GEATHERS, J.
These cross-appeals involve a decision of the South Carolina Administrative Law Court (ALC) upholding the issuance by the South Carolina Department of Health and Environmental Control (DHEC) of a Certificate of Need (CON) for hospital construction in Berkeley County to both Roper St. Francis Hospital-Berkeley (Roper) and Trident Medical Center, LLC (Trident) pursuant to the State Certification of Need and Health Facility Licensure Act, S.C.Code Ann. § 44-7-110 to -394 (2002 and Supp. 2014) (the CON Act). Trident challenges the issuance of a CON to Roper, arguing the "Bed Transfer Provision" in the 20082009 State Health Plan prohibits DHEC from issuing a CON for the transfer of beds from Roper's hospital in downtown Charleston to a hospital that has not yet been built.
On the other hand, Roper's primary position is that the ALC's decision should be affirmed in its entirety, but if this court accepts Trident's argument and reverses the issuance of a CON to Roper, then the issuance of a CON to Trident must also be reversed. Because we affirm the ALC's decision to uphold the issuance of a CON to both Roper and Trident, we need not address Roper's appeal issue.
In 2008, Berkeley County's estimated population was 158,140. However, there were (and still are) no acute care hospital beds licensed in Berkeley County. On August 13,
Chapter II.G.1 § (A)(4)(d), 2004-2005 State Health Plan (Fifty Bed Rule).
Trident proposed to build the new hospital on a twenty-one acre site adjacent to its existing freestanding emergency department and outpatient center, Moncks Corner Medical Center. Trident indicated it planned to convert the building that houses the emergency department into a medical office building and move the emergency department into the new hospital.
On May 21, 2009, DHEC conducted a joint project review hearing on the two applications. On June 26, 2009, DHEC approved both applications. DHEC also determined that Trident and Roper were not "competing applicants" and, thus, it could properly grant CONs to both. The term "competing applicants" is defined in section 44-7-130(5) of the South Carolina Code (2002) as
(emphasis added). When DHEC is considering competing applications, it must award a CON on the basis of which applicant most fully complies with the CON Act, the State Health Plan, project review criteria,
On July 6, 2009, Trident submitted two requests for final review conferences before DHEC's board (the Board), seeking
On August 7, 2009, Trident and Roper collectively filed three separate requests for a contested case review before the ALC. Trident sought (1) reversal of DHEC's determination that Trident and Roper were not competing applicants and (2) reversal of DHEC's issuance of a CON to Roper. Roper sought a decision either upholding DHEC's issuance of CONs to both applicants or finding that Roper was the applicant that most fully complied with the CON Act, the State Health Plan, project review criteria, and applicable DHEC regulations.
The ALC consolidated the proceedings for trial and discovery purposes. Beginning on January 30, 2012, the ALC conducted a contested case hearing that lasted through February 16, 2012. Prior to receiving testimony, the ALC granted Roper's motion for partial summary judgment, concluding that if the applicants were found to be competing, the matter would be remanded to DHEC for identification of the applicant that most fully complied with the CON Act, the State Health Plan, project review criteria, and applicable DHEC regulations.
On September 26, 2012, the ALC issued a written decision upholding DHEC's issuance of a CON to both Trident and Roper. In its decision, the ALC deferred to DHEC's interpretation of the Bed Transfer Provision and the Fifty Bed Rule and found that if both applications were approved, they would not exceed the need for acute care hospital beds in the area. On October 5, 2012, Trident filed a motion for reconsideration, which was denied on November 1, 2012. These appeals followed.
1. Did the ALC err in deferring to DHEC's interpretation of the Bed Transfer Provision?
2. Did the ALC err in concluding that Trident and Roper were not competing applicants?
The Administrative Procedures Act governs the standard of review from a decision of the ALC, allowing this court to
S.C.Code Ann. § 1-23-380(5) (Supp.2014). "An abuse of discretion occurs when the ruling is based on an error of law or a factual conclusion that is without evidentiary support." Fields v. Reg'l Med. Ctr. Orangeburg, 363 S.C. 19, 26, 609 S.E.2d 506, 509 (2005).
Further, this court may not substitute its judgment for the judgment of the ALC as to the weight of the evidence on questions of fact. Spartanburg Reg'l Med. Ctr. v. Oncology & Hematology Assocs. of S.C., LLC, 387 S.C. 79, 89, 690 S.E.2d 783, 788 (2010) (citing § 1-23-380(5)).
Trident does not challenge any of the ALC's findings of fact. Rather, Trident maintains that the ALC committed an error of law in deferring to DHEC's interpretation of the Bed Transfer Provision. Trident argues the Bed Transfer Provision prohibits DHEC from issuing a CON for the transfer of beds from an existing hospital to a hospital that has not yet been constructed. To address this argument, we will first discuss the general provisions governing CONs and then focus on the Bed Transfer Provision and the section of the 2008-2009 State Health Plan in which this provision can be found.
The purpose of the CON Act is to "promote cost containment, prevent unnecessary duplication of health care facilities and services, guide the establishment of health facilities and services [that] will best serve public needs, and ensure that high quality services are provided in health facilities in this State." S.C.Code Ann. § 44-7-120 (2002). To achieve these purposes, the CON Act requires (1) the issuance of a CON before undertaking a project prescribed by the CON Act; (2) the adoption of procedures and criteria for submitting a CON application and for review before issuing a CON; (3) the preparation and publication of a State Health Plan; and (4) the licensing of health care facilities. Id. DHEC is designated the sole state agency for control and administration of the CON program and licensing of health facilities. S.C.Code Ann. § 44-7-140 (2002). A person or health care facility must obtain a CON before, among other things, establishing a new health care facility or changing the existing bed complement of a health care facility. S.C.Code Ann. § 44-7-160 (2002) (amended 2010).
With the advice of a health planning committee, of which most of the members are appointed by the Governor, DHEC must prepare a State Health Plan for use in administering the CON program. S.C.Code Ann. § 44-7-180(A), (B) (2002) (amended 2010). The State Health Plan must include
§ 44-7-180(B). The State Health Plan must also include projections and standards for certain health services and equipment having "a potential to substantially impact health care cost and accessibility." Id.
DHEC is required to submit the State Health Plan to the Board for final revision and adoption at least once every two years. S.C.Code Ann. § 44-7-180(C). Finalization of the State Health Plan requires a public comment period and a public hearing. Id. ("[DHEC] shall adopt by regulation a procedure to allow public review and comment, including regional public hearings, before adoption or revision of the plan."). Because the legislature has required these stringent requirements for the State Health Plan's implementation, it is clear the legislature intended for the State Health Plan to be an enforceable document. Cf. Spectre, LLC v. S.C. Dep't of Health & Envtl. Control, 386 S.C. 357, 371, 688 S.E.2d 844, 851 (2010) (noting the stringent requirements for DHEC's enactment of the Coastal Management Program "suggest that the General Assembly did not believe it was meant to be an unenforceable document"); id. at 371-72, 688 S.E.2d at 851-52 (rejecting the argument that because the promulgation of the Coastal Management Program did not comply with the Administrative Procedures Act, the Coastal Management Program was not enforceable and noting the legislature "created a separate and more rigorous procedure for promulgation of the [Coastal Management Program] and, because DHEC acted
The State Health Plan has designated four regions of the state for the purpose of keeping an inventory of health facilities and services. E.g., Chapter II.A, 20082009 State Health Plan. Each region is further divided into service areas. Id. In the 2008-2009 State Health Plan and the 2004-2005 State Health Plan, most service areas consist of individual counties. However, in the 2008-2009 State Health Plan, two service areas consist of multiple counties: (1) the Tri-County Service Area, consisting of Berkeley, Charleston, and Dorchester counties; and (2) the Orangeburg/Calhoun Service Area.
Finally, DHEC may not issue a CON unless an application complies with the State Health Plan, project review criteria, and other regulations. § 44-7-210(C); see also S.C.Code Ann. Regs. 61-15 § 801.3 (2011) (amended 2012) ("[N]o project may be approved unless it is consistent with the State Health Plan."); S.C.Code Ann. Regs. 61-15 § 802.1 ("The proposal shall not be approved unless it is in compliance with the State Health Plan.").
In the present case, Trident contends Roper's proposed hospital is not consistent with the 2008-2009 State Health Plan because it does not comply with the plain language of the Bed Transfer Provision,
Chapter II.G.1 § (A)(4)(j), 2008-2009 State Health Plan (emphasis added). Trident argues this language allows DHEC to issue a CON for the transfer of beds between hospitals only when both hospitals already exist.
In 2009, the Board specifically addressed the Bed Transfer Provision in the 20042005 State Health Plan, which is identical to the Bed Transfer Provision in the 2008-2009 State Health Plan. The interpretation of the Bed Transfer Provision
The Board noted that DHEC's staff had properly interpreted and applied the 20042005 State Health Plan in approving the transfer of seventy-six acute care hospital beds from Palmetto Health Baptist Hospital in downtown Columbia to create Palmetto Health Baptist Parkridge, which was to be built in northwest Richland County.
Our supreme court has recently expounded on the application of statutes and regulations administered by an administrative agency. In Kiawah Development Partners, II v. South Carolina Department of Health & Environmental Control, the court stated:
411 S.C. 16, 766 S.E.2d 707 (2014) (Shearouse Adv. Sh. No. 49 at 11) (citations and internal quotation marks omitted).
The court further stated, "We defer to an agency interpretation unless it is `arbitrary, capricious, or manifestly contrary to the statute.'" Id. at 34-35, 766 S.E.2d 707 (quoting Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 844, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984)).
In Murphy v. South Carolina Department of Health & Environmental Control, our supreme court was presented with DHEC's interpretation of its regulation concerning state water quality certifications.
(emphasis added).
We note Trident argues that Roper's Charleston facility and its proposed new hospital in Goose Creek are not "affiliated hospitals" because the definition of "affiliated hospitals" in Chapter II.B of the 2008-2009 State Health Plan excludes two facilities whose relationship has been established for the purpose of transferring beds. However, the record shows that Roper is not attempting to establish a relationship with a legally separate entity that has its own network of existing hospitals. Rather, Roper seeks to expand its own network of hospitals with the intent to provide convenience for its existing patients residing in Berkeley County, who now travel to Roper's facility in downtown Charleston.
The remainder of the Bed Transfer Provision consists of a list of eight criteria with which a CON applicant must comply. See supra. The language in this list certainly accommodates those CON applications for the transfer of beds to a receiving
In any event, the Bed Transfer Provision is not a section unto itself—it is part of Chapter II.G.1 § (A) ("General Hospitals").
Hence, we must examine all the provisions of Chapter II.G.1 § (A) ("General Hospitals") before determining whether there is a compelling reason to reject DHEC's interpretation of the Bed Transfer Provision. Section (A) includes provisions that
Id. These criteria are not listed in order of importance. Chapter I.H, 2008-2009 State Health Plan. In fact, "[t]he relative importance assigned to each specific criterion is established by [DHEC] depending upon the importance of the criterion applied to the specific project." S.C.Code Ann. Regs. 61-15 § 801.2. Further, "[a] project does not have to satisfy every criterion in order to be approved," provided the project is consistent with the applicable State Health Plan. S.C.Code Ann. Regs. 61-15 § 801.3.
The first listed criterion, "Compliance with the Need Outlined in [the State Health Plan]," refers to the need for, or surplus of, beds at each listed hospital in the respective service areas. Notably, items (d) and (e) of Chapter II.G.1 § (A)(4), 2008-2009 State Health Plan, contemplate circumstances in which population projections that are not considered in the State Health Plan demonstrate the need for beds in a service area.
The second listed criterion, "Community Need Documentation," states that the proposed project should provide services that meet a documented need of the target population and current or projected utilization should justify the expansion or implementation of the proposed service. S.C.Code Ann. Regs. 61-15 § 802.2. The third listed criterion, "Distribution (Accessibility)," provides, in pertinent part, that the proposed service "should be located so that it may serve medically underserved areas" and "allow for the delivery of necessary support services in an acceptable period of time." S.C.Code Ann. Regs. 61-15 § 802.3.
The fourth listed criterion, "Acceptability," states that the proposed project and the applicant should have the support of "affected persons,"
All of these criteria undoubtedly afford DHEC broad discretion in bringing its expertise in health care planning to the evaluation of CON applications for general hospitals. In turn, the incorporation of these criteria into the section in which the Bed Transfer Provision is located, Chapter II.G.1 § (A), signifies the intent of the State Health Planning Committee to provide flexibility in the application of section (A) to each proposed project with its own unique circumstances. Thus, it is reasonable for DHEC to interpret the Bed Transfer Provision as allowing the transfer of beds to a hospital that has not yet been built when the transfer would improve health care access for the target population. This is consistent with the plain language of the Bed Transfer Provision as well as the General Assembly's stated purpose for the CON Act: "[T]o promote cost containment, prevent unnecessary duplication of health care facilities and services, guide the establishment of health facilities and services [that] will best serve public needs, and ensure that high quality services are provided in health facilities in this State." § 44-7-120 (emphasis added).
Just as the Murphy court found DHEC's flexible interpretation of its water quality certification regulation reasonable and consistent with the regulation's plain language,
Based on the foregoing, the ALC properly deferred to DHEC's interpretation of the Bed Transfer Provision.
Trident assigns error to the ALC's finding that Trident and Roper were not "competing applicants." Trident argues that as a matter of law, the approval of both CON applications would exceed the need for hospital beds in the area, and, therefore, DHEC was required to determine which applicant most fully complied with the CON Act, the State Health Plan, project review criteria, and applicable DHEC regulations. We disagree.
Section 44-7-130(5) defines "competing applicants" as
(emphasis added).
Here, the parties agree that (1) both Trident and Roper propose to provide similar services and facilities in the same service area; and (2) Trident's and Roper's respective CON applications were filed within the appropriate time frame for competing applications. However, Trident challenges the ALC's finding that the approval of both applications would not exceed the need for hospital facilities in the service area. Roper, on the other hand, argues substantial evidence supports the ALC's finding.
Nevertheless, Trident characterizes this issue as an issue of law, asserting that the question of whether both projects would exceed the need for hospital beds in the service area is determined solely by the indication of need set forth in the 2008-2009 State Health Plan's hospital inventory, which reflects an excess of forty-eight hospital beds for the Tri-County Service Area and an excess of six beds in Roper's inventory. Trident concludes that Roper's proposed hospital, "by itself or in conjunction with Trident's proposed hospital exceeds the need for hospital beds in the service area." We disagree. Section 44-7-130(5) clearly focuses on whether the proposed projects would cause an excess of services or facilities for the service area.
We agree with Trident that this issue is one of law but only because, in this case, we need not look to indicators of need outside of the 2008-2009 State Health Plan—the approval of both CONs will not exceed the need already documented in the 2008-2009 State Health Plan.
Further, Trident's proposed addition of beds to the service area is filling a need already documented in the State Health Plan's hospital inventory. Moreover, the number of beds added by Trident that will exceed the number designated in the hospital inventory are allowed under the Fifty Bed Rule. See supra.
Based on the foregoing, the ALC correctly determined that Trident and Roper are not "competing applicants."
Accordingly, the ALC's decision is
S.C.Code Ann. Regs. 61-15 § 103.1 (2011) (amended 2012).
S.C.Code Ann. Regs. 61-15 § 103.6 (emphasis added).