STATE OF NORTH CAROLINA IN THE OFFICE OF
ADMINISTRATIVE HEARINGS
COUNTY OF CUMBERLAND
CUMBERLAND COUNTY HOSPITAL )
SYSTEM, INC. d/b/a CAPE FEAR )
VALLEY HEALTH SYSTEM, )
)
Petitioner, )
)
vs. ) 08 DHR 3676
)
N.C. DEPARTMENT OF HEALTH AND )
HUMAN SERVICES, DIVISION OF )
HEALTH SERVICE REGULATION, )
CERTIFICATE OF NEED SECTION, )
)
Respondent, )
)
and )
)
THE RADIATION MEDICINE GROUP, )
PLLC and THE RADIATION MEDICAL )
CENTER, LLC, )
)
Respondent-Intervenors. )
______)
COUNTY OF ROBESON )
)
THE RADIATION MEDICINE GROUP, )
PLLC and THE RADIATION MEDICAL )
CENTER, LLC, )
)
Petitioners, )
)
vs. ) 08 DHR 3680
)
N.C. DEPARTMENT OF HEALTH )
AND HUMAN SERVICES, DIVISION )
OF HEALTH SERVICE REGULATION, )
CERTIFICATE OF NEED SECTION, )
)
Respondent, )
)
and )
)
CUMBERLAND COUNTY HOSPITAL )
SYSTEM, INC. d/b/a CAPE FEAR )
VALLEY HEALTH SYSTEM, )
)
Respondent-Intervenor. )
RECOMMENDED DECISION
This matter came for hearing before Joe L. Webster, Administrative Law Judge (“ALJ”), on July 8-12, and 15-18, 2009 and on August 3-5 and 12, 2009, in Raleigh, North Carolina. Having heard all of the evidence in the case, and having considered the exhibits, arguments, and relevant law, the undersigned makes the Findings of Fact, by a preponderance of the evidence, enters his Conclusions of Law thereon, and makes the following recommended decision.
APPEARANCES
For Petitioner/Respondent-Intervenor Cumberland County Hospital System, Inc. d/b/a Cape Fear Valley Health System (“Cape Fear”):
Gary S. Qualls
Colleen M. Crowley
K&L Gates LLP
430 Davis Drive, Suite 400
Morrisville, NC 27560
For Petitioner/Respondent-Intervenor The Radiation Medicine Group, PLLC and The Radiation Medical Center, LLC (collectively “RMG”):
Joy Heath Thomas
The Law Office of Joy Heath Thomas
514 Daniels St. # 182
Raleigh, NC 27605
For Respondent N.C. Department of Health and Human Services, Division of Facility Services, Certificate of Need Section (the “CON Section” or “Agency”):
June S. Ferrell
Juanita B. Tywford
NC Department of Justice
PO Box 629
Raleigh, NC 27602-0629
APPLICABLE LAW
1. The procedural statutory law applicable to this contested case is the North Carolina Administrative Procedure Act (the “APA”), N.C. Gen. Stat. § 150B-1 et seq.
2. The substantive statutory law applicable to this contested case hearing is the APA and the North Carolina Certificate of Need Law, N.C. Gen. Stat. § 131E-175 et seq.
3. The administrative regulations applicable to this contested case hearing are the North Carolina Certificate of Need Program Administrative Regulations, 10A N.C.A.C. 14C.0101 et seq., the Criteria and Standard for Radiation Therapy Equipment, 10A N.C.A.C. 14C.1901 et seq., and the Office of Administrative Hearings Regulations, 26 N.C.A.C.3.0101 et. seq.
ISSUES
Cape Fear’s Contested Issues
1. Whether the Agency’s decision violated the provisions set forth in N.C. Gen. Stat. § 150B-23(a)(1) through (5), including whether or not the Agency has deprived Cumberland County Hospital System, Inc. d/b/a Cape Fear Valley Health System (“Cape Fear”) of property or has otherwise substantially prejudiced Cape Fear’s rights in reaching its decision to deny Cape Fear’s application, and whether the Agency thereby: (1) exceeded its authority and jurisdiction; (2) Acted erroneously; (3) Failed to use proper procedure; (4) Acted arbitrarily or capriciously; or (5) Failed to act as required by law or rule.
2. Whether the Agency’s decision violated the provisions set forth in N.C. Gen. Stat. § 150B-23(a)(1) through (5), including whether or not the Agency has deprived Cape Fear of property or has otherwise substantially prejudiced Cape Fear’s rights in reaching its decision to deny the application filed by The Radiation Medicine Group, PLLC and The Radiation Medical Center, LLC (collectively “RMG”), yet not citing all review criteria that could be cited as reasonable justifications therefore, including the review criteria at N.C. Gen. Stat. § 131E-183(a) subsections (7), (8), (13), and 10A N.C.A.C. 14C.1905, and whether the Agency thereby: (1) exceeded its authority and jurisdiction; (2) Acted erroneously; (3) Failed to use proper procedure; (4) Acted arbitrarily or capriciously; or (5) Failed to act as required by law or rule.
3. Whether the Agency’s decision violated the provisions set forth in N.C. Gen. Stat. § 150B-23(a)(1) through (5), including whether or not the Agency has deprived Cape Fear of property or has otherwise substantially prejudiced Cape Fear’s rights by not citing all reasonable justifications for finding RMG’s application non-conforming with the review criteria with which the Agency found RMG’s application non-conforming, and whether the Agency thereby: (1) exceeded its authority and jurisdiction; (2) Acted erroneously; (3) Failed to use proper procedure; (4) Acted arbitrarily or capriciously; or (5) Failed to act as required by law or rule.
4. Whether the Agency correctly applied proper comparative factors in its competitive analysis.
5. Whether RMG improperly amended its application in violation of CON statutes and regulations, as well as case law interpretations thereof.
RMG’s Contested Issues
1. Whether the Agency substantially prejudiced RMG/RMC’s rights; whether the Agency exceeded its authority or jurisdiction, acted erroneously, failed to use proper procedure, acted arbitrarily or capriciously, or failed to act as required by law by its decision to disapprove the CON Application of RMG/RMC.
2. Whether the Agency acted without substantial prejudice to the rights of Cape Fear, within its authority and jurisdiction, without erroneous action, in accordance with proper procedure, without arbitrary or capricious action, and without a failure to act as required by law by its decision to disapprove the CON Application of Cape Fear for the reasons articulated in the Agency Findings as well as for additional reasons that could have been noted by the Agency.
Respondent Agency’s Contested Issues
1. Whether the Respondent substantially prejudiced Cape Fear’s rights; exceeded its authority or jurisdiction; acted erroneously; failed to use proper procedure; acted arbitrarily or capriciously; or failed to act as required by law or rule, in disapproving the CON application of Cumberland County Hospital System, Inc. d/b/a Cape Fear Valley Health System, Project I.D. No. M-8133-08.
2. Whether the Respondent substantially prejudiced RMG and RMC’s rights; exceeded its authority or jurisdiction; acted erroneously; failed to use proper procedure; acted arbitrarily or capriciously; or failed to act as required by law or rule, in disapproving the CON application of The Radiation Medicine Group, PLLC and The Radiation Medical Center, LLC, Project I.D. No. M-8143-08.
BURDEN OF PROOF
Cape Fear and RMG each bears the burden of showing by the greater weight of the evidence that the Agency substantially prejudiced their respective rights, and that the Agency also acted outside its authority, acted erroneously, acted arbitrarily and capriciously, used improper procedure, or failed to act as required by law or rule:
1. In finding Cape Fear’s competing application to acquire a linear accelerator at Cape Fear Valley Health System (“Cape Fear”) in Fayetteville, Cumberland County, nonconforming with statutory review Criteria 1, 3, 4, 5, 6, 18a, 20 and rules 10A N.C.A.C.14C.1902(b)(3), -.1903(a)(2) and (3) and -.1903(d).
2. In finding RMG’s competing application to acquire a linear accelerator at RMG’s proposed facility in St. Pauls, Robeson County, nonconforming with statutory review Criteria 1, 3, 4, 5, 6, 18a and rules 10A N.C.A.C.14C.1902(b)(3), -.1903(a)(2) and -.1903(d).
N.C. Gen. Stat. § 150B-23(a); Britthaven, Inc. v. N.C. Dept. of Human Resources, et al., 118 N.C. App. 379, 455 S.E.2d 455, 459, disc. rev. denied, 341 N.C. 418, 461 S.E.2d 754 (1995). Also see generally, Jt. Ex. 1 at 1264-1332.
WITNESSES
Witnesses for Petitioner Cape Fear:
Helen Alexander, Team Leader, CON Section
Andrea Murphy, Former Project Analyst, CON Section
Craig R. Smith, Assistant Chief, CON Section
Brenda Hall, Cape Fear
Dr. John Hugh Bryan, Radiation Oncologist, Cape Fear
Daniel Carter, Consultant, Health Planning Source
Witnesses for Petitioner RMG:
Helen Alexander, Team Leader, CON Section
Andrea Murphy, Former Project Analyst, CON Section
Craig R. Smith, Assistant Chief, CON Section
Dr. Yatwah (John) Leung, RMG
Deborah Churchill, Consultant, Churchill Consulting
Nancy Lane, Consultant, PDA, Inc.
Witnesses for Respondent Agency:
Helen Alexander, Team Leader, CON Section
EXHIBITS ADMITTED INTO EVIDENCE
Joint Exhibits
1. Agency File
2. RMG/RMC Application
3. Cape Fear Application
Cape Fear Exhibits
4. Brenda Hall resume
5. Settlement Agreement from Cyberknife Appeal dated December 10, 2007
6. Agency Findings for Project ID. No. J-7885-07, UNC Hospitals dated November 11, 2007
8. RMG documents produced pp. 49, 65, 69, 72, 73, 76 and 79
9. RMG documents produced pp. 827, 884, 891, 977, 987 and 1222-25
10. Daniel Carter resume
13. Documents produced by NewBridge Bank pp. 7 and 20
19a. Map of Existing and Proposed Service Area 18 Linac Providers
19b. Map of Service Area 18
20a. Excerpt from 2009 DOT State Map
21. Cape Fear 2007 SHCC Petition
22. Medical Facilities Planning Section Response to SHCC Petition
29. Excerpts from the 2008 State Medical Facilities Plan
34. Excerpts from Hearing Transcript in 2007 Wake County Linac Appeal
44a. MapQuest Map, Driving Directions, Time and Distance from Fayetteville to St. Pauls
44b. MapQuest Map, Driving Directions, Time and Distance from Fayetteville to Lumberton
44c. MapQuest Map, Driving Directions, Time and Distance from Lumberton to St. Pauls
47. Nancy Lane’s Competitive Comments on Radiation Oncology Treatment Center and Acquisition of Linear Accelerator for Sampson County dated June 2, 2003
50. Excerpts from Cary Urology’s CON Application for Project ID. No. J-7933-07
RMG Exhibits
5. Lane Resume
6. MD Referral Estimates
7. Cape Fear Produced Docs 006 - 0023
8. NCCN Guidelines/Extraction
9. Cape Fear Linear Accelerator Procedure/Patient Data
11. Dr. Goyal Letter
13a. Agency Findings for Project ID. No. F-7912-07, BMA d/b/a Huntersville dated December 28, 2007
13b. Agency Findings for Project ID. No. F-8073-08, BMA d/b/a Huntersville dated August 28, 2008
13c. Agency Findings for Project ID. No. K-8024-07, Louisburg HMA d/b/a Franklin Regional dated April 25, 2008
14. IMRT Project Year 3 Calculation Sheet
15. Dr. John Hugh Bryan Deposition pp. 21-26
16. Excerpts from 2008 Hospital Licensure Renewal Applications for Lenoir Memorial Hospital, Inc. and Forsyth Memorial Hospital, Inc.
17. Chart Comparing MD Support
20. Step 8 to One Decimal Place
29. Shea Poteet Deposition
Agency’s Exhibits
6. Excerpts from Cape Fear’s Cyberknife Application dated November 15, 2006
9. Worksheets from Recalculation of RMG’s Financial Projections (Proformas)
BASED UPON careful consideration of the sworn testimony of the witnesses presented at the hearing, the documents and exhibits received and admitted into evidence, and the entire record in this proceeding, the Undersigned makes the following Findings of Fact. In making the Findings of Fact, the Undersigned has weighed all the evidence and has assessed the credibility of the witnesses by taking into account the appropriate factors for judging the credibility, including but not limited to, the demeanor of the witnesses, any interests, bias, or prejudice the witness may have, the opportunity of the witness to see, hear, know, or remember the facts or occurrences about which the witness testified, whether the testimony of the witness is reasonable, and whether the testimony is consistent with all other believable evidence in the case.
FINDINGS OF FACT
II. BACKGROUND
A. Parties
1. The Certificate of Need Section (“CON Section” or the “Agency”) is the agency within the N.C. Department of Health and Human Services (the “Department”), the Division of Health Service Regulation (the “Division”) that carries out the Department’s responsibility to review and approve the development of new institutional health services under the Certificate of Need (“CON”) Law, codified at N.C. Gen. Stat. Chapter 131E, Article 9.
2. Cape Fear is not-for-profit, multi-hospital system with its principal place of business in Cumberland County, North Carolina. Cape Fear provides health care services, which includes oncology treatment and radiation therapy linear accelerator (“linac”) services. A linac is a piece of equipment by which patients receive external beam radiation therapy treatments. (Jt. Ex. 3 at 18; Hall Tr. Vol. 4 at 703-04, 721)
3. Cape Fear is located in Linac Service Area 18, as defined by the 2008 State Medical Facilities Plan (“2008 SMFP”), which consists of Cumberland, Bladen, Robeson, and Sampson Counties (“Service Area 18”). This is the same service area in which both applicants propose to locate their linacs that are the subject of this review. (Cape Fear Ex. 29 at 112, 114)
4. Cape Fear currently operates four State-approved linacs as part of its existing oncology treatment and radiation therapy linac services. (Hall Tr. Vol. 4 at 720-721) Cape Fear also has an approved CON for a CyberKnife scheduled to be installed September 30, 2009, which will replace one of the existing linacs. (Carter Tr. Vol. 5 at 1039.) Additionally, Cape Fear manages and staffs the linac at Southeastern Regional Medical Center (“Southeastern Regional”), located in Robeson County, North Carolina. (Jt. Ex. 1 at 1272)
5. Yatwah (John) Leung, M.D., is the sole member of both The Radiation Medicine Group, PLLC and The Radiation Medical Center, LLC (collectively, “RMG”). RMG is proposing to develop a freestanding radiation treatment center, by acquiring and operating a linac, simulator and related equipment and software in St. Pauls, Robeson County, North Carolina. The proposed new facility would be called The Radiation Medical Center. (Jt. Ex. 2 at 4, 7)
6. At the time of filing RMG’s CON Application, RMG did not operate an existing linac. (Cape Fear Ex. 29 at 107-08; Jt. Ex. 2 at 4; Leung Tr. Vol. 7 at 1531-32)
B. Cape Fear’s Expert Witnesses
7. Mr. Daniel Carter was accepted as an expert witness in CON application preparation, analysis and health planning. Mr. Carter has prepared over 200 CON applications, more than half of which have been equipment or technology applications, including linacs. (Carter Tr. Vol. 5 at 1030-32)
8. Dr. John Hugh Bryan was accepted as an expert witness in radiation oncology, including linac services. (Bryan Tr. Vol. 5 at 858) Dr. Bryan is a Senior Partner at Southeastern Radiation Oncology and treats patients at Cape Fear’s main campus, Cape Fear’s Health Pavilion North, and at Southeastern Regional in Lumberton, Robeson County. Dr. Bryan has over twenty-nine years of experience in radiation oncology services. He started the Radiation Oncology department at Cape Fear in 1982 and is currently the medical director for Cape Fear’s radiation oncology department. (Bryan Tr. Vol. 5 at 846-48; Jt. Ex. 3 at 1070)
9. Brenda Hall was accepted as an expert in the management of radiation oncology services and linac services. (Hall Tr. Vol. 4 at 718-19) Ms. Hall is the Service Line Director for Oncology Services and has over sixteen years of experience in the management of oncology services. (Hall Tr. Vol. 4 at 698-700; Cape Fear Ex. 4)
C. RMG’s Expert Witnesses
10. Ms. Deborah Churchill was accepted as an expert witness in radiation therapy consulting. (Churchill Tr. Vol. 8 at 1688-89) Ms. Churchill started Churchill Consulting in 1992 which provides practice management evaluation for linear accelerator providers. (Churchill Tr. Vol. 8 at 1664-75)
11. Ms. Nancy Lane was accepted as an expert in CON analysis and preparation and planning. (Lane Tr. Vol. 8 at 1822) Ms. Lane has been preparing CON application since 1983. In 1997, she became President of PDA, a company that prepares CON applications. (Lane, Tr. Vol. 8 at 1821-22)
12. Dr. Leung was accepted as an expert in radiation oncology and linear accelerators, clinical practice, and strategic planning. (Leung Tr. Vol. 7 at 1470, 1477) Dr. Leung became board certified in radiation oncology in 1995. In 2000, he became an assistant professor at Wake Forest Medical School (Leung Tr. Vol. 7 at 1457-58)
D. Procedural Background
13. On or about June 16, 2008, in response to the adjusted need identified in the 2008 SMFP, Cape Fear filed its CON application (the “Cape Fear Application”) to retain its fourth existing linac that was slated for removal from its acute care hospital upon installation of the approved CyberKnife pursuant to the terms of the CyberKnife Settlement Agreement, as described below. (Jt. Ex. 3; Cape Fear Ex. 5; Alexander Tr. Vol. 1 at 84-85)
14. On or about June 16, 2008, RMG filed its CON Application (the “RMG Application”) proposes to acquire a new linac with dual energies as well as IMRT and IGRT capabilities, together with a CT simulator and to develop a new freestanding radiation center in St. Pauls, Robeson County in Service Area 18. (Jt. Ex 2; Lane Tr. Vol. 8 at 1832; Leung Tr. Vol. 7 at 1544-45)