Colbert Cnty. Nw. Ala. Health Care Auth. v. Regionalcare Hosp. Partners, Inc.

195 So.3d 948

COLBERT COUNTY NORTHWEST ALABAMA HEALTH CARE AUTHORITY d/b/a Helen Keller Hospital

v.REGIONALCARE HOSPITAL PARTNERS, INC., RCHP–Florence, LLC, d/b/a North Alabama Medical Center, and the State Health Planning and Development Agency.

2130843.

Court of Civil Appeals of Alabama.

Aug. 14, 2015.

G. Dennis Nabors and Brent L. Rosen of Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, Montgomery; and William G. Somerville and Andrew P. Walsh of Baker, Donelson, Bearman, Caldwell & Berkowitz, PC, Birmingham, for appellant.

Stephen A. Rowe, Laurence J. McDuff, and Aaron G. McLeod of Adams & Reese, LLP, Birmingham, for appellees RegionalCare Hospital Partners, Inc., and RCHP–Florence, LLC, d/b/a North Alabama Medical Center.

Mark D. Wilkerson and Dana H. Billingsley of Wilkerson & Bryan, P.C., Montgomery, for appellee State Health Planning and Development Agency.

DONALDSON, Judge.

The Montgomery Circuit Court entered a judgment affirming a decision by the State Health Planning and Development Agency (“SHPDA”) to allow RegionalCare Hospital Partners, Inc., and RCHP–Florence, LLC, d/b/a North Alabama Medical Center (hereinafter referred to collectively as “RegionalCare”) to relocate a hospital in Florence. For the reasons explained below, we affirm the judgment of the circuit court.

Facts and Procedural History

The following facts are contained in the record. Eliza Coffee Memorial Hospital (“ECMH”) is a general, acute-care hospital located in Florence that has been in existence since 1919. ECMH's existing facility, which was constructed in the early 1940s, is licensed by SHPDA for 358 beds. In 2010, RegionalCare purchased ECMH from the Health Care Authority of Lauderdale County and the City of Florence (“the Health Care Authority”). As part of the agreement with the Health Care Authority, RegionalCare agreed to construct a new hospital facility containing at least 300 beds to replace the existing ECMH facility. On December 30, 2011, RegionalCare filed an application with SHPDA seeking a certificate of need (“CON”) for the construction of a 300–bed replacement hospital for ECMH in Florence, which would be licensed and operated as RCHP–Florence, LLC, d/b/a North Alabama Medical Center (“NAMC”). See § 22–21–265, Ala.Code 1975 (requiring a CON from SHPDA for new institutional health-care facilities). In the application, RegionalCare proposed that 280 of the 300 requested beds would serve as acute-care beds, with the 20 additional beds serving as psychiatric-care beds. RegionalCare also proposed in the application that NAMC would transform itself into a regional hospital by 2018. ECMH had served as a community hospital. On January 17, 2012, RegionalCare amended its application to include information regarding the square footage of the proposed facility, construction costs, and the physical location of the proposed facility. RegionalCare's application was prepared by Noel Falls, who served as RegionalCare's health-care expert witness at the subsequent administrative hearing concerning the need for the 300–bed CON.

In March 2012, Colbert County Northwest Alabama Health Care Authority d/b/a Helen Keller Hospital (“Helen Keller”) and other health-care facilities in north Alabama filed notices of intervention before SHPDA in opposition to RegionalCare's CON application. On March 11, 2012, RegionalCare filed a “Contested Case Request” asking for the appointment of an administrative-law judge (“ALJ”) pursuant to § 22–21–275(6), Ala.Code 1975, and Rules 410–1–8–.01 and–.02, Ala. Admin. Code (SHPDA). SHPDA appointed an ALJ to conduct the contested-case hearing. Between February 4, 2013, and February 19, 2013, the ALJ conducted a 12–day hearing at which 46 witnesses testified and 160 exhibits were introduced into evidence.

On May 30, 2013, the ALJ issued a recommendation that SHPDA grant RegionalCare a CON permitting it to construct the replacement hospital for ECMH as requested. The ALJ determined that ECMH's current facility was outdated, that it was in need of replacement, that the location of ECMH's current facility was no longer feasible, that renovating and/or replacing ECMH's current facility at its existing location was not practical, that the replacement project would be financially feasible, and that the location for the proposed NAMC facility is more appropriate and accessible than the location of ECMH's current facility. Helen Keller does not contest those findings and concedes that ECMH's current facility is in need of replacement.

The ALJ, however, declined to recommend that SHPDA grant a CON for the requested 300 beds. The ALJ determined that Falls's testimony regarding his analysis of community need for a 300–bed hospital was not based on credible evidence or reliable data. The ALJ concluded that the 300–bed figure requested in the CON application “was not the result of any sort of needs analysis.” The ALJ stated that Falls's conclusion “that [ECMH] can successfully metamorphose from a community hospital into a regional hospital rests on insufficient data.” The ALJ further concluded that Falls's testimony that the 300–bed hospital would not have an adverse effect on Helen Keller was not based on sufficiently reliable facts and data. The ALJ found that Falls's “conclusions regarding patient referral and migration patterns ... lack a scientific foundation,” that Falls's “conclusions are not based on sufficient or reliable data and were not derived through application of a reliable methodology,” and that, “[i]nstead, Mr. Falls says he ‘was left at the point of making a reasonable and appropriate judgment about what may happen.’ ”

An administrative rule adopted as part of the State Health Plan, Rule 410–2–4–.14(3)(b), Ala. Admin. Code (SHPDA), provides as follows:

“For replacement of hospitals, the occupancy rate for the most recent annual reporting period should have been at least 60 percent. If this occupancy level was not met, the hospital should agree to a reduction in bed capacity that will increase its occupancy rate to 60 percent. For example, if a 90–bed hospital had an average daily census (ADC) of 45 patients, its occupancy rate was 50 percent. (The ADC of 45 patients divided by 90 beds equals 50 percent). To determine a new bed capacity that would increase the hospital's occupancy rate to 60 percent, simply divide the ADC of 45 patients by .60 (A fraction of a bed should be rounded upward to the next whole bed) The hospital's new capacity should be 75 beds, a 15 bed reduction to its original capacity of 90 beds.”

We will refer to this rule as the “60% occupancy rule.” The ALJ determined that, applying the 60% occupancy rule, the number of beds for the new hospital should be limited to 233 based on the occupancy levels stated in ECMH's 2010 annual report, the most recent and applicable annual report. As the ALJ explained in its recommendation,

“[a]verage daily census is calculated by dividing the number of patient days in a particular-service category by the number of operational days in a year, which is normally 365. Ala. Admin. Code r. 410–2–4–.02(e).... [ECMH] had 47,092 acute care patient days in 2010, 46,622 in 2011, and 48,088 in 2012. Applying SHPDA's methodology, [ECMH]'s average daily census was 129.02 in 2010, 127.73 in 2011, and 131.75 in 2012. Applying the Sixty Percent Rule found in Ala. Admin. Code r. 410–2–4–.14 [3](b) yields the following replacement hospital bed numbers; 215 for 2010, 213 for 2011, and 220 for 2012.

“For psychiatric beds, the calculation is performed in a similar fashion, and yields the following replacement hospital bed numbers: 18 for 2010, 16 for 2011, and 14 for 2012.

“... The most recent annual report at the time the Application was filed was the 2010 Annual Report. According to the Sixty Percent Rule, therefore, the replacement hospital proposed by [RegionalCare] should be limited to 233 beds based on the 2010 average daily census.”

(Citations omitted.)

The ALJ determined that RegionalCare “has not demonstrated a need that would justify exceeding the number of beds pursuant to the [60% occupancy rule]....” The ALJ stated:

“Although [RegionalCare] has demonstrated that [ECMH] is outdated, it has not demonstrated a need that would justify exceeding the number of beds mandated by the Sixty Percent Rule, assuming for the sake of argument that any facts would justify such a departure.... [T]here is no evidence of any community need that would warrant building beds in excess of the number mandated by the State Health Plan.”

On June 6, 2013, RegionalCare and Helen Keller filed exceptions with SHPDA to the ALJ's recommended order. On June 19, 2013, the SHPDA's CON Review Board (“the CONRB”) held a hearing on the matter at which it received the arguments of the parties and received testimony of various witnesses.¹ At the conclusion of the hearing, the CONRB voted to adopt the findings and recommendations of the ALJ, except that the CONRB voted to reject the ALJ's 233–bed recommendation and, instead, to issue a CON to RegionalCare for a total of 280 beds (263 acute-care beds and 17 psychiatric-care beds). Accordingly, on July 5, 2013, the CONRB issued the following order awarding the CON:

“After deliberation, [the CONRB] rejected the ALJ's recommendation as to the number of beds, and instead approved a reduction in authorized beds from 300 (as requested) to 280 beds, which shall be comprised of 263 acute care beds and 17 psychiatric beds. In so doing [the CONRB] found that there was sufficient justification in this case to approve a larger number of beds than would result from strict application of the 60 percent guideline under Ala. Admin. Code r. 410–2–4–.14(3)(b).”

Pursuant to the version of § 22–21–275(6), Ala.Code 1975, in effect at the time RegionalCare filed its CON application, Helen Keller filed a notice of appeal to the circuit court on July 11, 2013.² The circuit court held a hearing on May 2, 2014. On June 3, 2014, the circuit court entered an order affirming the decision...