SC Administrative Law Court Decisions

This matter arises from a request by Petitioner Greenville Hospital System ("Petitioner" or "GHS") for a contested case hearing pursuant to S.C. Code Ann. §§ 1-23-310 et seq. (1986 & Supp. 1997), S.C. Code Ann. §§ 44-7-110 et seq. (1976 & Supp. 1997), and the Rules of Procedure for the Administrative Law Judge Division, to review the proposed decision of the South Carolina Department of Health and Environmental Control ("Department" or "DHEC") to issue a Certificate of Need ("CON") to Charter Greenville Behavioral Health System, Inc. ("Charter"). Charter seeks to convert eleven existing substance abuse beds at its Greer, South Carolina facility to eleven psychiatric beds. GHS opposes issuance of the CON, citing lack of need for the services because of an alleged overstatement of need in the 1996 State Health Plan and actual lack of need for psychiatric beds in the Greenville/Pickens Service Area.

On May 2, 1997, Charter moved the court for summary judgment on the grounds that GHS was estopped from asserting, and had waived its right to assert, the alleged error in psychiatric bed need stated in the 1996 State Health Plan. The basis of Charter's motion was GHS' failure to assert the alleged error during the drafting phase of the 1996 State Health Plan, despite GHS' comment letter during the drafting process.

Charter's motion for summary judgment was based upon GHS's failure to bring the alleged overstatement of GHS patient days to the Department's attention and to avoid incorporation of this alleged error in the final Plan. On October 13, 1997, the court denied Charter's motion for summary judgment on the grounds that issues of genuine fact existed regarding GHS' actions during the drafting phase of the 1996 State Health Plan.

After notice to the parties, a hearing was held February 25, 26, and 27, 1998. At the close of GHS's case on February 26, 1998, Charter moved to dismiss GHS's case on the grounds that GHS failed to meet its burden of proof that the Department's proposed decision to grant Charter's CON application was not supported by stated or actual need. Charter also argued that Charter, through cross-examination of GHS witnesses, met its burden to prove that GHS should be estopped from asserting, or should be found to have waived its right to assert, the alleged error in the 1996 State Health Plan.

Rule 52 of the Rules of Procedure for the Administrative Law Judge Division incorporates the South Carolina Rules of Civil Procedure to resolve matters not addressed by the ALJD's rules. The ALJD's rules do not address what procedure applies for dismissing a matter at the close of a petitioner's case. Rule 41(b) of the South Carolina Rules of Civil Procedure therefore provides guidance on that point:

. . . After the plaintiff in an action tried by the court without a jury has completed presentation of his evidence, the defendant, without waiving his right to offer evidence in the event the motion is not granted, may move for a dismissal on the ground that upon the facts and the law the plaintiff has shown no right to relief.

The court as trier of the facts may then determine them and render judgment against the plaintiff or may decline to render any judgment until the close of all the evidence. . . .

In Johnson v. J.P. Stevens & Co., Inc., 308 S.C. 116, 417 S.E.2d 527 (1992), the South Carolina Supreme Court clarified the standard for a court, as the trier of fact, to consider a defendant's motion for involuntary dismissal. In Johnson, the Court held, "Under Rule 41 in a nonjury trial, the trial judge clearly may dismiss the action even though the plaintiff may have established a prima facie case. Rule 41(b) allows the judge as the trier of facts to weigh the evidence, determine the facts and render a judgment against the plaintiff at the close of his case if justified."

With the above standard in mind and, after careful consideration of all of the testimony and documentary evidence presented in Petitioner's case, I find that GHS's case should be dismissed and Charter's CON application granted for the reasons stated below.

GHS is a full service hospital located in Greenville, South Carolina. As part of its services, GHS operates a psychiatric and substance abuse facility known as Marshall I. Pickens Psychiatric Hospital. One program offered by GHS/Marshall I. Pickens is a residential treatment facility for children and adolescents.

Charter, on the other hand, is a specialty hospital offering only psychiatric and substance abuse treatment and services to patients. Charter is located in Greer, South Carolina. Both Charter and GHS are in the Greenville/Pickens Service Area for purposes of planning for psychiatric services in the 1996 State Health Plan.

On July 22, 1996, Charter filed an application with the Department for a CON to convert eleven of its existing substance abuse beds to eleven psychiatric beds at its Greer, South Carolina facility. The basis of Charter's application was, in part, Charter's demonstration of actual need for additional psychiatric beds in the Greenville/Pickens Service Area and the 1996 State Health Plan's indication of the need for eleven additional psychiatric beds in that Service Area.

On November 20, 1996, GHS sent a letter opposing Charter's CON application and urging the Department to deny the CON. In opposing Charter's application, GHS notified the Department for the first time that, in GHS' opinion, the need stated in the 1996 State Health Plan for psychiatric beds in the Greenville/Pickens Service Area was in error as a result of an alleged overstatement of GHS' Fiscal Year 1994 psychiatric inpatient days. GHS claims that, although the Hospital Discharge Data System ("HDDS") information for GHS used by the Department reflects a total of 18,564 patient days for psychiatric care in 1994, in fact, only 14,097 days of psychiatric patient care were delivered by GHS during this time period. GHS thus contends that the 1996 State Health Plan overstates psychiatric patient days by 4,467 days and erroneously indicates a bed need of eleven psychiatric beds. The discrepancy allegedly results from inclusion of GHS's patient days for its residential treatment program for children and adolescents ("RTC"). RTC services are not acute care and should not be included in tabulations of patient days to determine psychiatric bed need.

On December 12, 1996, the Department issued its proposed decision to grant Charter's CON application finding that Charter had adequately documented need, that approval of the application was consistent with the 1996 State Health Plan and applicable project review criteria, that the project was financially feasible, and that the project enjoyed community support. On December 23, 1996, GHS asked the Department to reconsider its proposed decision to grant Charter's CON. GHS's grounds were the same as stated in its letter of opposition.

On January 7, 1997, the Department denied Petitioner's request for reconsideration. On January 17, 1997, GHS served its request for contested case hearing on the Board of Health and Environmental Control, thereby conferring jurisdiction on the Administrative Law Judge Division to hear this case.

The State Certification of Need and Health Facility Licensure Act at S.C. Code Ann. § 44-7-180 requires the Department, in conjunction with the State Health Planning Committee, to "prepare a State Health Plan for use in the administration of the Certificate of Need Program . . ." The Plan must include, among other things, an inventory of existing health care facilities, beds, specified health services, and equipment and projections of need for additional health care facilities, beds, health services, and equipment.

In developing both the inventory of existing services and the projections of need, the Department collects information reported by providers both to the Department and to the South Carolina Budget and Control Board, Office of Research and Statistics ("ORS"). The data used to prepare the 1996 State Health Plan as to psychiatric bed need was for Fiscal Year 1994 and came from two sources. For GHS, the Department used discharge data reported by GHS to ORS under the HDDS program. For Charter, the Department used Charter's utilization numbers from Charter's Joint Annual Report ("JAR"), because specialty hospitals did not report discharge data to ORS in 1994. According to GHS' November 20, 1996 letter opposing Charter's application for the Certificate of Need, the FY 1994 data collected by the Department for psychiatric inpatient days in the Greenville/Pickens Service Area erroneously included 4,467 inpatient days for GHS Children's Program, a residential treatment facility. GHS claims this alleged discrepancy can be readily identified through a review of the Joint Annual Report, and through a review of GHS medical records.

On March 22, 1996, public notice was given in the State Register that comments were being solicited on the 1996 State Health Plan. The comment period ran from March 22, the date of publication, to April 26, 1996. In addition, four public hearings were scheduled during that time to receive comments from interested persons across the State. One public hearing was held in Greenville, South Carolina. GHS did not attend any of the public hearings, and, although it did submit written comments within the comment period, those comments did not concern psychiatric bed need. The 1996 State Health Plan went into effect on June 14, 1996, with the stated eleven psychiatric bed need intact.

I make the following findings of fact, taking into consideration the burden on the respective parties to establish their cases by a preponderance of the evidence and taking into account the credibility of the witnesses:

1. On or about March 22, 1996, DHEC published a public notice of the draft 1996 State Health Plan in the State Register.
2. The public comment period for the draft 1996 State Health Plan began on March 22, 1996, and continued up to and through April 26, 1996.
3. Petitioner received a copy of the draft Plan at sometime during the comment period and distributed it to its department heads for review. Among those receiving copies of the draft Plan was the administrator of Petitioner's psychiatric programs.
4. Petitioner, through its planner Greg Brink, sought input (either in writing or through meetings) from each department about the draft Plan. Mr. Brink also read the entire draft Plan.
5. Mr. Brink was aware of the stated need for eleven psychiatric beds in the Greenville/Pickens area. He did not believe there was a need for these additional beds.
6. Thereafter, Petitioner submitted written comments on the draft 1996 State Health Plan on or about April 26, 1996. These comments addressed concerns about the need calculation methodology used by DHEC for home health agencies and other specific word editing. The psychiatric bed need reflected in the Plan for the Greenville Pickens service area was not questioned or commented upon.
7. A public hearing was held on the draft 1996 State Health Plan on or about April 23, 1996, but Petitioner did not attend the meeting.
8. The 1996 State Health Plan was adopted by the DHEC Board in June of 1996, and contained a stated psychiatric bed need of eleven beds.
9. On July 22, 1996, Charter filed a CON application seeking approval to convert eleven existing substance abuse beds to eleven psychiatric beds.
10. In submitting its CON application, Charter relied in part on the statement of bed need contained in the 1996 State Health Plan.
11. By letter dated November 20, 1996, Petitioner, through Greg Brink, opposed Charter's CON application and, for the first time, raised with the Department GHS' concerns regarding an alleged overstatement of psychiatric inpatient days and the inclusion of residential treatment facility patient days in calculating the psychiatric bed need for the Greenville/Pickens Service Area in the 1996 State Health Plan.
12. GHS was informed by DHEC that GHS would need to correct the data and provide it to ORS. At that point, ORS could take appropriate action and submit the information to DHEC.
13. Despite being in telephone communication with ORS, Petitioner never asked ORS to communicate with DHEC regarding the alleged overstatement of bed need. ORS never changed the data for GHS.
14. On December 12, 1996, DHEC issued its decision approving Charter's application for conversion of the eleven substance abuse beds to psychiatric beds.
15. By letter dated December 23, 1996, Petitioner requested that DHEC reconsider its decision to award the CON to Charter, but again Petitioner presented no evidence that the bed need set forth in the 1996 State Health Plan was in error other than Petitioner's assertion that such was the case.
16. On January 7, 1997, DHEC denied Petitioner's request for reconsideration.
17. In compiling the 1996 State Health Plan, DHEC drew on 1994 utilization data from two sources. For GHS, DHEC utilized the HDDS data reported by GHS to ORS. Because specialty hospitals did not report discharge data to ORS in 1994, in order to get Charter's numbers, DHEC had to use the patient days reported by Charter on its JAR.
18. Petitioner's HDDS data for 1994 reflects 18,564 total psychiatric patient days for Petitioner.
19. The HDDS system utilizes information from a hospital's UB-92s, a uniform billing form used by all hospitals, including GHS, in the filing of insurance claims.
20. GHS reviewed the information on the UB-92's to determine whether services from the residential treatment unit could be separated from information reported to ORS.
21. Petitioner possessed the information necessary to determine whether RTC and psychiatric inpatient days had been commingled and was in the best position to provide information to ORS.
22. During the time the 1996 State Health Plan was in its draft phase, Petitioner had the knowledge and the means to alert DHEC to any alleged overstatement of psychiatric bed need or the problems with utilizing the HDDS data instead of the JAR data for GHS. Petitioner did not do so.
23. Charter's psychiatric bed utilization for fiscal year 1995 was 84%. Utilization in excess of 80%, for planning purposes, reflects a need for increasing bed capacity to meet bed demand. Charter's application also has letters of support from physicians, counselors, and governmental agencies, many of which indicate that patients are available for referral for such specialized services in the community.
24. The 1996 State Health Plan accurately reflects the need for eleven psychiatric beds in the Greenville/Pickens Service Area.
25. Charter's application was in conformity with the need for services as stated in the State Health Plan and presented other evidence of need in the community outside of the State Health Plan.

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

1. The Administrative Law Judge Division has jurisdiction over this matter and is authorized to hear it as a contested case pursuant to S.C. Const. art. I, § 22; S.C. Code Ann. § 1-23-600(B) (Supp. 1997); S.C. Code Ann. §§ 1-23-310, 320 (Supp. 1997); S.C. Code Ann. § 44-7-210(D)(2) (Supp. 1997); 24A S.C. Code Ann. Regs. 61-15 § 403 (Supp. 1997) and 25 S.C. Code Ann. Regs. 61-72.201 (Supp. 1997).
2. The issues considered at the contested case hearing are limited to those presented, or considered, during the staff review and decision process. S.C. Code Ann. § 44-7-210(E) (Supp. 1997).
3. As a state-wide administrative tribunal authorized to take evidence and determine contested case hearings, the Administrative Law Judge Division is the fact finder in this matter for purposes of administrative and judicial review. See Lindsey v. S.C. Tax Comm'n, 302 S.C. 504, 397 S.E.2d 95 (1990).
4. GHS is an "affected person" with standing to request a contested case hearing to review DHEC's decision to approve Charter's CON application for the conversion of eleven substance abuse beds to psychiatric beds. S.C. Code Ann. § 44-7-130 (Supp. 1997) and 24A S.C. Code Ann. Regs. 61-15, § 103.1 (Supp. 1997).
5. GHS timely filed a request for a contested case hearing regarding DHEC's approval of Charter's CON application. S.C. Code Ann. § 44-7-210(D) (Supp. 1997); 24A S.C. Code Ann. Regs. 61-15 § 403.1 (Supp. 1997).
6. The standard in weighing the evidence and making a decision on the merits in a contested case hearing is a preponderance of the evidence. Anonymous v. State Board of Medical Examiners, Op. No. 24754 (S.C.Sup.Ct. filed January 26, 1998)(Davis Adv.Sh. No. 5 at 11). In this case, GHS had the burden of proof to establish by a preponderance of the evidence that Charter's CON application should be denied. S.C. Code Ann. §§ 44-7-110 through 44-7-340 (Supp. 1997); 24A S.C. Code Ann. Regs. 61-15, § 403.1 (Supp. 1997); National Health Corp. v. S.C. Dept. of Health and Environmental Control, 298 S.C. 373, 380 S.E.2d 841 (Ct. App. 1989).
7. The preponderance of the evidence means evidence which is of a greater weight, or is more convincing than that offered in opposition to it. Black's Law Dictionary 1182 (6th ed. 1990).
8. The State Certification of Need and Health Facility Licensure Act, S.C. Code Ann. §§ 44-7-110, et seq. (Supp. 1997), grants DHEC the authority to administer the State's CON program.
9. S.C. Code Ann. §§ 44-7-180, et seq. (Supp. 1997) provides for the application procedures, criteria, and standards for a CON.
10. The CON program is administered under the guidelines of 24A S.C. Code Ann. Regs. 61-15 (1992 and Supp. 1997).
11. A CON must not be awarded to an applicant unless the application complies with the State Health Plan, Project Review Criteria, and other regulations. S.C. Code Ann. § 44-7-210(C) (Supp. 1997). Based on Project Review Criteria and other regulations, which must be identified by the Department, a CON may be denied even if an application complies with the State Health Plan. Id.; 24A S.C. Code Ann. Regs. 61-15, § 802.1 (1992).
12. All CON applications must be consistent with the State Health Plan in effect at the time of application. 24A S.C. Code Ann. Regs. 61-15, § 504 (1992).
13. The 1996 State Health Plan, effective June 14, 1996, is the applicable Plan controlling this matter.
14. According to the 1996 State Health Plan, p. II-88, the following project review criteria are considered most important in evaluating a CON for psychiatric beds:

a. Compliance with the Need Outlined in this Plan;

b. Community Need Documentation;

c. Distribution (Accessibility);

d. Acceptability;

e. Financial Feasibility;

f. Ability of the Applicant to Complete the Project;

g. Cost Containment; and

h. Staff Resources.

1. The Department considered Charter's application under the following Project Review Criteria contained in 24A S.C. Code Ann. Regs. 61-15, § 802 (1992), ranked in order of importance by DHEC (by letter dated September 18, 1996), as follows:

a. Compliance with the Need Outlined in this Plan - 1;

b. Community Need Documentation - 2a, b, c, e;

c. Distribution (Accessibility) - 3, a-h;

d. Acceptability - 5a, c; and

e. Financial Feasibility - 15.

1. Charter's application for Certificate of Need to convert eleven substance abuse beds to eleven psychiatric beds meets the requirements of 24A S.C. Code Ann. Regs. 61-15 (1992 and Supp. 1997), and the requirements of S.C. Code Ann. §§ 44-7-110, et seq. (Supp. 1997).
2. Charter's application is also consistent with the 1996 State Health Plan.
3. GHS failed to meet its burden to prove that no actual need, or less than an eleven bed need, existed for psychiatric beds in the Greenville/Pickens Service Area at the time Charter filed its CON application.
4. GHS failed to meet its burden to prove that the 1996 State Health Plan is not accurate in its statement of an eleven bed psychiatric need in the Greenville/Pickens Service Area.
5. The party asserting equitable estoppel has the burden of proof thereon. Estes v. Roper Temporary Services, Inc., 304 S.C. 120, 403 S.E.2d 157 (Ct. App. 1991). Silence when it has the effect of misleading a party, may operate as equitable estoppel, and there is no requirement that the person whose silence misleads another have actual knowledge of the true facts if circumstances are such that knowledge is necessarily imputed to him." Faulkner v. Millar, 319 S.C. 216, 460 S.E.2d 378 (1995); Southern Development Land and Golf Company, Ltd. v. South Carolina Public Service Authority, 311 S.C. 29, 426 S.E.2d 748 (1993).
6. If , in fact, an alleged overstatement of psychiatric bed need occurred in the 1996 State Health Plan, it was based on information concerning Petitioner's patient days, which Petitioner knew or should have known was erroneous at the time the Plan was being drafted. Therefore, Petitioner's silence in the face of knowledge of such alleged error and the opportunity to correct it had the effect of misleading the Department into accepting and relying on the allegedly erroneous statement of bed need. Thus, Petitioner is equitably estopped from asserting the error now.
7. A party asserting waiver has the burden of proof thereon. NationsBank v. Scott Farm, 320 S.C. 299, 465 S.E.2d 98 (Ct. App. 1996). A waiver is an intentional relinquishment of a known right, which may be express or implied from the conduct of the party against whom waiver is invoked. Lyles v. BMI, Inc., 292 S.C. 153, 355 S.E.2d 282 (Ct. App. 1987).
8. GHS had both opportunity and the means to discover and notify DHEC whether the statement of bed need in the draft 1996 State Health Plan was erroneous by reason of inclusion of GHS's RTC patient days. GHS's failure during the comment period to notify the Department of the alleged overstatement of bed need in the draft 1996 State Health Plan amounts to a waiver of GHS's right to assert the alleged error now.

For the reasons stated above, it is hereby

ORDERED, that the application of Charter Greenville Behavioral Health Systems, Inc. for a Certificate of Need to convert eleven substance abuse beds to eleven psychiatric beds is GRANTED.

AND IT IS SO ORDERED.

_____________________________________

ALISON RENEE LEE

Administrative Law Judge

June 29, 1998

Columbia, South Carolina