Is Carolinas HealthCare appeal a signal for future litigation?

dworthington@heraldonline.comApril 12, 2014 

Carolinas HealthCare System’s request that an S.C. Administrative Law judge reconsider his decision to allow Piedmont Medical Center to build a Fort Mill hospital may signal the system’s strategy for appealing in state or federal courts, legal experts say.

Attorneys for Carolinas HealthCare, the parent company of Carolinas Medical Center, argued in an appeal filed last week that by ruling in favor of PMC, Judge Phillip Lenski “unconstitutionally engaged in economic protectionism that violates the dormant Commerce Clause of the U.S. Constitution and the basic tenets of the free market system.”

On April 1, Lenski overturned a 2011 decision by the state Department of Health and Environmental Control that gave CMC permission to build the Fort Mill hospital. Lenski said allowing the Charlotte-based hospital system to build the Fort Mill hospital would cause Piedmont economic harm, reduce the number of Piedmont patients, and affect the Rock Hill hospital’s ability to provide quality healthcare.

Under the state’s certificate of need program, Lenski was allowed to consider economic harm to Piedmont in determining who should build the hospital. But attorneys for Carolinas HealthCare argue Lenski placed too much weight on the issue.

The appeal says “the entire basis of (Judge Lenski’s) order is to protect Piedmont from perceived adverse effects of competition from an out-of-state hospital and to reduce the number of South Carolina residents who voluntarily seek healthcare from Carolinas HealthCare hospitals in North Carolina.”

Lenski’s decision was the latest in a series of legal actions in the nearly 10-year battle to build a hospital to serve the expanding population in northern York County.

James B. Blumstein, director of the Vanderbilt Health Policy Center and a professor of constitutional and health law, said Carolinas HealthCare could have a reasonable claim if it can show the judge’s intent was to favor the in-state hospital. “This is not a silly claim,” Blumstein said.

Challenging certificate of need cases on constitutional and interstate commerce grounds is a relatively recent legal phenomenon, legal experts said.

In 2013, the 9th U.S. Circuit Court upheld the state of Washington’s certificate of need standards in a case brought by Yakima Valley Hospital. The hospital challenged a 2008 state law that limited the number of certificates that could be awarded in a community for a non-surgical treatment for coronary heart disease. Yakima Valley’s competitor held the community’s sole certificate.

Attorneys for Yakima Valley argued that the certificate of need law violated the “dormant commerce clause” — a Supreme Court interpretation of the Constitution that gives Congress, not the states, the power to restrain interstate trade. The Supreme Court has also a test to weigh the local benefit of a law against the negative impact on interstate commerce.

Yakima Valley Memorial attorneys argued that Washington’s certificate of need law unconstitutionally restricted its ability to attract out-of-state patients, to hire doctors, or to buy medical supplies. Those restrictions on interstate trade require authorization from Congress, hospital attorneys said.

Another potential avenue of appeal for Carolinas HealthCare is Lenski’s decision to base his ruling in part on Piedmont’s proposal to build a 100-bed hospital in Fort Mill, Blumstein said. Carolinas HealthCare proposed a 64-bed facility, which is what the state called for in its initial determination nearly 10 years ago that the area needed more hospital beds.

Piedmont says the higher number of beds would better serve the area for the present and future, and Lenski agreed.

Blumstein said Carolinas HealthCare could file both federal and state lawsuits challenging Lenski’s decision.

A federal appeal could pursue the constitutional and interstate commerce questions, Blumstein said. A state lawsuit could target the number of beds. Because DHEC originally said only 64 beds were needed, the appeal could claim the judge “misapplied” the current state health plan by inflating the number of beds needed in York County.

Don Worthington •  803-329-4066

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