Singing River Health System v. Mississippi State Department of Health

IN THE COURT OF APPEALS OF THE STATE OF MISSISSIPPI
NO. 2013-SA-00790-COA
SINGING RIVER HEALTH SYSTEM, APPELLANTS
CONSISTING OF SINGING RIVER HOSPITAL
AND OCEAN SPRINGS HOSPITAL;
MEMORIAL HOSPITAL AT GULFPORT, AND
GARDEN PARK MEDICAL CENTER
v.
MISSISSIPPI STATE DEPARTMENT OF APPELLEES
HEALTH AND HARRISON HMA, LLC, D/B/A
GULF COAST MEDICAL CENTER
DATE OF JUDGMENT: 04/15/2013
TRIAL JUDGE: HON. PATRICIA D. WISE
COURT FROM WHICH APPEALED: HINDS COUNTY CHANCERY COURT
ATTORNEYS FOR APPELLANTS: BARRY K. COCKRELL
BETTY TOON COLLINS
ELIZABETH G. HOOPER
ATTORNEYS FOR APPELLEES: BEATRYCE MCCROSKY TOLSDORF
THOMAS L. KIRKLAND JR.
ROBERT EMMETT FAGAN JR.
ANDY LOWRY
ALLISON CARTER SIMPSON
NATURE OF THE CASE: CIVIL - STATE BOARDS AND AGENCIES
TRIAL COURT DISPOSITION: AFFIRMED AGENCY’S DECISION
GRANTING CERTIFICATE OF NEED
DISPOSITION: AFFIRMED AND REMANDED - 11/18/2014
MOTION FOR REHEARING FILED:
MANDATE ISSUED:
BEFORE IRVING, P.J., MAXWELL AND JAMES, JJ.
IRVING, P.J., FOR THE COURT:
¶1. Singing River Health System, consisting of Singing River Hospital and Ocean Springs
Hospital; Memorial Hospital at Gulfport, and Garden Park Medical Center (collectively the
Gulf Coast Hospitals) appeal from the judgment of the Hinds County Chancery Court
affirming the order of the Mississippi State Department of Health (DOH) granting a
Certificate of Need (CON) to Harrison HMA LLC d/b/a Gulf Coast Medical Center
(hereinafter HMA, unless the context dictates otherwise). The Gulf Coast Hospitals argue
that the chancery court erred in affirming the order of the DOH because the DOH failed to
comply with Mississippi law in granting the CON to HMA.
¶2. Finding no reversible error, we affirm the judgment of the Hinds County Chancery
Court and remand this case for a determination of the amount of attorney’s fees to be
awarded to HMA.
FACTS
¶3. Gulf Coast Medical Center (GCMC), a hospital in Biloxi, Mississippi, was licensed
for 144 beds. In 2008, GCMC closed down, but HMA placed the beds in abeyance in a de-
licensed status, pursuant to Mississippi Code Annotated section 41-7-191(1)(c) (Rev. 2013).
At that time, HMA placed a sign on the facility stating that GCMC would reopen in a new
location. Three years later, HMA filed a CON application for the replacement and relocation
of GCMC. HMA asked to spend $133,322,098 to construct a 144-bed hospital off of
Interstate 10 in Biloxi to be named “The Hospital at Cedar Lake” (the Project). After a
hearing, the DOH granted the CON. The Gulf Coast Hospitals appealed to the Hinds County
Chancery Court, which upheld the grant of the CON, leading to this appeal.
DISCUSSION
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¶4. A strict standard governs judicial review of the DOH’s final order granting or denying
a CON. Mississippi Code Annotated section 41-7-201(2)(f) (Rev. 2013) sets forth the
applicable standard of review:
The order shall not be vacated or set aside, either in whole or in part, except
for errors of law, unless the court finds that the order of the State Department
of Health is not supported by substantial evidence, is contrary to the manifest
weight of the evidence, is in excess of the statutory authority or jurisdiction of
the State Department of Health, or violates any vested constitutional rights of
any party involved in the appeal . . . .
“The decision of the hearing officer and [the] State Health Officer is afforded great deference
upon judicial review by [appellate courts], even though [appellate courts] review the decision
of the chancellor.” St. Dominic-Jackson Mem'l Hosp. v. Miss. State Dep’t of Health, 728 So.
2d 81, 83 (¶9) (Miss. 1998) (quoting Miss. State Dep’t of Health v. SW. Miss. Reg'l Med.
Ctr., 580 So. 2d 1238, 1240 (Miss. 1991)). “[An appellate court] will neither reweigh the
evidence nor conduct a de novo review of contested facts. Rather, [the appellate] review is
limited to whether substantial evidence existed to support the DOH’s decision.” Id. ¶5.
In this case, HMA requested a CON to build a new facility in a new location, about
four miles north of its old facility, with the same number of beds that had been de-licensed
when GCMC ceased operations in the old facility. The Gulf Coast Hospitals admit that
HMA possessed beds in a de-licensed status and that GCMC was not closed for sixty months.
However, because HMA was not seeking to reopen its old facility in its original building at
its same location, the Gulf Coast Hospitals contend that the DOH was required to evaluate
HMA’s CON application as if GCMC never existed. In other words, the Gulf Coast
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Hospitals’ position is that GCMC was no longer an existing hospital and could not be treated
as such in the CON process. More specifically, the Gulf Coast Hospitals in essence contend
that DOH was required to analyze the need component for the project as if GCMC was
establishing a new hospital, not replacing or relocating an existing hospital. As support for
their argument, the Gulf Coast Hospitals point to the fact that HMA had sold the physical
structure that once contained the beds. As we explain later, we reject the contention that
GCMC was not an existing hospital at the time of HMA’s CON application and, therefore,
could not be considered—for purposes of the CON process—a relocation of an existing
hospital.
¶6. Additionally, the Gulf Coast Hospitals contend that the DOH did not review HMA’s
CON application for compliance with the general review considerations of the State Health
Plan, specifically general review criteria numbers 3, 5, including its sub-parts, and 8. We
also disagree with this contention. We discuss later in this opinion the DOH’s consideration
of general review criteria numbers 3, 5, and 8, which are the review criteria that the Gulf
Coast Hospitals claim were not considered by the DOH, leading to the Gulf Coast Hospitals’
ultimate contention that the evidence is insufficient to support the DOH’s finding that the
CON should be granted. We have attached, as an appendix, the hearing officer’s findings
of fact, conclusions of law, and recommendation, that clearly show the DOH considered
general review criteria numbers 3, 5, and 8, as well as considered HMA’s application
consistent with the applicable statutory law, the State Health Plan, and relevant case law.
¶7. We disagree as well with the Gulf Coast Hospitals’ lack-of-substantial-evidence
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contention and point out that the hearing officer, in her findings of fact, addressed each
contention now made by the Gulf Coast Hospitals. Admittedly, the evidence was conflicting,
as all parties presented expert testimony supporting their point of view. But at the end of the
day, it was the prerogative of the DOH, as the fact-finder, to determine the credibility of the
witnesses. Viewed from this perspective, there is substantial evidence supporting the
decision of the DOH.
¶8. Finally, before we delve further into our discussion, we should point out that we reject
the Gulf Coast Hospitals’ further contention that only the DOH’s staff findings can be
considered in this appeal because the State Health Officer did not incorporate the findings
of the hearing officer in her order granting the CON. We quote the relevant portion of the
State Health Officer’s order:
This proposal came before the State Health Officer on this the 20th day of
December 2012, for culmination of review and determination.
STAFF FINDINGS: The project is in substantial compliance with the State
Health Plan and General Review Criteria found in the Certificate of Need
Review Manual.
STAFF RECOMMENDATION: Approval
HEARING OFFICER RECOMMENDATION: Approval
THE STATE HEALTH OFFICER FINDS: Concurs with and adopts staff’s
findings and recommendation.
DECISION OF INTENT
It is the intent of the State Health Officer, after considering the Department’s
plans, standards and criteria; staff’s analysis; hearing officer’s
recommendation, if any, and making written findings, that the proposed be
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approved.
So ordered this the 20th day of December 2012.
(Emphasis added). The Gulf Coast Hospitals suggest that it is protocol for the State Health
Officer to “adopt” the findings of the hearing officer. While the State Health Officer did not
state in the order that she adopted the findings of the hearing officer, it is clear to us that her
order granting the CON was based on the findings of the hearing officer, as well as on the
recommendation of the staff based on its analysis because she approved both of them.
I. Controlling Statutory Law
¶9. In Mississippi, the DOH is charged with reviewing applications for a CON.
Mississippi Code Annotated section 41-7-191 (Rev. 2013) states in pertinent part:
(1) No person shall engage in any of the following activities without obtaining
the required certificate of need:
(a) The construction, development or other establishment of a new health care
facility, which establishment shall include the reopening of a health care
facility that has ceased to operate for a period of sixty (60) months or more;
****
(c) Any change in the existing bed complement of any health care facility
through the addition or conversion of any beds or the alteration, modernizing
or refurbishing of any unit or department in which the beds may be located;
however, if a health care facility has voluntarily delicensed some of its existing
bed complement, it may later relicense some or all of its delicensed beds
without the necessity of having to acquire a certificate of need. The State
Department of Health shall maintain a record of the delicensing health care
facility and its voluntarily delicensed beds and continue counting those beds
as part of the state's total bed count for health care planning purposes. If a
health care facility that has voluntarily delicensed some of its beds later desires
to relicense some or all of its voluntarily delicensed beds, it shall notify the
State Department of Health of its intent to increase the number of its licensed
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beds. The State Department of Health shall survey the health care facility
within thirty (30) days of that notice and, if appropriate, issue the health care
facility a new license reflecting the new contingent of beds. However, in no
event may a health care facility that has voluntarily delicensed some of its beds
be reissued a license to operate beds in excess of its bed count before the
voluntary delicensure of some of its beds without seeking certificate of need
approval;
****
(m) Reopening a health care facility that has ceased to operate for a period of
sixty (60) months or more, which reopening requires a certificate of need for
the establishment of a new health care facility.
(Emphasis added).
II. State Health Plan
¶10. All parties agree that the statutory mandate is effectuated through the State Health
Plan, which “establishes standards and criteria for granting a CON in compliance with
[s]ection 41-7-191.” See Miss. Code Ann. § 41-7-173(s) (Rev. 2013). Additionally, all
parties agree that section 102.03 of the State Health Plan applies to consideration of HMA’s
CON application for the Project. Because the Project will cost more than $2,000,000, section
102.03 requires the DOH to evaluate the need for the Project under the general criteria for
the establishment of new facilities, as well as under the specific criteria for the relocation of
facilities when no acute care beds are being added, such as the case here. The relevant
portion of section 102.03 provides:
Certificate of Need Criteria and Standard for Construction, Renovation,
Expansion, Capital Improvements, Replacement of Health Care Facilities,
and Addition of Hospital Beds
The Mississippi State Department of Health (MSDH) will review applications
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for Certificate of Need for the addition of beds to a health care facility and
projects for construction, relocation, expansion, or capital improvements
involving a capital expenditure in excess of $2,000,000 under the applicable
statutory requirements of Sections 41-7-173, 41-7-191 and 41-7-193,
Mississippi Code of 1972, as amended. The MSDH will also review
applications for Certificate of Need according to the general criteria listed in
the Mississippi Certificate of Need Review Manual; all adopted rules,
procedures, and plans of the MSDH; and the specific criteria and standards
listed below.
****
3. Need Criterion:
a. Projects which do not involve the addition of any acute
care beds: The applicant shall document the need for the
proposed project. Documentation may consist of, but is not
limited to, citing of licensure or regulatory code deficiencies,
institutional long term plans (duly adopted by the governing
board), recommendations made by consultant firms and
deficiencies cited by accreditation agencies (JCAHO, CAP,
etc.). In addition, for projects which involve construction,
renovation, or expansion of emergency department facilities the
applicant shall include a statement indicating whether the
hospital will participate in the statewide trauma system and
describe the level of participation, if any.
¶11. The general review considerations are set forth in chapter 8, section 100.01 of the
Certificate of Need Manual. Section 100.01 sets forth sixteen general review criteria. We
quote the relevant portions of the section:
CHAPTER 8 - CRITERIA USED BY STATE DEPARTMENT OF
HEALTH FOR EVALUATION OF PROJECTS
100 General Considerations
100.01 Projects will be reviewed by the Department as deemed
appropriate. Review, evaluation, and determination of
whether a CON is to be issued or denied will be based
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upon the following general considerations and any
service specific criteria which are applicable to the
project under consideration.
1. State Health Plan: The relationship of the health services being
reviewed to the applicable State Health Plan.
NOTE: CON applications will be reviewed under the
State Health Plan that is in effect at the time the
application is received by the Department.
No project may be approved unless it is consistent
with the State Health Plan. A project may be
denied if the Department determines that the
project does not sufficiently meet one or more of
the criteria.
2. Long Range Plan: The relationship of services reviewed to the
long range development plan, if any, of the institution providing
or proposing the services.
3. Availability of Alternatives: The availability of less costly or
more effective alternative methods of providing the service to be
offered, expanded or relocated.
4. Economic Viability: The immediate and long-term financial
feasibility of the proposal, as well as the probable effect of the
proposal on the costs and charges for providing health services
by the institution or service. Projections should be reasonable
and based upon generally accepted accounting procedures.
a. The proposed charges should be comparable to those
charges established by other facilities for similar services
within the service area or state. The applicant should
document how the proposed charges were calculated.
b. The projected levels of utilization should be reasonably
consistent with those experienced by similar facilities in
the service area and/or state. In addition, projected levels
of utilization should be consistent with the need level of
the service area.
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c. If the capital expenditure of the proposed project is
$2,000,000 or more, the applicant must submit a
financial feasibility study prepared by an accountant,
CPA, or the facility's financial officer. The study must
include the financial analyst's opinion of the ability of the
facility to undertake the obligation and the probable
effect of the expenditure on present and future operating
costs. In addition, the report must be signed by the
preparer.
5. Need for the Project: One or more of the following items may
be considered in determining whether a need for the project
exists:
a. The need that the population served or to be served has
for the services proposed to be offered or expanded and
the extent to which all residents of the area – in particular
low income persons, racial and ethnic minorities, women,
handicapped persons and other underserved groups, and
the elderly – are likely to have access to those services.
b. In the case of the relocation of a facility or service, the
need that the population presently served has for the
service, the extent to which that need will be met
adequately by the proposed relocation or by alternative
arrangements, and the effect of the relocation of the
service on the ability of low income persons, racial and
ethnic minorities, women, handicapped persons and other
underserved groups, and the elderly, to obtain needed
health care.
c. The current and projected utilization of like facilities or
services within the proposed service area will be
considered in determining the need for additional
facilities or services. Unless clearly shown otherwise,
data where available from the Division of Health
Planning and Resource Development shall be considered
to be the most reliable data available.
d. The probable effect of the proposed facility or service on
existing facilities providing similar services to those
10
proposed will be considered. When the service area of
the proposed facility or service overlaps the service area
of an existing facility or service, then the effect on the
existing facility or service may be considered. The
applicant or interested party must clearly present the
methodologies and assumptions upon which any
proposed project's impact on utilization in affected
facilities or services is calculated. Also, the appropriate
and efficient use of existing facilities/services may be
considered.
e. The community reaction to the facility will be
considered. The applicant may choose to submit
endorsements from community officials and individuals
expressing their reaction to the proposal. If significant
opposition to the proposal is expressed in writing or at a
public hearing, the opposition may be considered an
adverse factor and weighed against endorsements
received.
6. Access to the Facility or Service: The contribution of the
proposed service in meeting the health related needs of members
of medically under-served groups which have traditionally
experienced difficulties in obtaining equal access to health
services (for example, Medicaid eligible, low income persons,
racial and ethnic minorities, women, and handicapped persons),
particularly those needs identified in the applicable State Health
Plan as deserving priority. For the purpose of determining the
extent to which the proposed service will be accessible, the state
agency shall consider:
a. The extent to which medically under-served populations
currently use the applicant's services in comparison to the
percentage of the population in the applicant's service
area which is medically under-served and the extent to
which medically under-served populations are expected
to use the proposed services if approved;
b. The applicant's performance in meeting its obligation, if
any, under any applicable federal regulations requiring
provision of uncompensated care, community service, or
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access by minorities and handicapped persons to
programs receiving federal financial assistance
(including the existence of any civil rights access
complaints against the applicant);
c. The extent to which the unmet needs of Medicare,
Medicaid, and medically indigent patients are proposed
to be served by the applicant; and
d. The extent to which the applicant offers a range of means
by which a person will have access to the proposed
facility or services.
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8. Relationship to Existing Health Care System: The
relationship of the services proposed to be provided to the
existing health care system of the area in which the services are
proposed to be provided.
III. Application of Relevant Case Law
¶12. In Queen City Nursing Center v. Mississippi State Department of Health, 80 So. 3d
73, 75 (¶2) (Miss. 2011), a case cited by HMA, Meadowbrook Health and Rehab LLC
(Meadowbrook) applied to the DOH for a CON to construct a new sixty-bed nursing home
in Lauderdale County. The owner of Meadowbrook, Bruce Kelly, purchased twenty-one
beds from Kemper Homeplace, a nursing home in Kemper County that had been forced to
close in January 2006. Id. at 75 n.2. In March 2007, Kelly placed the twenty-one beds in
abeyance. Id. at n.3. Kelly also owned Poplar Springs Nursing Home, a thirty-nine-bed
facility in Lauderdale County, Mississippi. Meadowbrook proposed to combine the twenty-
one beds from Kemper Homeplace with the thirty-nine beds from Poplar Springs Nursing
Home to build the new sixty-bed facility to replace the Poplar Springs Nursing Home. Id.
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at 75 (¶2).
¶13. The Mississippi Supreme Court agreed with the DOH’s interpretation of Mississippi
Code Annotated section 41-7-191(1)(a) (Rev. 2013) and found that the Kemper Homeplace
was still an “existing” facility for purposes of the CON process. Queen City Nursing Ctr.,
80 So. 3d at 85 (¶35). Here, as was the case with the Kemper Homeplace beds in Queen
City, the beds in HMA’s proposed new facility have been held in abeyance or de-licensed.
Further, just as in Queen City, all beds here are being moved to a new facility at a new
location within sixty months of the closing of the old facility. Therefore, we find that, for
purposes of the CON process, HMA’s proposed new facility—containing the 144 beds that
it had de-licensed—is a replacement and relocation of GCMC.
¶14. In St. Dominic-Jackson Memorial Hospital v. Mississippi State Deparment of Health,
954 So. 2d 505, 507 (¶1) (Miss. Ct. App. 2007), the CON applicant, Madison HMA,
proposed to close its old, outdated, sixty-seven-bed hospital and replace it with a sixty-
seven-bed hospital built in a more accessible location off of Interstate 55 in Canton,
Mississippi. We held:
Unlike other recent applications for relocation that were determined to be
expansions, Madison HMA is seeking a true relocation. No services will be
duplicated. It will move its entire hospital to the Nissan Parkway and close
the current location. Since this is a relocation, the criteria under which the
State Health Department correctly reviewed the application is that for
“Construction, Renovation, Expansion, Capital Improvement, Replacement
of Health Care Facilities, and Addition of Hospital Beds.” This section
requires documentation of need by, but not limited to, showing licensure and
code deficiencies, long-term plans, recommendations of consulting firms,
deficiencies cited by accreditation agencies, and, if there is an expansion of
emergency facilities, a statement concerning whether the hospital will
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participate in the statewide trauma system.
Id. at 507 (¶2). Just as in St. Dominic-Jackson Memorial Hospital, the record in our case
indicates that the DOH’s grant of the CON was based on the specific criteria for relocation
and the need component was evaluated according to the relevant sections. This case can be
distinguished from a case with the same name, St. Dominic-Jackson Memorial Hospital,
728 So. 2d at 85 (¶14) (the North Campus case), where the Mississippi Supreme Court held
that there was not sufficient evidence of need to support the grant of a CON for
establishment of the North Campus facility because the facility would be new facility, rather
than a relocation of an existing facility. Methodist Medical Center was attempting to
establish a new medical center using its unused licensed beds, at its existing facility in south
Jackson, to create a new location in north Jackson. Here, HMA is relocating all of its beds
and will not have a footprint at its old location. Therefore, HMA’s CON application is for
a “true relocation” as espoused in St. Dominic-Jackson Memorial Hospital, 954 So. 2d at
507 (¶1), and Queen City, 80 So. 3d at 84 (¶35).
IV. General Review Criterion 3 (Availability of Alternatives)
¶15. The Gulf Coast Hospitals argue that the DOH’s decision is not supported by
substantial evidence with respect to this review criterion because there was substantial
evidence indicating “that HMA did not conduct a full and genuine evaluation of less
expensive options to constructing a new $133 million hospital” and that “the most obvious
option [was] renovating the existing hospital,” but that could not be done “because HMA
[had] sold [the existing structure] before its architect even conducted an inspection of the
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facility.”
¶16. Clearly, the DOH considered this criterion, as noted in the hearing officer’s findings:
As set forth in the application and staff analysis, [HMA] considered four
alternatives to the proposed project, which the staff reviewed—relocate to a
proposed location north of the old hospital; not reopen; construct fewer than
144 beds; or, renovate the old GCMC at the existing location. While [Ron]
Luke testified he thought the alternative that HMA should have chosen was
not to reopen and let the beds expire or construct fewer beds, [the Gulf Coast
Hospitals nor any of their witnesses] disagreed that the proposed location was
a poor location or that [HMA] failed to consider alternatives. In addition,
[neither the Gulf Coast Hospitals nor any of their witnesses] testified that
assuming [GCMC] was returned to service that it should do so at its current
location. . . . [T]estimony both from [HMA] and [Don] Eicher demonstrated
that the expenditure of large sums of money at the current location near the
shoreline was not suitable for investment or patient care, especially when the
population has shifted away from the existing location.
We find no merit in the contention that the DOH did not consider General Review Criterion
3. Although the testimony was conflicting, there was evidence to support the DOH’s
decision with respect to this criterion.1
V. General Review Criterion 5 (Need for the Project)
¶17. The Gulf Coast Hospitals argue that there was not substantial evidence showing the
need to reopen GCMC. More specifically, Gulf Coast Hospitals argue that the need
criterion set forth in subsection 3(a) of section 102.03 describes an “institutional need” and
that the DOH did not properly evaluate need as specified in General Review Criterion 5.
We disagree.
¶18. As stated, in order to satisfy the need component, the State Health Plan requires the
1
See pages 18-19 of the appendix attached to this opinion.
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CON applicant to submit documentation satisfying the general criteria listed in the
Mississippi Certificate of Need Review Manual and the specific criteria listed in section
102.03 for relocating or replacing an existing facility.
¶19. The DOH’s staff reviewed HMA’s CON application for compliance with the
required general review criteria, as well as the specific need criteria under section 102.03,
and recommended that the DOH grant the CON. The DOH’s findings specifically
addressed the Gulf Coast Hospitals’ concerns that the “General Review Criterion 5: Need
for Project”—as set forth in the Certificate of Need Review Manual—was not met. The
staff analysis, reviewed by the DOH, considered
the need that the population presently served has for the facility/service, the
extent to which that need will be met adequately by the proposed relocation
or by alternative arrangements, and the effect of the relocation of the
facility/service on the ability of low income persons, racial and ethnic
minorities, women, handicapped persons and other undeserved groups, and
the elderly, to obtain needed health care.
HMA provided graphs and analysis regarding the population growth and the needs of the
aging population, which the DOH reviewed.
¶20. At the hearing before the hearing officer, Don Eicher, the Director of the DOH’s
Office of Health Policy and Planning, testified that in determining the need component, the
DOH analyzed hospitals’ service areas in the Mississippi Gulf Coast area. In this case,
according to Eicher, the primary service area of the proposed facility covers approximately
five zip code areas, and the secondary service area includes another eight zip code areas.
Eicher testified that the staff considered projections of population growth, historical trends,
16
and the patient discharge numbers in the service areas, among other factors, to determine
the need to reopen GCMC. Eicher believed that the information in the staff analysis
supported the grant of the CON, and stated, “[For] every application we analyze . . . future
utilization rate, future occupancy rate . . . [and] future population growth.”
¶21. On the other hand, Brenda Waltz, the hospital administrator for Garden Park Medical
Center, a 130-bed facility in the Gulf Coast area, believed that the overall inpatient days are
decreasing because there is “a lot more outpatient surgery, plus technology nowadays
allows for simpler procedures . . . and patients aren’t required to stay overnight. So that’s
a main contributor [for] the reason [of] the decrease in inpatient census.” Waltz also
testified that reopening GCMC would be “devastating” to Garden Park Medical Center.
¶22. The Gulf Coast Hospitals also presented Dr. Ronald Luke, a health planning expert.
Based on official Mississippi growth projections, Dr. Luke concluded that, even by 2025,
the Project would not meet the demand for inpatient service in the service area. Dr. Luke
went on to state that maintaining the status quo, instead of creating additional beds, was the
most appropriate alternative from a health-planning standpoint.
¶23. The hearing officer addressed each of the sub-parts of General Criterion 5. Since
we have attached the hearing officer’s findings of fact and conclusions of law, we pretermit
a discussion of the evidence regarding the sub-parts here and refer to pages twenty through
twenty-six of the appendix. It is sufficient to say, as is the case with all of the DOH’s
findings, that the evidence was conflicting. Yet out of the conflicting evidence, there is
substantial evidence supporting the DOH finding of need under the general review criteria.
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VI. General Review Criterion 8 (Relationship to Existing Health Care System)
¶24. The DOH found that HMA demonstrated through its application and expert
testimony that the Project will have a minimal adverse impact on the Gulf Coast Hospitals.
In arriving at this conclusion, the DOH relied upon the expert testimony of Noel Falls.
Falls, a Gulf Coast expert in health care planning, testified on behalf of HMA. He testified
that he looked at the service areas of all hospitals in the area in great detail. Based on his
findings, he concluded that there was little or no overlap, on average, between GCMC’s and
Singing River Hospital’s service areas, but that there was an overlap with the service areas
of Ocean Springs Hospital, Garden Park Medical Center, and Memorial Hospital of
Gulfport. Nonetheless, Falls opined that an overlap is “fairly typical in cities that have more
than one hospital . . . located relatively close . . . [to each other] and [that] these
circumstances . . . exist[ed prior to January 2008] when GCMC was still operating. [GCMC]
was getting patients from essentially the same areas.” Falls also examined the growth in the
general population and the sixty-five-and-older population and strongly felt that they
provide a population base sufficient to support the relocation and reopening of GCMC. He
also testified that the growth in the service area at issue actually exceeds what was “going
on or even projected to happen prior to Hurricane Katrina.”
¶25. On the other hand, Thomas Davidson, a health planning expert testifying on behalf
of the Gulf Coast Hospitals, observed that the facility is proposed in a service area that is
“terribly, terribly over-bedded.” Davidson opined that “this is not a situation in which
growth would save the day. In order for [GCMC] to have success and meet it utilization
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projections, it must not only do grievous, but sustained damage to other existing hospitals
in the service area.” Davidson based his opinion on the ten percent decrease in the average
daily census bed count for the Gulf Coast-area hospitals from 2005 to 2011, noting that
census data from GCMC was not considered in his analysis because, during that period,
GCMC was closed down. He also stated: “The primary service area defined for the
replacement hospital is absolutely vital to four [existing] hospitals. This is not a case of
some peripheral or minor service area overlap.” Davidson also believed that, based on
HMA’s application, ninety-five percent of the number of total admissions forecast for the
future hospital in year three
must come at the expense of the existing providers. This is the total impact
that has to be absorbed by one hospital or another or [by] all of the hospitals
in the service area in order for [GCMC] to achieve its utilization projections.
There’s no other place for these patients to come from.
Davidson also monetarized the amount he believed would be lost from the existing
hospitals. Several CEOs from the other Gulf Coast Hospitals also testified that reopening
GCMC would have a deleterious effect on the existing hospitals.
¶26. It is sufficient to say that both HMA and the Gulf Coast Hospitals offered experts
who gave conflicting testimony about the Project’s impact on the existing health care
system. However, as a review of the hearing officer’s findings will reveal, the hearing
officer favored Fall’s testimony in finding that the Project would have minimal adverse
impact on the existing health care systems.
VII. Specific Need Criterion Under Section 102.03
19
¶27. The DOH also reviewed the evidence supporting the need requirement under section
102.03. This evidence included code deficiencies of the closed facility, the need to relocate
the facility in light of its proximity to the shoreline, expert testimony on the structural
damage of the closed facility, and evidence that HMA’s long-term plan anticipated, at the
time of closure, that the facility would eventually be relocated.
¶28. Timothy Mitchell, former operator of HMA, testified regarding the condition of the
closed hospital and stated, “[HMA] continued to have problems with the building [after
Hurricane Katrina] because of the amount of time that it had sat, with damage to the drywall
and everything else.” Mitchell continued to explain that if the facility stayed at its current
location on the coast, that there would be constant “issues with [the] mechanical equipment
failing, like the cooling towers stalling, and out electrical panels just going out, power going
out to part of the building . . . [and rust] from salt water intrusion.” Mitchell also testified
that at the time GCMC closed, there was already an initiative to relocate to a different site.
He supported this claim by showing the notice of closure and a newspaper article prepared
at the time, both referencing the plan to relocate.
¶29. The record reflects that there were experts on both sides, and the DOH ultimately
found that HMA had demonstrated a need to reopen and relocate the hospital. The DOH
correctly points out that, “[b]y the Manual’s own language, not every subpart is applicable
to a proposed project.” Nonetheless, the DOH reviewed the expert testimony on population
growth, access by the current population to the proposed facility, numerous community
endorsements, and the effect that the reopening of GCMC would have on existing facilities.
20
The DOH, as the fact-finder, determined that there would be minimal negative effect, if any,
to the surrounding hospitals and the health care system.
¶30. The DOH, as the fact-finder, makes the determination of the credibility of the
evidence. Dialysis Solutions LLC v. Miss. State Dep’t of Health, 96 So. 3d 713, 718 (¶11)
(Miss. 2012). We find substantial evidence supporting DOH’s factual findings. We also
find that the DOH correctly reviewed HMA’s CON application in accordance with section
41-7-191, the 2012 State Health Plan, and the DOH’s Certificate of Need Review Manual.
The Gulf Coast Hospitals would have this Court reevaluate the evidence presented to the
DOH. It is not the role of this Court to reweigh the evidence if the DOH’s findings are
supported by substantial evidence. See St. Dominic-Jackson Mem’l Hosp., 728 So. 2d at
83 (¶9). Therefore, our standard of review requires us to affirm the decision of the DOH.
As such, we affirm the DOH’s decision granting the CON to HMA.
¶31. The dissent makes several points that in the dissent’s view require that this case be
reversed and remanded. First, the dissent says that the record lacks substantial evidence to
support the DOH’s decision to grant the CON. Second, the dissent states that the case law
and the record reflect that the statutory requirements applicable to establishing a new
hospital apply, not the less stringent requirements applicable to hospital relocations. Third,
the dissents attempts to distinguish Queen City in a way to rob it of any applicability to our
case. We briefly address each of these points in turn.
¶32. Apparently the dissent, in asserting that DOH’s decision is not undergirded by
substantial evidence, would have us reweigh the evidence. Or perhaps more appropriately,
21
the dissent has already reweighed the evidence. It is well-settled law that an appellate court
cannot and must not reweigh the evidence relied upon by an agency in its fact-finding
process. The findings of fact by the hearing officer, which were approved by the State
Health Officer show that the DOH utilized the proper standard of review and reviewed
HMA’s application in accordance with the applicable statutory law, the State Health Plan,
and controlling case law. As to the dissent’s attempt to distinguish Queen City, we simply
say the facts are the facts. Here, as in Queen City, a hospital that had been closed down and
its beds placed in abeyance or de-licensed was declared by the Mississippi Supreme Court
to be an existing hospital for purposes of the CON application process. Additionally, those
beds were coupled with beds from a still functioning facility that relocated to another area.
¶33. While it is true that the DOH determined that HMA’s application was for a relocation
of GCMC, and, therefore, considered the requirements for relocating an existing hospital,
it cannot be legitimately argued, based on an objective review of the hearing officer’s
findings, that the DOH did not also consider need generally for the replacement or
relocation of GCMC.
¶34. THE JUDGMENT OF THE HINDS COUNTY CHANCERY COURT IS
AFFIRMED, AND THIS CASE IS REMANDED TO THE HINDS COUNTY
CHANCERY COURT FOR A DETERMINATION OF THE AMOUNT OF
ATTORNEY’S FEES. ALL COSTS OF THIS APPEAL ARE ASSESSED TO THE
APPELLANTS.
LEE, C.J., GRIFFIS, P.J., BARNES, ISHEE, ROBERTS, MAXWELL, FAIR
AND JAMES, JJ., CONCUR. CARLTON, J., DISSENTS WITH SEPARATE
OPINION.
22
APPENDIX
BEFORE THE MISSISSIPPI STATE DEPARTMENT OF HEALTH
In the hearing during the course of review in connection with:
CON REVIEW: HG-NIS-1111-022
HARRISON HMA, LLC d/b/a GULF COAST MEDICAL CENTER
CONSTRUCTION/RELOCATION AND REPLACEMENT of
GULF COAST MEDICAL CENTER
CAPITAL EXPENDITURE: $133,322,098
LOCATION: BILOXI, HARRISON COUNTY, MISSISSIPPI
HEARING OFFICER'S FINDINGS OF FACT,
CONCLUSIONS OF LAW AND RECOMMENDATION
Having reviewed and considered the testimony and evidence introduced during the
hearing on the above-styled certificate of need ("CON") application, I, the undersigned Hearing
Officer, hereby issue the following Findings of Fact, Conclusions of Law and
Recommendation.
I. SUMMARY OF PROCEEDINGS
The Applicant, Harrison HMA, LLC d/b/a Gulf Coast Medical Center ("Gulf Coast
Medical" "Applicant" "GCMC") submitted its Certificate of Need ("CON") application on
November 28, 2011, titled the Construction/Relocation and Replacement of Gulf Coast Medical
Center (the "Application"). The Application was deemed complete on January 3, 2011, and was
recommended for approval by the Department's staff in a June 2012 Staff Analysis. Singing River
Health System, consisting of Singing River Hospital ("Singing River") and Ocean Springs Hospital
("OSH") (collectively "SRHS"), Memorial Hospital at Gulfport ("Memorial"), Garden Park
Medical Center ("Garden Park"), and also James Crowell[,] representing Mississippi citizen
consumers ("Crowell") (collectively the "Contestants") properly requested a hearing during the
course of review. (While Crowell is included as a "Contestant," Crowell presented no testimony
or evidence during the Hearing and his attorneys only asked a handful of questions all concerning
Page 1 of 38
Biloxi Regional Medical Center. Tr. 300-01, 1160. Highland Community Hospital also requested
a hearing, but it withdrew its request. Tr. 6.) The ''Hearing'' took place August 22-24, 2012 and
September 4-7, 2012, and after each party was afforded the opportunity to present evidence and
testimony to support its position and members of the public were invited to comment on the
Application, the Hearing was concluded.
It is the responsibility of this Hearing Officer to review all evidence and testimony and to
set forth the findings of fact and conclusions of law regarding this matter. In summary, I find that
the Application does substantially comply with the CON law, the 2012 State Health Plan's ("Plan")
criteria and goals, the CON Manual's general review criteria, and the four general policy goals of
the Plan. Specifically, I find this Application is one for the replacement and relocation of a closed
hospital which under the CON law is treated as currently existing as it has not yet been closed for
sixty months. Though the Contestants argued that the Applicant did not demonstrate "need" for
the project, I believe that the Applicant demonstrated substantial compliance with the appropriate
need criterion in the Plan regarding the replacement of healthcare facilities. In addition, testimony
also demonstrated compliance with General Review Criterion 5 concerning the need for the project.
While the Contestants argued that the replacement hospital would have a significant adverse impact
on the existing hospitals, the Applicant demonstrated that the information utilized by the
Contestants to project their anticipated adverse impact failed to take into account the entire
projected population of Harrison, Hancock and Jackson counties which currently utilize the
hospitals and instead focused solely on population data for thirteen zip codes projected by the
Applicant as its primary and secondary service area.
Page 2 of 38
For at least these reasons, all of which are set forth in detail in the following sections of
this Opinion, the Application should be approved.
II. THE APPLICATION
The Application proposes to relocate and replace the 144 bed Gulf Coast Medical Center
which closed in January 2008 and to reinstate magnetic resonance imaging and obstetric services.
Ex. 2, 3. The building which housed Gulf Coast Medical is located 300 yards from the Gulf of
Mexico, and during Hurricane Katrina it received wind and water damage. Tr. 233, 358, 368; Ex.
2, 29. The Hurricane also destroyed the buildings between the shoreline and the hospital so that
currently there is nothing located between the old GCMC and the Gulf of Mexico. Tr. 363, 370.
It was undisputed that the GCMC location is in an area susceptible to future hurricanes and
damage. Tr. 365; Ex. 29. After the Hurricane in August 2005, Health Management Associates,
Inc. purchased Gulf Coast Medical. After purchasing and operating the hospital from May 2006
through January 2008, at a location that was still recovering from the Hurricane and losing both
population and physicians, Health Management closed the hospital on January 3, 2008. Tr. 8, 212;
Ex.2. On or about February 11, 2008, Gulf Coast Medical requested that the Department put its
144 acute care beds in abeyance, a request which the Department accepted per letter dated April
l, 2008. Ex. 5.
The replacement hospital, to be known as The Hospital at Cedar Lake, will be located
immediately south of and adjacent to Interstate 10 in an already existing medical community. Ex.
2. The proposed site is four miles from the Gulf, and did not experience flood waters during the
Hurricane. Tr. 368; Ex. 3, 5.
III. THE STAFF ANALYSIS
Page 3 of 38
In June 2012, the Mississippi State Department of Health (the "Department") rendered its
staff analysis which recommended approval of Gulf Coast Medical's CON Application (the "Staff
Analysis"). Ex. 3. The Department's Staff determined that the project was one for the replacement
and relocation of a general acute care hospital and reviewed it as such. Ex. 3. Don Eicher
("Eicher"), Director of the Office of Health Policy and Planning, testified that the Department
believed it had all the information it needed to make a recommendation regarding the Application.
Tr. 25-26. This was true regardless of the Application not including a signed cost estimate or
contract for land. Tr. 150-51. The Staff Analysis determined the project was in substantial
compliance with the four goals of the Plan, the Plan's criteria, the General Review Criteria in the
CON Manual and all adopted rules, procedures, and plans of the Department.
IV. WHAT IS BEING PROPOSED BY GULF COAST MEDICAL IS THE
REPLACEMENT AND RELOCATION OF A HOSPITAL, NOT A NEW
HOSPITAL
The first consideration regarding the Application is whether or not Gulf Coast Medical
proposes to establish a new general acute care hospital since that determination impacts which of
the SHP criteria are applicable. Based on the following discussion, I believe the Application does
not propose the establishment of a new general acute care hospital but instead proposes a replaced
and relocated hospital.
A. Mississippi Case Law Distinguishes Projects for Relocation Versus Projects for
New Healthcare Facilities.
The Mississippi Supreme Court has repeatedly stated that in reviewing a proposed project,
"the showing of need must be commensurate to what the project actually is." St. Dominic-Jackson
Mem’l Hosp. v. Miss. Slate Dep't of Health & Madison HMA, Inc., 87 So. 3d
Page 4 of 38
1040, 1046 (Miss. 2012) (“St. Dominic 2012”). That St. Dominic 2012 case involved the proposed
"relocation" of a portion of its hospital to Madison County. St. Dominic, 87 So. 3d at 1042. The
Court determined in the St.. Dominic 2012 case that the project was actually for a new hospital, or
a "mini version of its Jackson campus." St. Dominic 2012, 87 So. 3d at 1052. Determining whether
the Application proposes a “new" hospital or "relocated" hospital is essential to determining what
need criteria applies so that the correct showing of need can be required.
This Application proposes to replace and relocate the old GCMC. Though GCMC closed
in 2008, it placed its 144 beds in abeyance and is still considered an "existing" hospital under the
CON law. Tr. 26. Eicher testified, a facility
can put all [its] beds in abeyance and close, and state law provides that as long as
you're not closed within 60 months or more, then you're not considered a new
facility. So, theoretically, a facility could close up to 60 months or five years and
then reopen. The caveat would be whether reopening would cause you to make a
capital expenditure, an expenditure in excess of 2 million. If that's the case, then
a CON would be required.
Tr. 27. Currently and until the expiration of 60 months, the beds held in abeyance by GCMC
remain part of the state's inventory and can be returned to service without the requirement of a
CON. Tr. 28-29; Ex. 5; See Miss. Code § 41-7-191(1)(m) (stating "reopening a health care facility
that has ceased to operate for a period of sixty (60) months or more" requires a CON "for the
establishment of a new health care facility" to reopen); Queen City Nursing Ctr., Inc., et. al v. Miss.
State Dep't of Health & Meadowbrook Health and Rehab, LLC, 80 So. 3d 73, 85 (Miss. 2011)
(stating closed facility which has beds in abeyance “is still an ‘existing’ facility for purposes of the
CON process. The CON statute does not require a CON if a facility attempts to
Page 5 of 38
reopen within sixty months of ceasing to operate.”); 2011 Miss. AG Lexis 334. *3 (stating facility
is "existing" facility for CON purposes until closed for 60 months). In fact, when GCMC’s 144
beds were placed in abeyance, Rachel Pittman, then chief of the CON division, wrote GCMC a
letter which stated that "upon proper notification to and approval by the Department, these beds
may return to service without the requirement of a Certificate of Need." Tr. 402-03; Ex. 5.
Similarly, Robert Pascasio, the CEO at Hancock Medical Center, testified that after the Hurricane,
Hancock Medical put some number of its beds in abeyance and has been bringing them back online
without CON review because he testified it was simply a "recovery of preexisting beds . . . " Tr.
538, 540. As Eicher stated, the reason GCMC needs a CON to reopen the beds is that the capital
expenditure is over 2 million dollars. Tr. 27.
The classification of the beds as existing beds is important since the proposed relocated
beds are not "additional" beds, prohibited from being relocated, but are beds existing in the State's
bed inventory though in abeyance. Ex. 5. When Singing River previously sought to "relocate"
licensed but unused beds to OSH, the Supreme Court held the result would be the "addition" of
beds to OSH. Singing River Hosp. 819. v. Biloxi Reg'l Med Ctr., 928 So. 2d 810, 811, 813 (Miss.
2006) (emphasis in original). The Court stated that Singing River's CON application did not
propose the relocation of a health care facility or of a health service[,] but instead the proposed
relocation would be a change in existing bed complement at OSH. Singing Riv., 928 So. 2d at 813.
That change in bed complement could not be avoided by the use of relocated beds since the statute
regarding bed additions does not include "relocated" beds. Singing Riv., 928 So. 2d at 813. The
Court thus concluded that the
relocation of unused but already-licensed beds from one health care facility to
Page 6 of 38
another is not contemplated under the relevant statute. The statute only uses the
word "relocation"when speaking of the relocation of an entire or a portion of a
health care facility, or of health services, not of beds.” Finally, and most
importantly, the proposal, in actuality, is for Ocean Springs to add sixty beds.
Singing Riv., 928 So. 2d at 814 (italics in original). Singing River's prior attempt at relocating beds
failed because the Court found the relocation of licensed, unused beds from one facility to another
would be the "addition" of beds. However, the proposed GCMC project does not seek to relocate
beds from one facility to another increasing the bed complement at the accepting facility, but
instead, in compliance with the Court's conclusion, seeks to relocate its entire, existing facility.
Thus, there is not an anticipated change in bed complement at GCMC as would have occurred, in
violation of statute, at OSH as a result of SRHS' s proposed relocation. Furthermore similar to
another CON applicant who sought to relocate beds that had been held in abeyance to a
replacement nursing facility, the Court agreed that "no new beds would be established" by the
relocation/replacement since the beds in abeyance would be reestablished. Queen City, 80 So. 3d
at 78. In Queen City, the Court agreed with the Department's decision that the construction of a
new building would not be considered new for health planning purposes since it would replace a
previously operating but still existing provider. Queen City, 80 So. 3d at 85. Similar to the GCMC
beds, because the beds in Queen City were in abeyance for less than 60 months they were not
"new" but were "currently existing beds" capable of being relocated to a replacement facility[.]
Queen City, 80 So. 3d at 85.
Therefore, because GCMC has not been closed for more than 60 months, it is considered
an existing healthcare facility with existing beds under the CON law, and its Application is one
for the replacement and relocation of that old facility and beds, not a new healthcare facility
Page 7 of 38
with new beds in the service area. Tr. 400; Ex. 6.
Per the Plan, the Department "intends to approve" a CON application "if it substantially
complies with the projected need and with the applicable criteria and standards presented" in the
Plan. Ex. 10. Though the Contestants put forth various reasons why the proposed project should
be disapproved, they failed to argue that the Application did not comply with the applicable
portions of the Plan. As discussed below, the Application complies with the applicable Plan Need
Criterion for the replacement of healthcare facilities and thus it should be approved. And the
Supreme Court has accepted the State Health Officer's decision that "there is no occupancy
standard which applies to replacement projects." CLC of Biloxi, et. al v. Miss. Dep’t of Health &
Harrison Co. Prop., LLC, 91 So. 3d 633, 638 (Miss. 2012) (concerning relocation and replacement
of nursing home destroyed by Hurricane Katrina).
While the Application complies with the applicable Plan need criterion along with the
applicable manual general review criteria, it should also be noted that this project complies with
the supreme court's rulings regarding the relocation of healthcare facilities. A "relocation is a
transfer of an entire health service" so that "the transferring facility would no longer have the
authority to provide the same service." St. Dominic, 87 So. 3d at 1047. The Application proposes
a true relocation as all authority to provide services and operate an acute care hospital will be
relocated from the prior GCMC site to the proposed site in north Harrison County. While the Court
has frequently reviewed an applicant's plans to hire new employees, buy new equipment, and
construct a new building in determining if a project proposes a new hospital, it has stated those
items are not "individually prohibited under CON law." St. Dominic, 87 So. 3d at 1048. Most
importantly where the Court considered new employees, new buildings,
Page 8 of 38
and new equipment in cases involving a proposed relocation, the relocation concerned a currently
operating facility. GCMC's facility, which was damaged by the Hurricane, will be completely
replaced and relocated. Since it has been closed, new employees and new equipment will be
obtained. The relocation of GCMC is similar to the replacement and relocation of Madison HMA
which was a true relocation. St. Dominic-Jackson Mem’l Hosp. v. Miss. State Dep’t of Health &
Madison HMA, Inc., 954 So. 2d 505 (Miss. Ct. App. 2007). In that case, similar to GCMC, no
services were duplicated and the entire hospital was relocated. Id.In compliance with prior case law, the Department's staff correctly reviewed this project
as one for the replacement and relocation of an existing healthcare facility.
V. COMPLIANCE WITH THE PLAN SERVICE SPECIFIC CRITERIA
A. Applicable Methodology for the Proposed Hospital
Unlike previous hospital CON projects, which Plan methodology Gulf Coast Medical's
Application must comply with was not a major issue debated at the Hearing. In fact none of the
Contestants argued that this project should comply with the Plan criteria regarding new general
acute care hospitals, and the attorney for SRHS and Memorial stated that the Application was not
subject to the criteria for a new hospital. Tr. 736, 1088.
Falls testified that when you are reviewing a project and considering the "need for a new
facility, you go to the criteria and standards for a new facility," in the Plan as most every project
"is tied to some criteria and standard in the State Health Plan." Tr. 352, 1171. Under the Plan, that
proposed hospital will be in a county without a hospital; in a county with a hospital; in a rapidly
growing county; or, as in this situation, will be for the replacement of a hospital. Tr. 1171-72. If
you try to use the criteria for a new hospital, which contains occupancy standards,
Page 9 of 38
along with the replacement criteria,
you’d never be able to relocate or replace a hospital in the State of Mississippi. I
mean, it's just – it's an illogical assumption to reach, that you should go back and
use one of those other criteria and standards to determine a need for a hospital for
purposes of relocation,
Falls testified. Tr. 1172; See also CLE of Biloxi, 91 So. 3d at 638 (stating Plan contains no
occupancy standard for replacement projects).
The applicable Plan criteria is Section 102.03, CON Criteria and Standards for
Construction, Renovation, Expansion, Capital Improvements, Replacement of Health Care
Facilities, and Addition of Hospital Beds, subsection (3), Projects which do not involve the
addition of any acute care beds. Ex. 7; Tr. 54, 78, 401-02. This Section states:
102.03 Certificate of Need Criteria and Standards for Construction,
Renovation, Expansion, Capital Improvements, Replacement of Health Care
Facilities, and Addition of Hospital Beds
...
3. Need Criterion:
a. Projects which do not involve the addition of any acute care beds: The
applicant shall document the need for the proposed project. Documentation may
consist of, but is not limited to, citing of licensure or regulatory code deficiencies,
institutional long-term plans (duly adopted by the governing board),
recommendations made by consultant firms, and deficiencies cited by accreditation
agencies (JCAHO, CAP, etc.). In addition, for projects which involve construction,
renovation, or expansion of emergency department facilities, the applicant shall
include a statement indicating whether the hospital will participate in the statewide
trauma system and describe the level of participation, if any.
Ex. 7; Tr. 54 (italics added). The Plan states that an applicant "may" provide the documentation
listed above to demonstrate its compliance with the examples set forth in the Need Criterion. As
discussed below, the Applicant demonstrated its compliance with this Need Criterion.
Page 10 of 38
1. The Old GCMC Building Has Numerous Code Deficiencies & the Applicant
Obtained Consultant Recommendations To Replace and Relocate the Hospital.
Danny Cawthon ("Cawthon"), an architect who testified as an expert in healthcare facility
construction, testified regarding the deficiencies at the old GCMC and his recommendation, Tr.
236; Ex. 17. Prior to his testimony, Cawthon toured the old GCMC and documented his
observations by taking pictures. Ex. 18. Based on his observations Cawthon testified regarding
his impression of the facility. "Overall, the facility is in extremely bad shape '" probably one of
the worst I've encountered . . . . It would be not even suitable for an office building, much less a
hospital." Tr. 238. In general Cawthon's pictures and corresponding testimony demonstrated that
moisture had entered and damaged the building as evidenced by water stains, mold, and the
condition of the ceiling; that the parking lot failed because of water; that the copper piping was
corroded and would have to be replaced; and that asbestos exists in the building. Tr. 233, 241, 245,
246-50, 252, 255. Testimony also demonstrated that the chillers for the facility were on the ground
floor and suffered irreparable salt water damage, and that the generators were also at ground level.
Tr. 243-44. Also the current windows would not withstand Hurricane winds. Tr. 243-44. Tim
Mitchell ("Mitchell"), the former CEO at Biloxi Regional and currently the CEO at River Oaks and
Marketing Manager for Health Management’s Jackson area hospitals, testified that during the time
Health Management operated GCMC[,] the hospital was constantly having issues with mechanical
equipment failures, the cooling tower stalling, and power going out in the building which the
repairmen linked to salt water intrusion. Tr. 225. The Contestants implied that some of the
existing damage was a result [of] Health Management not maintaining the building. Tr. 678-79,
705. However, whether the moisture, mold and corrosion were directly
Page 11 of 38
attributable to the Hurricane or a result of the facility being closed, the fact remains that those
issues exist and would have to be repaired. Even SRHS's witness, Randall Cobb ("Cobb"), an
expert in mechanical engineering and health facilities engineering and the system director of
facility support, acknowledged the existence of the damage and the necessity to bring the facility
up to code as discussed below.2 Tr. 626, 639, 705-07, 709-11.
Regardless of the existing damage caused by water, there are numerous code deficiencies
that would require correction through significant renovation prior to reopening the old building as
a hospital. Because of the changes in building and life safety codes from the time of the building's
construction until now, Cawthon testified the old GCMC "wouldn't meet anything near today's
standards." Tr. 239-40. When renovation of more than 50% of a healthcare facility is undertaken,
it must be brought up to current codes, and in this situation, the entire facility would be renovated
meaning all of it would have to be brought up to today's code. Tr. 303-05. Cawthon's testimony
regarding code violations at the old hospital included holes between floors and fire dampers that
no longer work and a lack of the required number of handicap bathrooms under the Americans with
Disabilities Act. Tr. 247-48, 253. The new Life Safety Code standards would also require widening
the ICU corridor from six to eight feet which would require gutting and renovating that end of the
hospital. Tr. 253. While not necessarily a code deficiency, Cawthon testified the emergency
entrance and main entrance were cramped and would need to be widened and that the patient rooms
were too small by today's standards. Tr. 244, 246, 249-50. The old hospital also had semi-private
rooms which would need to be renovated by taking three rooms and making two which would
require reducing the number of available beds or constructing a new addition. Tr. 251-52.
2
There was conflicting testimony regarding the amount of water that entered GCMC as a
result of the Hurricane. Regardless of how much water entered the hospital, everyone agreed the
current building is damaged, would have to be renovated, and would have to be brought up to code.
Page 12 of 38
Cawthon testified based on his experience and analysis of the conditions at the old GCMC
in order to gut and renovate the old hospital including the replacement and enlargement of the
parking lot the cost would be 20 to 25 million, and in order to maintain the bed count (due to the
expansion of existing spaces in the old building), a new addition would cost another 20 to 25
million for a total of 40 to 50 million. Tr. 258, 263, 265"66; Ex. 21. This 40 to 50 million dollar
estimate does not consider the cost of equipment, which is estimated at 46 million for the proposed
hospital. Tr. 258, 263, 266; Ex. 21. Cobb questioned whether all the costs for the replacement
hospital had even been included, but he acknowledged that at this point in the process, there is no
way you could have everything in an estimate. Tr. 696. Thus, adding those numbers together results
in a project which would cost at least between 86 and 96 million dollars and still be located in an
area prone to hurricane damage. Cawthon testified based on his experience and analysis of the
conditions at the old GCMC that he would not advise building a hospital or renovating the current
GCMC site because of the close proximity to the beach and because of the lack of access roads.
Tr. 257. Instead, Cawthon testified he recommended the proposed location since the replacement
hospital would be above the nearest storm surge level; have easy access by 1-10; have ample
parking; have easy access to the emergency entrance; have surgery areas near the emergency areas
and near radiology service; have an ICU on the second floor for easy transport; have two access
points; have two generators; have two electrical feeds with two entirely different grids coming into
the hospital; have two entirely different water
Page 13 of 38
sources; and, have exterior walls and windows designed for at least 140 miles per hour gale force
winds. Tr. 261-62, 276-78. Cawthon concluded,
it would take a lot of money to rehab and redo the old hospital. And location,
location, location is everything, and you're still at the same spot. So in were a
businessman and looking at this, and I put that much money into it, yet I've got a
nice new hospital, but I'm still less than a thousand feet from the beach, I wouldn't
do it. That's a huge risk, ... [M]y recommendation is definitely to move.
Tr. 262-63.
Noel Falls ("Falls"), the Applicant's expert in healthcare planning, testified that one of the
primary goals of the Application was to move the "hospital out of harm's way and keep it
accessible to the population." Tr. 352, 362. His recommendation was to find a site that was out of
harm's way but still accessible to the population, ideally along the interstate. Tr. 362. Taking into
account the age of the GCMC building and its old design with small patient and operating rooms,
the current location "is not a suitable place to build a replacement facility," Falls testified. Tr. 370-
72. To make a significant investment in a renovated building at the old site "just didn't make any
sense to me at all," Falls testified. Tr. 363. Brenda Waltz ("Waltz"), the CEO at Garden Park,
agreed that if a hospital on the Coast was to be relocated, moving it away from the shoreline would
be important. Tr. 506.
The existing issues and code deficiencies at the old GCMC along with the recommendations
from both Cawthon and Falls demonstrate compliance with this prong of the criterion.
2. Health Management Intended to Replace and Relocate the old GCMC at the Time
It Closed.
In compliance with this prong of the criterion, Mitchell testified that at the time GCMC
Page 14 of 38
was closed Health Management was considering relocating the hospital and that different sites
were considered at the time of closing. Tr. 213, 222, 228-29; Ex. 16. Further evidence of the
parent company’s prior and long-standing intention to replace and relocate the hospital is
demonstrated in the notice of closure from GCMC and a local newspaper article, both prepared and
issued near the time of closing. Ex. 14, 16. Thus, there is evidence of the entity's long-term plan
for the hospital.
3. The Proposed Hospital Will Seek Participation in the State's Trauma System
The final prong of the applicable need criterion requires an applicant that proposes a project
involving the construction of an emergency department to include a statement indicating whether
the hospital will participate in the trauma system and the proposed level of participation. Ex. 7.
As stated in the Application, the new hospital will seek certification as a Level III trauma center.
Ex. 2, SRHS argued that the Gulf Coast area has ample trauma centers and the addition of another
participating hospital would dilute specialty coverage at area hospitals. Tr. 563-64, However,
Contestants admitted that current staff shares call requirements for trauma coverage, and it could
be anticipated that those specialties would continue to share call to provide trauma coverage. Tr.
502, 601-02. Furthermore, Eicher testified that in past conversations with the trauma division at
the Department, he understood the State needed more Level III centers, such as the one proposed,
to ease pressure on the Level I and Level II centers, Tr. 173. Regardless, as the Contestants' expert
agreed, the criterion simply requires an applicant to state its plan regarding trauma participation,
a requirement which the Applicant met. Tr. 1143.
For these reasons, the Department's staff was correct in its findings that the Application met
the applicable Plan Need Criterion for the replacement of an existing hospital.
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B. The Hospital's Proposed MRI Service Meets the Applicable Plan Criteria.
As part of the CON Application, GCMC sought authority provide MRI services at the
replacement hospital. Ex. 2. The Staff Analysis determined the Applicant had complied with the
Plan's MRI criteria. Ex. 3. While the Plan contains additional requirements, with which the
Applicant complied, the only contested aspect of the criteria concerned the Applicant's projection
that it would perform 2,700 scans by the end of the second year of operation. Ex. 8. That portion
of the Plan states,
1. Need Criterion: The entity desiring to offer MRI services must document
that the equipment shall perform a minimum of 2,700 scans by the end of the second
year of operation . . . .
Ex. 8 (bold removed). Prior to the hurricane, GCMC operated a fixed 1.5T unit. Tr. 403;
Ex. 3. During Eicher's testimony, he mistakenly stated that GCMC currently provided MRI
services; however, after Garden Park's attorney brought the mistake to his attention, he
acknowledged he had misunderstood the current MRI providers on the Coast, but testified the MRI
portion of the Application still complied with the Plan. Tr. 109, 200. Eicher testified since GCMC
previously provided MRI service, the Department would anticipate it would perform a similar
number of scans; that in compliance with Plan requirements, the staff calculated the need for the
MRI service compared to the population and state's MRI use rate; that the staff reviewed the
projected utilization and projected population; and that a proposed trauma center would need an
MRI unit. Tr. 100, 109, 111, 200. Though the Application proposed a higher use rate per 1000 in
population, both the proposed use rate and the Department's use rate resulted in a projected number
of procedures which complied with the Plan's methodology of 2,700 scans by the end of the second
year of operation. Ex. 2, 3; Tr. 403-04.
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In addition, testimony at the hearing demonstrated that the unit proposed in the Application,
a 3.0T, was a stronger unit than what was readily available on the Coast. Tr. 1058-59. One of the
physicians at Singing River testified that the images obtained from a 3.0T unit are better and
obtained in a shorter period of time. Tr. 1051, 1053-54. The doctor also testified that if Singing
River bought another unit, he would want a 3.0T unit such as the one proposed. Tr. 1059.
The Department found, and testimony supported its finding, that the Applicant met the Plan's
MRI Criteria.
C. The Hospital's Proposed Obstetric Service Meets the Applicable Plan Criterion.
Also as part of the CON Application, GCMC sought authority to provide OB services at the
replacement hospital. Ex. 2. Like MRI, prior to closing GCMC, the hospital offered obstetric
services and proposes to dedicate the same number of acute beds as OB beds that it previously used.
Tr. 404. The applicable criterion, in Section 103, which was addressed in the Application, primarily
requires that an applicant demonstrate that it will deliver 150 babies. Ex. 2, 9. Prior to closing,
GCMC was delivering 150 babies. Tr. 404. The Department, after reviewing the Application and
Plan, agreed the Applicant met the Plan's criteria for obstetric services in that the replacement
hospital would deliver 150 babies. Tr. 404; Ex. 3.
VI. COMPLIANCE WITH THE CON MANUAL GENERAL REVIEW CRITERIA
In addition to complying with the requirements of the State Health Plan, applicants for a
CON must meet the general review criteria in the CON review manual. The CON Manual contains
certain rules, regulations, and procedures to which the Department must adhere in considering
whether to grant or deny a CON application. The CON Manual contains sixteen
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general review criteria by which CON applications are judged. As discussed below, the testimony
and evidence presented at the Hearing demonstrated substantial compliance with the General
Review ("OR") Criteria. The Staff Analysis considered the GR Criteria and determined the
Application complied with each applicable one. Ex. 3. Instead of restating the findings in the Staff
Analysis which were not questioned by the Contestants (or which have been discussed above), the
discussion below concerns those GR Criteria with which the Contestants sought to demonstrate the
Applicant had failed to comply.
A. GR Criterion 3, the Applicant Considered the Availability of Alternatives.
As set forth in the Application and Staff Analysis, the Applicant considered four alternatives
to the proposed project which the Department's staff reviewed - relocate to a proposed location north
of the old hospital; not reopen; construct fewer than 144 beds; or, renovate the old GCMC at the
existing location. Tr. 120-21; Ex. 2, 3. While Luke testified he thought the alternative the
Applicant should have chosen was to not reopen and let the beds expire or construct fewer beds,
none of the Contestants' witnesses disagreed that the proposed location was a poor location or that
the Applicant failed to consider alternatives. Tr. 1102, 1112. In addition[,] none of the Contestants'
witnesses testified that assuming the hospital was returned to service that it should do so at its
current location. Though SRHS and Memorial argued in their brief that renovating the building at
its existing location should have been more thoroughly considered by the Applicant, testimony both
from the Applicant and Eicher demonstrated that the expenditure of large sums of money at the
current location near the shoreline was not suitable for investment or patient care, especially when
the population has shifted away from the existing location. While Luke may have preferred the
Applicant to choose another alternative, the
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Applicant's choice to relocate and replace the hospital in an area the Department agreed was a good
location does not demonstrate the Applicant failed to consider alternatives. Thus, the Applicant
complied with this General Review Criterion.
B. GR Criterion 4, the Proposed Project Is Economically Viable.
The Application, Staff Analysis and testimony at the hearing demonstrated that the proposed
project will be economically viable. This genera] review criterion requires an applicant's financial
projections be reasonable. Ex. 11.
In order to demonstrate the economic viability of the project the Department's staff
considered and analyzed the Applicant's projected utilization level and found it reasonable[,] given
the area's population growth. Tr. 37, 123-24, 162, 165. While Contestants attempted to rely on
historical utilization numbers both at GCMC and at the competing hospitals to question the
Applicant's utilization projections, they did not present testimony or evidence which demonstrated
the Applicant's utilization projections were unreasonable. Thus, while the historical numbers do
show a decrease in utilization, Eicher explained that the staff "factored in future years, so there
would be future population growth and future needs," and stated he couldn't simply "look at
historical data that only sets the trend to start with . . . you still [have] to project out, and that's what
the Applicant has done here." Tr. 124.
Dan Sullivan ("Sullivan,”), an expert in healthcare planning and healthcare finance, testified
the proposed project is financially feasible. Tr. 321, 323. Sullivan testified that the approach taken
by the Applicant to prepare the financial projections and utilization projections was reasonable. Tr.
327, 341. He testified,
There's no such thing as an accurate projection because a projection is something
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that happens in the future. It's how reasonable it is. And I think that's the test that
we're talking about is, are you basing the projections on reasonable underlying
assumptions? In this case, I think the application was based on reasonable
underlying assumptions.
Tr. 341 (internal citations omitted). Sullivan tested the reasonableness of the Applicant's projections
by applying more conservative assumptions to ensure the project was economically viable,
especially as the projections related to staffing and salaries. Tr. 329, 331-32, 335-39; Ex.
24. Sullivan's testimony regarding his review and analysis of the financial projections demonstrated
the project was economically viable, and the Contestants failed to put forth any substantial evidence
suggesting otherwise. The Applicant thus demonstrated its proposed project was economically
viable in compliance with this GR Criterion.
C. GR Criterion 5, the Applicant Demonstrated the Need for the Project.
General Review Criterion 5 states that "one or more of the following items may be
considered in determining whether a need for the project exists." Ex. 11. By the Manual’s own
language, not every subpart of GR Criterion 5 has to be applied, and as stated in GR Criterion 5, not
every subpart is applicable to a proposed project. In finding the Applicant complied with GR
Criterion 5, Eicher explained the staff reviewed the Application under GR Criterion 5 by reviewing
the discharges for the service area, GCMC's historical utilization, area hospitals' historical
utilization, projected utilization, population projections, proposed services, proposed location,
projected patient mixes, and the likelihood that the population would utilize the hospital. Tr. 129-
133.
1. Subpart 5(a).
Subpart 5(a) states the Department may consider the "need that the population served or
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to be served has for the services proposed to be offered . . . . " Ex. 11. In order to ensure the
replacement hospital remained accessible to the population but moved away from the coastline,
Falls reviewed the patient population the old GCMC served and the patient population that the
replacement hospital would serve. Tr. 372-73; Ex. 29. Falls determined that the previous GCMC
and the replacement hospital would serve the same zip codes, though the primary and secondary
service areas would be reversed because of the shift in population as most of the growth in
population is in northern Harrison County. Tr. 373-75; Ex. 29. Falls reviewed both the county
population growth and zip code level growth. Tr. 386. From the time the Application was prepared
to the time of the hearing, new data from ESRI (a national demographic data house which is
normally relied upon by experts) published its 2016 population projections which Falls had
originally extrapolated for the information in the Application. Tr. 386-87; Ex. 29. ESRI's new
projections confirmed a growth in the proposed service area by 2016. Tr. 388. With the 2010
Census data now available, the information shows that the growth in some zip codes along the Coast
is "actually much greater than we anticipated," in the Application[,] Falls testified. Tr. 388. In
addition to more up-to-date ESRI projections, since the filing of the Application, the Institutions for
Higher Learning (IHL") released its population projections which demonstrate a substantial increase
in population from that originally projected for Harrison County by 2015 and with a continuing
increase into 2020. Tr. 389; Ex. 30. Per the IHL projections, every county in General Hospital
Service Area 9, the applicable Service Area, will experience population growth. Tr. 389-90; Ex. 30.
Luke agreed there was a 12% increase in population projected from 2010-2020 in Harrison County,
and for the three county coastal area there would be a growth rate projected of 10.9%. Tr. 1147-48.
The growth in population is "important because the growth
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will drive the number of discharges and whatever impact there might be on existing providers,"
Falls stated. Tr. 389.
In addition to the general population growth, Falls testified that the 65 and older population
in the projected primary and secondary service areas was expected to grow at about 32.7 % between
2011 and 2016. Tr. 391. Falls testified the 65 and older population ''uses hospital services . . . at
about three times the rate as the rest of the population," and "drive[s] to a large extent the utilization
of inpatient care." Tr. 391; Ex. 29 at 35. Luke testified between 2010 and 2017 the growth rate for
those 65 and over was 36% in Harrison and Jackson Counties alone. Tr. 1149"50. Falls concluded
the population growth in the area ''provides a population base sufficient to support the relocation and
reopening of Gulf Coast Medical Center and limit[s] to some extent the impact on the other
hospitals in the Service Area, with the exception of Biloxi Regional Medical Center." Tr. 391.
2. Subpart 5(b).
Falls testified that the subpart which most closely applies to the Application is GR 5(b). Tr.
407. Subpart 5(b) states:
In the case of a relocation of a facility or service, the need that the population
presently served has for the service, the extent to which that need will be met
adequately by the proposed relocation or by any alternative arrangements . . .
Ex. 11. In addition to the projected population growth discussed above, the proposed hospital was
planned to be accessible to both the patients it served prior to its closure and to those it plans to
serve -all in the same service area. Tr. 408. It was also planned in order to capture the same
medical staff, to the extent they remained in the area, as it previously had at GCMC. Tr. 408.
Furthermore, while the Contestants argued that the service area hospital's should reach the
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benchmark of a 60% occupancy level prior to the approval of new beds, this benchmark is not
applicable to this Application as that occupancy threshold is utilized tor acute care bed expansions,
not the replacement of an existing hospital and existing beds. The Applicant demonstrated that the
proposed hospital would be accessible to its anticipated patients and to areas of population growth.
3. Subpart 5(c).
Subpart (c) allows the Department to consider the current and projected utilization of like
facilities/services to determine the need for additional facilities/services. Ex. 11. Testimony
demonstrated that area hospitals were expanding services and expeliencing increased demand.
SRHS is undertaking capital projects to handle the patient demand on the Coast including adding
Level II rehabilitation beds, renovating rooms, modernizing the hospital, and undertaking
mechanical and electrical upgrades. Tr. 584-85. In addition SRHS is currently expanding OSH to
add observation beds. Tr. 586. This 84,000 square foot tower addition will allow OSH to re-utilize
acute beds that were being used for observation patients. Tr. 586-87, 590. This re-utilization is
supported by one of OSH’s physicians who stated in the local newspaper, "Beds are definitely
needed at the hospital. It's going to allow us to take care of more patients here in the community.
The community is growing." Tr. 587; Ex. 40. In addition, an administrator at OSH stated in that
article, "On occasion, we have been on diversion, which is a situation we're really trying to avoid
because then we're looking at transferring patients to our sister facility." Tr.
588; Ex. 40. In addition, Kevin Holland ("Holland"), SRHS's chief operating officer for
hospital operations, agreed that both OSH and the emergency room have been on diversion. Tr.
588. The OSH administrator also stated that "our Service Area has been probably one of the
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highest growth rates in the region." Tr. 588; Ex. 40. Holland and Chris Anderson ("Anderson"),
the CEO for SRHS, testified the hospital and its clinics had experienced an increase in volume of
various services from 2007 to 2010. Tr. 591-92, 948-49. SRHS also opened a clinic at Cedar Lake,
staffed with employed physicians, near the proposed hospital location, in an area Holland testified
needed additional physician services. Tr. 593-94, 934. Testimony also demonstrated that Memorial
owns over forty clinics, two of which are in Biloxi, whose physicians are aligned with the hospital
and make referrals to Memorial. Tr. 981-83. As discussed below, and as the Department found,
the proposed project will not have a significant impact on the current hospitals' operations. Tr. 135.
4. Subpart 5(d).
As to subpart 5(d), the Manual states the Department may consider
The probable effect of the proposed facility or service on existing facilities providing
similar services to those proposed will be considered. When the service area of the
proposed facility or service overlaps the service area of an existing facility or
service, then the effect on the existing service may be considered. The applicant or
interested party must clearly present the methodologies and assumptions upon which
any proposed project's impact on utilization in affected facilities or services is
calculated. Also, the appropriate and efficient use of existing facilities/services may
be considered.
Ex. 11. Falls testified that while there will be some discharges coming from the other hospitals,
it will be about the same amount that was served by Gulf Coast Medical Center
before it started slowing down and closed ultimately in 2008. But there is growth
now in this area that actually exceeds what was going on or even projected to happen
prior to Hurricane Katrina. . . . So that additional growth will ultimately eliminate
any adverse impact in the near term. . . . [I]n the long term or the near term, the
population growth would appear to wipe out any negative effect on the other
hospitals.
Tr. 408-09. Based on the staff's review, the Department determined there would not be an
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adverse impact on other area hospitals. Tr. 135. After reviewing GCMC's occupancy rate prior to
closing, the occupancy rates for 2010, and the projected population increase and projected
utilization, the Department concluded the reopening of the hospital would not have an adverse
impact on acute care providers or residents. Tr. 135, 137. Mitchell testified that he believed the
worst adverse impact would be on Biloxi Regional but that he anticipated it would remain
successful since it previously competed with GCMC. Tr. 217. See my discussion under General
Review Criterion 8 also.
5. Subpart 5(e).
As to subpart (e), the Manual states the Department may consider community reaction to the
proposed facility. Ex. 11. Eicher testified the staff reviewed all the comment letters received on
the Application, both for and against the project. Tr. 197-98. The Mayor of Biloxi, A. J. Holloway
("Holloway"), testified he supported the relocation of GCMC as did his constituents in Biloxi since
having a hospital in Biloxi that was away from the Coast was very important for the city's medical
care. Tr. 473. Holloway also testified that after the hurricane the population declined, the
population was now increasing, and the proposed location was near that growth and would be a
"great asset to the City of Biloxi." Tr. 473-75.
In addition, Eicher testified regarding the potential for harm to the public if the project was not
approved. He testified,
Well, at some point in the not near distant future, 60 months would pass with it not
being open and operating, and that would trigger the requirement under the law that
for this hospital to reopen, it would have to show a need for a new hospital. And
then that would be analyzed under the existing formula that’s in the Plan. The
problem I see with the Coast recovery and the population growing in the future is
that they would be cut off by this hospital and these number of beds and the scope
of these services potentially for a very, very long period of time.
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And so with that being said, there would be one hospital left in Biloxi to handle all
the needs in that localized area and just a few other hospitals. It would be different
if I didn't have an Applicant that says, ‘We're willing to make this capital
expenditure. We're willing to relocate this hospital away from storm damage and
have better access, and we project reasonable utilization to get back and have a track
record of utilization by the community.’ So, in my sense, they are just trying to get
back to where they were and then an improved situation in terms of access and
further away from hazards such as hurricanes.
Tr. 179-80. Without the project[,] Eicher testified, "it would be a very long time before there could
be a new hospital anywhere on the Gulf Coast," based on the Plan criteria for new hospitals so that
without approval, the community would lose 144 acute beds "potentially forever." Tr. 181.
The Staff Analysis, Eicher's testimony, other evidence and testimony presented at the
Hearing, and the discussions above demonstrate that the Application does comply with GR Criterion
5 and its subparts.
D. GR Criterion 8, the Applicant Demonstrated It Will Not Have a Significant Adverse
Impact on the Existing Providers.
General Review Criterion 8, states the Department, as it deems appropriate, will consider
the proposed project's relationship to the existing health care system. Specifically this criterion
states, the Department may consider[:] "The relationship of the services proposed to be provided
to the existing health care system of the area in which the services are proposed to be provided."
Ex. 11.
1. The Applicant Demonstrated Through Its Application and Expert Testimony that the
Proposed Project Will Not Have an Adverse Impact on the Existing Providers.
In order to determine if the replacement hospital would have an adverse impact on the
existing hospitals, Falls compared the service areas of the contesting hospitals on the Coast and the
distance away from each hospital that a majority of a hospital's patients originate. Tr. 376,
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379, 381. Using discharge data, he was able to plot the geographic epicenter of each zip code as a
proxy for the location of the hospitals’ patients.3 Tr. 378; Ex. 29. While there is overlap between
some of the Contestants and the proposed hospital, Falls testified overlaps were not uncommon. Tr.
383. Overlapping service areas are "fairly typical in cities that have more than one hospital that are
located relatively close together. It’s not at all unusual,” Falls stated. Tr. 383. The Department also
determined the reopening of services that previously existed would not have a negative impact on
the service area since the hospital would come back into service as it previously was. Tr. 139-140.
Falls agreed stating that the overlap previously existed prior to 2008 when GCMC was operating
and drawing patients from the same area. Tr. 383.
Testimony at the Hearing and the Application itself demonstrated that the Applicant
anticipates a substantial portion of patients at the replacement hospital will be pulled from Biloxi
Regional, due to its proximity and anticipated medical staff overlap, with approximately 36% of the
estimated patients at the new hospital coming from Biloxi Regional by the third year of operation.
Tr. 217. 392; Ex. 2. Thus, the impact on other hospitals will average between a 10-13% reduction
in volume. Tr. 392. However, given the continuing population growth in the area, the impact will
be “time limited,” Falls testified. Tr. 393.
2. The Hospitals Attempted to Demonstrate a Financial Adverse Impact on Their
Operations by Limiting Their Service Area to Thirteen Zip Codes.
Thomas Davidson ("Davidson"), the Contestants’ expert in healthcare planning and healthcare
finance, testified that the replacement hospital would have a negative impact on the other hospitals
because the existing decreasing hospital utilization could not absorb the 144 beds with the current
3
Luke attempted to discredit Falls' use of a zip code epicenter by presenting another map of
what he thought showed the location of the population's epicenter. Tr. 1132; Ex. 62. However, Falls
demonstrated on redirect that Luke used a different type of file to plot his points on Ex. 62. Tr.
1162. While the information shows "essentially the same thing," Falls testified the information he
used to plot the population epicenter on his Ex. 29 could not be compared to the information Luke
attempted to use because it is from two different data sources. Tr. 1162, 1164-65.
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population growth. Tr. 723-24, 740. Davidson testified the hospitals could not absorb the 144 beds
coming back on-line even though testimony demonstrated an improvement in finances for some of
the Contestants through 2010. Tr. 942, 944-45, 987-88. And, Luke testified that the purpose of the
CON law is not to protect providers. Tr. 1155-56. According to Luke, whether a non-profit makes
10 million or 10 thousand dollars does not matter as long as the hospital is able to carry out its
public mission, and likewise, if a for-profit hospital can carry out its mission, the amount of money
made does not matter. Tr. 1156-57.
To demonstrate the negative impact the replacement hospital would have on the contesting
hospitals, Davidson analyzed the Applicant’s stated primary and secondary service areas (which is
comprised of only 13 zip codes) compared to the 2011 admissions by hospital. Tr. 752-55; Ex. 50.
By calculating the market share for each hospital from the 13 zip codes proposed as the primary and
secondary service area, Davidson showed an overlap in the service area. Tr. 755-57. After
calculating the percentage market share by hospital within those 13 zip codes, Davidson used the
Application's projections for patient days and admissions to calculate an "adjusted patient day." Tr.
759. (The adjusted patient day, by taking into account total patient revenues divided by inpatient
revenues and multiplying that by the patient days, provides a patient day that reflects inpatient and
outpatient utilization. Tr. 759.) The Application projected 32,719 patient days in year 3, which
Davidson adjusted to 60,776 adjusted patient days. Tr. 759-60. Then Davidson looked at the year
3 projected patient admissions of 8,276, from the
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Application, and determined only 420 admissions could be attributed to population growth, and that
growth only accounted for 5.1% of the total projected admissions for the hospital in year 3. Tr. 763;
Ex. 50. He then decided that left 94.9% of patient days to come from somewhere other than
population growth to reach the replacement hospital’s needed adjusted patient days. Tr. 763-64; Ex.
50. Taking the GCMC adjusted patient days, Davidson applied the Application's division between
primary and secondary service area of 50% patients from the proposed primary service area, 45%
from the proposed secondary service area, and 5% from other areas. Tr. 764; Ex. 50. He then
applied his calculated market shares to the adjusted patient days for both the primary and secondary
service area to determine how many adjusted patient days he thought each hospital would
contribute. Tr. 765; Ex. 50. Davidson then also reviewed the potential loss of patient days by
accepting that 35% of admissions would come from Biloxi Regional and concluded that some
hospitals would be contributing more than others based on their market shares. Tr. 773; Ex. 50.
After determining the adjusted patient days each hospital could be expected to contribute, he found
the "contribution margin" for each hospital. Tr. 767. (The contribution margin is the additional
revenue the hospital makes less the money that it has to spend to provide the patient day. Tr. 767.)
By applying the hospital's contribution margin to the anticipated loss of adjusted patient days,
Davidson calculated how much Garden Park could anticipate losing as a result of the loss of patient
days to the replacement hospital. Tr. 768; Ex. 50. (Another of the Contestants' experts admitted he
was unaware of any requirement that the Department calculate or utilize a methodology to calculate
adverse impact. Tr. 842.) From this calculation, Davidson testified during sealed testimony that
Garden Park would suffer a loss. See Tr. 771; Ex. 50. (Davidson admitted in his sealed testimony
that he did not question a change in
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bad debt between 2011 and 2012 or payments to Garden Park's parent company, both of which
could have impacted Garden Park's projected net income.) See Tr. 801-02,895-96. Martin Brown
(“Brown"), an expert in healthcare finance, testified regarding the financial impact, using the
contribution margin, for Memorial, SRHS and Garden Park by using the anticipated lost adjusted
patient days compared to the hospitals’ 2010 net income numbers. Tr. 815, 822, 824; Ex. 52. He
testified the project would have a negative adverse financial impact on SRHS and Memorial. Tr.
834.
Though the Applicant only anticipates a profit of 8.9 million a year according to the
Application 's projections, according to Brown's calculations under seal, depending on what
percentage of days are used, Memorial, Garden Park and SRHS would lose money.4 See Tr. 828-32;
Ex. 52. However, as explained below, Brown's and Davidson's calculations were based off of
population in only 13 zip codes as opposed to the entire three coastal counties - Harrison, Hancock
and Jackson. Furthermore, Brown's and Davidson's calculations were based off of 2016 population
projections (the original anticipated third year of operation for the replacement hospital) though
testimony demonstrated that given the CON delay, the hospital's third year of operation will more
likely be 2020, a year with more population projected.
3. Through the Applicant's Rebuttal Testimony It Demonstrated that the Impact
to Area Hospitals when Considering the Contesting Hospitals' Appropriate
Service Area Was Minimal.
The Application set forth the proposed hospital's primary and secondary service area. Those
4
There was also testimony at the Hearing speculating on the impact of Affordable Care Act
and whether or not Mississippi would expand its Medicaid program which could have an impact on
the DSH and UPL payments to all hospitals. The Contestants argued this would further decrease
the hospitals' funds; however, we have yet to see the impact the federal healthcare changes will
actually have on hospitals. Thus, it is inappropriate to consider the still uncertain monetary impact
as a result of the federal government's rules in this state CON matter.
Page 30 of 38
service areas were made up of 13 total zip codes in Harrison, Hancock and Jackson Counties, from
which the Applicant expects to obtain patients. Tr. 1184-85; Ex. 2. However, the Contestants'
experts took the Applicant's projected patient days, in the third year of operation, applied those to
the area hospitals' 2010 patient utilization numbers to determine if there was a detrimental impact
from those 13 zip codes. Tr. 1173. Not only did the Contestants compare 2010 information to
projected year 3 data, the Applicant's projections were
applied without consideration given to growth from any of the other three counties
outside of the [proposed] Service Area or patients that come from outside of those
three counties or . . . the remaining hospitals in the county. . . . [B]y designing it that
way, you get this horrendous detrimental impact. I mean, it's maybe one of the worst
detrimental impacts I’ve seen in over 30 years of practice. . . . But . . . when you
isolate . . . only the impact of the proposed hospital without also having an
assumption for growth when you've - already put the growth in the impact part of it,
but you don't consider the corresponding growth anywhere else, it's a real one-sided
equation, and I would expect that kind of overstatement of impact,
Falls testified. Tr. 1173-74. While Davidson's and Brown's calculated impact within only those 13
zip codes may be accurate, Sullivan stated that the competing hospitals looked only at growth in
the projected 13 zip code service area,
they didn't consider the growth within the broader areas that those hospitals, the
three hospitals that we're focusing on, serve. . . . And so they're looking at the loss
of discharges or adjusted patient days in those zip codes, but they weren't looking
at growth outside of those zip codes.
Tr. 1198-99, 1206. Furthermore, the anticipated year 3 information in the Application contemplated
year 3 of operation to be 2017. Tr. 1175. However, given the Contestants delay, appeal process, and
design and construction process, the Applicant anticipates the third year will
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be near the middle of 2020, at a time with even more population growth projected. Tr. 5 1175,
1178.
In order to clarify the Contestants' testimony of the anticipated negative impact, Falls utilized
the Contestants' presented methodology, only changing population totals through 2020 (instead of
2017) to more accurately identify the area at the time of the anticipated third year of operation. Tr.
1176; Ex. 64. Falls maintained Davidson's and Brown's calculation of the adjusted patient days that
would be corning from the other hospitals to meet GCMC's projections. Tr. 1176; Ex. 64. After
taking 34% of adjusted patient days from Biloxi Regional, 40,085 patient days could be anticipated
to be taken from the other hospitals. Tr. 1176; Ex. 64. Falls then took the other hospitals 2010
acute care patient days and multiplied them times the adjusted patient day factor for the remaining
hospitals in the three[-]county area to reach the adjusted patient days of 359,398 in 2010. Tr. 1177;
Ex. 64. The population for those three counties (371,250) when divided by the adjusted patient days
gives an adjusted patient day per hospital of 0.97. Tr. 1177; Ex. 64. When the adjusted patient day
per entity is compared to the anticipated population for the three counties in 2020, the total adjusted
patient days are 398,570 which gives 39,172 adjusted patient days from growth between 2010 and
2020. Tr. 1177; Ex. 64. That growth, added to Biloxi Regional’s adjusted patient days of20,691,
results in 59,863 patient days, subtracted from the Applicant's projected adjusted patient days leaves
only 913 adjusted patient days to come from the other hospitals when the population of the entire
three county area
is considered. Tr. 1177; Ex. 64. Falls testified since 85% of the aggregate of the contesting
5
The Contestants in their briefs took issue with Falls extending the population growth further
from the date of the hearing based on the delay in construction caused by the CON contest. While
this does expand the projections past a five-year period, it is not feasible that the proposed hospital's
third year of operation will occur prior to that time[,] given the hearing and probable appeal.
Page 32 of 38
hospitals' patients come from the three-county area, in order to determine the impact you should
look at the counties instead of only the 13 zip codes of the projected primary and secondary service
area. Tr. 1196. "The [projected] Service Area, wasn't constructed for purposes of determining the
impact on the other hospitals but to show the relationship between the discharges at the proposed
replacement hospitals and the remaining hospitals," Falls testified. Tr. 1196; Ex. 32.
By looking at the growth within the three counties from which the contesting hospitals draw
patients, instead of solely focusing on the growth within the Applicant's projected 13 zip code
service area, the impact to the contesting hospitals is minimal as a result of the project. Sullivan
testified the contesting hospitals "have the ability to mitigate [their anticipated loss] by drawing
patients from other portions of their Service Area outside of that 13 [zip] area, and there's a fair
amount of population out there," as there is another 200,000 in population projected outside of the
13 zip codes. Tr. 1204. Sullivan testified,
There's different ways to calculate impact, and that's what we've been talking about.
And if you want to look at just incremental impact from one geographic area, you
can do that, but then don't try to take that impact and apply it to the bottom line of
the hospitals, because if you do that, then you've got to take into account that the
growth comes from everywhere else. And once they took that next step, then they
had to add in the growth that came from everywhere else.
...
Mr. Davidson's the one who adopted the concept that you'd take into account growth.
And If you're going to take into account growth, you have to take into account
growth from all the areas in which the hospitals draw patients. So the impact within
the [proposed] Service Area is much larger, but the impact when you consider the
growth outside the [proposed] Service Area reduces the impact [to the hospitals]
within the [proposed] Service Area.
Page 33 of 38
Tr. 1206, 1208. By spreading the 913 adjusted patient days out over the contesting hospitals, based
on Davidson's market share percentages and Brown's contribution margins, the impact is
significantly diminished. Tr. 1205; Ex. 66. Instead of the millions of dollars impact the Contestants
presented, by simply accounting for the entire three county area from which the hospitals' draw
patients instead of only 13 zip codes, Memorial could potentially lose $542,349, Garden Park
$149,695, and SRHS $265,225 as a result of this project. Tr. 1206; Ex. 66. These potential losses
also assume that the hospitals do not make any changes in their operations to account for the
replacement hospital. With losses in those amounts, the resulting net income for each of the
contesting hospitals remains positive and should not significantly impact the Contestants or their
ability to provide indigent care. Ex. 66.
For these reasons, the Applicant complied with General Review Criterion 8.
E. GR Criterion 9, Availability of Resources.
General Review Criterion 9 states the Department may consider the availability of resources
including health personnel and available funds for the services proposed to be provided. This
Criterion includes looking at the Applicant's recruiting plan, current satisfactory staffing and
alternative resources. Ex. 11.
The staff considered that prior to closing GCMC had appropriate staffing, reviewed the
Applicant's plan for recruiting both physicians and healthcare personnel, and reviewed the Applicant's
proposed financing source in determining the Applicant's compliance with this Criterion. Ex. 3. The
Applicant stated it anticipated sharing medical staff with Biloxi Regional. Ex. 2. Further, while the
Contestants attempted to argue that there was a healthcare personnel shortage, testimony and evidence
demonstrated at least some of the Contestants have been adding
Page 34 of 38
healthcare personnel over the last six years and that physicians frequently share call coverage. Tr.
502, 599, 601-02; Ex. 43. Thus, the Department correctly found that the Applicant complied with
this Criterion.
VII. COMPLIANCE WITH STATE HEALTH PLAN'S GENERAL CERTIFICATE OF
NEED POLICIES
In addition to the service-specific criteria and standards for the replacement of healthcare
facilities without the addition of acute care beds, the Plan requires an applicant to demonstrate
compliance with four general health planning priorities: (1) to improve the health of Mississippi
residents (2) increase the accessibility, acceptability, continuity and quality of health services; (3)
to prevent the unnecessary duplication of health resources; and (4) to provide some cost
containment. In its Staff Analysis and as explained by Eicher during his testimony, the Department
found that the proposed project was consistent with these four overall goals. Tr. 26; Ex. 10. Eicher
testified there was no formula specified in the Plan to review these goals, instead, "every application
is looked at in total, the sum total of the entire project, compliance with the Plan, and the general
review criteria to determine if it’s within these goals or outside these goals." Tr. 155.
A. The Application Does Not Propose an Unnecessary Duplication of Services.
Regardless of the Plan's preliminary statement that a "glut" of acute care beds exists
throughout the State, Eicher testified the proposed project was not an unnecessary duplication of
services. Tr. 83-84. Likewise, in CLC of Biloxi, the Court accepted the State Health Officer's
decision that bringing beds back on-line that were recognized by the State for planning purposes
through a replacement/relocation was not an unnecessary duplication of services. CLC of Biloxi,
Page 35 of 38
91 So. 3d at 637; Ex. 5. Falls also testified that putting the GCMC beds back into service with the
anticipated patient utilization would not become part of a glut of beds since the replacement hospital
would be operating those beds. Tr.405. To determine there was not an unnecessary duplication of
services for acute beds, MRI and OB services, the staff reviewed GCMC's prior utilization,
reviewed current hospital utilization, evaluated the population changes in the area, and reviewed the
proposed location. Tr. 83-84, 156-58. The staff also considered the population growth in the
service area in reaching its conclusion. Tr. 85.
B. The Proposed Project Promotes Cost Containment.
To determine that the project promoted cost containment, the staff determined that the cost
associated with the project was reasonable, especially compared to a significant renovation at the
same location with the likelihood of another hurricane. Tr. 86, 88. Falls echoed that thought by
testifying that "ultimately, reconstructing this facility in an area that is less vulnerable to [destruction
by a hurricane] is an element of cost containment." Tr. 407. Cawthon also testified that the
contractor's cost estimate for construction of the replacement hospital was reasonable. Tr. 264; Ex.
20.
C. The Proposed Project Will Improve the Health of Mississippi Residents &
Increase the Accessibility, Acceptability, Continuity and Quality of Health
Services.
Falls testified that the treatment of patients in the new hospital located within the Biloxi
community, where there is currently only one hospital, would improve the health of the residents.
Tr.406. In addition accessibility will be increased due to the new location near 1-10, and the
acceptability, continuity and quality of the facility will be improved because of the updated design
and new equipment. Tr. 406.
Page 36 of 38
The Department also recognized that GCMC was damaged by the Hurricane and that without
any changes in the hospital's elevation or new barriers, there is a probability that another hurricane
would cause damage and interrupt patient care. Tr. 38. The hospital Contestants presented
testimony from various hospital employees regarding Katrina's impact on their own hospitals and
their subsequent hurricane preparedness. See generally Tr. 489-94, 526-29, 552-53, 555-58, 861-63,
963-66, 997-1014; Ex. 56. Also, an expert in emergency management and preparedness from
Connecticut testified regarding hurricane preparedness in general. Tr. 1025-50. However, the CON
law does not consider surrounding hospitals' emergency plans. It is true that the Applicant stated
both in the Application and through its witnesses that the relocation/replacement of the old GCMC
further from the Gulf of Mexico would be more appropriate in the event of another hurricane. And
while the Applicant also testified that the damage suffered by the existing structure would be costly
to repair, especially in light of its proximity to the Gulf, the ability of the hospital Contestants to
implement and exercise their own emergency preparedness plans does not influence whether or not
the Application should be approved. From the Department's view, Eicher testified, moving the
hospital would be a "better decision because potentially the new location could receive little or no
damage . . . and may continue to operate potentially through another hurricane or other special
weather event.” Tr. 38. He continued by stating the
Department would like to see any replacement along the Gulf Coast take into
account the conditions that may exist on the property or location if another hurricane
would occur or another special weather event. As far as the [proposed] location, I
think it's part of the review of the site appropriateness, I think they did look at flood
zones, flooding potential, surge area, that kind of thing. The proximity to I-10 would
also help with evacuation if that would be needed and access and potentially better
likelihood that the facility would be able to maintain
Page 37 of 38
access to utilities and necessary transportation in and out, that kind of thing. So you
know, I hate to kind of say it this way, but if you are going to relocate, the further
north, the better. . . .
Tr. 39. As discussed in detail below, the proposed hospital location is in an area experiencing and
projected to continue experiencing population growth. Ron Luke ("Luke"), the Contestants' expert
in health planning and health economics, agreed that hospitals that seek to relocate should make
capital expenditures in areas of population growth to improve access. Tr. 1072, 1155.
For these reasons, the Application meets the Plan's four goals.
VIII. CONCLUSION AND RECOMMENDATION
Based on the substantial evidence presented at the Hearing, I find that the project proposed
by Harrison HMA, LLC d/b/a Gulf Coast Medical Center is in substantial compliance with the
statutes of the State of Mississippi, the requirements of the Fiscal Year 2012 Mississippi State
Health Plan, the Mississippi Certificate of Need Review Manual, and all of the adopted rules,
procedures and plans of the Department.
Therefore; I respectfully recommend that the CON Application for the
Construction/Relocation and Replacement of Gulf Coast Medical Center to be named The Hospital
at Cedar Lake together with the proposed MRI and obstetric services should be approved.
DATED this the 28 day of November.
/s/___________________________________
Cassandra B. Walter
ADMINISTRATIVE HEARING OFFICER
Page 38 of 38
CARLTON, J., DISSENTING:
¶35. I respectfully dissent, and would vacate and remand the decision of the Mississippi
Department of Health. See Miss. Code Ann. § 41-7-201(f) (Supp. 2014). My review of the
record and applicable case law reflects that the decision of the State Department of Health
is not supported by substantial evidence.6 The case law and the record herein reflect that the
statutory requirements applicable to establishing a new hospital apply in this case, and not
the less stringent requirements applicable to hospital relocations. However, the evidence
fails to show that the Department of Health considered whether sufficient need existed to
support building a new hospital in Biloxi. See Miss. Code Ann. § 41-7-193 (Rev. 2013). See
St. Dominic-Jackson Mem'l Hosp. v. Miss. State Dep't of Health, 87 So. 3d 1040, 1042 (¶1)
(Miss. 2012) (finding project constituted establishing a new hospital and not a relocation and
that no need had been shown to support the capital investment required for a new hospital);
St. Dominic-Madison Cnty. Med. Ctr. v. Madison County Med. Ctr., 928 So. 2d 822, 830
(¶32) (Miss. 2006).7
¶36. In St. Dominic-Jackson Mem'l Hosp, 87 So. 3d at 1050 (¶42), the Mississippi
6
A reviewing court may vacate a final order of the State Health Department regarding
the issuance of a certificate of need (CON) if it finds that the final order is not supported by
substantial evidence, or is contrary to the manifest weight of the evidence. Singing River
Hosp. Sys. v. Biloxi Reg’l Medical Center, 928 So. 2d 810, 811-12 (¶4) (Miss. 2006); Miss.
Code Ann. § 41-7-201(f). When reviewing the Department of Health's issuance of a CON
to a hospital, the appellate court must consider the substance of the proposal rather than its
label. Singing River Hosp. Sys. at 812 (¶8).
7
See also St. Dominic–Jackson Memorial Hospital v. Miss. State Dep't of Health, 728
So. 2d 81, 85 (¶13) (Miss. 1998) (finding that a medical center’s proposed relocation of
sixty-four beds to a new satellite campus actually constituted the establishment of a new
hospital and not merely a relocation, and thus required a showing of need for a new hospital
in that location).
23
Supreme Court recently found that an attempt by St. Dominic Hospital to relocate seventy-
one existing beds from Jackson to a new satellite campus in Madison constituted the
establishment of a new hospital, and not a relocation of the beds to an existing licensed
facility. Similarly, in the instant case, the relicensed beds are not being relocated to an
existing facility, but, rather, are being used to establish the bed capacity at a new hospital
facility without a determination of need for the capital investment of a new hospital in that
area or of any unnecessary duplication of services. Therefore, in this case, in accordance
with precedent, the decision of the Department of Health lacks sufficient basis and should
be vacated and remanded, since no evidence shows consideration of need for a new hospital.8
¶37. The supreme court has provided that when reviewing the State Department of Health's
issuance of a CON to a hospital, the reviewing court must consider the substance of the
proposal, rather than simply its label. See Miss. Code Ann. § 41-7-201(f); Singing River
Hosp. Sys. v. Biloxi Reg’l Med. Ctr., 928 So. 2d 810, 812 (¶8) (Miss. 2006). Despite its
label, a review of the record shows that this case fails to show a mere reopening of a hospital
that ceased to operate for less than sixty months, as is allowed by Mississippi Code
Annotated section 41-7-191(1)(a) (Rev. 2013), and the evidence fails to support any finding
that this project constitutes the relocation of an existing facility involving no capital
expenditures, as allowed by section 41-7-191(b). Section 41-7-191(c) permits voluntary
8
See St. Dominic-Jackson Mem'l Hosp., 728 So. 2d at 91-92 (¶¶39-42) (distinguishing
between relocation and establishment of a new facility) (citing Ex Parte Shelby Medical
Center, Inc., 564 So. 2d 63 (Ala. 1990) (providing that a determination of need for a new
hospital is required to determine if sufficient need exists to support the capital expenditure
required to establish a new hospital and to comply with the state’s health plan)).
24
delicensed beds to be relicensed by a health-care facility to increase the number of its
licensed beds. However, in this case, the relicensed beds are not being added to any existing
licensed beds at any existing licensed medical facility. This statutory authorization to
relicense beds contemplates on its face the addition of the relicensed beds to an existing
licensed medical facility.9 The statutory power to relicense beds in order to increase the
number of licensed beds provides no authorization for the capital investment, construction,
and establishment of a new health-care facility in a new location. See Miss. Code Ann. § 41-
7-191(1)(c).
¶38. In the case relied upon by the majority, Queen City Nursing Center, Inc. v. Mississippi
State Department of Health, 80 So. 3d 73, 75-76 (¶2) (Miss. 2011), the opinion shows that
beds from a closed facility were added to a “then-existing” licensed facility in Lauderdale
County and that the then-existing facility was relocated within that same county, with
additional bed capacity. The opinion reflects that there was evidence of an existing need in
Lauderdale County for the existing licensed facility and the expansion of beds to that
existing licensed facility. Id. at 80 (¶14). The opinion also reflects that economies of scale
were realized by combining the beds of the closed facility with the existing facility. Id. at
82 (¶22).
¶39. In this case, in contrast to Queen City Nursing Center, HMA has no existing
“licensed” health-care facility in Biloxi to which it seeks to add the relicensed beds from the
closed hospital. Rather, HMA seeks to build a new hospital in Biloxi with bed capacity from
9
See Miss. Code Ann. § 41-7-191(c) (relicensed beds may increase number of
licensed beds).
25
the closed hospital. The relicensed beds herein are not increasing the number of existing
licensed beds at an existing licensed medical facility, as authorized by section 41-7-191(c).
Instead, HMA’s project requires a large capital investment to build a new hospital facility
to provide additional hospital services in that area, to be built at a new location in Biloxi with
relicensed beds from a closed hospital, without a determination of whether need exists to
support such.
¶40. The CON criterion seeks to improve the health of Mississippi residents; to increase
accessibility, acceptability, and continuity of care and quality of care; to prevent unnecessary
duplication; and to provide cost containment. Unnecessary duplication of capital investment
and medical services could result in excessive costs to the state and to patients.10 The beds
from the closed hospital herein are not being added to an existing licensed hospital, and no
evidence shows that the establishment of a new hospital could contain costs, could prevent
unnecessary duplication of services, or could be economically viable.11 In the Queen City
Nursing Center opinion, as acknowledged, the record showed an existing licensed nursing
home in Lauderdale County was meeting an existing and increasing need in that area. By
contrast, in this case, the record contains no evidence of consideration of the CON criterion
or of need, economic viability, or cost containment analysis for the large capital investment
10
See Miss. State Dep't of Health v. Mid-S. Assocs., 25 So. 3d 358, 364 (¶21) (Miss.
Ct. App. 2009); see also Miss. Code Ann. § 41-7-193 (certificate of need for new
institutional health service).
11
This case differs from CLC of Biloxi LLC v. Miss. Dep't of Health, 91 So. 3d 633,
638-39 (¶17) (Miss. 2012), wherein a nursing home was destroyed by a hurricane. The
supreme court found that the destroyed nursing home needed no new CON to rebuild since
substantial evidence in the record supported the finding of need for the nursing home services
in the area of the proposed location.
26
of a new hospital in Biloxi.12 Based on upon the foregoing, I respectfully dissent, since the
record contains no evidence that the Department of Health evaluated the applicable criterion
for the building of a new hospital. Since the decision and order of the Department of Health
lacks applicable evidentiary support, I would vacate and remand the order to the Department
of Health for further proceedings consistent with this dissent, and with instructions for the
Department of Health to evaluate need and applicable criteria for establishing a new hospital
in Biloxi. See Miss. Code Ann. § 41-7-201(f); see also Miss. Code Ann. § 41-7-191(1)(c).
12
St. Dominic-Madison Cnty. Med. Ctr., 928 So. 2d at 830 (¶32) (An application for
a CON filed by hospital that had a licensed capacity of 571 beds and wanted to relocate 100
beds sought a new hospital, and not a relocation, and, thus, in light of hospital's admitted
inability to meet the standards of need for a new hospital, there was no need to remand case
for further review by the Department of Health.).
27