCC has obtained DHEC's approval. Thus, OCTI must establish the approval was wrongly given.

In this case, OCTI argues DHEC wrongly gave its approval since the cost of the new site will be $4,385,000, which allegedly produces an increase of approximately $1 million from the previous proposal. I find DHEC properly gave its approval and adequately considered the cost of the new site.

While the total cost of the new building, including land and financing costs, will be $4,385,000, the portion of the building representing the radiation therapy area is $1,337,425. That amount is less than a 5% increase over the cost included in the original CON application. Further, the costs used in the original CON application did not include land costs and thus is a further reduction to the 5% increase. Finally, while capital costs may go up, operating costs will go down by at least $60,000 per year. After considering all factors, DHEC properly approved GCC's request for approval of GCC's plans to alter its building plans.

Finally, I note OCTI argues that a change in ownership occurring in 1997 has presented another change from the original GCC application and that these changes in ownership and development structure are "troubling." DHEC examined the changes, approved the application with the changes, and still intends to issue a CON. I do not find any reason to alter DHEC's decision merely for troubling developments. Should DHEC later find that GCC is not operating within the restrictions of the CON issued to it, DHEC may seek sanctions allowed by law. See S.C. Code Ann. § 44-7-320 (Supp. 1996).

4. Conclusions of Law

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

a. General

1. The Licensure Act provides the framework for obtaining a CON. See S.C. Code Ann. §§ 44-7-110 (Supp. 1996).

To assure proper compliance with the Lincensure Act, DHEC is charged with control and administration of the granting of CONs. S.C. Code Ann. § 44-7-140 (Supp. 1996).

To carry out its duty, DHEC is mandated to promulgate Project Review Criteria. S.C. Code Ann. § 44-7-190 (Supp. 1996).

The Project Review Criteria are found in S.C. Code Regs. 61-15, Chapter 8 with those criteria used to review all projects seeking a CON. S.C. Code Regs. 61-15, § 801, et. seq.

DHEC is also mandated to prepare a SHP which, upon approval by the Health Planning Committee and final adoption by the Board of DHEC, is used in the administration of the CON Program. S.C. Code § 44-7-180(B) (Supp. 1996).

DHEC may not issue a CON unless an application complies with the SHP, Project Review Criteria, and other regulations. See S.C. Code Ann. § 44-7-210(C) (Supp. 1996).

An application will not be approved unless it is in compliance with the SHP. S.C. Code Regs. 61-15, § 802.1.

b. Project Review Criteria

S.C. Code Regs. 61-15, § 801, et. seq. establishes five categories of review criteria:

Need for the Proposed Project § 802.1 - 802.4

Economic Considerations § 802.5 - 802.19

Health System Resources § 802.20 - 802.25

Site Suitability § 802.26 - 802.30

Special Consideration § 802.31 - 802.33

Approval does not require satisfying all thirty-three (33) criteria. S.C. Code Regs. 61-15, § 801.3.

The parties narrowed the disagreement in this case to the four criteria of need, distribution (accessibility), projected revenue, and projected expenses. See S.C. Code Regs. 61-15 §§ 802.1 and 802.2 for need; § 802.3 for distribution; § 802.6 for projected revenue; and § 802.7 for projected expenses.

DHEC is authorized to set the relative importance of the criteria to be used in evaluating CON applications. S.C. Code Regs. 61-15, § 801.2.

The contested case may only address those issues "presented or considered during the staff review and decision process." S.C. Code Ann. § 44-7-210(E) (Supp. 1996).

Relevant to the areas in dispute, DHEC established the following factors ranked in order of importance:

A. Compliance with the Need Outlined in the Plan - §802.1

B. Community Need Documentation - §802.2a, 2b, 2c, 2e

Distribution (Accessibility) - §802.3b, 3c, 3f, 3g, 3l

C. Financial Feasibility - §802.6a, 7

Since an application will not be granted if it fails to comply with the SHP and since even applications complying with the SHP may be denied if pertinent Project Review Criteria are not satisfied, within the disputed criteria of this case, the inquiry is whether compliance with the SHP is shown and, if yes, have the pertinent review criteria been satisfied. S.C. Code Ann. § 44-7-210(C) (Supp. 1996); S.C. Code Regs. 61-15, § 801.3 and § 802.1.

c. Need Criteria -- SHP

15. The purpose of the SHP is to outline the need for medical facilities and services in the State. SHP, I-2, Court's Exh. 3.

16. Need is established by applying standards identified in the SHP.

17. The two standards most in dispute are population and the number of ESTVs.

18. The population standard explains that a megavoltage radiation unit should serve a population of 120,000. SHP, II-62

19. The ESTVs standard explains that a realistic load for a megavoltage unit is about 6,500 standard treatments per year and that no additional megavoltage units should be opened unless each linear accelerator in the service area is performing at least 6,500 ESTVs per year. SHP, II-62.

1. Population Standard

20. As the party with the burden of proof, OCTI must demonstrate that consideration of the population standard is required and that DHEC did not consider the standard. National Health Corp. v. S.C. Dept. of Health and Envtl. Control, 298 S.C. 373, 380 S.E.2d 841 (1989).

21. Since the SHP is a planning tool outlining the need for services in the State, no mandatory duty exists to apply the population standard where other measures of need are more persuasive. SHP, I-2, Court's Exh. 3.

22. An "outline of need" does not convey a mandatory duty to consider all standards mentioned in the plan. SHP, I-2, Court's Exh. 3.

23. The literal and plain language of the SHP should be applied in its ordinary meaning. See Multimedia Inc. v. Greenville Airport Comm'n, 287 S.C. 521, 339 S.E.2d 884 (Ct. App. 1986); and Higgins v. State, 307 S.C. 446, 415 S.E.2d 799 (1992).

24. The language of the SHP states that the standard for a megavoltage radiation unit "should" serve a population of at least 120,000 persons with such language, when read as part of a guide for planning, having the meaning of "may" and thus precatory rather than mandatory. See 80 C.J.S. Shall (1953).

25. No reasons exist to disregard DHEC's prior consistent position on the application of the population standard since interpretations of a provision by an agency charged with administration of that provision are entitled to great weight. Marchant v. Hamilton, 279 S.C. 497, 309 S.E.2d 781 (1983).

2. 6,500 ESTVs Standard

26. The SHP establishes 6,500 ESTVs per year as a realistic load for a linear accelerator. SHP, II-62.

27. The SHP measures need based upon the number of ESTVs performed in a service area. SHP, II-62.

28. The service area for radiation therapy is found by examining the "service standard" since the "service standard constitutes the service area." SHP, II-2, Court's Exh. 3.

29. The service standard is a combination of utilization criteria and travel time requirements. SHP, II-2, Court's Exh. 3.

30. The service area for radiation therapy is an area in which 90 percent of the population is within 45 minutes one way automobile travel time of the radiation service. SHP, II-62, Court's Exh. 3.

31. A "service area" is not the same as an "inventory region." SHP, II-2, Court's Exh. 3.

32. The service area for the GCC and ECC applications is the populations within Anderson and Greenville counties while excluding Spartanburg County.

33. The fact that radiation therapy services are capable of generating more than 6,500 ESTVs per linear accelerator is not a controlling factor.

3. GCC and ECC As Competing Applications

34. Applications are competing if two or more persons or health care facilities apply for a CON to provide similar services or facilities in the same service area within a time frame as established by DHEC regulations and whose applications, if approved, would exceed the need for services or facilities. S.C. Code Ann. § 44-7-130(5).

35. When confronted with competing applications, the applicant that most fully complies with the State Health Plan, Project Review Criteria, and DHEC regulations receives the CON. S.C. Code Ann. § 44-7-210(C).

36. OCTI is incorrect in asserting the GCC and ECC applications should be treated as competing. S.C. Code Ann. § 44-7-130(5).

b. Need Criteria -- Documentation

37. Applicants may be required to document the need for a service by identifying a target population, basing the need upon a reasonable projection for anticipated population changes, demonstrating a documented need within that target population and determining that the projected utilization of the project will justify the implementation of the service offered. S.C. Code Regs. 61-15, §§ 802.2a, 802.2b, 802.2c, and 802.2e.

38. In deciding whether documentation of need has been shown, the applications must be viewed in light of the factual finding of need established by the SHP for the service area under consideration.

39. The 6,500 ESTV measure of need is applicable to the dispute before me. SHP, II-62.

40. GCC and ECC demonstrated a documented need in the Anderson - Greenville service area.

41. The burden is upon OCTI to prove that GCC and ECC have not documented a need. National Health Corp. v. S.C. Dept. of Health and Envtl. Control, 298 S.C. 373, 380 S.E.2d 841 (1989).

42. OCTI has not carried its burden of proof. Id.

c. Distribution / Accessibility Criteria

43. A project should locate so as to serve medically under-served areas without unnecessarily duplicating existing services in the service area. S.C. Code Regs. 61-15, § 802.3b.

44. The project should provide its services at an acceptable time and reasonable cost. S.C. Code Regs. 61-15, § 802.3c.

45. The applicant should address the extent to which all residents of the area, including medically underserved groups, will have access to the services. S.C. Code Regs. 61-15, § 802.3f, 31.

46. The project should establish provisions to treat patients unable to pay. S. C. Code Regs. 61-15, § 802.3g.

47. OCTI has the burden of establishing a lack of compliance with the distribution / accessibility criteria. S.C. Code Ann. § 44-7-210(E) (Supp. 1996).

48. OCTI asserts and must prove that the GCC and ECC services will not be located so as to serve a medically underserved area or that the granting of the CON will unnecessarily duplicate existing services in the service area. S.C. Code Ann. § 44-7-210(E) (Supp. 1996); S.C Code Regs. 61-15, § 802.3b.

49. The benefits of improved accessibility cannot outweigh the adverse effects caused by a duplication of existing service (SHP, II-63).

50. OCTI has not established that GCC or ECC has failed to provide its services at an acceptable time and reasonable cost, to provide access to all residents of the area, including medically underserved groups, and to establish provisions to treat patients unable to pay. S.C. Code Regs. 61-15, §§ 802.3c, 802.3f, 802. 31, and 802.3g.

51. OCTI has not demonstrated the GCC and ECC facilities will occupy an improper location. S.C. Code Regs. 61-15, § 802.3b.

52. A temporary duplication of services resulting from the startup of additional services is not an unnecessary duplication.

53. OCTI has not established that the GCC and ECC CONs will create an unnecessary duplication of services. S.C. Code Regs. 61-15, § 802.3b.

54. OCTI has not proven a failure of accessibility by the GCC and ECC applications.

d. Projected Revenues and Expenses

55. The review criteria include economic considerations. S.C. Code Regs. 61-15, §§ 802.5 through 802.19.

56. The criteria include projected revenues. S.C. Code Regs. § 803.6.

57. Since DHEC only applied §803.6a to the evaluation and since no issue may be raised at the contested case that was not considered by the review below, as to the revenue criteria, only § 803.6a is in dispute here. S.C. Code Ann. § 44-7-210(E) (Supp. 1996).

58. The criteria include projected expenses. S.C. Code Ann. § 803.7.

59. The dispute over projected revenues and projected expenses requires examining § 803.6a and 803. 7.

60. Under projected revenues, the applicant should document how the charges are calculated and establish that its fees will be comparable to those charged by other providers in the service area. S.C. Code Regs. § 802.6a.

61. Under projected expenses, projections of costs should be consistent with the costs experienced by similar service providers. S.C. Code Regs. § 802.7.

62. OCTI bears the burden of proof. S.C. Code Ann. § 44-7-210(E) (Supp. 1996).

63. OCTI has failed to prove the required proof of the charges made by other providers and thus failed to prove a violation of the projected revenue criteria.

64. OCTI failed to establish the required proof of the costs experienced by similar service providers and thus failed to prove a violation of the projected expense criteria.

e. Changes in Location and Ownership

65. CONs are valid only for the project as described in the application, and if an applicant proposes a change that would substantially alter the original application, the change must be approved by DHEC. S.C. Code Ann. § 44-7-230(C) (Supp. 1996).

66. Once a CON is issued, DHEC must determine whether an amendment or alteration to a project "is substantial and thereby constitutes a new project." S.C. Code Regs. 61-15, § 605.

67. The plain language of S.C. Code Regs. 61-15, § 605 declares that regulation applies only where the applicant has received his CON.

68. S.C. Code Regs. 61-15, § 605 is not literally applicable to either of the GCC amendments since no CON has been issued.

69. No CON can be issued until "the completion of ... contested case proceedings." S.C. Code Ann. § 44-7-210(E) (Supp. 1996).

70. At the conclusion of the contested case, the decision on the CON becomes final and GCC is then able to seek DHEC approval for changes it wishes to make. S.C. Code Ann. § 44-7-210(E) (Supp. 1996).

71. Likewise, S.C. Code Ann. § 44-7-230 (Supp. 1996) contemplates seeking approval of a change that substantially alters a project for which a CON has already been issued.

72. Judicial economy dictates that the matter be decided here rather than forcing the parties to litigate the matter further.

1. Change in Location and Ownership: Regulatory Standard

73. The standard under S.C. Code Regs. 61-15, § 605 is whether the change is so substantial as to "constitute a new project."

74. Nothing in the change of ownership or change of location transforms the GCC project into a new project.

2. Change in Location and Ownership: Statutory Standard

75. DHEC's prior approval is required for any changes that "substantially alter the scope of work, function of construction, or major items of equipment, safety, or cost of the facility during construction." S.C. Code Ann. § 44-7-230(C) (Supp. 1996).

76. GCC's change in ownership and change in location do not offend the standard established by S.C. Code Ann. § 44-7-230(C) (Supp. 1996).

77. The statute, when read as a whole, addresses changes in construction.

78. A change in ownership does not present a substantial alteration within the meaning of S.C. Code Ann. § 44-7-230(C) (Supp. 1996).

79. A change in construction resulting from a new building layout, is not forbidden. S.C. Code Ann. § 44-7-230(C) (Supp. 1996).

80. If GCC intends to "substantially alter the scope of work" GCC must obtain DHEC's approval. S.C. Code Ann. § 44-7-230(C) (Supp. 1996).

81. DHEC adequately considered the cost of the new site and the approval of GCC's change was not an approval wrongly given.

82. DHEC properly approved GCC's request for approval of GCC's plans to alter its building plans.

83. A change in ownership in 1997 does not deny GCC a CON.

84. If DHEC later finds that GCC is not operating within the restrictions of the CON issued to it, DHEC may seek sanctions allowed by law. See S.C. Code Ann. § 44-7-320 (Supp. 1996).

85. I do not find any reason to alter DHEC's decision approving change in ownership.

DHEC is ordered to grant Certificates of Need to GCC and ECC.

AND IT IS SO ORDERED.

RAY N. STEVENS

Administrative Law Judge

June 6, 1997

Columbia, South Carolina

1. OCTI has a statutory right to a contested case "before the board or its designee." S.C. Code Ann.§ 44-7-210(D)(2) (Supp. 1996). The statute's authorization of a hearing officer (as opposed to the literal act of naming a designee) removes all contested case authority from DHEC and places contested case jurisdiction in the Administrative Law Judge Division (ALJD). See

S. C. Code Ann. § 1-23-600(B) (Supp. 1996) (ALJD shall preside over all contested cases in which a single hearing officer is authorized or permitted by law or regulation). DHEC acts as an appellate body and not as a fact-finder. See S.C. Code Ann. § 1-23-610(D) (Supp. 1996) (review confined to the record based upon substantial evidence standard).

2. De novo means to rehear or hear for a second time. Black's Law Dictionary, 721 (6th ed. 1990). DHEC investigated and examined the applications of GCC and ECC but held no hearing. Accordingly, the ALJ hearing is not a rehearing. However, to the extent the label de novo implies an independent hearing held by a fact-finder not bound by previous decisions, the label of de novo may have some relevance to the GCC and ECC applications.

3. To the extent the prior case law of National Health Corp. v. S.C. Dept. of Health and Envtl. Control, 298 S.C. 373, 380 S.E.2d 841 (1989) applies a standard of review at the contested case level, that case is not persuasive here. Decided prior to restructuring, that decision examines the pre-restructuring deliberation process used by the Board. The case does not address the newly created jurisdiction of an ALJ in a contested case hearing.

4. As to the population standard, the SHP states a megavoltage radiation unit should serve a population of at least 120,000 within a service area which consists of an area in which 90 percent of the population is within 45 minutes one way automobile travel time of the radiation service.

5. As to the number of ESTVs as a standard, the SHP states a realistic load for a megavoltage unit is about 6,500 ESTVs per year and that no additional megavoltage units should be opened in a service area unless each linear accelerator is performing at least 6,500 ESTVs or treating 250 new patients per year.

6. A "service area" is not the same as an "inventory region." Rather, the two are different concepts since the SHP explains that, for various reasons, the service area may cross inventory regions. SHP, II-2, Court's Exh. 3 Thus, the fact that inventory Region I contains the counties of Anderson, Cherokee, Greenville, Oconee, Pickens, Spartanburg, and Union does not establish the fact that the same counties constitute the service area for radiation therapy.

7. OCTI has not presented any serious challenge to GCC's and ECC's ability to provide its services at an acceptable time and reasonable cost (802.3c), to provide access to all residents of the area, including medically underserved groups (802.3f, 31), and to establish provisions to treat patients unable to pay. (802.3g).