Amisub of S.C., Inc. v. S.C. Dep't of Health

• Decision Date: 29 May 2013
• Docket Number: No. 27257.,27257.
• Parties: AMISUB OF SOUTH CAROLINA, INC., d/b/a Piedmont Medical Center, Respondent, v. SOUTH CAROLINA DEPARTMENT OF HEALTH AND ENVIRONMENTAL CONTROL; Charlotte–Mecklenburg Hospital Authority, d/b/a Carolinas Healthcare System; and Carolinas Physicians Network, Inc., Defendants, of whom South Carolina Department of Health and Environmental Control is the Petitioner, and Charlotte–Mecklenburg Hospital Authority, d/b/a Carolinas Healthcare System; and Carolinas Physicians Network, Inc. are Respondents. Appellate Case No. 2011–193828.
• Court: South Carolina Supreme Court

403 S.C. 576

743 S.E.2d 786

AMISUB OF SOUTH CAROLINA, INC., d/b/a Piedmont Medical Center, Respondent,

v. SOUTH CAROLINA DEPARTMENT OF HEALTH AND ENVIRONMENTAL CONTROL; Charlotte–Mecklenburg Hospital Authority, d/b/a Carolinas Healthcare System; and Carolinas Physicians Network, Inc., Defendants,of whom South Carolina Department of Health and Environmental Control is the Petitioner,andCharlotte–Mecklenburg Hospital Authority, d/b/a Carolinas Healthcare System; and Carolinas Physicians Network, Inc. are Respondents.Appellate Case No. 2011–193828.

No. 27257.

Supreme Court of South Carolina.

Heard Jan. 10, 2013.

Decided May 29, 2013.

Ashley Caroline Biggers, of Columbia, for Petitioner.

Travis Dayhuff, of Nelson Mullins Riley & Scarborough, of Columbia; James Grant Long, III, Tanya Amber Gee, Jennifer Joan Hollingsworth, and Edward Houseal Bender, all of Nexsen Pruet, of Columbia, for Respondents.

Chief Justice TOAL.

This matter began as a contested case in the administrative law court (ALC) brought by Amisub of South Carolina, Inc., d/b/a Piedmont Medical Center (Piedmont), a hospital in Rock Hill, South Carolina. The dispute arises out of Piedmont's contention that an urgent care center operated by a competitor, Carolinas Physicians Network, Inc. (CPN), was required to have a Certificate of Need (CON) or a Non–Applicability Determination (NAD) from the South Carolina Department of Health and Environmental Control (DHEC). CPN is a wholly owned subsidiary of Charlotte–Mecklenburg Hospital Authority, d/b/a Carolinas Healthcare System (CHS). The ALC granted summary judgment to CHS and CPN on the basis the urgent care center was a licensed private physician's office and, thus, exempt from CON review as a matter of law. The Court of Appeals reversed, finding summary judgment was premature, and remanded to allow Piedmont the opportunity to conduct discovery. The Court of Appeals rejected DHEC's argument that the ALC did not have subject matter jurisdictionin this case because the agency had issued no staff decision subject to a contested case hearing. Amisub of S.C., Inc. v. S.C. Dep't of Health & Envtl. Control, Op. No. 2010–UP–523 (S.C. Ct.App. refiled Apr. 25, 2011). This Court granted DHEC's petition for a writ of certiorari as to the issue of jurisdiction. We reverse.

FACTUAL/PROCEDURAL BACKGROUND

I. Development of Medical Center

CPN is a nonprofit corporation organized under the laws of North Carolina. It owns and operates physicians' offices in North Carolina and South Carolina. CPN is a wholly owned subsidiary of CHS, a nonprofit health care system based in Charlotte, North Carolina.

On October 17, 2007, CHS wrote to DHEC and requested confirmation that its proposed construction of a medical office building in Fort Mill, South Carolina did not require CON review. A DHEC staff member responded on October 26, 2007 and confirmed that the “project does not require Certificate of Need review because it is an expenditure by a health care facility for a non-medical project” as provided in S.C.Code Ann. Regs. 61–15 § 104(2)(f) (Supp.2008). The letter's subject line referenced this decision as E–07–125 / Construction of a medical office building / Carolinas Medical Center—Fort Mill Office Plaza / Fort Mill, South Carolina.

Upon learning of DHEC's grant of a written exemption for the construction project, Piedmont filed a request for final review (RFR) by the DHEC Board of E–07–125 (the exemption decision) in 2007. The DHEC Board declined review on the basis the request was untimely. Piedmont then requested a contested case hearing. The ALC ruled Piedmont's challenge was not timely filed, and the matter as to E–07–125 was dismissed in 2008. Amisub of S.C., Inc. v. S.C. Dep't of Health & Envtl. Control, 2008 WL 4879672 (ALC order filed Oct. 3, 2008). Piedmont did not further challenge this ruling.

According to Piedmont, CHS thereafter had the medical office building constructed in Fort Mill at a cost of approximately $13.9 million. CPN opened its urgent care center there on January 12, 2009. CPN employed two family medicinephysicians, two nurses, and other personnel to staff the center. The practitioners provide primary care, including initial diagnosis and treatment, from 8:00 a.m. to 8:00 p.m. seven days a week. Patients are not required to have appointments, and they do not stay overnight at the facility. CPN reportedly owns the center and the personal property, including the equipment, used to treat the patients.

Prior to the opening of the urgent care center, Piedmont's counsel met with DHEC staff on January 5, 2009, regarding the plan to establish the center at the Fort Mill medical office building. On January 16, 2009, Piedmont's counsel sent a follow-up letter to DHEC requesting that DHEC “take immediate steps to require CHS's submission of either a non-applicability request or a CON application” for the urgent care center. Piedmont's counsel asserted CHS's actions were contrary to its previous written assurance to DHEC that it would not open an urgent care center without first obtaining a CON or a NAD, citing a 2007 letter from CHS to DHEC.¹ Counsel further asserted that expenditures by a health care facility in excess of $2 million required a CON and that, while the offices of licensed private practitioners generally are exempt, that exemption does not apply to the urgent care center because, “upon information and belief, the physicians who will staff the center are employed by a public health care facility (or its affiliate)....”

On January 28, 2009, Piedmont's counsel, Daniel Westbrook, spoke with Beverly Patterson, Director of DHEC's CON program, about the urgent care center and was informed by Patterson that “DHEC had not decided to take any action to require Carolinas [CHS] to apply for a Non-applicability Determination or Certificate of Need for its Ft. Mill urgent care center.” Counsel prepared an affidavit dated January 30, 2009 summarizing this telephone conversation. Counsel added,“As of the date of this affidavit, I have not received a writing from DHEC memorializing its decision to not take any action against Carolinas [CHS] for the opening of its urgent care center.”

On February 2, 2009, Piedmont's counsel filed with the Clerk of the DHEC Board a written request for final review, which sought the Board's review of “DHEC's staff decision” not to require a CON or a NAD for the opening of the urgent care center.² Counsel attached his affidavit dated January 30, 2009 that summarized his telephone conversation with the Director of DHEC's CON program. Counsel asked the Board (1) to issue a cease and desist order prohibiting further operation of the center until there was a final decision on a CON application or a NAD request, and (2) to require CHS to file a CON application or a NAD request prior to reopening the center.

The Clerk of the DHEC Board responded to Piedmont's counsel on February 4, 2009, declining the request for review. The Clerk noted the request was filed 464 days after DHEC's decision in the matter was mailed to the applicant on October 26, 2007, and any request for review was due within fifteen days after notice of the decision. The subject line of the letter referenced

“

Docket No. 09–RFR–06

—Staff decision dated October 26, 2007, (mailed 1/7/2009), to approve an exemption (E–07–125) for an expenditure by health care facility for a non-medical project.” Thus, the letter referenced DHEC's earlier determination that the construction of the medical office building was exempt from CON requirements, rather than Piedmont's question regarding the opening of the urgent care center.

Counsel for Piedmont wrote to the Clerk of the Board and acknowledged that any challenge to E–07–125 would be untimely and that Piedmont was not challenging the exemption for the building construction in 2007. Counsel explained, “The DHEC staff decision for which we seek review is the unwritten decision made in January or February 2009 and communicated to me verbally on January 28, 2009, as described in my affidavit of January 30, 2009....” Counsel asserted DHEC's determination that the center was a private practitioner's office and therefore not subject to CON review was in error because the physicians there were employed by a health care facility. Counsel asked for clarification as to whether the letter of February 4, 2009 represented a final decision of the DHEC Board to deny Piedmont's request for review.

Thereafter, the Clerk of the Board notified Piedmont that the DHEC Board had met on February 12, 2009 and had declined to conduct a final review conference in this matter.

II. Contested Case Hearing

On March 5, 2009, Piedmont filed a request with the ALC for a contested case hearing, challenging DHEC's failure to require CHS to apply for and obtain a CON or a NAD for the urgent care center. CHS and DHEC were named as respondents in the filing. Counsel argued a CON or a NAD was required because the urgent care center was established by or on behalf of a health care facility, i.e., CHS. Counsel for Piedmont attached his January 30, 2009 affidavit regarding his conversation with DHEC staff, along with Piedmont's request for review and the notice from the DHEC Board declining review.

CPN (which was added as a respondent by consent of the parties) and CHS moved for a dismissal or for summary judgment.³ At the hearing before the ALC on April 16, 2009, Piedmont asserted no discovery had been completed and argued the center was not entitled to classification as a private physician's office because it was owned and operated by a health care facility. Specifically, Piedmont asserted the center ⁴ is marketed as a CHS facility, not as a physicians' practice, and that CHS, which originally expended the funds to construct the medical office building, controls the urgent care center through its wholly owned subsidiary, CPN. Piedmont contended further discovery was needed to determine the actual relationship...