Trident Medical v. SCDHEC (Medical University) ( 2022 )

THE STATE OF SOUTH CAROLINA
In The Court of Appeals
Trident Medical Center, LLC, d/b/a Trident Medical
Center, Respondent,
v.
South Carolina Department of Health and Environmental
Control and Medical University Hospital Authority d/b/a
MUSC Radiation Therapy Center - Berkeley County,
Respondents,
Of Which, Medical University Hospital Authority d/b/a
MUSC Radiation Therapy Center - Berkeley County is
the Appellant.
Appellate Case No. 2019-001159
Appeal From The Administrative Law Court
Harold W. Funderburk, Jr., Administrative Law Judge
Opinion No. 5956
Heard October 5, 2022 – Filed December 14, 2022
REVERSED
Daniel J. Westbrook, William C. Wood, Jr., Travis
Dayhuff, and Allen Mattison Bogan, all of Nelson
Mullins Riley & Scarborough, LLP, of Columbia, for
Appellant.
David Beam Summer, Jr., and William R. Thomas, both
of Parker Poe Adams & Bernstein, LLP, of Columbia, for
Respondent Trident Medical Center, LLC.
Ashley Caroline Biggers and Vito Michael Wicevic, both
of Columbia, for Respondent South Carolina Department
of Health & Environmental Control.
Robert L. Widener, Celeste T. Jones, and Jane W.
Trinkley, all of Burr & Forman, of Columbia, for Amici
Curiae Medical University of South Carolina and MUSC
Strategic Ventures.
THOMAS, J: Trident Medical Center, LLC, d/b/a Trident Medical Center
(Trident), filed this action in the Administrative Law Court (ALC) against the
South Carolina Department of Health and Environmental Control (DHEC) and
Medical University Hospital Authority, d/b/a MUSC Radiation Therapy Center –
Berkeley County (MUHA). The action contested DHEC's approval of MUHA's
Certificate of Need (CON) application for a new radiation therapy center in
Berkeley County. After a contested case hearing, the ALC reversed DHEC's
approval and denied the application. MUHA appeals, arguing, inter alia, the ALC
erred in exceeding its statutory authority by ruling on the validity and
constitutionality of MUSC Strategic Ventures (MSV) and MUSC Health Center
Cancer Care Network, LLC (the Network) when DHEC had neither considered nor
addressed the issues. We reverse.
FACTS
In May of 2017, MUHA filed a CON application requesting approval of a radiation
therapy center in Berkeley County. MUHA was identified as the licensee, and the
Network 1 was identified as the management company. The CON application
identified the owners as follows: Alliance 2 "is the majority owner of [the
Network] with a 51% membership interest. [MSV] is the minority owner . . . with
a 49% membership interest." The application proposed to "increase the capacity of
MUSC Health's radiation therapy by adding a sixth linear accelerator." By letter
dated June 7, 2017, Trident notified DHEC it was an affected person with respect
to MUHA's application, and it opposed the approval of the application. On
November 22, 2017, DHEC granted the CON to MUHA. DHEC's findings
1
The Network was formed in January 2016, is authorized to do business in SC,
and is owned 51% by Alliance Oncology, LLC, and 49% by MSV.
2
A for-profit Delaware company headquartered in California.
indicate it considered the South Carolina Health Plan and the various regulations
regarding community need, medically underserved groups, and financial
feasibility. There is no indication DHEC considered the validity and/or the
constitutionality of MSV or the Network.3 The DHEC Board declined Trident's
request for a review.
Trident filed a petition for a contested case with the ALC, arguing DHEC's
decision to grant the application was arbitrary, capricious, and affected by other
error of law or fact. In its opening statement at the contested hearing before the
ALC, Trident also argued the proposed project did not comply with the South
Carolina Health Plan; MUHA did not meet the requirements of community need,
medically underserved groups, and accessibility; the project did not meet the
financial feasibility requirements; and Trident would be adversely impacted by the
project. DHEC opened, arguing in part that although the hearing before the ALC
was de novo, the ALC could not consider issues not raised to or considered by the
agency.
Trident offered numerous witnesses in support of its position during the five-days-
long hearing. DHEC called one witness, Margaret Murdock, the DHEC attorney
who reviewed the MUHA application. Murdock was asked if DHEC was
concerned "that a company called Alliance [was]" the manager of the project rather
than MUHA. MUHA objected on several grounds, including that the issue was not
raised to DHEC. Counsel for Trident stated, "Thankfully it was in the CON
application, so we know that it was considered." When asked what she knew about
the entity Alliance, Murdock answered, "I don't recall specifically sitting here
today."
At the end of all testimony, Trident argued it was entitled to judgment as a matter
of law. Trident argued DHEC was not aware of the ownership of the joint venture.
Trident acknowledged the operating agreement explaining the ownership was not
before DHEC, asserting it was not revealed until discovery for the ALC hearing.
Trident argued the ownership structure violated the statutory mandates governing
MUSC. The ALC accepted Trident's written motion and adjourned to give MUHA
time to respond.
3
DHEC acknowledges in its brief that nothing in the CON Act, Regulations, or
South Carolina Health Plan authorizes it to rule on the constitutionality of a legal
entity listed in a CON application.
The ALC granted Trident judgment as a matter of law. The ALC found "[d]espite
the fact that The Network or Alliance is clearly funding the project . . . , the
Application identifies The Network as only the management company engaged by
the licensee to manage or operate the facility." The ALC found that although the
application provided various answers regarding the ownership and/or control of the
facility, the "answers provide[d] a somewhat murky picture of the overall
organizational structure of the proposed project" and DHEC was not aware of the
ownership until the ALC hearing. The ALC found neither MUSC nor MUHA had
the authority to create a joint venture with a private, for-profit company. The ALC
concluded MUSC violated the constitutional prohibition against joint ownership
and the Network was an unconstitutional and, therefore, an illegal or ultra vires
entity. Finally, the ALC found Alliance, rather than MUHA, was the actual
licensee of the proposed project; thus, the CON previously issued was void.
Accordingly, the ALC denied the CON for MUHA's proposed project. The ALC
summarily denied MUHA's motion to reconsider. This appeal followed.
STANDARD OF REVIEW
"The ALC presides over the hearing of a contested case from DHEC's decision on
a CON application and serves as the finder of fact." Spartanburg Reg'l Med. Ctr.
v. Oncology & Hematology Assocs. of S.C., LLC, 387 S.C. 79, 89, 690 S.E.2d 783,
788 (2010). In reviewing the appeal of a contested CON case, the Administrative
Procedures Act (APA) establishes the standard of review. See id. at 89–90, 690
S.E.2d at 788–89 (applying the APA to the appeal of a contested case from
DHEC's decision on a CON application).
The APA provides that an appellate court
may affirm the decision or remand the case for further
proceedings; or, it may reverse or modify the decision if
the substantive rights of the petitioner have been
prejudiced because the finding, conclusion, or decision
is:
(a) in violation of constitutional or statutory provisions;
(b) in excess of the statutory authority of the agency;
(c) made upon unlawful procedure;
(d) affected by other error of law;
(e) clearly erroneous in view of the reliable, probative,
and substantial evidence on the whole record; or
(f) arbitrary or capricious or characterized by abuse of
discretion or clearly unwarranted exercise of discretion.
S.C. Code Ann. § 1-23-610(B) (Supp. 2022).
LAW/ANALYSIS
MUHA and DHEC argue the ALC erred in ruling on the validity and
constitutionality of MSV and the Network because (1) such a ruling exceeded the
statutory authority of the ALC and (2) the issues were not presented to or
considered by DHEC. We agree.
A. Statutory Authority
We first find the ALC did not have the statutory authority to rule on the
constitutionality of MSV and the Network. The General Assembly created the
ALC as "an agency and a court of record within the executive branch of the
government of this State." S.C. Code Ann. § 1-23-500 (Supp. 2022). "The
General Assembly has the authority to limit the subject matter jurisdiction of a
court it has created; therefore, it can prescribe the parameters of the ALC's
powers." Amisub of S.C., Inc. v. S.C. Dep't of Health & Envtl. Control, 403 S.C.
576, 585, 743 S.E.2d 786, 791 (2013). "An administrative agency has only such
powers as have been conferred upon it by law and must act within the granted
authority for an authorized purpose. It may not validly act in excess of its powers .
. . ." S.C. Tax Comm'n v. S.C. Tax Bd. of Rev., 278 S.C. 556, 560, 299 S.E.2d 489,
491 (1983) (quoting 2 Am. Jur. 2d, Admin. Law, § 188, at 21); see generally
Travelscape, LLC v. S.C. Dep't of Revenue, 391 S.C. 89, 108, 705 S.E.2d 28, 38
(2011) ("It is well settled in this State that ALCs, as part of the executive branch,
are without power to pass on the constitutional validity of a statute or regulation.").
MUHA relies on SGM-Moonglo, Inc. v. South Carolina Department of Revenue,
378 S.C. 293, 662 S.E.2d 487 (Ct. App. 2008). In SGM-Moonglo, this court
reviewed the ALC's approval of an off-premises beer and wine permit. 378 S.C. at
294, 662 S.E.2d at 488. "The ALC held it did not have jurisdiction to enforce a
restrictive covenant because its jurisdiction was limited to whether a proposed
location meets the criteria established by statute and case law." Id. This court
stated:
An administrative agency has only the powers conferred
on it by law and must act within the authority created for
that purpose. Pursuant to [the] . . . South Carolina
Code[,] . . . the ALC must determine whether a proposed
location is proper and suitable prior to granting an off-
premises beer and wine permit. Restrictions in the chain
of title of a proposed location, however, are not a
legitimate concern of the ALC in determining whether
the location is suitable. Accordingly, the ALC did not err
in refusing to consider the existence of the restrictive
covenant.
Id. at 295, 662 S.E.2d at 488 (internal footnotes omitted); see Be Mi, Inc. v. S.C.
Dep't of Revenue, 408 S.C. 290, 299, 758 S.E.2d 737, 741–42 (Ct. App. 2014)
(finding the ALC could not resolve the issue of compliance with a master deed in a
contested liquor license case because such an issue had to be resolved by the
circuit court). Trident argues SGM-Moonglo is distinguishable because the issue in
SGM-Moonglo concerned an unrelated private contract right, whereas in this case,
the purpose of the CON Act, to "guide the establishment of health facilities and
services which will best serve public needs," is at issue. See S.C. Code Ann. § 44-
7-120 (2018).
However, we find nothing in the CON Act authorizes the ALC to rule on the
constitutionality of a legal entity listed in a CON application. See MRI at Belfair,
LLC v. S.C. Dep't of Health & Env't Control, 392 S.C. 314, 319, 709 S.E.2d 626,
628–29 (2011) ("The express purposes of the CON Act are 'to promote cost
containment, prevent unnecessary duplication of health care facilities and services,
guide the establishment of health facilities and services which will best serve
public needs, and ensure that high quality services are provided in health facilities
in this State." (quoting S.C. Code Ann. § 44-7-120 (2002))). DHEC must deny a
Certificate of Need if an application does not comply with the South Carolina
Health Plan. S.C. Code Ann. § 44-7-210(B) (2018). Under the applicable South
Carolina Health Plan, the project review criteria included compliance with the need
standards, community need documentation, accessibility, projected revenues,
projected expenses, financial feasibility, and cost containment. Like the court in
SGM-Moonglo, we find the ALC's jurisdiction was limited to whether the
application met the criteria established by the governing law.4
B. Contested Cases Before the ALC
We also find the ALC erred in ruling on an issue not presented to or considered by
DHEC.
A party in a contested case regarding an agency decision is required to file a notice
including "the legal authority and jurisdiction under which the hearing is to be
held; . . . reference to the particular sections of the statutes and rules involved; [and
a] . . . short and plain statement of the matters asserted." S.C. Code Ann. § 1-23-
320 (B) (Supp. 2022). The ALC has the authority to hear contested cases and is
allowed to conduct de novo hearings. S.C. Code Ann. §§ 1-23-380, -505(3), & -
600 (Supp. 2022). Although the ALC conducts de novo hearings, under the CON
Act, "[t]he issues considered at the contested case hearing considering a
Certificate of Need are limited to those presented or considered during the staff
review." S.C. Code Ann. § 44-7-210(E) (2018) (emphasis added); see SCALC
Rule 21(B) ("Discovery in Certificate of Need (CON) contested cases is limited to
the issues presented or considered during the staff review.") (emphasis added).
"Findings of fact must be based exclusively on the evidence and on matters
officially noticed." S.C. Code Ann. § 1-23-320(I) (Supp. 2022) (emphasis added).
DHEC reviews an application to determine compliance "with the South Carolina
Health Plan, Project Review Criteria, and other regulations." § 44-7-210(B).
DHEC's review includes, but is not limited to "the application, comments from
affected persons . . . concerning the application, data, studies, literature and other
information available to the Department . . . ." S.C. Code Ann. Regs. 61-15 § 308
(Supp. 2022). The regulations require the "Name and address of licensee or
prospective licensee[, who is] . . . defined as the legal entity who, or whose
governing body, has the ultimate responsibility and authority for the conduct of the
facility or service; the owner of the business." S.C. Code Ann. Regs. 61-15 §
202(2)(b)(8)(b) (Supp. 2022).
4
DHEC acknowledges in its brief that nothing in the CON Act, governing
regulations, or South Carolina Health Plan authorizes it to rule on the
constitutionality of a legal entity listed in a CON application.
We find the issues of the constitutionality and validity of MSV and the Network
were neither raised by Trident in its request for final review to DHEC nor
presented to or considered by DHEC during its staff review. See S.C. Code Ann. §
44-7-210(E) (2018) (stating the ALC's review under the CON Act is limited to
issues "presented or considered during the staff review"); § 44-7-210(C) (stating "a
person may not file a request for final review in opposition to the staff decision on
a Certificate of Need unless the person provided written notice to the department
during the staff review that he is an affected person and specifically states his
opposition to the application under review" (emphasis added)). On this matter, we
find the ALC's reliance on Marlboro Park Hospital v. South Carolina Department
of Health & Environmental Control, 358 S.C. 573, 595 S.E.2d 851 (Ct. App. 2004)
is misplaced. The ALC correctly read the holding in Marlboro Park, interpreting
section 44-7-210(E) as limiting a contested case hearing to the issues presented or
considered by DHEC, but permitting evidence to be presented that was not
presented to DHEC. 358 S.C. at 579, 595 S.E.2d at 854. However, the ALC did
more than merely allow evidence to be heard that was not before DHEC by ruling
on the legality and constitutionality of MSV and the Network where the ownership
issue was not presented to or considered by DHEC.
CONCLUSION
For the foregoing reasons, the ALC's order is
REVERSED.
HILL, J., and LOCKEMY, A.J., concur.