Judge’s recommendation complicates hospitals’ expansion plans in Wake

A judge faults state analyses of proposals

akenney@newsobserver.com May 29, 2012 

Local hospitals may see their Wake County expansion plans delayed further as a result of an administrative judge’s recent filing.

Administrative Law Judge Beecher R. Gray found that last year the state improperly analyzed three hospital systems’ proposals to build new hospitals or expand existing ones in Wake County.

That includes a new 50-bed hospital in Holly Springs that Rex Healthcare won approval to build in September, as well as 51 new beds that WakeMed won approval to add at its Cary and Raleigh campuses.

The state Department of Health and Human Services systematically failed to consider how the new medical projects would affect the local healthcare market, Gray wrote in his recommendation last week. He said the mistake is not a “harmless error and substantially prejudices” each of the applications that were reviewed by the state’s Certificate of Need office.

What Gray’s recommendation means for the projects that were approved last year remains unclear. The case came before Gray after Novant Health appealed the Certificate of Need office’s ruling and sought a summary judgment in the case.

The recommendation will now be sent to Drexdal Pratt, the director of the state’s Division of Health Service Regulation, who will make a ruling within two months of receiving it on whether to follow Gray’s advice and throw out the decisions and re-review all the applications.

A Novant Health representative said the Winston-Salem company agrees with the judge’s assessment but declined to comment further. Both WakeMed and Rex officials said Thursday that they don’t believe the recommendation puts their projects in jeopardy.

Stan Taylor, WakeMed’s vice president of corporate planning, said he expects Pratt to override Gray’s recommendation, which would then send the case to the N.C. Court of Appeals. If the Court of Appeals agrees with Gray, the review process would need to be done all over again.

If the court doesn’t agree with Gray, the case would still need go back for a trial because the judge didn’t address the other issues raised by Novant in its appeal, Taylor said.

“It complicates the decision but I don’t think it derails it,” he said.

Rex spokesman Alan Wolf said the UNC Health Care-owned hospital system ultimately expects to prevail.

“This is one small step of a long legal process,” he said.

The state allows only a fixed number of new hospital rooms to be built each year, and its decisions often result in fierce competition and endless appeals. Novant has been trying to enter the Wake County market by building a hospital in Holly Springs, but has had its applications denied twice.

State law says DHHS must weigh each hospital system’s plans against a battery of 15 questions meant to ensure private companies don’t over-build the healthcare system; they’re supposed to prove their services are needed, and that they can deliver them efficiently.

But Gray concluded that the state ignored one of the law’s main tenets, which says applicants must show their plan’s “impact upon the cost effectiveness, quality, and access to the services proposed.”

Kenney: 919-460-2608

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