       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

                                            2
¶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


                                               3
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

                                             4
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

                                              5
       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

                                                6
       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

                                               7
       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

                                               8
            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.

                              9
     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

                             11
                           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.

                                         ****

              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.

                                            12
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

                                             13
       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

                                               14
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.

                                              15
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.

                                              17
       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

                                              18
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.



                                           Page 15 of 38
        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.



                                           Page 16 of 38
       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



                                          Page 17 of 38
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



                                           Page 18 of 38
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



                                              Page 19 of 38
       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



                                            Page 20 of 38
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



                                            Page 21 of 38
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




                                             Page 22 of 38
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




                                           Page 23 of 38
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



                                           Page 24 of 38
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.


                                           Page 25 of 38
          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,




                                             Page 26 of 38
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.

                                               Page 27 of 38
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




                                           Page 28 of 38
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




                                           Page 29 of 38
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

                                            Page 31 of 38
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
