South Carolina              
Administrative Law Court
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SC Administrative Law Court Decisions

CAPTION:
Open MRI of Charlotte, Inc. vs. SCDHEC et al.

AGENCY:
South Carolina Department of Health and Environmental Control

PARTIES:
Petitioner:
Open MRI of Charlotte, Inc.

Respondent:
South Carolina Department of Health and Environmental Control, and Piedmont Medical Center, Rock Hill, South Carolina
 
DOCKET NUMBER:
97-ALJ-07-0706-CC

APPEARANCES:
n/a
 

ORDERS:

FINAL ORDER AND DECISION

STATEMENT

This matter came before me pursuant to S.C. Code Ann. § 1-23-310, et seq., and § 44-7-210 (Supp. 1997), S.C. Regs. §61-15 and § 61-72 (Supp. 1997) on November 23 and 24, 1998, upon the request of Petitioner, Open MRI of Charlotte, Inc., for a contested case hearing regarding Respondent South Carolina Department of Health and Environmental Control's ("DHEC") decision dated November 14, 1997, to grant a certificate of need ("CON") to Respondent Piedmont Medical Center ("PMC") for the construction and renovation of its existing Magnetic Resource Imaging ("MRI") area for the addition of a second MRI unit, which will be a Hitachi .3 Aris Open unit.

Based upon the testimony and evidence presented PMC's CON application is approved. Any issues raised or presented in the proceeding of this matter that are not addressed in this Order are deemed denied. ALJD Rule 29(C).

FINDINGS OF FACT

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

1. PMC is a 268 bed acute care hospital located in Rock Hill, South Carolina, with a primary service area of York, Chester and Lancaster counties.

2. It currently operates a closed MRI unit within its Imaging Department. This is staffed by technicians, registered nurses and radiologists.

3. Approximately 90% of its MRI scans are performed on an outpatient basis.

4. Over the years, PMC's MRI utilization has increased as follows:

1995 3001 scans

1996 3325 scans

1997 4058 scans

1998 projected at 4980 scans

5. An MRI unit can comfortably perform 2000 scans per year, per shift. Patient convenience and efficient cost-effective utilization of facilities and personnel are all best achieved by limiting operations of a unit to one shift per day.

6. It takes approximately 45 to 60 minutes to conduct a scan of that time the unit operates about 30 minutes and the remaining time is for pre and post procedures.

7. Because of the expanded workload, PMC, at the time of hearing, was running its MRI unit in excess of two shifts per day. As a result, it has to pay increased salaries to nurses and technicians in order to induce them to work a second shift, and radiologists are required to extend their work hours in order to be available to review images from scans performed during the second shift. Patients scheduled for scans during the second shift are inconvenienced by having to travel to and from appointments late in the evenings, sometimes arriving home well after midnight. Additionally, if the equipment needs repair patients have to be rescheduled, including some who have previously been sedated.

8. DHEC in reviewing the application took into consideration the hours of operation of the facility. It is preferable to have a single shift to avoid having to reschedule patients in the event problems occurred.

9. Aside from the over-utilization of the existing MRI unit, PMC's closed unit is unable to accommodate either severely claustrophobic or obese patients.

10. The closed MRI unit at PMC is a long, narrow, cylindrical type of magnet which completely surrounds the patient, who is placed on a movable table which slides into the cylinder through a small opening. The patients must remain perfectly still within this confined space for periods of time ranging from 30 minutes to 2 or more hours. During this time they may experience a variety of anxiety related reactions, which in some cases require sedation.

11. To alleviate the over-utilization of its existing unit, and to accommodate those patients suffering from claustrophobia or obesity, PMC seeks to install an open MRI unit. This unit is open at the sides, not only permitting easier and less claustrophobic access, but also allowing physicians to work with the patients during scans, enhancing diagnostic capabilities.

12. With an increasing population and greater utilization of MRI techniques, the use of MRIs as diagnostic tools are projected to continue to grow.

13. It is projected that by the year 2000, there will be a need for over 8,000 scans conducted, or residents of York, Chester, and Lancaster Counties due to an increase in population and in MRI as a diagnostic tool.

14. On April 14, 1997, PMC submitted a CON application to DHEC for construction and renovation of its existing MRI area for the purpose of adding a second MRI which will be an open unit.

15. This application was opposed by Open MRI of Charlotte, Inc.

16. In South Carolina, Open MRI of Charlotte, Inc., serves the York County service area.

17. PMC complied with all the regulatory and statutory requirements during the CON application process, including providing additional information to DHEC, which was submitted by the required deadline of June 6, 1997.

18. By letter dated November 14, 1997, DHEC approved PMC's CON application.

19. Open MRI of Charlotte thereafter requested a contested case hearing and administrative review of this approval.

20. The 1996 State Health Plan (Plan), under which PMC's application was reviewed, authorizes DHEC to permit an installation of an MRI unit if, among other things, it is projected that the unit will perform a minimum of 1500 scans annually by the third year of its operation. 21. At the time of its application in 1997, PMC's 1996 utilization rate of its existing MRI unit was enough to provide 1825 annual scans for its existing unit and 1500 scans for the requested unit.

22. At the time of trial, PMC's utilization of MRI procedures had reached the point where, even with the new unit, it would be unable to take care of its existing workload without running more than one shift per day. The utilization rate had increased to the point that the need for a third unit was imminent and the need for a second unit was critical.

23. The installation of a second MRI unit at PMC will not negatively impact Open MRI of Charlotte. PMC and Open MRI of Charlotte serve different markets and provide different standards of care to their patients. For example:

A. Approximately 98% of PMC's scans are performed on patients referred by physicians located in South Carolina, the remaining percentage of the scans are performed on patients referred by North Carolina physicians. Open MRI of Charlotte, Inc., on the other hand, receives approximately 75% of its referrals from North Carolina physicians and 25% from South Carolina physicians. Of the 25% of patients referred to Open MRI of Charlotte, Inc., by South Carolina physicians, 11% are referred by physicians who do not have privileges at PMC.

B. PMC's Imaging Department is staffed by technicians, registered nurses and radiologists. This staffing assures maximum efficiency and convenience to both the patients and referring physicians. Open MRI, on the other hand is staffed mainly by technicians. A registered nurse is on call on selected days per week. Where nurses are not available, if a patient requires sedation, the patient is required to leave the premises, obtain the sedation from his or her physician, and return to the premises to self-administer the necessary medication and prepare again for scanning. Additionally, Open MRI of Charlotte has no physician on staff to review images before the patient leaves. Its images are sent by overnight delivery to Open MRI's owner's offices in Virginia where they are read. The reports of the scans are then faxed back to the facility and subsequently delivered to the referring physicians. Consequently, if it is determined upon reading the images, that additional imaging is required, patients have to be called back to the facility for other appointments. At PMC radiologists read the images before the patients depart the premises and, while the patients are present, confer with the referring physicians in the event additional diagnostic work is required.

24. Open MRI of Charlotte, Inc.'s utilization rate has increased significantly every year that it has been in operation. In fiscal year 1995, it performed 912 scans. In fiscal year 1996, Open MRI performed 990 scans.

25. Even with installation of an open MRI magnet at PMC, continued growth in the utilization of MRI procedures will offset any shifting of patient referrals from Open MRI of Charlotte to PMC by some of the South Carolina physicians who have privileges at PMC. 26. On the other hand, installation of an open MRI magnet at PMC will provide better operational efficiency and patient accessibility. Failure to obtain a second unit will critically affect PMC's ability to serve even its current patient base.

27. Patients will experience serious problems in terms of availability, accessibility, and obtaining care of the type proposed by PMC's CON application in the absence of approval of the project, including access to new technologies within a hospital setting.

28. The capital and operating costs of PMC's proposed project, and its potential impact on patient charges, are reasonable.

29. Superior alternatives to establishment of the second MRI at PMC in terms of cost, efficiency or appropriateness do not exist, and the development of such alternatives is not practical.

30. DHEC considered alternatives to PMC's CON application and properly found that superior alternatives did not exist.

31. DHEC's approval of PMC's CON application complies with the Plan.

32. The benefits of improved accessibility for persons seeking MRI services at PMC outweigh any alleged adverse effects which could be caused by duplication of Open MRI of Charlotte's existing service.

33. Petitioner has failed to establish by a preponderance of the evidence that DHEC erred in finding PMC's CON application in compliance with the applicable statutes, regulations and Plan. The record shows beyond a preponderance of the evidence that DHEC's decision to approve PMC's CON application was correct.DISCUSSION

Open MRI of Charlotte, Inc., argued that PMC had not documented that a minimum of 1,500 "new" scans could be performed annually by the end of the third year of operation of PMC's proposed MRI unit. This argument is without merit for several reasons. First, the Plan does not require that the projected number of scans be "new" scans. The Plan simply states that the applicant must document that a minimum 1,500 scans can be performed annually. See Plan, p. II-62. The literal and plain language of the Plan should be applied in its ordinary meaning. See Multimedia Inc., v. Grenville Airport Commission, 287 S.C. 521, 339 S.E.2d 884 (Ct. App. 1986). Secondly, PMC demonstrated that its current MRI unit is severely over utilized. It is perfectly reasonable and expected that some of the scans currently performed on the existing MRI unit will be shifted to the second MRI unit establishing sufficient volume justifying approval of the second unit. Thirdly, the evidence shows PMC has already exceeded the volumes projected in its application, and will far exceed the Plan's required projections for its third year of operation. Approval of PMC's application is consistent with standard one (1) in the Plan. (Plan, p. II-62).

DHEC also considered planning standard (2) of the Plan, the utilization of existing resources, in determining whether to approve the CON. Open MRI of Charlotte, Inc., serves a substantially different patient and physician base than does PMC, and its method of operation, level of care provided and potential uses of MRI services differs from PMC. Analysis of the growth of MRI scans per thousand population plus the population growth in the service area demonstrated that DHEC correctly determined there would be sufficient utilization for both facilities. DHEC properly found the addition of an MRI unit at PMC would have no significant effect on Open MRI of Charlotte, Inc. PMC's application is consistent with standard (2) contained in the Plan.

Pursuant to S.C. Regs. 61-15, §§ 305 -306, DHEC received comments from Open MRI of Charlotte, Inc., during the review process, including the project review committee meeting and a public hearing requested by Open MRI. DHEC considered Open MRI of Charlotte Inc.'s arguments; however, Open MRI did not produce evidence to support its assertions that PMC's second MRI unit would significantly impact utilization of its facility. To the contrary, the record shows that from 1995 to 1997, both PMC's and Open MRI's utilization grew at approximately the same rate.

Open MRI of Charlotte, Inc., argued that PMC should have attempted to use a shared mobile MRI service. This argument is without merit. There is no requirement in the Plan that PMC seek a shared mobile MRI service. Furthermore, the Plan states that a shared mobile MRI service would operate on a part-time basis, and PMC has shown its patient needs require a second MRI unit on a full-time basis, and actually are now in need of a third unit.

In addition, Open MRI of Charlotte, Inc., argued that PMC's application should not be approved because the Plan contains the following language:

Based on the planning emphasis on shared mobile services and the current availability and utilization of existing magnetic resonance imaging services, the benefits of improved accessibility do not outweigh the adverse affects (sic) caused by the duplication of existing services. (Plan, p. II-63.)

Open MRI of Charlotte, Inc., argues this language should be interpreted to forbid approval of PMC's second MRI unit. This argument is without merit. The language addresses the issue of accessibility when there is no established need for the addition of equipment. DHEC's expert in state health planning and the CON process testified that the purpose of this provision is to make sure accessibility in and of itself is not a reason to duplicate services in a community. If the only reason the Department approves the project is accessibility because the patients would have more accessibility to the service, that does not justify duplicating underutilized services. In this case DHEC felt this was a necessary duplication, that it was needed, and not just that the patients would have more accessibility.

This interpretation was also supported by Open MRI's expert. Furthermore, to accept Petitioner's interpretation of this language would render the need standards set forth in the Plan moot, which could not logically be the intent of the Plan. The need standards govern the approval of additional MRIs, and fulfill the very purpose of the Plan to outline the need for additional health services in the State. S.C. Code Ann. § 44-7-180 (Supp. 1997). To ignore the need standards would create an absurd result. The court will reject construction of a statute that would lead to an absurd result not possibly intended by the legislature. Miller vs. Lawrence Robinson Trucking, 1998 WL 832266 (Ct. App. 1998); McCummings v. S.C. Dept. Of Corrections, 319 S.C. 440, 462 S.E.2d 271 (1995); State ex. rel. McLeod v. Montgomery, 244 S.C. 308, 136 S.E.2d 778 (1964). Finally, as discussed throughout this order, the record contains ample evidence that a second MRI unit is urgently needed at PMC.

As required by S.C. Regs. 61-15, § 501, DHEC correctly made the following findings:

1. The capital and operating costs of the proposal and the potential impact on patient charges are reasonable.

2. Superior alternatives such as services in terms of cost efficiency or appropriateness do not exist and the development of such alternatives is not practicable.

3. In the case of new construction, alternatives to new construction have been considered; and

4. Patients would experience serious problems in terms of costs, availability or accessibility, or such other problems as may be identified by the Department in obtaining care of the type proposed in the absence of the project.



The record is replete with evidence supporting these findings under S.C. Regs. 61-15, §501. PMC's establishment of a second MRI unit will have a positive impact upon its operating costs of the service. The potential impact, if any, on patient charges as a result of the addition of the second MRI unit is reasonable. No superior alternatives exist in terms of cost efficiency or appropriateness and the development of such alternatives is not practicable. The Department considered the alternatives and correctly determined PMC's project is needed. Patients will experience even greater problems in terms of availability and accessibility in the absence of this project. It is imperative that PMC purchase its second MRI unit. PMC's existing MRI unit is operating above optimum capacity, and, given current and projected MRI volume increases, the second MRI unit will be operating above optimum capacity when it is brought on line.

PMC's CON application complied with the Project Review Criteria and particularly those considered most important in evaluating CON application for MRI services. See S.C. Regs. 61-15, Chapter 8 (Supp. 1997).

A. Compliance with the Need outlined in the Plan: As discussed above, not only did the Department properly determine PMC met the need standards in the Plan, but the evidence shows its MRI utilization exceeds the projections in its application. At present, PMC's existing resources are over utilized, and its existing MRI unit, staff, radiologists and patients are being pushed beyond optimum capacity levels on the single existing MRI unit. Furthermore, during this period, Open MRI of Charlotte, Inc.'s utilization has also grown.

The Department considered utilization of existing resources and correctly determined that PMC's application should be approved. The record shows that PMC and Open MRI of Charlotte's patient and physician referral bases differ substantially. In 1996 and 1997, approximately 72% and 75%, respectively, of Open MRI of Charlotte's referrals came from North Carolina physicians and/or chiropractors. In contrast, in 1996, 98.3% of PMC's referrals came from South Carolina, and only 1% from North Carolina. Likewise, in 1997, 98% of PMC's referrals came from South Carolina, and only 1% from North Carolina. It is evident that PMC's utilization does not significantly affect Petitioner's utilization. Also, over the three year period of 1995 through 1997, only 14% of the total scans performed at Petitioner's facility were referred by physicians who have privileges at PMC.

Furthermore, given the differences in quality of care, mode of operation, staffing and a myriad of other factors distinguishing the service provided by PMC from that provided by Open MRI of Charlotte, the need for the second unit at PMC cannot be denied. PMC must be allowed to meet the needs of the South Carolina physicians who choose to send their patients to PMC for MRI services and the continuum of care provided there.

B. Community Need Documentation: PMC's application identified the target population and projected increase in population growth. The application contained conservative projections of growth in MRI utilization to meet needs of this population. Those projections have been exceeded by subsequent utilization at PMC.

C. Distribution (Accessibility): As discussed at length above, addition of a second MRI unit at PMC is justified and will not be an unnecessary duplication of services. As the sole acute care hospital in York County and the primary provider of indigent care to the citizens of York County and the surrounding area, PMC is required to provide health care services to the citizens of York County, regardless of their ability to pay.

D. Acceptability: PMC's application has tremendous support from local physicians, business leaders and the target population.

E. Operating Budget: PMC's project is financially feasible as shown in the budgets.

F. Ability of the Applicant to Complete the Project: PMC is able to purchase, install and operate a second MRI unit for the benefit of its patients.

G. Cost Containment: The method of funding the project is cost effective and certain. The addition of a second MRI unit will not substantially affect the cost of providing MRI services at the hospital. The project will foster economies of scale and better utilization of staff.

CONCLUSIONS OF LAW

Based upon the Findings of Fact, I conclude the following:

1. The South Carolina Administrative Law Judge Division has jurisdiction over the consested case hearing pursuant to S.C. Ann. § 44-7-130 and S.C. Reg. 61-15 (Supp. 1997). 2. The South Carolina Administrative Law Judge Division has personal and subject matter jurisdiction. S.C.Code Ann. § 1-23-600(B) (Supp.1998).

3. The issues considered at the contested case hearing are those presented, or considered, during the DHEC staff review and decision process. S.C. Code Ann. § 44-7-210(E) (Supp. 1997).

4. The Administrative Law Judge 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).

5. Open MRI of Charlotte, Inc. is an "affected person" with standing to request a contested case hearing to review DHEC's decision to approve Piedmont's CON application for an open MRI unit. S.C. Code Ann. § 44-7-130 (Supp. 1997) and 24A S.C. Code Ann. Regs. 61-15, § 103.1 (Supp. 1997).

6. Open MRI of Charlotte, Inc. timely filed a request for a contested case hearing regarding DHEC's approval of Piedmont'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).

7. The standard in weighing the evidence and making a decision on the merits in a contested case hearing is preponderance of the evidence. Anonymous v. State Board of Medical Examiners, No. 24754 (S.C. Sup. Ct. filed January 26, 1998).

8. In a contested case hearing, the standard of proof is the preponderance of the evidence with the burden of proof upon the moving party, to establish by a preponderance of the evidence that DHEC erred in its decision to approve the CON application. S.C. Code Ann. Regs. 61-15, § 403; See National Health Corp. v. S.C. Department of Health and Environmental Control, 298 S.C. 373, 380 S.E.2d 841 (1989).

9. The "State Certification of Need and Health Facility Licensure Act," S.C. Code Ann. § 44-7-110, et seq. (Supp. 1997) ("Act") mandates that DHEC establish a certificate of need program to promote cost containment, prevent unnecessary duplication of health care facilities and services, guide the establishment of health care facilities and services which will best serve public needs, and ensure that high quality services are provided in health care facilities in this State. S.C. Code Ann. § 44-7-120 (Supp. 1997).

10. DHEC is charged with control and administration of the granting of CONs. S.C. Code Ann. § 44-7-140 (Supp. 1998).

11. DHEC is the sole state agency responsible for implementation of the CON Program, its interpretations of the Plan and regulations concerning administration of the Certificate of Need Program must be accorded great deference and will not be overruled absent compelling reasons. See S.C. Code Ann. §§ 44-7-110, 180 (Supp. 1998). See Byerly Hospital and Loris Community Hospital v. South Carolina State Health and Human Services Finance Commission, 319 S.C. 225, 460 S.E.2d 383 (1995); Image Trust Florence, Inc. v. South Carolina Department of Health and Environmental Control, Florence Medical Imaging, Florence, South Carolina, Docket No. 95-ALJ-07-0539-CC (1996); Captain's Quarters v. S.C. Coastal Council, 306 S.C. 488, 413 S.E.2d 13 (1992).

12. In its review of CON applications, DHEC applies Project Review Criteria. S.C. Code Ann. § 44-7-190 (Supp. 1997); S.C. Regs. 61-15, §801, et. seq. (Supp. 1997).

13. The following project review criteria are considered to be the most important in evaluating certificate of need applications for this service:

a. Compliance with the Need Outlined in this Plan;

b. Community Need Documentation;

c. Distribution (Accessibility);

d. Acceptability;

e. Operating Budget;

f. Ability of the Applicant to Complete the Project; and

g. Cost Containment.



Based on the planning emphasis on shared mobile services and the current availability and utilization of existing magnetic resonance imaging services, the benefits of improved accessibility do not outweigh the adverse affects caused by the duplication of existing services.



14. The Act also requires DHEC to prepare a State Health Plan, approved by the DHEC Board, as a tool for the administration of the certificate of need program. The Plan outlines the need for medical facilities and services in the State and is a criterion for reviewing projects under the CON program. S.C. Code § 44-7-180(B); S.C. Regs. 61-15, §§ 801.3 and 802.1 (Supp. 1997).

15. The 1996 South Carolina State Health Plan ("Plan") was in effect when PMC's application was filed, and therefore, is applicable to this matter.

16. The Plan forth specific planning standards for approval of additional MRI units as follows:

(1) the applicant must document that a minimum of 1,500 scans can be performed annually by the end of the third year of operation. This documentation must include proposed utilization by both patient diagnostic category and number of patients to be examined.



(2) the utilization of existing resources must be considered prior to approval of additional equipment.



1996 State Health Plan, p. II-62.



17. PMC's CON application met both of the above planning standards.

18. Open MRI of Charlotte, Inc., failed to meet its burden of proof to establish that, and the record PMC's CON application for a second MRI unit was correct, proper, and in compliance with applicable statutes, regulations (including the Project Review Criteria), and the Plan.

ORDER

Based upon the foregoing Findings of Fact and Conclusions of Law it is hereby

ORDERED that PMC's application for a CON to construct and renovate its existing MRI area and add a second MRI unit Hitachi .3 Aris open is granted.

AND IT IS SO ORDERED.



ALISON RENEE LEE

Administrative Law Judge



March 5, 1999

Columbia, South Carolina.


Brown Bldg.

 

 

 

 

 

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