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1089336.6 i
IN THE CIRCUIT COURT OF MONTGOMERY COUNTY, ALABAMA
BROOKWOOD HEALTH SERVICES, INC. d/b/a BROOKWOOD MEDICAL CENTER and ST. VINCENT’S HEALTH SYSTEM; Appellants/Petitioners, v. AFFINITY HOSPITAL, LLC d/b/a TRINITY MEDICAL CENTER OF BIRMINGHAM and ALABAMA STATE HEALTH PLANNING AND DEVELOPMENT AGENCY, an agency of the State of Alabama, Appellees/Respondents.
CASE NO.: CV-2010-001587.00 CV-2010-901590.00
(Consolidated cases)
BRIEF OF APPELLEE/RESPONDENT AFFINITY HOSPITAL, LLC. D/B/A TRINITY MEDICAL CENTER
Robert D. SegallCOPELAND, FRANCO, SCREWS & GILL, P.A.
444 South Perry StreetMontgomery, Alabama 36104
Direct Telephone: (334) 420-2956Direct Facsimile: (334) 834-3172
Email: [email protected]
Robert E. Poundstone IVBRADLEY ARANT BOULT CUMMINGS LLP
The Alabama Center for Commerce401 Adams Avenue, Suite 780Montgomery, Alabama 36104
Direct Telephone: (334) 956-7645Direct Facsimile: (334) 956-7845
Email: [email protected]
David R. BoydBALCH & BINGHAM LLP
Post Office Box 78Montgomery, Alabama 36101-0078
Direct Telephone: (334) 269-3132Direct Facsimile: (866) 783-2739
Email: [email protected]
Carey B. McRaeJennifer H. Clark
BRADLEY ARANT BOULT CUMMINGS LLP One Federal Place
1819 Fifth Avenue North Birmingham, Alabama 35203
Direct Telephone: (205) 521-8014Facsimile: (205) 521-8800
Email: [email protected]@babc.com
April 6, 2012
ELECTRONICALLY FILED4/6/2012 4:13 PM
CV-2010-001587.00CIRCUIT COURT OF
MONTGOMERY COUNTY, ALABAMAFLORENCE CAUTHEN, CLERK
1089336.6 i
TABLE OF CONTENTS
EXECUTIVE SUMMARY .............................................................................................................1
OVERVIEW ....................................................................................................................................6
PROCEDURAL HISTORY AND STATEMENT OF FACTS .......................................................8
STANDARD OF REVIEW ...........................................................................................................18
ARGUMENT .................................................................................................................................20
I. EX PARTE SHELBY MEDICAL CENTER AND HUMANA V. SHPDA DO NOT APPLY BECAUSE THEY DEALT WITH PROPOSALS TO OPERATE TWO OR MORE HOSPITALS TO INCREASE OR MAINTAIN THE NUMBER OF BEDS IN AN OVERBEDDED COUNTY WHILE TRINITY’S PROPOSAL IS TO OPERATE JUST ONE HOSPITAL AND TO REDUCE THE NUMBER OF BEDS IN JEFFERSON COUNTY. ..............................................................................................20
II. ST. VINCENT’S AND BROOKWOOD’S 60% OCCUPANCY RATE ARGUMENTS FAIL BECAUSE TRINITY’S CON FOR 372 BEDS RESULTS IN A 60% OCCUPANCY RATE. ..........................................................................................24
A. Trinity’s CON Application Was Not Inconsistent With the State Health Plan Because the State Health Plan’s 60% Provision for Replacement Hospitals is Permissive and Not Mandatory. .............................................................................25
B. The CON Review Board Awarded Trinity a CON For Only 372 Beds Consistent with the 60% Provision. .......................................................................29
III. TRINITY’S PROJECT IS CONSISTENT WITH THE REPLACEMENT HOSPITAL PROVISIONS OF THE ALABAMA STATE HEALTH PLAN. .................34
A. If Trinity is Not Permitted to Relocate, It Will Likely be Forced to Close. ..........35
B. Relocation to the 280 Hospital is the Most Cost Effective Alternative for Trinity. ...................................................................................................................48
1. Trinity can Realize Substantial Cost Savings by Relocating to the 280 facility. .......................................................................................................48
2. Relocation to the 280 Hospital Would be More Cost Effective than Renovation of the Existing Trinity Campus. .............................................58
3. Relocation to the 280 Facility Would be More Cost Effective than Trinity’s Former Option of Relocating to Irondale. ...................................64
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C. Relocation to the 280 Hospital is the Most Appropriate Alternative for Trinity. ...................................................................................................................67
1. Relocation to the 280 Facility is the Most Appropriate Alternative for Trinity Because of the Amount and Quality of the Work Already put into the Hospital. ........................................................................................68
2. Any Perceived Problems with the 280 Hospital Are Either Immaterial or Easily Remediable. ................................................................................70
3. Relocation to the 280 Facility is a More Appropriate Alternative than Renovation of Trinity’s Existing Campus. ................................................78
4. Relocation to the 280 Facility is a More Appropriate Alternative than Trinity’s Relocation to Irondale Would Have Been. .................................85
D. There are Code Deficiencies at the Montclair Hospital that Cannot Feasibly be Corrected. ..........................................................................................................89
E. There are Operational Deficiencies at the Montclair Hospital that Cannot be Feasibly Corrected. ................................................................................................94
IV. TRINITY COMPLIES WITH THE CON RULES’ CRITERIA FOR ISSUANCE OF A CON. ............................................................................................................................104
A. Trinity’s Proposed Relocation to the 280 Hospital is Financially Feasible. ........105
B. The Location of the 280 Hospital is an Appropriate Site for Trinity’s Relocation Hospital. .............................................................................................111
C. Trinity’s Proposed Relocation Project Would Meet the Need for an Acute Care Hospital in Southern Jefferson and Northern Shelby Counties. ..................119
1. The Need for an Acute Care Hospital on the 280 Corridor is Supported by Population Statistics. .........................................................120
2. The Absence of an Acute Care Hospital in Southern Jefferson and Northern Shelby Counties is a Danger to Area Residents. ......................121
3. Trinity’s Relocation to the 280 Hospital Would Address the Current Misdistribution of Acute Care Hospitals in Jefferson County. ................127
4. The City of Hoover Alone Needs Over 200 Acute Care Hospital Beds..........................................................................................................130
5. The Need for the 280 Hospital is Evidenced by Brookwood’s Near Purchase of the Hospital. .........................................................................134
6. The Opponents’ Submission of CON Applications to Construct and Operate Free Standing Emergency Departments Indicates the Need for Emergency Services in the southern Jefferson/northern Shelby County area. .............................................................................................136
7. The Fact that Jefferson County has an Excess number of Acute Care Beds is Immaterial to the Instant Relocation Project. ..............................138
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D. Any Detrimental Impact the Project Might Have on Existing Providers is Outweighed by the Positive Impact the Project Will Have on Jefferson and Shelby Counties. ..................................................................................................139
1. St. Vincent’s Detrimental Impact Analysis Has Little Probative Value. .......................................................................................................141
2. Brookwood’s Projected Detrimental Impact Analysis is Inaccurate. ......145
3. The Proposed Project’s Alleged Detrimental Impact on the Opponents Would be Minimal. ..................................................................................150
4. There are Several Probable Positive Effects that the Proposed Project Would Have on the Opponents and on the Provision of Healthcare in Jefferson County in General. ...................................................................158
E. There Has Been an Overwhelmingly Positive Community Reaction to Trinity’s Project. ..................................................................................................162
1. Physicians and Other Community Members Support the Proposed Project. .....................................................................................................163
2. The Jefferson County Business Community Supports Trinity’s Proposed Relocation, Due in Large Part to the Positive Economic Impact that Project Would Have on the Area. .........................................165
3. Governmental Leaders Support Trinity’s Proposed Project. ...................174
4. Community Members Opposing the Project Because Trinity Will Be Moving Away From Their Neighborhoods Will Still Have More Than Adequate Access to Acute Care Hospitals if Trinity Relocates. .............176
F. Trinity’s Project will Increase the Overall Accessibility of Trinity’s Services for All Potential and Existing Patients, Including the Medically Underserved. ..178
G. Trinity is an Appropriate Applicant. ....................................................................185
V. THE BOARD’S DECISION TO DENY OPPONENTS’ MOTIONS FOR RECONSIDERATION WAS SUPPORTED BY THE RECORD AND WITHIN THE BOARD’S DISCRETION. .....................................................................................191
A. The 16 Documents Confirm Miller’s Testimony that He Had Not Decided to Go to the Digital Hospital Before Late September 2008. ....................................193
B. The Record Confirms Heburn’s Testimony that He Did Not Negotiate with Daniel, Make the Decision to Move to the Digital Hospital, or Know of the Decision Until the Last Week of September 2008. ..............................................197
CONCLUSION ............................................................................................................................200
APPENDIX A ..............................................................................................................................202
APPENDIX B ..............................................................................................................................229
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CERTIFICATE OF SERVICE ....................................................................................................248
1
BRIEF OF APPELLEE/RESPONDENT AFFINITY HOSPITAL, LLC. D/B/A TRINITY MEDICAL CENTER
EXECUTIVE SUMMARY
SHPDA’s order granting Trinity the CON for the relocation should be affirmed because:
(1) Trinity will Reduce Jefferson County Hospital Beds: Trinity’s relocation will include closing its current hospital building with 560 beds, opening the digital hospital building with 372 beds, and enabling Trinity to operate the new hospital on an efficient basis. This is consistent with the State Health Plan and the opposite of the CON disapproved in Ex parte Shelby Medical Center, 564 So. 2d 63 (Ala. 1990), which would have allowed operation of an old and a new hospital with no reduction in total beds.
(2) Trinity’s CON Complies with the 60% Occupancy Guideline: The CON Review Board’s reduction in the number of beds Trinity may use under the CON brings Trinity into undisputed compliance with the 60% occupancy guideline in the State Health Plan. SHPDA had authority to require acceptance of a reduced number of beds from that listed in the CON application. See Ala. Admin. Code § 410-1-8-.05 (the CON Review Board my grant “in whole or in part” a CON application and ratify “in whole or in part” the ALJ’s recommendation); Ala. Admin. Code § 410-2-4-.14(3)(b) (“[T]he hospital should agree to a reduction in bed capacity that will increase its occupancy rate to 60 percent”).
(3) Trinity Meets the Statutory Criteria for a CON: Substantial evidence supports the CON Review Board’s findings that Trinity meets each statutory criterion for the issuance of the CON. This Court must take the CON Review Board’s order adopting the ALJ’s recommended order as prima facie just and reasonable and may not substitute its judgment for that of SHPDA as to the weight of the evidence. See State Health Planning & Dev. Agency v. Baptist Health Sys., 766 So. 2d 176, 178 (Ala. Civ. App. 1999) (reversing circuit court’s order and approving CON granted by SHPDA).
The 5 Statutory Findings Required By Ala. Code § 21-22-266
(1) SHPDA Found that Trinity’s CON is Consistent with the State Health Plan
(Ala. Code § 22-21-266(1).) -- The State Health Plan has four factors:
(a) Most cost-effective or otherwise most appropriate alternative -- Trinity submitted substantial evidence of this factor, including:
Trinity can complete the 280 hospital for $144 million while new construction of same facility would cost $300 million. (T. 2854-2855).
Renovation would be substantially more expensive than relocation to the 280 hospital. (T. 719; 726-728; 965-973; 979; 1501-1502; 1921, 2591; 2065; 6531-6532; Exh. TMC 47 at 14).
2
Relocation to 280 hospital is more cost-effective and appropriate than relocation to Irondale because the 280 hospital is already 60-65% completed and has shell space for future growth with mechanical, plumbing and electrical systems in place. (T. 1517-1518; 2419, 2889).
After weighing all the evidence, the CON Review Board made the following finding: “The Applicant made a prima facie showing that a relocation to the Highway 280 facility is the most cost-effective alternative if relocation is to take place.” (AR 3242).
(b) Reasonableness of square footage, construction cost, and equipment cost for types and volumes of patients to be served -- Trinity submitted substantial evidence of this factor, including:
Construction costs to complete Highway 280 hospital including site development, road improvements, a parking garage and furnishing the interior estimated at approximately $144,000,000 - (Exh. TMC 91)
The square footage of the Highway 280 facility is adequate to accommodate the beds and that the cost per square foot is $154.76. (Exh. TMC l at p. 106)
The cost of fixed equipment is $72,000,000 at a maximum. (Exh. TMC 1 at p. 12)
After weighing all the evidence, the CON Review Board made the following finding: “The Applicant established, by the evidence, that as a relocation to the Highway 280 site, the proposed square footage, construction costs per square foot and the cost of fixed equipment will be appropriate and reasonable for the types and volumes of patients to be served.” (AR 3239).
(c) Applicant same as owner of facility being replaced -- The parties did not, and do not, dispute that “Affinity Hospital is the legal entity which owns Trinity Medical Center. If Trinity is relocated, the ownership will not change.” (AR 3239).
(d) Evidence of need for project (i.e., need to replace the existing hospital) -- Trinity submitted substantial evidence of this factor, including:
The Montclair facility is spread out over a number of floors and across attached additions requiring much patient movement among floors during a surgery. (T. 910).
The fire egress corridors often are congested with waiting patients on stretchers or beds, supplies, and equipment due to the lack of patient holding areas and storage space throughout the facility. (Id. at 11.)
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The Montclair hospital does not comply with the ADA’s Guidelines. (T. 663, 5393, 777, 828, 691, 708-709).
Patients have trouble finding their way through the hospital. (T. 323). Way-finding problems at the hospital lower patient satisfaction and frustrate families. (T. 3731).
Operating rooms are too small, prohibiting certain types of procedures. (T. 878, 349-353; 858-862; 367-368).
There are multiple code violations caused by space constraints and Life Safety Code Violations necessitating replacement and relocation. (T. 697-698; 699-703; Exh. TMC 45).
The Montclair hospital is at the end of its useful life. (T. 937, 652; Exh. TMC 27).
After weighing all the evidence, the CON Review Board made the following finding: “The Applicant demonstrated that the existing facility at Montclair needs replacement to meet licensure and certification requirements.” (AR 3238).
(2) SHPDA Considered Less Costly, More Efficient or More Appropriate Alternatives and Found None Existed. (Ala. Code § 22-21-266(2).) -- Trinity submitted substantial evidence of this factor, including:
Renovation of the Montclair facility would be more expensive than relocation to
the 280 hospital. (Exh. TMC 47 at 14; T. 719; 726-728; 1921; 2065; 2591.)
Relocating to Irondale would be more costly than relocation to the 280 hospital. (Exh. TMC 1; TMC 57; TMC 93.)
After weighing all the evidence, the CON Review Board made the following finding:
“That this application is the less costly, more efficient or more appropriate alternative to the provision of inpatient services, and clearly other alternatives have been studied and found not to be practicable.” (AR 3210).
(3) SHPDA Found that Similar Existing Facilities Providing Similar Services As
Trinity Are Being Used in an Appropriate and Efficient Manner (Ala. Code § 22-21-266(3).) -- Trinity submitted substantial evidence of this factor, including:
Brookwood provides care for approximately 40,000 people annually in its
emergency department (T. 5507), has experienced growth in its orthopedics services (T. 5528), has the most active surgical volumes in the state (T. 4937), and is the state's largest outpatient provider. (T. 4966.)
4
St. Vincent's has applied for an additional 37 beds under a rule that requires 80% utilization (Exh. TMC 385), has had significant growth in its primary care base and surgical beds, and says it lacks critical care beds. (T. 6086.)
After weighing all the evidence, the CON Review Board made the following finding: “That existing hospitals in Jefferson County, Alabama that provide similar services to those which the Applicant proposes to perform at the replacement facility are being utilized in an appropriate and efficient manner consistent with the community's demand.” (AR 3210). (4) SHPDA Considered Alternatives to New Construction (e.g., Modernization and
Sharing Arrangement), And Found None to be Practicable. (Ala. Code § 22-21-266(4).) --Trinity submitted substantial evidence of this factor, including:
Montclair hospital is at the end of its useful life. (T. 937; 652; Exh. TMC 27.)
Renovation of the Montclair facility would be more expensive than relocation to the 280 hospital. (Exh. TMC 47 at 14; T. 719; 726-728; 1921; 2065; 2591.)
After weighing all the evidence, the CON Review Board made the following finding: “That alternatives to new construction have been considered and implemented to the maximum extent practicable. This proposal utilizes (in part) an incomplete existing structure.” (AR 3210). (5) SHPDA Found that Patients Will Experience Serious Problems Obtaining Acute
Care Unless Trinity Obtains the CON. (Ala. Code § 22-21-266(5).) --Trinity submitted substantial evidence of this factor, including: Evidence from Birmingham Fire and Rescue of lengthy travel time for service
from 280 corridor. (T. 3681-2; TMC 135). Faster transport is significant in severe injuries and increases patient’s chances of survival. (T. 3681-3682, 3684).
There is no hospital on Highway 280 between Brookwood and Sylacauga. (T. 5230).
Evidence showed need for 202 beds in City of Hoover alone. (Exh. TMC 132 at p. 31; Exh. TMC 131.)
After weighing all the evidence, the CON Review Board made the following finding: “In the absence of this facility, patients in southern Jefferson and northern Shelby counties, as well as certain patients to the north, south and west of Trinity's existing campus, will experience serious problems in obtaining needed healthcare. The proposed relocation would improve access to, and availability of, emergency room services for patients in the region by making Trinity more accessible for all patients due to the hospital's proximity to all of the area's major roadways, as well as to those underserved patients residing in the immediate area around the Highway 280 site and further down the Highway 280 corridor.” (AR 3209).
5
In this fact-intensive case, this Court must uphold SHPDA’s order granting the CON
because SHPDA’s findings are supported by “substantial evidence” and because this Court may “not substitute its judgment for that of the agency as to the weight of the evidence on questions of fact.” See State Health Planning & Dev. Agency v. Baptist Health Sys., 766 So. 2d 176, 178 (Ala. Civ. App. 1999); State Health Planning Agency v. Mobile Infirmary Ass’n, 533 So. 2d 255, 257 (Ala. Civ. App. 1988).
6
OVERVIEW
Every day, thousands of people drive by the 13-story glass and steel building on Highway
280, formerly referred to as the “Digital Hospital,” on their morning commute. The building has
stood at that location, vacant, since 2002. Over $200,000,000 has already been invested in the
hospital, and it is 65% complete. No expense was spared in the construction of the building,
which incorporates forward-thinking operational and technical features. In less than 18 months,
it could be a state-of-the-art acute care hospital ranked in the top 5% of all hospitals in the United
States. However, if the State Health Planning and Development Agency’s (“SHPDA”) issuance
of this Certificate of Need (“CON”) is not affirmed, the building will be demolished. (T. 1152.)
In addition to commuters, there are others passing the 280 hospital daily, namely
ambulances and patients driving from areas like Hoover, Greystone, Chelsea, Childersburg, and
Dunnavant to downtown Birmingham. At certain times of day, those ambulances and patients
are experiencing drive times in excess of one hour to reach the nearest hospital. Some of the
people in the back of those ambulances are stroke patients who are losing brain functionality by
the minute. Some of those patients driving themselves to downtown hospitals are elderly or
infirm.
There is another hospital in Birmingham that not so many people drive by, and that is
Trinity Medical Center. People used to drive past it all the time in the 1960s, the decade when it
was built and when the areas of East Lake, Crestwood, Crestline, and Mountain Brook were
growing. Over time, the population of Birmingham has moved south and east, and despite the
excellent care provided at Trinity, patient admissions are declining. Also declining is the number
of physicians on Trinity’s medical staff, who have been lured away by other hospitals with better
locations and facilities. The hospital itself has a failing physical plant, with mechanical,
7
electrical, and plumbing systems that are beyond their useful life. The hospital has been added
onto so many times over its 45-year existence that Trinity employs individuals for the sole
purpose of shuffling patients from floor to floor over the course of a single surgery. In short,
Trinity’s hospital operations are slowly dying in its current, old location. (T. 425.)
The closure of Trinity would mean the loss of an institution that has been providing high-
quality care to Birmingham citizens since 1930, and currently boasts the best cardiac care
program in the state. It would mean the loss of a faith-based hospital unique in the depth and
breadth of its devotion to its mission. The closure of Trinity Medical Center would mean that a
hospital that has given of its time and resources to shoulder an inordinate amount of services for
patients that are too poor to afford healthcare would just disappear. Trinity should not be forced
to close its doors. But it must relocate to survive.
Allowing Trinity to relocate to the 280 hospital is a common-sense decision. Trinity is
dying on the vine on Montclair Road, while the 280 hospital stands vacant and under threat of
demolition in the very area of the state where services are needed most. Good healthcare
planning involves bringing healthcare resources to the people who need them, in the most
efficient and cost-effective way possible. Relocating Trinity to the 280 hospital is smart
healthcare planning. SHPDA heard all of this evidence (and much more) over the lengthy course
of the CON application process and determined, unanimously, that Trinity should be granted a
CON to relocate its existing hospital to the 280 hospital.
SHPDA’s approval of Trinity’s CON application is due to be affirmed because its
decision was supported by substantial evidence, complies with all applicable law, and was not
arbitrary or capricious. (“A decision by a state agency is presumed to be correct and will be
affirmed unless it is arbitrary or capricious or fails to comply with the applicable law.” State
8
Health Planning & Dev. Agency v. Baptist Health Sys., 766 So. 2d 176, 178 (Ala. Civ. App.
1999). “[R]eview of this case is limited to determining whether the SHPDA Board's decision
was made in compliance with the applicable law, whether the SHPDA Board's decision was
arbitrary and unreasonable, and whether the SHPDA Board's decision was supported by
substantial evidence.” Id. (citing State Health Planning Agency v. Mobile Infirmary Ass'n, 608
So. 2d 1372 (Ala. Civ. App. 1992); Health Care Authority of the City of Huntsville v. State
Health Planning Agency, 549 So. 2d 973 (Ala. Civ. App. 1989)).)
PROCEDURAL HISTORY AND STATEMENT OF FACTS1
1) Affinity Hospital, LLC, owns and operates Trinity Medical Center (“Trinity”)
located in Birmingham, Alabama (also, the “Montclair Campus” or the “Montclair Facility”).
Trinity Medical Center is a 560-bed tertiary level hospital which has served Birmingham and the
surrounding area since 1930, when the hospital opened on Highland Avenue on Birmingham's
Southside. (Exh. TMC 26). At that time, the hospital was operated by the Baptist Health System
(“Baptist”). In 1966, the hospital relocated to its present location on Montclair Road. Id. (For a
graphic representation of the ownership of and history of the hospital, see infra, p. 12, Exh. TMC
174.).
2) Today, the ultimate parent company of Trinity is Community Health Systems,
Inc. (“CHSI”), a publicly-traded healthcare system. (Exh. TMC 75, 76, 77). Subsidiaries of
CHSI own and/or operate approximately 121 hospitals in 29 states with an aggregate of
approximately 18,000 licensed beds. (Exh. TMC 77).
1 For a comprehensive description of the procedural history of the instant proceedings, please see
the recommended order at pp. 1-7. (AR 3252-3248).
9
3) Community Health Systems Professional Services Corporation (“CHSPSC”)
provides management and consulting services to Trinity pursuant to a management agreement.
(T. 1560-61).
4) There were two Intervenors in the instant CON proceeding that opposed Trinity’s
CON application: (1) Brookwood Medical Center (hereinafter referred to as "Brookwood"), a
602-bed acute care, for-profit hospital located in Homewood, Alabama, and (2) St. Vincent’s
Birmingham, a 372-bed acute care hospital located in Birmingham, Alabama.
5) Brookwood is owned by the Tenet Healthcare Corporation, which is one of the
largest for-profit healthcare systems in the United States. (Exh. TMC 207; T. 5487).
6) St. Vincent’s is owned by the Ascension Healthcare System, which is the largest
not-for-profit healthcare system in the United States. (T. 6004). St. Vincent’s also is part of a
local four-hospital health system, all owned by Ascension, that is comprised of St. Vincent’s
Birmingham, St. Vincent’s East (formerly Medical Center East), St. Vincent’s-St. Clair (located
in St. Clair County), and St. Vincent’s Blount (located in Blount County). (T. 6000).
7) Baptist was the sole owner of Trinity from 1930 until October 1, 2005, when it
entered into a joint venture with an indirect subsidiary of Triad Hospitals, Inc. (“Triad”)
Birmingham Holdings, LLC, to own and operate Trinity. (Exhs. TMC 37, 174).
8) The Baptist-Triad joint venture determined that replacement and relocation of
Trinity’s Montclair campus was necessary for the hospital’s ultimate survival, and filed the first
CON application for the replacement and relocation of Trinity’s Montclair facilities on
November 3, 2006. That CON application requested approval to relocate Trinity’s facilities and
campus located on and around 800 Montclair Road in Birmingham, Alabama, and build a
10
completely new 424-bed hospital in Irondale, Alabama, at a total cost of $576,986,000. (Exh.
STV 23).
9) On December 22, 2006, Brookwood intervened and requested a contested case
hearing; and on December 26, 2006, Noland Health Services, Inc. and Long Term Hospital of
Birmingham, L.L.C. (hereinafter referred to as "Noland"), filed its letter in opposition and its
application to intervene. (Exh. TMC 1, Ex. 3, p. 2.)
10) On July 25, 2007, after the CON application to relocate had been filed, but before
the contested case hearing took place, an indirect subsidiary of CHSI merged into Triad,
resulting in the former Triad subsidiary that was a joint venture partner in the ownership of
Trinity, Birmingham Holdings, LLC, becoming an indirect subsidiary of CHSI. (Exhs. TMC 37,
175). The following is an organizational chart representing the current structure of CHSI and its
subsidiaries:
11
11) On October 1, 2007, the Irondale contested case hearing began. The hearing was
presided over by Administrative Law Judge (“ALJ”) Mike Cole. Also on the first day of the
hearing, Noland announced its withdrawal from the case. (Exh. TMC 1, Ex. 3, 4.)
12) The Irondale contested case hearing continued and the parties presented testimony
and submitted evidence for fourteen (14) hearing days concluding on November 7, 2007. (Exh.
TMC 1, Ex. 3, 4.)
12
13) On April 3, 2008, the ALJ entered a recommended order to the CON Review
Board recommending approval of Trinity’s CON application to relocate its campus to Irondale.
(Exh. TMC 1, Ex. 3, 72.)
14) On May 21, 2008, the CON Review Board voted to adopt the ALJ’s
recommended order and to allow Trinity to relocate its hospital. (Exh. TMC 1, Ex. 3, 73.)
15) On June 23, 2008, as a result of the Board’s vote, SHPDA issued CON 2233-H
authorizing Trinity to construct a new acute care hospital in Irondale and to relocate its existing
campus to that site. (AR 451.)
16) On June 30, 2008, Birmingham Holdings, LLC, purchased Baptist’s membership
interest in Affinity Health Systems, LLC, which in turn owns 100% of Affinity Hospital, LLC
d/b/a Trinity Medical Center. (Exh. TMC 175). The following chart provides a graphic
representation of the changes in ownership of the hospital:
13
17) The following timeline provides a visual representation of Trinity’s history and
various ownership changes (Exh. TMC 174):
18) On July 3, 2008, Brookwood filed a notice of appeal and cost bond with SHPDA.
On August 1, 2008, Brookwood filed a petition for judicial review with the Circuit Court of
Montgomery Count appealing the CON Review Board’s decision to grant Trinity’s CON
application to relocate to Irondale. (BMC 189.)
14
19) On October 6, 2008, Trinity filed with SHPDA a letter of intent proposing to
relocate and complete construction of a replacement hospital at the 280 site. (AR 9).
20) On December 1, 2008, Trinity surrendered its CON to relocate to Irondale. On
the same day, Trinity also filed a CON application to relocate its campus to the 280 site.2 (AR
450).
21) On December 5, 2008, Trinity filed a motion with the Circuit Court of
Montgomery County to dismiss Brookwood’s petition for judicial review as moot on the grounds
that Trinity no longer intended to relocate to Irondale, had voluntarily surrendered its CON to do
so, and was instead in the process of seeking regulatory approval to relocate to the 280 site. On
December 15, 2008, Brookwood responded by requesting that the Court dismiss Brookwood’s
petition only upon the condition that the CON Review Board’s final order and the ALJ’s
underlying recommended order be vacated. On January 8, 2009, Trinity replied, agreeing and
stipulating to the conditions requested by Brookwood. On February 12, 2009, the Circuit Court
dismissed Brookwood’s appeal subject to the condition that the CON Review Board’s order and
the ALJ’s underlying recommended order were rendered null and void.
22) On January 5, 2009, Brookwood filed with SHDPA another notice of appeal and
cost bond with SHPDA stating its intent this time to appeal to the Circuit Court of Montgomery
County SHPDA’s decision to deem Trinity’s new CON application complete. (AR 1224-1221).
23) On February 3, 2009, Brookwood filed its petition for judicial review in the
Circuit Court of Montgomery County, requesting that the court reverse SHPDA’s December 5,
2008, ruling deeming Trinity’s CON application in Project AL 2009-009 complete. (AR 943-
935).
2 For a comprehensive description of Trinity’s proposed project, please see the recommended
order at p. 11-21. (AR 2498-2487).
15
24) On January 20, 2009, Brookwood filed with SHDPA a notice of intervention and
opposition as well as a request for contested case hearing in the instant project. (AR 898-867).
25) On January 23, 2009, Administrative Law Judge James Hampton was assigned to
the instant case. (AR 915).
26) On January 28, 2009, St. Vincent’s also filed with SHPDA a notice of
intervention and opposition and request for contested case hearing. (AR 900; 926).
27) On March 12, 2009, the ALJ in this matter entered a scheduling order setting the
contested case hearing for four consecutive weeks beginning on August 24, 2009.
28) On May 4, 2009, the Intervenors filed a motion to stay with the ALJ pending
resolution of their petition for judicial review filed with the Circuit Court.
29) Also on May 4, 2009, the parties entered into an inspection agreement, whereby
Trinity allowed the Intervenors and certain of their representatives to enter the Montclair facility
as well as the 280 facility during certain dates and times, and pursuant to certain conditions, in
order to inspect those premises in anticipation of the contested case hearing.
30) On May 18, the Circuit Court of Montgomery County dismissed Brookwood’s
petition for judicial review appealing SHPDA’s decision to deem Trinity’s CON application
complete.
31) On September 11, 2009, Trinity filed a motion to view the 280 facility, requesting
that the ALJ tour the partially completed facility in order to have a better understanding of the
issues to be discussed at the hearing. (AR 2068-2065.)
32) The contested case hearing began September 28, 2009. As the applicant in this
proceeding, Trinity’s case-in-chief consisted of thirty-seven (37) witnesses testifying in support
of the project over the course of 13 days. (See Transcript from ALJ hearing).
16
33) On the first day of the hearing, the parties discussed the motion to view the 280
facility, which the ALJ granted. The ALJ toured the 280 facility on September 30, 2009,
accompanied by counsel for Trinity, Brookwood, and St. Vincent’s, as well as a representative of
the Daniel Corporation (“Daniel”) familiar with the facility, who acted as a guide. There was no
testimony and counsel made no arguments during the tour.
34) Brookwood presented its case next, offering the testimony of 20 witnesses over
the course of six days in opposition to the project. St. Vincent’s then put on its case, with four
witnesses testifying against Trinity’s project over the course of two days. (See Transcript from
ALJ hearing).
35) After the hearing concluded, all parties submitted briefs and recommended orders
to the ALJ. (AR 2985-2191).
36) After hearing all of the evidence and arguments of the parties, the ALJ issued a
recommendation (the “Recommended Order”) that the CON Board grant Trinity’s request for a
CON to relocate its hospital to the location on Highway 280. (AR 3253-3203.)
37) In its meeting on September 15, 2010, the CON Review Board reviewed the
ALJ’s Recommended Order and also received evidence and heard arguments from all parties.
(Transcript September 15, 2010 CON Review Board meeting.)
38) At the conclusion of the presentations, the CON Review Board voted
unanimously to adopt the findings set forth in the ALJ’s Recommended Order and grant Trinity’s
CON application (the “CON Issuance Order”). (Transcript September 15, 2010 CON Review
Board meeting; AR 3640.)
39) The CON Review Board issued SHPDA’s Final Order on September 30, 2010.
(AR 3640.)
17
40) On October 15, 2010, Opponents filed separate Requests for Reconsideration of
the final order. (AR 4367-3646; 4489-4368).
41) On October 17, 2010, Trinity produced to Opponents and the CON Review Board
16 more documents (“Supplemental Production”), in addition to the 7,000 pages of documents it
had already produced. (AR 4594-4497).
42) On October 19, 2010, both opponents filed reply briefs arguing that the ALJ
hearing portion of the contested case proceeding should be re-opened based upon Trinity’s
supplemental production of 16 documents. (AR 4731-4645; 4644-4596.)
43) On October 20, 2010, the parties appeared before the CON Board and argued
their respective positions relating to Opponents’ Motions for Reconsideration. (October 20,
2010 CON Review Board hearing transcript.)
44) At this hearing, Opponents argued that the administrative hearing portion of the
contested case proceeding should be reopened so that Opponents could question Trinity
witnesses regarding the 16 additional documents. (October 20, 2010 CON Review Board
hearing transcript.)
45) On November 4, 2010, the CON Board issued an Order denying Opponents’
Requests for Reconsideration and issued the CON for the project (the “Reconsideration Denial
Order”). (AR 4739, 4740.)
46) On December 16, 2010, Brookwood and St. Vincent’s filed Petitions for Judicial
Review of SHPDA’s final decision granting Trinity’s CON application with this Court.
47) St. Vincent’s and Brookwood filed motions asking this Court to remand the case
to SHPDA for additional discovery and proceedings based upon the 16 additional documents.
18
48) On March 16, 2011, this Court issued an order granting the Opponents’ motions
for remand.
49) On December 9, 2011, the Alabama Court of Civil Appeals ruled that remand was
not appropriate under the Alabama Administrative Procedure Act (“AAPA”) and instructed this
Court to vacate its order.
50) On March 12, 2012, this Court dismissed three additional claims contained in
Brookwood’s Petition. These claims had been asserted by Brookwood in addition to its appeal
of the issuance of the CON by SHPDA under the AAPA.
STANDARD OF REVIEW
The limited scope of appellate review of a SHPDA order begins with the Alabama
Administrative Procedure Act, Ala. Code § 41-22-20(k), which requires that “the agency order
shall be taken as prima facie just and reasonable and the court shall not substitute its judgment
for that of the agency.” The Court of Civil Appeals has explained: “A decision by a state agency
is presumed to be correct and will be affirmed unless it is arbitrary or capricious or fails to
comply with the applicable law.” State Health Planning & Dev. Agency v. Baptist Health Sys.,
766 So. 2d 176, 178 (Ala. Civ. App. 1999). “[R]eview of this case is limited to determining
whether the SHPDA Board's decision was made in compliance with the applicable law, whether
the SHPDA Board's decision was arbitrary and unreasonable, and whether the SHPDA Board's
decision was supported by substantial evidence.” Id. (citing State Health Planning Agency v.
Mobile Infirmary Ass'n, 608 So. 2d 1372 (Ala. Civ. App. 1992); Health Care Authority of the
City of Huntsville v. State Health Planning Agency, 549 So. 2d 973 (Ala. Civ. App. 1989)). “The
weight or importance assigned to any given piece of evidence presented in a CON application is
left primarily to the SHPDA Board's discretion, in light of the Board's recognized expertise in
19
dealing with these specialized areas.” Baptist Health Sys., 766 So. 2d at 178 (citing State Health
Planning Agency v. Mobile Infirmary Ass'n, 533 So. 2d 255 (Ala. Civ. App. 1988)). “The
standard of review in this case requires that the trial court shall not substitute its judgment for
that of the agency as to the weight of the evidence on questions of fact.” State Health Planning
Agency v. Mobile Infirmary Ass’n, 533 So. 2d 255, 257 (Ala. Civ. App. 1988).
A court reviewing a state administrative agency's decision cannot find the decision to be
arbitrary unless there is no reasonable justification for the decision, or unless the agency's
decision is not founded upon adequate principles or fixed standards. Humana Medical Corp. v.
State Health Planning and Development Agency, 460 So. 2d 1295, 1298 (Ala. Civ. App. 1984).
As Alabama courts have consistently held, even when the evidence in support of the decision is
meager and the testimony generalized, it is not a court's place "to pass upon the wisdom of the
decision of [an] administrative agency." State Health Planning and Resource Development
Admin. v. Rivendell of Alabama, Inc., 469 So. 2d 613, 615 (Ala. Civ. App. 1985). The circuit
court’s “[j]udicial review of an agency’s administrative decision is limited to determining
whether the decision is supported by substantial evidence, whether the agency’s actions were
reasonable, and whether its actions were within its statutory and constitutional powers. Judicial
review is also limited by the presumption of correctness which attaches to a decision by an
administrative agency.” Ex parte Medical Licensure Comm’n of Ala., 897 So. 2d 1093, 1097
(Ala. 2004) (internal quotation marks and citations omitted).
20
ARGUMENT
I. EX PARTE SHELBY MEDICAL CENTER AND HUMANA V. SHPDA DO NOT APPLY BECAUSE THEY DEALT WITH PROPOSALS TO OPERATE TWO OR MORE HOSPITALS TO INCREASE OR MAINTAIN THE NUMBER OF BEDS IN AN OVERBEDDED COUNTY WHILE TRINITY’S PROPOSAL IS TO OPERATE JUST ONE HOSPITAL AND TO REDUCE THE NUMBER OF BEDS IN JEFFERSON COUNTY.
Under its CON, Trinity proposes to close its obsolete Montclair facility that has 560 beds
and relocate to the Digital Hospital building where it will operate only 372 beds. This move will
reduce the total number of hospital beds in Jefferson County by 188 and will enable Trinity to
operate a single state-of-the-art hospital on an efficient basis. Omitting these critical facts, St.
Vincent’s asserts Ex parte Shelby Medical Center, Inc., 564 So. 2d 63 (Ala. 1990), and Humana
Medical Corp. v. State Health Planning and Development Agency, 460 So. 2d 1295 (Ala. Civ.
App. 1984), militate against a CON in this case. (St. Vincent’s brief at 2). These cases actually
stand for the unremarkable proposition that when a county has too many hospital beds to begin
with, a large capital expenditure to increase or maintain the same excessive number of beds is
not prudent.
In Ex parte Shelby Medical Center, Inc., 564 So. 2d at 69, SHPDA granted the Lloyd
Noland Foundation a CON to relocate 40% of its licensed beds from its existing Fairfield facility
to a proposed second, new hospital that it would build in southern Jefferson County at a cost of
$26,270,000. The beds that Lloyd Noland sought to relocate in its proposed project to build the
second hospital were all beds that it was not utilizing at its current site. Id. at 69. SHPDA
granted Lloyd Noland’s CON application, and St. Vincent’s and Brookwood, among others,
appealed. The Supreme Court reversed because Lloyd Noland sought to relocate a portion of its
beds (beds that it was not using) to a new facility in an already overbedded county, while
simultaneously continuing to operate its existing facility located in Fairfield. Id. The Supreme
21
Court concluded: “First, . . . [c]onstructing a new $26,270,000 hospital in an overbedded area,
relocating currently unstaffed beds into the new hospital, and providing duplicative services in
the new hospital do not promote the SHP goal of cost containment.” Id. In short, spending over
$26 million and operating two hospitals, instead of one, to increase the number of staffed beds
was not efficient. Additionally, the Court held that “there was evidence of less costly, more
efficient, or appropriate alternatives to the proposed service.” Id. The Court further held that
“the record indicate[d] that existing inpatient facilities with services similar to those proposed
[we]re not being used in an appropriate and efficient manner consistent with community
demands.” Id. The Court observed that although the population in the surrounding area was
increasing at that time, “the occupancy rates for surrounding hospitals [we]re falling.” Id. at 70.
The Court also found that “according to the evidence, alternatives to new construction have not
been considered or implemented to the maximum extent practicable.” Id. According to the
Court, “[t]he needs of the Fairfield residents could be met by the renovation of the Fairfield
facility,” and there was no showing that “the residents of southern Jefferson County and northern
Shelby County needed a relocation of beds from Lloyd Noland.” Id. Finally, the Court held “the
record reflect[ed] that patients [would] not experience serious problems in obtaining inpatient
care of the type proposed in the absence of the proposed new service” because there were other
existing hospitals in the area that could provide the same services as those proposed to be offered
by Lloyd Noland. Id. The Supreme Court concluded: “We hold that SHPDA's decision granting
a CON to Lloyd Noland was clearly erroneous, because the record did not contain
substantialevidence to support the findings required by § 22-21-266.” Id. at 71.
By contrast, the different record evidence in this different case shows: (1) that Trinity
proposes to complete a currently half-finished hospital building, relocate 188 fewer beds than it
22
has now to that building, close its existing, obsolete Montclair facility, and thus provide no
“duplicative services” in the new hospital (Exh. TMC 1; AR 4795-4744); (2) that the most
efficient and appropriate alternative was Trinity’s relocation because renovating Trinity’s
existing Montclair facility would cost more than completing the 280 hospital (T. 719, 726-728;
965-973; 979; 1420-1421; 1517-1518; 1501-1502; 1921; 2591; 2065; 3878-3879; 6531-6532;
Exh. TMC 16 & 17; Exh. TMC 47 at 14); (3) that while there are no existing inpatient facilities
with services similar to those proposed on Highway 280, Brookwood has experienced growth in
its orthopedics services (T. 5528), has the most active surgical volumes in the state (T. 4937),
and is the state’s largest outpatient provider (T. 4966), and St. Vincent’s has applied for an
additional 37 beds under a rule that requires 80% utilization (Exh. TMC 385), has had significant
growth in its primary care base and surgical care beds, and says it lacks critical care beds (T.
6086); (4) that alternatives to construction (e.g., expanding or renovating the Montclair facility)
have been considered, but none are feasible given the obsolete condition of the 46-year-old
facility (T. 158; 245; 323; 356; 468-469; 656-659; 663; 685-689; 692; 697-706; 708-711; 714;
716-717 719, 726-728; 777; 828-830; 910; 965-973; 979; 1352-1353; 1501-1502; 1921; 2591;
2065; 5393; 3728-3732; 3736; 3812; 3857; 6531-6532; Exhs. TMC 45, TMC 47); and (5) that
patients along the highway 280 corridor will experience serious problems in obtaining inpatient
care, including delays of up to one hour in traveling to any of the other Birmingham-area acute
care hospitals (T. 3681-3682; 3684; 3689-3696; 4503; 5230; Exhs. TMC 131, TMC 132, TMC
135).
Unlike the different record in Ex parte Shelby Medical Center, the record in this case
does include substantial evidence of each of the findings required by § 22-21-266. The Lloyd
Noland project was an effort to increase staffed beds and increase the number of hospitals,
23
whereas the Trinity project is a reduction of beds and with no increase in the number of hospitals
as the old Montclair facility will be closed. The CON Review Board weighed the substantial
evidence against the competing evidence offered by St. Vincent’s and Brookwood and found that
Trinity’s CON application was consistent with the State Health Plan and should be issued.
Because those findings are supported by substantial evidence, the CON Review Board’s decision
was not arbitrary and capricious.
Similarly, Humana Medical Corp., 460 So. 2d 1295, which St. Vincent’s also cites, is
inapplicable here. In Humana Medical Corp., SHPDA denied the CON application of Humana
Hospital of Huntsville, and the Alabama Court of Civil Appeals, under the deferential standard
of review required in CON appeals, affirmed that decision.3 Humana proposed to relocate 31
hospitals beds from two other Madison County hospitals to Humana with no reduction in total
beds. 460 So. 2d at 1298. Because Madison County was overbedded and the proposal would not
reduce beds, SHPDA’s finding that incurring additional costs to move 31 beds would neither
serve community need nor contain costs was not arbitrary and capricious. Id.
By contrast, Trinity’s CON would reduce the total number of beds in Jefferson by 188.
(AR 4795-4744). And the record in this case shows that Trinity would provide more efficient
service of the reduced number of beds at the state-of-the-art digital hospital than at its obsolete
Montclair facility. (T. 1563-156; 3874-3876; Exh. TMC 1). Another important principle that
Humana offers for this Court, which itself is acting in an appellate capacity under the AAPA, is
that the CON Review Board denied Humana’s application and the Court of Civil Appeals, in
affirming the agency action, refused to substitute its judgment in place of the agency’s.
3 The fact that St. Vincent’s relies on Humana in its arguments here is especially
interesting because, on October 14, 2009, St. Vincent’s itself applied for and received a CON for 37 additional acute care beds precisely because its high occupancy rate (well in excess of 80%) was causing serious operational concerns about its ability to provide quality healthcare.
24
Contrary to the argument made by St. Vincent’s in its brief, both Ex parte Shelby Medical
Center, Inc. and Humana Medical Corp. actually support the decisions made by the
Administrative Law Judge and unanimously adopted by the CON Review Board in this matter
and which are to be given great deference by this Court on appeal. Because the State Health
Plan requires efficiency in the provision of health care, making new capital expenditures to
maintain or increase the number of staffed beds in an overbedded county is not allowed. The
same efficiency requirement allows making capital expenditures that have to be made in any
event to replace an obsolete facility that will decrease the number of beds in an overbedded
county. The CON Review Board recognized these benefits and properly granted Trinity’s CON
application.
II. ST. VINCENT’S AND BROOKWOOD’S 60% OCCUPANCY RATE ARGUMENTS FAIL BECAUSE TRINITY’S CON FOR 372 BEDS RESULTS IN A 60% OCCUPANCY RATE.
The State Health Plan contains a guideline stating that replacement hospitals “should”
have an occupancy rate of 60%. Though omitted from their briefs to this Court, St. Vincent’s
and Brookwood’s own experts admitted before SHPDA that the 60% provision is only a
guideline, not a mandatory bright-line test.4 In any event, SHPDA granted the CON to Trinity
on the condition that Trinity agree to operate the digital hospital with only 372 beds, which
meets the 60% guideline precisely. SHPDA had the express authority to condition the CON on
Trinity’s agreement to a reduction to 372 beds under regulations that provide “the hospital
should agree to a reduction in bed capacity that will increase its occupancy rate to 60 percent”
4 In fact, the record is devoid of any evidence that would support the contention that the
60% provision is mandatory. In putting forth this argument, yet again, counsel for St. Vincent’s obviously disagrees with all the record evidence and also with his client’s own health care planning expert.
25
and the CON Review Boards may “grant or deny, in whole or in part, the application for the
CON.” See Ala. Admin. Code §§ 410-2-4-.14(3)(b), and 410-1-8-.05.
A. Trinity’s CON Application Was Not Inconsistent With the State Health Plan Because the State Health Plan’s 60% Provision for Replacement Hospitals is Permissive and Not Mandatory.
Nonetheless, St. Vincent’s and Brookwood argue that the CON Review Board was
required to dismiss Trinity’s CON application because it did not satisfy the State Health Plan’s
60% provision for replacement hospitals. As the plain language of the 60% provision confirms,
however, the 60% provision is merely a non-binding guideline for SHPDA to apply when
weighing the propriety of a CON application for a replacement hospital. Section 410-2-4-
.14(3)(b) of the State Health Plan provides as follows:
For replacement of hospitals, the occupancy rate for the most recent annual reporting period should have been at least 60 percent. If this occupancy level was not met, the hospital should agree to a reduction in bed capacity that will increase its occupancy rate to 60 percent. For example, if a 90—bed hospital had an average daily census (ADC) of 45 patients, its occupancy rate was 50 percent. (The ADC of 45 patients divided by 90 beds equals 50 percent). To determine a new bed capacity that would increase the hospital’s occupancy rate to 60 percent, simply divide the ADC of 45 patients by .60 (A fraction of a bed should be rounded upward to the next whole bed) The hospital’s new capacity should be 75 beds, a 15 bed reduction to its original capacity of 90 beds.
(Exh. TMC 180(b)) (emphasis added).
“‘Words used in [a] statute must be given their natural, plain, ordinary, and commonly
understood meaning, and where plain language is used a court is bound to interpret that language
to mean exactly what it says.’” Ex parte Looney, 797 So. 2d 427, 428 (Ala. 2001) (quoting
Tuscaloosa Cnty. Comm’n v. Deputy Sheriffs’ Ass’n of Tuscaloosa Cnty., 589 So. 2d 687, 689
(Ala. 1991)). The ordinary and plain meaning of the term “should” denotes a directive that is
permissive or suggestive in nature and not mandatory or imperative. See, e.g., Lambert v. Austin
26
Ind., 544 F.3d 1192, 1197 (11th Cir. 2008) (holding that statement in arbitration policy that
employees “should” consult with an Open Door facilitator was permissive and not mandatory
precondition to filing arbitration claim); United States v. Messino, 382 F.3d 704, 711 (7th Cir.
2004) (finding that a change of jury instructions from “may find” to “should find” had no effect
because “[e]ither wording is permissive, not mandatory. ‘Should’ may be stronger than ‘may’
but the difference, in practice, is meaningless.”); Atla-Medine v. Crompton Corp., No. 00 CIV
5901(HB), 2001 WL 1382592, at *5 (S.D.N.Y. Nov. 7, 2001) (finding that a statement that
parties “should negotiate the terms and conditions” was not a promise because “‘should’ is
permissive, not mandatory.”) “Shall,” on the other hand, is clearly and unambiguously
mandatory and imperative in nature. See, e.g., Ex parte Looney, 797 So. 2d at 428. Thus,
section 410-2-4-.14(3)(b)’s statement that a “hospital should agree to a reduction in bed capacity
that will increase its occupancy rate to 60 percent” is merely a non-binding recommendation that
SHPDA should consider when weighing a CON application for a replacement hospital. (See,
also, Health Care Authority of Huntsville v. SHPDA, 549 So. 2d 973 (Ala. Civ. App. 1989) (In
this case, the Court of Civil Appeals examined the “should” provisions of the Cardiac Services
Section of the State Health Plan and expressly held that those provisions “serve merely as a
source of guidance to aid the SHPDA” and were “neither mandatory nor binding on the
SHPDA….” Id. at 975.)
Indeed, as Noel Falls, a health planner and health market researcher and former member
of the Alabama Statewide Health Coordinating Council’s (“SHCC”) replacement hospital task
force, testified before ALJ Hampton, the 60% provision in section 410-2-4-.14(3)(b) originally
used the mandatory “shall,” but SHCC ultimately softened that language to provide the CON
Review Board with more discretion when reviewing applications for replacement hospitals. (T.
27
4358.) Recounting his experience on the SHCC replacement hospital task force, Mr. Falls
testified as follows:
Well, the big issue on replacement hospitals had to do with the utilization of the hospitals. And the recommendation that is in there now, which is a 60 percent occupancy standard, as it was originally drafted was mandatory language. It said “shall be 60 percent.” And I argued in favor of that making that less restrictive and giving the Certificate of Need Review Board a little more leeway in making their decisions because there are all kinds of factors that influence a hospital’s utilization.
(T. 4358.) Mr. Falls went on, testifying as follows:
Q. Now, before, when you were talking about your previous experience in healthcare planning, you mentioned that you were on the SHCC task force that dealt with the replacement section of the State Health Plan, correct?
A. Yes.
Q. All right. Do you remember the discussions regarding this rule? A. Yes, I do.
Q. And tell us about that. A. The -- at the time that this rule was adopted, there was a general sense that
there were too many hospital beds in Alabama. And the replacement rule was seen as a mechanism by which the number of excess beds in the state could be eliminated. And as it was originally written, the rule would have mandated the reduction of beds at the 60 percent level if you were to replace your hospital. And as I had testified earlier, my experience had been that there were circumstances in which a hospital’s decline was related to the age and the condition of the facility and that it was unfair to penalize a hospital if that -- particularly if that decline had been relatively recent and if replacing the facility would ameliorate that declining census and that the Certificate of Need Review Board should at least have the option of deciding whether or not that 60 percent standard should be applied.
(T. 4471-72.) The fact SHCC had the authority to make the 60% provision mandatory by using
the word “shall” in section 410-2-4-.14(3)(b), but, according to Mr. Falls, deliberately chose
instead to use the permissive “should,” demonstrates SHCC’s intent to provide the CON Review
Board discretion in applying the provision.
28
Even the Opponents’ own experts confirm that the 60% provision is not mandatory.
Although he maintained that the 60% provision is a “requirement,” Dan Sullivan, Brookwood’s
health care planning expert, admitted that he had no experience with the provision’s application
in the State of Alabama. (T. 5803). In fact, Sullivan even agreed that the decision whether to
allow the relocation of beds beyond those contemplated by the 60% provision is within the
discretion of the CON Review Board. (T. 5801). Similarly, Armand Balsano, the health care
planning expert for St. Vincent’s, agreed with Mr. Falls that the 60% provision was simply a
“strong recommendation.” (T. 6354). In fact, when speaking about the 60% provision at the
contested case hearing, Mr. Balsano testified as follows:
Q. . . . Do you remember your testimony about the 60 percent standard for replacement hospitals?
A. I do.
* * *
Q. And what exactly does that mean, in your opinion, if Trinity has not complied with what you believe that occupancy rule states?
A. Well, it’s -- it’s a standard that -- it’s a standard that the department -- that the Agency wants to see in its applications. And it’s not a -- it’s not an absolute requirement but rather a standard or a recommendation. I think that’s the way Mr. Falls referred to it, and I’d agree with that.
(T. 6418-19). Like Mr. Sullivan, Mr. Balsano also testified that he was not aware of any instance
in Alabama where the 60 percent provision was used to deny or modify a project. (T. 6421).
Moreover, as at least one of its own CON applications reveals, St. Vincent’s itself views
the 60% provision in the State Health Plan as mandatory only when it is convenient for it. For
example, in 2008, St. Vincent’s applied for a CON to replace and relocate its St. Clair County
campus. In the application, St. Vincent’s-St. Clair reported its occupancy rate for 2007 at
18.7%. (Exh. TMC 286, p. A-10). Interestingly, St. Vincent’s CON application, which was
ultimately unanimously approved by the CON Review Board, failed to mention that the facility
29
fell far short of the 60% occupancy rate that St. Vincent’s now claims is “mandatory.” (T. 4479;
Exh. TMC 286). At the contested case hearing, St. Vincent’s own expert even confirmed that St.
Vincent’s application for its St. Clair campus did not satisfy the 60% provision:
Q. Okay. Do you know whether St. Vincent’s St. Clair complied in every respect with this 60 percent occupancy standard?
A. In my opinion, they did not comply with the 60 percent standard.
(T. 6420).
The St. Vincent’s-St. Clair Hospital CON application is not an isolated case. Indeed, Mr.
Falls testified that he was aware of at least three other hospitals that have recently had CON
applications for relocation approved by the CON Review Board despite the fact that they did not
satisfy the 60% provision: Summit Hospital in Russell County, Jackson Medical Center in
Clarke County, and Rush-Butler Hospital in Choctaw County. (T. 4475-76.) It is clear that
neither St. Vincent’s nor the CON Review Board has historically viewed the 60% provision as a
mandatory rule, with which failure to strictly comply requires dismissal of an application. To the
contrary, both St. Vincent’s in its St. Clair Hospital CON application and the CON Review
Board have reached the same conclusion that Trinity has reached: compliance with the 60%
provision is aspirational, not mandatory.
The language of section 410-2-4-.14(3)(b) makes clear that the 60% provision in the State
Health Plan is a non-mandatory guideline of which the CON Review Board should be mindful as
it assesses applications to relocate existing hospitals. Both sides’ experts in this case confirm
this interpretation.
B. The CON Review Board Awarded Trinity a CON For Only 372 Beds Consistent with the 60% Provision.
In any event, the CON that SHPDA granted Trinity complied with the 60% provision. In
its CON application Trinity initially proposed to reduce its licensed bed capacity from 560 beds
30
to 398 beds in association with the proposed relocation project, which by Trinity’s calculation
satisfied the 60% provision.5 St. Vincent’s persuaded ALJ Hampton, however, that “Trinity
must reduce its licensed bed capacity to 372 beds in order to comply with the 60% standard.”
(St. Vincent’s brief at 63). Based on this argument, ALJ Hampton recommended that Trinity’s
CON application should be approved, conditioned upon its surrender of an additional twenty-six
(26) beds from the 398 listed in its application to ensure compliance with the 60% provision, as
calculated by St. Vincent’s. The CON Review Board agreed, adopting ALJ Hampton’s Findings
of Fact and Conclusions of Law, “subject to the stipulation that the number of acute care beds be
further reduced by another twenty-six (26) beds,” which “will result in a 372 authorized beds.”
(AR 4795). Thus, the CON that Trinity was ultimately granted by the CON Review Board was
for the exact number of beds that St. Vincent’s had identified as satisfying the 60% provision of
the State Health Plan.
St. Vincent’s and Brookwood argue, nevertheless, that the CON Review Board lacked the
authority to reduce the number of beds Trinity sought in its original CON application so that the
5 As Trinity argued below, its original CON application also satisfied the 60% provision at the time it was filed, when observation beds are considered. In order to calculate Trinity’s occupancy for purposes of determining compliance with the 60% provision, Trinity’s 2008 average daily census of 243.1, including observation patients, is divided by .60, which equals 405 beds, more than the 398 beds Trinity initially proposed to relocate. (T. 4492-4494).
Although St. Vincent’s and Brookwood have argued that Trinity’s observation beds should not be counted in determining occupancy rate for purposes of the 60% provision, there is no basis for excluding observation beds from Trinity’s occupancy calculation. Under Ala. Admin. Code § 410-2-4-.02, which is a State Health Plan rule allowing existing hospitals to obtain additional beds once they achieve 80% occupancy, regardless of the number of beds needed in the county according to the general bed-need methodology, observation patients (patients being monitored for possible admission into the hospital as inpatients) are counted in determining percentage occupancy. This methodology simply recognizes that observation patients are indistinguishable with regard to the level of care that they receive at the hospital, and that the hospital may receive reimbursement from Medicare for observation patients staying overnight in the hospital for up to three nights. (T. 4486). Thus, Trinity’s proposed project satisfied the requirement of Ala. Admin. Code § 410-2-4-.14 for replacement hospitals at the time it was filed.
31
CON complied with the 60% provision. This argument is disingenuous. Section 410-2-4-
.14(3)(b) of the State Health Plan clearly states that, in the event the 60% provision is not met,
“the hospital should agree to a reduction in bed capacity that will increase its occupancy rate to
60 percent.” Trinity agreed to such a reduction. (See Transcript of September 15, 2010 CON
Review Board meeting). The CON Review Board’s order specifically stated that Trinity’s CON
was approved, “subject to the stipulation that the number of acute care beds be further reduced
by another twenty-six (26) beds.” (AR 4795). The CON Review Board did not order Trinity to
build a hospital with only 372 beds. Instead, the CON Review Board indicated that it was
approving a CON only for a hospital with that number of beds, and consistent with the language
of the 60% provision, Trinity “agree[d] to [that] reduction in bed capacity.” Section 410-2-4-
.14(3)(b). This is similar to the common practice of a court’s affirming a reduced amount of
punitive damages upon the condition that the plaintiff agree to the reduction or suffer a new trial.
See, e.g., BMW of N. Am. v. Gore, 701 So. 2d 507, 515 (Ala. 1997) (“The trial court's order
denying BMW's motion for a new trial is affirmed on the condition that the plaintiff file with this
Court within 21 days a remittitur of damages to the sum of $50,000; otherwise, the judgment will
be reversed and this cause remanded for a new trial.”). St. Vincent’s and Brookwood cannot
now be heard to assign as error the very type of concession for which Section 410-2-4-.14(3)(b)
of the State Health Plan clearly calls and for which they argued.
SHPDA’s authority to grant part of the hospital beds sought in a CON application,
instead of the whole number sought, is further supported by SHPDA Rule § 410-1-8-.05, which
provides that the CON Review Board may “grant or deny, in whole or in part, the application for
the CON . . . .” (Emphases added.) Section 22-21-265 requires a provider of health services to
obtain a CON from SHPDA to offer a new health service. Section 22-21-275(10) provides that
32
SHPDA “shall prescribe by rules and regulations the procedures for review of applications for
certificates of need and for issuance of certificates of need.” The Legislature then gave SHPDA
broad authority to prescribe “[r]ules and regulations governing review procedures [that] shall
include, but not necessarily be limited to, the following: . . . (10) Provisions for written findings,
as appropriate, which the state used as the basis for its decision or any recommendation of the
state agency.” (Emphases added.)
SHPDA’s Rule 410-1-8-.05 has two subsections. Subsection (1) provides that where the
CON Review Board holds the public hearing, the Board “shall, by a majority vote of the
members voting, grant or deny, in whole or in part, the application for the CON or other matter
properly before the Board.” (Emphasis added.) Subsection (2) provides that where an ALJ holds
the public hearing and renders proposed findings of fact and conclusions of law, those findings
and conclusions will be “either ratified or rejected, in whole or in part, by a majority vote of the
quorum of [the CON Review Board’s] membership.” (Emphasis added.)6 Thus, the ALJ can
recommend that the CON Review Board adopt an order approving an application in part. That is
what the CON Review Board did in its order approving ALJ Hampton’s recommended order that
approved Trinity’s CON application “subject to the stipulation that the number of acute care beds
be further reduced by another twenty-six (26) beds.”
6 SHPDA Rule 410-1-8-.05, as originally promulgated in 1985, did not include the “in
whole or in part” language. In 1997, pursuant to its statutory rule-making authority, SHPDA amended the rule to insert the “in whole or in part language.” This amendment was not without meaning. See Tesoro Haw. Corp. v. United States, 405 F.3d 1339, 1346-1347 (Fed. Cir. 2005) (“We construe a regulation in the same manner as we construe a statute, by ascertaining its plain meaning.”) (Citing Bowles v. Seminole Rock & Sand Co., 325 U.S. 410, 414-15, 89 L. Ed. 1700, 65 S. Ct. 1215 (1945) (focusing on the “plain words of the regulation” to ascertain the meaning of the regulation)); Time Warner Entmt Co., L.P. v. Everest Midwest Licensee, L.L.C., 381 F.3d 1039, 1053 (10th Cir. 2004) (“[W]e interpret the language of regulations as we construe the language of statutes; accordingly, we must read the regulations such that every word is operative.”).
33
The rules or regulations of SHCC and of SHPDA, promulgated under the AAPA’s notice
and comment procedures, have the force and effect of law. See Health Care Auth. v. Statewide
Health Coordinating Council, 988 So. 2d 574, 582 (Ala. Civ. App. 2008) (“Rules, regulations,
and general orders of administrative authorities pursuant to powers delegated to them have the
force and effect of laws . . . when they are of statewide application and so promulgated that
information of their nature and effect is readily available or has become part of common
knowledge.”) (Internal quotation marks and citations omitted.)7
And SHPDA’s interpretation of its own rules to permit the reasonable practice of
reducing the number of beds in a CON application to approximate or meet the 60% rule is
entitled to judicial deference. See Ex parte Board of School Commissioners of Mobile County,
824 So. 2d 759, 761 (Ala. 2001) (“This court and the trial court must give substantial deference
to an agency’s interpretation of its rules and regulations.”); Sylacauga Health Care Ctr., Inc. v.
Alabama State Health Planning Agency, 662 So. 2d 265, 268 (Ala. Civ. App. 1994) (“[A]n
agency's interpretation of its own rule or regulation must stand if it is reasonable . . . .”).
The reasonableness of SHPDA’s practice and the rules allowing an application to be
granted “in part” is ultimately confirmed by common sense. If the statutory and administrative
scheme allows for discovery and trial of a contested case after an application for a CON is filed,
7 In addition, the Supreme Court has stated that it will not construe a law to “defeat
powers expressly granted or necessarily implied by a strict construction.” Chism v. Jefferson County, 954 So. 2d 1058, 1077 (Ala. 2006 (quoting Southern Ry. v. Cherokee County, 42 So. 66, 66 (Ala. 1905)). The power to grant a CON application “in part,” though not expressly given by statute, is necessarily implied by the Legislature’s broad delegation of CON approvals to SHPDA, the Legislature’s provision for a contested case proceeding, and the practical reality that the ultimate findings of SHPDA might be slightly different from the initial application set forth in a CON application that should, nevertheless, be granted. See generally, e.g., Yeilding v. Ball, 87 So. 785, 786-87 (Ala. 1921) (holding that the express authority to pay the “cost of the conduct and operations of [county] offices” included the implied authority to purchase a garage to maintain county automobiles).
34
then the ALJ and the CON Review Board ought to be able to take the resulting evidentiary
findings into account in their orders. By contrast, the all-or-nothing rule now asserted by St.
Vincent’s and Brookwood would mean that if after a three-year contested case proceeding and
the longest hearing in the history of the CON program, including the live testimony of expert and
fact witnesses, hundreds of exhibits, and arguments of counsel, Trinity’s 432-page CON
application for a project in excess of half a billion dollars were found to be off by one bed, or one
cent, the application would be automatically denied. That absurdity is not the law.
III. TRINITY’S PROJECT IS CONSISTENT WITH THE REPLACEMENT HOSPITAL PROVISIONS OF THE ALABAMA STATE HEALTH PLAN.8
In order to obtain a CON to construct a replacement hospital, the applicant is required by
the State Health Plan to “demonstrate that the proposed replacement is the most cost effective
or otherwise most appropriate alternative to provide patients with needed health care services
and/or facility improvements…” and “submit significant evidence of need” for the project,
which should include, but is not limited to, one or more of the following:
1. The existing structure requires replacement to meet minimum licensure and certification requirements.
2. There are operating problems, which can best be corrected by replacement of the existing facility.
3. The replacement of the existing structure will correct deficiencies that place the health and safety of patients and/or employees at significant risk.
8 In addition to requesting authorization to replace and relocate its existing hospital,
Trinity also requested permission to expand its cardiac catheterization services to include two new cardiac catheterization labs in addition to its existing labs. There was no dispute in the contested case hearing that Trinity met the criteria for expansion of existing cardiac services, and the expansion was approved as a part of this CON. Brookwood and St. Vincent’s have not raised any issue relating to the expansion of Trinity’s cardiac catheterization services in this appeal.
35
Ala. Admin. Code § 410-2-4-.14. There is a pressing need for the replacement of Trinity’s
existing Montclair facility, and relocation to the 280 hospital represents the most cost effective
and most appropriate alternative to meet that need.
A. If Trinity is Not Permitted to Relocate, It Will Likely be Forced to Close.
Trinity stands at a crossroads. The hospital has been in a state of decline for almost 10
years. That decline, as evidenced by a steady loss of market share and admissions, which have
accelerated in recent years, has resulted from an outdated physical plant, a location that is
removed from the growth areas of the city, the loss of physicians from the hospital’s staff, and
difficulty recruiting new physicians. Physicians, administrators, and staff members at Trinity all
agree that, if the hospital does not relocate, it will ultimately close. (T. 425). Trinity is not
content to stand by idly, however, allowing the hospital to suffer a slow death. The purpose of
this project is to save Trinity from eventual extinction, and to breathe new life into an institution
that has provided outstanding health care to the city of Birmingham and the surrounding region
for 80 years. After considering all of the evidence, SHPDA agreed that Trinity should be
allowed to relocate.
In reaching the final decision to issue the CON, the ALJ and CON Review Board took
into account testimony establishing that Trinity will likely close at some point if it is not
permitted to relocate. (AR 3240.) The Replacement Hospitals section of the State Health Plan
states that the applicant should submit significant evidence of need for the project, which should
include, but is not limited to, the evidence specifically outlined in that section. Evidence that a
hospital which has operated in the community for 80 years providing top-quality services to its
citizens will likely close its doors if not permitted to relocate constitutes “significant evidence”
of need for this project. An essentially identical situation was addressed in the case of Mid-Ohio
36
Health Planning Federation v. Certificate of Need Review Board, 1982 WL 4084 at *6 (Ohio Ct.
App. April 1, 1982). There, the court held that, in granting a hospital a CON to relocate, the
state agency properly considered the financial condition of the hospital. The court reasoned that
survival of the hospital was a matter of significant concern to the entire community because it
was a facility the loss of which would be disruptive to the provision of health care in the
community. Id. The court stated that the feasibility of continuing the operations of the existing
hospital was properly one of concern to responsible health planners. Id.
Birmingham has changed a great deal over the course of Trinity’s 80-year existence.
When Trinity opened in 1930 on Highland Avenue in downtown Birmingham, the population
was located near the city’s center. When the Baptist organization decided to relocate Trinity in
the 1960s from the then-antiquated building on Highland Avenue, it chose Montclair Road as the
replacement site because the population of Birmingham was shifting at that time from the
downtown Birmingham area northward and eastward, towards Crestline, Crestwood, and
Mountain Brook (T. 152-153). At that time, not one interstate highway came through
Birmingham. As explained by Mr. Wendell Harris, a member of Trinity’s Board of Trustees
who, as a local news anchor, covered the groundbreaking of the Montclair hospital in the 1960s:
“…the selection of the site by Baptist was a good location. It was just a few blocks off U.S.
Highway 78, which had been four-laned. And it was even — Montclair Road and Montevallo
Road and all of those roads were easily accessed.” (T.152-153).
Today, however, Montclair Road is a quiet, residential boulevard. (T. 3858). The
neighborhoods surrounding Montclair Road are no longer areas of growth, and the population is
declining in almost all of the zip codes surrounding the hospital. (T. 4403). In addition to the
fact that Montclair Road is no longer heavily traveled, the hospital cannot be seen from street
37
level, because it is located at the top of a steeply-graded hill, covered with trees that obstruct the
public’s view of the hospital from Montclair Road. (T. 649, 666).
Patients often have a difficult time locating Trinity. For example, Dr. Tom Eagan, Jr., a
cardiologist at Trinity, testified that many of his practice’s patients originate from outside the
immediate Birmingham area, and they sometimes have difficulty locating the hospital or
complain about its location. (T. 247-248). James Spann, President of Trinity’s Board of
Trustees, explained patients’ confusion and frustration as follows:
As I always do, I walk the halls. And there was an older lady crying. And one of our employees, to her credit, was there comforting the lady…I said, ma'am, why are you crying she said — and she's from Blount County. She's from Locust Fork. And for those that don't know Locust Fork, it's about 40 miles north of Birmingham, in Blount County, hear Oneonta. And she had been trying to find that hospital for two hours, just driving; and she was lost. And finally, somebody — she stopped at a gas station. She tried to find it after that. She couldn't find it. Finally, somebody got her there. And I looked at that women in the eyes, and there was real pain, and I knew this just won't work.
(T. 468-469). Dr. Garry Turner, an otolaryngologist (“ENT”) at Trinity, testified that his patients
are sometimes late for surgery because they get lost on their way trying to find the hospital. (T.
1352, 1353).
Several of Trinity’s witnesses testified to their personal experiences regarding the
difficulty of accessing the Montclair facility. Mr. Wendell Harris, a Trinity Board member,
testified that, when he recently suffered a stroke and was picked up by an ambulance in Hoover,
the driver had to use a GPS device to find his way to Trinity, because the ambulance driver was
unaware of how to get there. (T. 158). Jane Northcutt, Trinity’s Chief Quality Officer, testified
that she had to stay on the phone with her brother, who was trying to find Trinity to bring in his
injured son, to guide him to Trinity because he could not locate the hospital. (T. 3736). Both
38
Bill Heburn (former Trinity CEO) and Sean Dardeau (current Trinity COO) testified that they
became lost on the way to the hospital on their first day of work. (T. 3857).
The hospital’s outdated location has contributed to its decline. Andy Romine, Chief
Nursing Officer at Trinity, testified that the location of the hospital has been detrimental to the
hospital’s patient volumes. (T. 3812). Dr. Scott Pennington, a general surgeon on the medical
staff at Trinity, testified that the hospital’s location creates a barrier to Trinity’s physicians
receiving referrals from other physicians. The referring physicians are concerned that their
patients are unaware of or will be unable to find Trinity. (T. 356). In fact, Trinity’s location is
the biggest threat to viability of the hospital today, as explained by George Hairston, a member
of Trinity’s Board of Trustees and former Chief Executive Officer of Southern Nuclear
Operating Company. (T. 1461). Bill Heburn said it this way: “You’re looking at a hospital that
historically was downtown, saw the need to move to a different campus 50 years ago; it did. It’s
now time to move it for the next 50 years.” (T. 3866).
Trinity’s current decline is also attributable, in large part, to the mass exodus of
physicians from the medical staff in recent years. In the past two years alone, Trinity’s
physicians have been leaving the hospital in droves — there were at least 17 resignations in 2007
and 21 in 2008. (Exh. TMC 29). The vacancy rate in the medical office buildings (“MOB”) at
Trinity, according to Bill Heburn, is currently about forty percent. (T. 3859). Dr. Zen Hrynkiw,
a neurosurgeon at Trinity, described the attrition problem as follows:
You know, I was making rounds this summer a few weekends, and I go to the doctor's parking lot, and the place is empty. It's a ghost town, a real ghost town. And that's scary for a primary hospital. I think we're going to fold.
(T. 425).
39
The hemorrhaging outflow of physicians from Trinity has been extremely detrimental to
the viability of the hospital. Particularly damaging losses in the past several years have included
the following:
1. Seale Harris Internal Medicine Clinic. In 2008, the practice of approximately nine physicians, which had been based at Montclair since its inception, moved its offices to St. Vincent’s after the head physician of that practice became convinced that the group could not obtain the new, young patients or the volume needed to grow the group’s business at Trinity. (T. 2486-2488, 3038). The loss of the Seale Harris clinic has negatively affected volumes at Trinity. (T. 3036). After moving the practice to St. Vincent’s, the Seale Harris physicians began admitting their patients at St. Vincent’s instead of Trinity. (T. 3036-3037). Trinity, as a result, lost the large number of inpatient admissions that formerly flowed from those internists. (T. 3036).
2. Montclair OBGYN. Montclair OBGYN left Trinity for St. Vincent’s because the hospital, when under previous ownership, failed to build a new women’s center while many of the other hospitals in town were undertaking such projects. (T. 2490). The departure of that group, which represented the majority of the gynecologists on Trinity’s staff, has resulted in declining obstetrical and gynecological volumes since that time. (T. 3041).
3. Hospitalist group. In the spring of 2009 a group of four hospitalists left Trinity’s medical staff to join the staff at St. Vincent’s. (T. 2491-2492). Trinity will lose 3,000 to 4,000 patient admissions per year as a result of that departure. (T. 3048). Trinity has had a difficult time finding hospitalists to replace those who left for St. Vincent’s. (T. 3049).
4. Dr. Paul Sauer. Dr. Sauer is a plastic surgeon and long-time member of Trinity’s staff who left Trinity to join St. Vincent’s staff. (T. 3042).
5. Dr. Bud Woodall and Dr. Bo Bowen. Dr. Woodall and Dr. Bowen are neurosurgeons who were on Trinity’s active medical staff until 2007. (T. 3049, 3050).
6. Dr. Todd Smith and Dr. Andrew Cordover. Dr. Smith and Dr. Cordover are orthopedists who left Trinity to join St. Vincent’s medical staff. (T. 3051).
Further physician attrition is inevitable if the 280 hospital project is not approved. Andy
Romine testified that, in his experience, physicians tend to follow the population, and that
significant erosion of Trinity’s medical staff will continue if Trinity is not permitted to relocate.
(T. 3812-3813). In further support of that evidence, Mike May, Trinity’s Director of Surgical
Services, testified that certain surgeons have told him that they will leave if the CON is denied.
(T. 870). Dr. Pennington, a general surgeon whose practice is based at Trinity, testified that his
40
group would most likely go to St. Vincent’s if Trinity is unable to obtain a CON to relocate to
the 280 site. Even though he wishes to remain loyal to Trinity, Dr. Pennington and his group
fear that Trinity will fail if it is not permitted to relocate. (T. 394). James Spann explained the
danger Trinity faces in the following testimony:
…we've had a trickle of physicians that have left; but the minute our core healthcare professionals begin to leave the hospital, it's all over. And the minute they find out we're not moving, it's my opinion that most of them will not have anything to do with us anymore. They will phase it out; and before you know it, we'll just be a shell out there.
(T. 374).
It is crucial for Trinity to be able to recruit new physicians, not only to combat the steady
stream of physician departures, but also because many of its physicians are reaching retirement
age. Indeed, the average age of the medical staff at Trinity is 58 years old. (T. 3860-3861).
Recruiting new physicians to Trinity is very difficult, moreover, due to the location of the
hospital, the outdated facility, which does not appeal to residents, and the uncertainty related to
the institution’s future. (T. 424, 2517, 3027). Trinity’s inability to recruit new physicians to its
medical staff is reflected by the fact that although the hospital hosts 90 residents per year through
one of its five residency programs, in the past two years Trinity has been able to convince only
two or three residents to join its active medical staff. (T. 1567-1568).
There was a consensus among all witnesses in the contested case hearing offering
testimony on the issue that, as a general proposition, patients tend to follow their doctors. (see
e.g. T. 252, 585, 589, 567, 1385, 2333-2334, 2354; 2466-2467). In other words, if a physician
leaves one hospital for another, that physician’s patients tend to follow him or her to the new
hospital, instead of remaining a patient of the first hospital. Thus, as physicians have left Trinity
for greener pastures, so too have Trinity’s patients.
41
Patient volumes have been declining at Trinity since 2001 and for eight consecutive years
(T. 3867), with discharges falling from 21,000 in 2001 to 14,000 in 2008. (Exh. TMC 379).
Declines have occurred across the board, affecting all service lines, including skilled nursing,
rehabilitation, psychiatric, and acute care services. (T. 4466). Although patient losses began
with a trickle around a decade ago, they have gained momentum and developed into a full
fledged stream in the past several years. Since May of 2007, volumes have declined at Trinity
by approximately ten percent. (T. 3821). Today, Trinity’s average daily census is a mere 200
patients, and surgical volumes are currently down by 20 to 30 percent. (T. 883, 4466). The
inpatient admissions problem reached a new low when Trinity was recently forced to close down
its entire eighth floor, which contained a 40-bed medical-surgical unit, because it was operating
at only about 50% occupancy. (T. 3810). If one were to visit the eighth floor at Trinity today,
one would find dark, empty corridors. Although Trinity has been able to financially combat the
loss of patients thus far by reducing certain variable costs, Bill Heburn testified that at some
point, the patient losses will reach a critical mass, and Trinity will no longer be able to operate
the hospital. (T. 3868).
Trinity’s market share has also dwindled over the past decade. In 2001, Trinity’s market
share in its Primary Service Area (“PSA”) was 10.8%. That number declined to 8.1% by 2008.
(Exh. TMC 377). The following graph depicts Trinity’s declining acute care discharges and
market share from 2001 to 2008 (Exh. TMC 379):
42
While Trinity’s market share was declining, other hospitals’ market shares were
increasing. (T. 4461). Brookwood and St. Vincent’s have benefited the most from Trinity’s loss
of market share in its PSA over that time period, with Brookwood increasing its market share
from 12.2% in 2006 to 15.7% in 2008, and St. Vincent’s increasing its share from 21.4% in 2006
to 24.5% in 2008. (Exh. TMC 378). The following graph illustrates Trinity’s declining market
share and Brookwood’s, St. Vincent’s-Birmingham’s, and St. Vincent’s-East’s increasing market
share between 2001-2008 (Exh. 378):
43
Dr. Bradley Dennis, a physician at Brookwood, commented as follows on the decline of Trinity
in the area’s healthcare market: “Trinity was a major competitor we had in this market for
years…and now it’s—it’s laughable.” (T. 5040) (emphasis added).
So why does it matter if Trinity’s admissions continue to decline to the point that it is
forced to shutter its doors? Why should Trinity not be allowed to follow the path into oblivion
recently traveled by Physician’s Carraway Medical Center, a once-thriving, 500-bed hospital in
Birmingham’s city center? In short, allowing Trinity to close would be bad for the state of
Alabama and its citizens. Even Dr. Dennis, who condescendingly described Trinity’s
competitive position as “laughable,” and Patricia Todd, a member of the Alabama House of
Representatives who testified as a witness for Brookwood, admitted that the closure of Trinity
would have a negative impact on the area. (T. 5127, 5339). Valerie Abbott, a Birmingham city
44
council member whose district includes the Montclair site, and who testified on behalf of
Brookwood, conceded that if Trinity could not survive at its current location, she would prefer
that it be permitted to relocate to the 280 site. (T. 4920).
Trinity’s closure would overwhelm the capacity of Birmingham area hospitals. (T.
4527). A regional referral center for north central Alabama, Trinity treats high volumes of
extremely acute patients. (Exh. TMC 1, 56). During 2007, Trinity reported nearly 15,000
inpatient admissions and over 100,000 outpatient visits; delivered over 800 babies; performed
20,000 surgeries, including 400 open-heart surgeries and over 3,000 cardiac catheterizations; and
had more than 26,000 patient visits to its emergency department. (Exh. TMC 1 at 56; T. 3136).
It has 56 ICU beds that are constantly full. (T. 2496). In addition, the volume at Trinity, as well
as at all area hospitals, is likely to increase based on the new federal health care legislation, and
also due to the aging of the baby boomer generation over the next several years. (T. 3136).
Other Birmingham hospitals, many of which are often on emergency diversion status for
at least some of their services, cannot absorb all of Trinity’s patients. (T. 2496). The closure of
Carraway has put a terrible burden on an already stressed system, according to Brookwood’s
CEO, Garry Gause. (T. 5526). Trinity’s closure would compound that burden and likely
overwhelm the system. Dr. Jeffrey Wade, a Brookwood physician, testified that when Carraway
closed, Brookwood’s surgeons were operating until midnight to address the additional volume
from Carraway. (T. 5027). Even such extreme measures taken by other hospitals would likely
be insufficient to respond to the added volume of Trinity’s patients were Trinity to close.
Because Trinity currently provides certain services that are not available at other area
hospitals, if Trinity is forced to close its doors, those services would potentially be lost. For
instance, Trinity has 64 psychiatric beds, while many other area hospitals do not offer inpatient
45
psychiatric services. Because there are already insufficient numbers of psychiatric beds in
Jefferson County, according to Dr. Garry Grayson, president of the psychiatric group practice
Grayson and Associates, the loss of Trinity’s psychiatric beds would make a bad situation even
worse. (T. 4785). In addition, Paul Graham, Trinity’s current Chief Administrative Officer and
former Chief Financial Officer, testified that 600 babies are delivered annually at Trinity through
the Medicaid waiver program—a program in which not all Birmingham hospitals participate.
(T. 3136). St. Vincent’s does not participate in the Medicaid waiver program. (T. 2077-3078).
Dr. Zen Hrynkiw, a neurosurgeon at Trinity, explained in addition that Trinity is the only
hospital in Birmingham, other than UAB, that accepts neurological trauma call on the weekends.
(T. 410-420). In addition, most trauma cases that do not require a Level 1 trauma center are
treated at Trinity, due in large part to Trinity’s willingness to accept such patients despite the fact
that trauma patients are often indigent. Another service provided by Trinity that would be lost
should Trinity cease operations is its residency program. Trinity’s residency seats could not
simply be transferred to another hospital, because Medicare caps the number of residents allowed
at any given hospital. (T. 3065-3066).
If Trinity were to close, moreover, 1,500 to 1,600 individuals currently employed there
would lose their jobs and potentially join the ranks of the unemployed. (T. 3136-3140). On a
less tangible but still significant note, closure of Trinity would result in the loss of a coordinated
group of physicians who have worked with each other over the course of their entire careers,
providing excellent care to the community. (T. 2495). It is unlikely that such a unified group of
physicians, many of whom have worked together for decades, would be as effective if dispersed
throughout the Birmingham area. Id.
46
In addition, Trinity is worthy of saving because if it closes, the community will be losing
a faith-based hospital that is unique in the level of dedication to its mission. Since the time that it
was founded by the Baptist Health System in 1930, Trinity has been a faith-based hospital. (T.
354). Although there are other hospitals in Birmingham that are also faith-based, the
commitment to the provision of Christ-centered health care at Trinity is unique in its depth and
breadth.
Trinity’s administration is supportive of its faith-based mission. (T. 354). Board member
James Spann testified that he became comfortable within a short time of Baptist’s affiliation with
CHSI that Trinity was serious about continuing the hospital’s Christ-centered healthcare
ministry. (T. 458-459). If Trinity had retreated from that mission, Mr. Spann testified, he would
have resigned, as would most of the other Board of Trustees members. (T. 459-460). When
CHSI’s indirect subsidiary, Birmingham Holdings, LLC, purchased Baptist’s interest in Trinity
and became the sole owner of the hospital, however, it formally reaffirmed its commitment to the
hospital’s mission. The Board minutes from August 21, 2008, reflect that Mr. Spann presented
the following Mission Statement to the new Board for its approval:
As a witness to the love of God, revealed through Jesus Christ, Trinity Medical Center is committed to ministries that enhance the health, dignity, and wholeness of all the people we serve through Integrity, Compassion, Advocacy, Resourcefulness, and Excellence.
(Exh. TMC 204). The Board adopted the Mission Statement unanimously. (Exh. TMC 204).
Trinity employs a full-time Director of Pastoral Services, Pastor Bob Anderson, who
testified in the contested case hearing. Pastor Anderson testified that, since the merger of
CHSI’s indirect subsidiary into Triad, the hospital has not only maintained its commitment to
faith-focused care, but has increased it. (T. 3778). For example, prior to the merger, the hospital
used student chaplains. (T. 3779). In addition, Trinity has engaged two full-time, fully trained,
47
chaplains who serve the hospital during the day, and no longer relies on students. Id. In
addition to those two full-time chaplains, there are also 10 part-time pastoral staff members who
serve on nights and weekends. (T. 3779-3780). The only hospitals in town that have around-
the-clock coverage other than Trinity are UAB and Princeton-Baptist Medical Center
(“Princeton-Baptist”), which employs student chaplains. (T. 3780). Such constant pastoral
coverage is significant in that if a loved one passes away or has a serious health emergency, there
is always a chaplain available to be with the family. (T. 3780-3781). Pastor Anderson testified
that the pastoral care program is important to the continuum of care provided at Trinity because
when people are confronted with death or illness, they begin to question their mortality, and are
often in need of spiritual guidance. (T. 3781-3782).
Trinity’s Christ-centered mission is evident in the daily operations of the hospital. For
example, Pastor Anderson reads devotionals over the loudspeakers each morning as a way of
reminding people of their faith during their everyday lives. (T. 3789-3790; Exh. TMC 203). Dr.
Scott Pennington testified that “All my partners and I are Christians. We try to practice in a way
that demonstrates our faith.” (T. 354). Dr. Pennington testified that the doctors in his practice
pray with their patients before surgery and that his group’s patients expect that the physicians
will pray with them. (T. 355). Prayer before surgery calms patients, Dr. Pennington related. Id.
James Spann noted that the hospital’s mission is evidenced by the fact that people who come to
Trinity are not treated with indifference, and that he believes they can distinguish that sort of
care. (T. 465). As Spann’s Board colleague George Hairston testified:
… it's not often that you go in to have your shoulder repaired and the doctor says do you mind if we have a prayer before I start this procedure. And I'm like, please do. And I've had three procedures there, and I can't just say enough about it. It's not just the doctor's qualification, but it's the heart and soul of that operation.
(T. 1463).
48
Thus, Trinity has provided ample evidence that the proposed relocation is needed in order
to prevent its likely closure. The issues of physician attrition, location, and declining admissions
and market share threaten the existence of a unique, mission-driven hospital that has provided
exemplary care to the citizens of Jefferson County and the surrounding areas for 80 years.
Relocation is needed in order to save Trinity.
B. Relocation to the 280 Hospital is the Most Cost Effective Alternative for Trinity.
1. Trinity can Realize Substantial Cost Savings by Relocating to the 280 facility.
Relocation of Trinity to the 280 hospital is a common sense move. Trinity needs to
replace its facility. The 280 hospital is a 60 to 65%-completed structure with over $200 million
already invested in it. By relocating to the 280 hospital instead of building a new hospital from
the ground up, Trinity can not only save substantial capital expense, but can fulfill the promise of
bringing a world-class hospital to an area badly in need of its services. The CON Review Board
and ALJ considered this when granting the CON, recognizing that if Trinity’s application was
denied, a state-of-the-art, never-occupied hospital that is more than half complete will almost
certainly be demolished and lost to the community forever. Trinity’s relocation to the 280
hospital simply makes the best use of the community’s existing healthcare resources.
The total cost of Trinity’s proposed project is $555,680,437. (Exh. TMC 1 at 14). That
cost includes site acquisition, construction, the purchase of major medical equipment, and first
year annual operating costs. Id. The cost of major medical equipment is estimated to be
$72,000,000. Trinity projects first year annual operating costs of $275,680,437, which will be
entirely offset by revenues produced by the ongoing operation of the hospital. (Exh. TMC 1 at
14; T. 3331). Ed Smith, Executive Vice President of BE&K Building Group, estimated that the
49
cost to complete construction of the 280 facility will total $144,000,000. (Exh. TMC 91). That
total construction cost is comprised of $4,097,843 for completing site development, including
road improvements; $113,617,044 for finishing the interior build-out of the hospital (including
modifications to the already completed nursing stations (T. 2117)); and $26,437,500 to build a
parking garage attached to the hospital. (Exh. TMC 91). The following chart is a breakdown of
the costs associated with completion of the 280 hospital prepared by BE&K Building Group
(Exh. 1 at Exh. 12):
Ed Smith testified that he believes those costs estimates will prove to be very accurate,
and that there is a very low likelihood that his costs are understated. (T. 2579-2580). Mr. Smith
used the same model to estimate the cost of completing the 280 hospital that he used to estimate
the cost of UAB’s Women’s and Infants’ Facility, on which the winning contractor’s bid was
50
within one-half of one percent of Smith’s estimate. (T. 2554). In addition, Brasfield and Gorrie
(“Brasfield”), a construction firm based in Birmingham, Alabama; Robins and Morton, another
construction firm in Birmingham; and Earl Swensson and Associates (“ESA”), an architectural
firm specializing in healthcare, have all reviewed the project and concur in BE&K’s cost
estimates. (T. 2054, 2887).
Trinity’s estimated total project cost of approximately $555 million represents the very
high end of the project’s possible cost spectrum, and there are many factors that could actually
reduce that number. For example:
1. Ed Smith testified that, although he included a 7.5% cost escalation to account for several months of CON approval and design time, it is BE&K’s experience that there is currently stagnation and even deflation in construction materials and services pricing. (Exh. TMC 90).
2. The CON application’s estimate of $72 million for major medical equipment is overstated because it assumes that Trinity will purchase all new equipment upon relocation to the 280 hospital. In reality, however, there will be savings because, as Paul Graham testified, Trinity will evaluate all of its existing moveable equipment and will transfer all useful equipment with a reasonable service life to the new facility. (T. 3190-3191).
3. Richard Miller, a principal at Earl Swensson and Associates (“ESA”), the architecture firm hired to design the build-out of the 280 hospital for Trinity, testified that there will be value engineering, or cost cutting efforts, in the build-out of the 280 hospital, just as there is for any other construction project. (T. 2888). For example, Ed Smith testified that, after Children’s Hospital submitted a CON application to construct a replacement hospital, BE&K continued to work with the architect for that project and the client to bring the cost down so that it was more feasible for Children’s Hospital financially. (T. 2580).
4. Although Ed Smith assumed for purposes of his cost estimates that a substantial portion of the 280 hospital’s existing, finished space would have to be gutted and reconstructed for a different purpose, Richard Miller testified that ESA will use as much of what is already built out at the 280 site as possible. (T. 2888-2889).
Perhaps the most impressive cost savings are those associated with the purchase of the
hospital itself. Trinity is basically acquiring the unfinished hospital for free. Trinity has entered
into an agreement with Daniel to purchase the hospital for $40,000,000, contingent upon
51
Trinity’s obtaining a CON to operate the hospital. (Exh. TMC 16). The purchase price of $40
million is extraordinarily favorable given that over $200 million has already been invested in the
280 hospital, and it is approximately 65% complete. (T. 1517-1518). According to Jay Grinney,
present CEO of HealthSouth, and a veteran of the corporate healthcare world, to be able to
purchase a 400-bed hospital for anything less than $400,000,000 constitutes a true bargain. (T.
1886).
The opportunity for Trinity to purchase the 280 site for $40 million, would be, standing
alone, an amazingly attractive deal. In addition to that discounted purchase price, however, the
city of Birmingham has agreed to provide to Trinity an economic incentives package that is itself
worth some $40 million. (Exh. TMC 17). Under the October 2008 Financial Incentive
Agreement, the city of Birmingham would share future revenue from sales, use, occupational, ad
valorem, and property taxes with Trinity. (T. 1420-1421). The combination of the bargain-
basement purchase price and the tax incentives from the city means that Trinity would be
receiving $200 million worth of brand new hospital for free. As stated by Bill Heburn: “The
savings are phenomenal . . . to have an asset that you can develop, that you for all practical
purposes are receiving for nothing, and to bring that to life is a phenomenal opportunity.” (T.
3878-3879).
Relocating Trinity to the 280 hospital will also produce substantial savings in that Trinity
would not have to build a new, more expensive hospital from the ground up. Construction cost
expert Ed Smith testified that to build the same building as the 280 hospital on a hypothetical
green field site in Birmingham, with surface parking, would cost approximately $300,000,000.
(T, 2583-2585). Building a parking deck instead of surface parking would increase the cost of
the hypothetical project to $325,000,000. (T. 2854-2855). If, instead of building a facility to the
52
exceedingly high standards of the 280 hospital, one were to use the normal specifications of a
CHSI-affiliated hospital for new construction on a greenfield site, with surface parking, total
construction costs would be $260,000,000 to $280,000,000. (T, 2587-2589). By way of
contrast, the total construction cost of the 280 hospital, including the construction of a parking
deck, is $144,000,000. (T. 2586). In other words, it will be some $181 million less expensive to
acquire and finish the 280 hospital than to build a comparable, or even roughly comparable,
hospital from scratch.
Trinity’s relocation to the 280 hospital also would allow Trinity to save future costs
relating to expansion of the hospital because of the amount of shell space already built into the
280 facility. After building out all space needed to accommodate the beds and the program of
services proposed by Trinity in its CON application, there will still be some 92,000 square feet of
shell space in reserve. (T. 2419). The mechanical, plumbing, and electrical systems are,
moreover, already built to service that reserve space. (T. 2889). As described by Jason Hard, the
Brasfield and Gorrie project manager for construction of the Digital Hospital, the 280 hospital is
a campus within a single building. (T. 1960). Being able to grow into the facility’s shell space
in the future instead of expanding through construction of new space will create significant cost
savings. Gordon Carlisle, Vice-President for Construction for Community Health Systems
Professional Services Corporation, explained that it is much less costly to expand into shell
space, at the cost of about $160 per square foot, than to undertake new construction in order to
expand, at a cost of $320 per square foot. (T. 2426). Thus, in the future, Trinity can reduce
expansion costs by about one-half because of the reserve space built into the 280 facility.
In addition to being the most cost-effective alternative for Trinity as an institution, the
build-out and operation of the 280 site is the most cost-effective alternative to meet the
53
healthcare-related needs of the community. Trinity’s relocation to the 280 hospital is the least
costly means of meeting the need for acute care services in the southern Jefferson and northern
Shelby County area because it involves the relocation of existing beds. If Trinity’s project is not
granted, then in order for acute care beds to be added in that area, a new hospital will have to be
built from the ground up. Such new construction would represent a colossal waste of resources,
as there is a largely-complete, state-of-the-art hospital standing vacant in the exact area where
those services are needed. Construction of a new hospital on the 280 corridor would also require
new beds to be added to the system, with additional cost to government payors. By way of
contrast, Trinity, in relocating to the 280 hospital, will actually be reducing the number of beds
in Jefferson County (Trinity’s current bed count is 560 beds; the CON approved the relocation of
372 beds), thus saving money for government payors while simultaneously relocating its
remaining beds to the part of its service area most in need of acute care hospital services. (Exh.
TMC 1 at 3).
Trinity’s relocation to the 280 hospital represents the last hope to realize the potential of
that facility. The first attempt to market the 280 hospital was made by HealthSouth after Richard
Scrushy was relieved of his position as CEO of that organization. Jay Grinney, current CEO of
HealthSouth, explained that, when he became the CEO of HealthSouth, he determined that the
280 hospital did not fit into HealthSouth’s plans going forward, because he had determined from
a strategic perspective that it no longer made sense for HealthSouth to be in the acute care
hospital business. (T. 1826). Mr. Grinney then made the decision to market the 280 facility to
local as well as national providers of acute care services. (T. 1827-1828). There was a great
deal of interest in the hospital, and HealthSouth entered into approximately half a dozen
confidentiality agreements with other health care providers in order to provide information to
54
them about the purchase price and the cost to finish the build-out of the facility. (T. 1832).
Tenet, Brookwood’s parent corporation, was on the cusp of purchasing the hospital in 2005, but
the deal ultimately fell through, because, according to Tenet CEO Trevor Fetter, it was not an
investment Tenet could make given its circumstances at the time. (T. 1831). HealthSouth and
Baptist later entered into negotiations for the purchase of the 280 facility, but Baptist was also
ultimately unable to move forward with the deal because it could not secure financing. (T.
1832).
HealthSouth next commissioned the Jones Lang LaSalle firm to determine whether there
were any non-medical uses for the 280 hospital. Jones Lang LaSalle, after analyzing the 280
facility, found that, “…it would be virtually impossible to sell that building to another party for
that other party to then convert it to something other than an acute care hospital.” (T. 1834).
HealthSouth then decided to sell the entire HealthSouth headquarters campus, including the 280
hospital. The Daniel Corporation ultimately purchased the HealthSouth campus, including the
hospital, as the highest bidder. (T. 1838).
Charlie Tickle, President of Daniel, explained that since acquiring the 280 hospital,
Daniel has exhaustively explored both medical and non-medical alternative uses for the building.
With regard to possible non-medical uses for the facility, Mr. Tickle testified that when Daniel
purchased the HealthSouth campus, HealthSouth provided it with the Jones Lang LaSalle study
concluding that there were no economically viable alternate uses. (T. 1921). Brasfield and
Gorrie had also analyzed potential alternative uses for the building, concluding that it was too far
along in construction as a hospital to be adaptable to other purposes. (T. 1919-1920). Daniel
undertook its own analysis of potential alternative uses for the building, including as a hotel,
office, or retail space, but likewise concluded that none of those uses were feasible. (T. 1121).
55
The following largely explains why the only economically viable use for the 280 facility is as a
hospital:
The lower five floors of the hospital have very limited use possibilities because they have little, if any, window wall space. (T. 1122).
Daniel analyzed the possibility of converting floors 6 through 12 to office space and operating only those floors, but determined that such a plan would be cost-prohibitive. (T. 1122-1123). While typical office buildings have a central set of elevators around which office space is built, the 280 hospital has 19 elevator penetrations scattered throughout the building. There is thus no way to create normal core office space in that building. (T. 1123).
While suburban office space typically has surface parking, in this case a parking deck would have to be built. However, Mr. Tickle testified, the tenants of the office space would not be willing to bear the rent cost associated with the construction of the parking deck. (T. 1262-1263).
The building is unsuited to use as anything other than a hospital because the floor depths are so large that there would be too much interior space compared to exterior space. (T. 1123-1124).
Charlie Tickle testified that, after careful analysis, Daniel “…became painfully aware that the
building was built, in our opinion, as a hospital and didn't lend itself to any other use.” (T.
1124).
Daniel attempted to market the 280 hospital to all buyer prospects that had a potential
medical use for the building. Tickle described Daniel’s efforts as follows:
We met with most of the hospitals in town and asked them if they would be interested in looking at it again, that it was a new owner in town and we were very motivated to make a deal. We met with Congressman Mike Rogers, who got us in touch with the Pentagon, because there was a lot of talk going on about additional rehab hospitals. We had a lieutenant from the Pentagon down touring the hospital. We met with a VA group. So anywhere anybody could find somebody who had a potential medical use, we met with them. We met with the Eye Foundation, Helen Keller Foundation…So in any and every way we could try to find contact with any medical use at all, we tried to reach out to those people.
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(T. 1126-1127). However, in the end, no other healthcare system was able to purchase the
hospital. It was Trinity, and Trinity alone, that was both interested in purchasing the building
and had the money to do so.
Thus, if Trinity is prevented from relocating to the 280 facility pursuant to its CON, there
will be no viable use for the 280 facility in which some $200 million has already been invested.
In the meantime, Daniel is paying over one million dollars per year to maintain the hospital.
Without a viable use for the building, the land upon which the hospital is built will thus become
more valuable to Daniel without the hospital on it. (T. 1152). Charlie Tickle testified that if
Trinity does not purchase and occupy the hospital, Daniel will have no choice but to demolish it.
(T. 1152).
Although one can hardly fault Daniel for an economically driven decision to demolish the
building, especially when the company has exhausted every effort to save it, forced demolition of
the 280 hospital would be a shameful waste of this community’s resources. As observed by
Jason Hard, who oversaw the building project for Brasfield and Gorrie, if the 280 hospital were
demolished, it would be “a lot of good work gone to waste.” (T. 1921). Gordon Carlisle agreed,
testifying with regard to the demolition of the hospital: “I would view it as a waste, just a
tremendous waste.” (T. 2582). As Richard Miller, lead architect for Trinity’s relocation project
put it, “…the existing asset here would be tragic, in my opinion…if it’s not used as a medical
facility, number one, with the sunk cost that’s in it. Is it perfect? No. But it will work and it
will work extremely well.” (T. 3008).
Brookwood’s only counter to the voluminous evidence of impressive cost savings
presented at the contested case hearing is that that Trinity has “overblown” any cost savings
resulting from choosing the 280 facility over the Irondale project. (Brookwood Brief, 109.) In
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the final order issued by the ALJ and adopted by the CON Review Board, it was noted that “[t]he
Applicant made a prima facie showing that a relocation to the Highway 280 facility is the most
cost-effective alternative if relocation is to take place. This finding was made in the face of
significant conflicting evidence as to the costs associated with a relocation to the Highway 280
facility versus the costs of relocating to the Irondale location.” (AR 3241.) This finding is due
deference under the AAPA and is due to be upheld by this Court based upon a review of the
evidence presented.
Both Brookwood and St. Vincent’s asserted throughout the hearing that the costs
associated with litigation related to the now-withdrawn Irondale project initiated by Trinity’s
former ownership should be included in the cost of the instant project. Those costs, the
Opponents’ asserted, include attorneys’ fees and other costs associated with obtaining the
Irondale CON, the cost of the lease between Trinity and Irondale for the land on which the
replacement site would have been built, as well as any future costs that may result from the suit
that the city of Irondale has brought against Trinity and others. There is no basis for considering
those costs or possible costs in this proceeding.
First, the instant project represents a wholly separate and distinct undertaking from the
Irondale project. When Trinity relinquished its Irondale CON in December of 2008, that project
was officially terminated under SHPDA’s Rules. Likewise, when Trinity filed a Letter of Intent
to construct and operate a hospital on Highway 280, the instant project was begun under the
Rules. Second, the cost projection section of the CON form does not contemplate the inclusion
of any costs other than those requested. That section certainly does not request a statement of
costs regarding former, terminated projects.
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2. Relocation to the 280 Hospital Would be More Cost Effective than Renovation of the Existing Trinity Campus.
The CON Review Board and ALJ found that relocation to the 280 site is also a more cost
effective alternative than renovation of the existing Montclair Facility. (AR 3242). (“[T]he
Applicant made a prima facie showing that a relocation to the Highway 280 facility would be a
more cost-effective alternative to the renovation of the Montclair campus.”) Although Trinity
considered the possibility of renovating at its current campus, it determined that renovation is not
a feasible alternative for the continued viability of the hospital. Architect Chris Ross, of C. Ross
Architecture, LLC, explained that renovation would constitute an undue hardship for Trinity, and
that in any event renovation does not make economic sense. (T. 719). It would be more
expensive to renovate the Montclair Facility than to relocate to the 280 hospital, and if the
current hospital was renovated in place, it would lose revenue as a result of the disruption in
operations. (Exh. TMC 47 at 14). See In the Matter of: Application of Manor Care of Parma,
2005 WL 2787644 at *5 (Ohio Ct. App. October 27, 2005) (upholding finding that replacement
of hospital was necessary and renovation was cost prohibitive where hospital was built in 1929,
and required new plumbing, a new heating plant, and other new infrastructure); In the Matter of:
Eda Rae Care Center, 1995 WL 127882 at *7 (Ohio Ct. App. March 23, 1995) (holding grant of
CON to relocate 110 long-term care nursing home beds was appropriate where “[e]xtensive
testimony was presented as to the cost to correct deficiencies in the existing building versus cost
to build a modern, state-of-the-art facility…It appears that the increased costs to update the
present facility…would over a very short period of time equal the cost involved in building a
new facility.”); Mid-Ohio Health Planning Federation v. Certificate of Need Review Board,
1982 WL 4084 at *6 (Ohio Ct. App. April 1, 1982) (holding that, in granting CON for relocation,
59
SHPDA properly relied upon the fact that relocation of the facility was much more desirable than
a very expensive renovation of the hospital’s present facility to meet required safety standards).
The CON Review Board’s decision is supported by evidence showing that renovation of
the existing campus is not a feasible alternative for Trinity because it would be prohibitively
expensive. (T. 726-728; 2065). Chris Ross testified that renovation was not economically
viable because Trinity could spend as much or more money renovating the Montclair hospital as
tearing it down and rebuilding it from the ground up. (T. 726-728). Both Ed Smith of BE&K
Building Group and Jason Hard, Digital Hospital Project Manager for Brasfield, testified that
renovation is more expensive than new construction. (T. 1921, 2591). Even Garry Gause, CEO
of Brookwood, has recognized that relocation is a cheaper alternative than renovation. In fact,
one reason that Brookwood almost purchased the 280 hospital from HealthSouth in 2005 was
that Brookwood recognized that it could save money by making that purchase instead of
renovating its existing facility. When Tenet (Brookwood’s parent company) was in negotiations
with HealthSouth in 2005 for the purchase of the 280 hospital, Mr. Gause stated in a document
entitled “Post Transaction Analysis” that “[f]inancially, the acquisition would allow Brookwood
to postpone future major expansion and renovation projects and therefore realize capital
expenditure savings of $60 million over a thirteen-year period.” (Exh. TMC 308).
One reason that renovation of the current site would be prohibitively expensive is that it
would have to be done in multiple phases, and possibly on nights and weekends when labor costs
are at a premium. (T. 979). In addition, renovation of the current campus could become
expensive due to unforeseeable sunk costs. (T. 965-973). For example, Sean Dardeau, Chief
Operating Officer (“COO”) at Trinity, testified that while he was overseeing a renovation project
at another hospital prior to his employment at Trinity, the hospital was forced to protect historic
60
magnolia trees from the heavy machinery that would be brought onto the campus for the
renovation. During another renovation project, Dardeau recalled, construction workers
accidentally punctured a water line and flooded a patient floor. (T. 965-966; 1006). Any
reasonable person would determine, as Trinity has, that it makes more economic sense to invest
its capital in completing the 280 facility rather than sinking those funds into a building
constructed in the 1960s which will, at the end of renovation, still be a 1960s building. (T.1501-
1502).
Gordon Carlisle undertook an analysis of what would be required to renovate the
Montclair site so that it would be as similar as possible to the 280 alternative, and would last for
the next 30 years. (T. 6472-6474; 6476). In his study, Mr. Carlisle assumed that, after the
hypothetical renovation, the Montclair campus would have a total of 857,000 square feet and 398
beds (a net useable square footage in between the Irondale and 280 projects, and the same bed
complement that would have been used for the Irondale project and the 280 project). (T. 6480-
6481). Based on his analysis, Mr. Carlisle testified unequivocally that renovating Trinity’s
current campus would be more expensive and take much longer than completing the construction
of the 280 site. (T. 6531-32). Mr. Carlisle’s conclusion flows from his determination that an all-
encompassing renovation would require at least the following:
The building of brand new space in which to locate various departments while renovating the existing space, which would be costly and time-consuming. (T. 6483).
Significant “phasing” of the project, which would lead to additional costs and loss of time. (T. 6517-32).
Bringing up to code various renovated spaces that, but for the renovations, would not have to be made code-compliant because Trinity’s age gives it grandfathered status. These codes include the Alabama Department of Public Health’s (“ADPH”) regulations, the 2006 Architectural Institute of America (“AIA”) Guidelines, and the Americans with Disabilities Act (“ADA”) Guidelines. (T. 6472-6474).
The construction and building out of seven new and additional floors of space, including:
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o a two-story addition that would serve as an emergency room and a cancer center (T. 6489);
o a five-story addition, wherein the first floor would be support space, the second floor an expansion of the surgical department, the third floor a women’s services center, and the fourth and fifth floors housing for 60 additional medical/surgical beds that would be needed to bring the hospital’s bed count back up to 398 beds because of the loss of beds that would occur in the existing buildings after conversion of all semi-private patient rooms to private patient rooms (T. 6492-6495).
Bringing the patient rooms in the existing patient tower up to code (T. 6494-6495).
Adding a parking deck with 300 parking spaces to replace the parking spaces that would be lost when the five-story addition was built where parking spaces exist currently (T. 6499).
Tearing down the nursing school in order to build the 300-space parking deck (T. 6498-6500).
Moving and reconstructing the road on the campus leading to the loading dock in order to ensure access to the dock, since the five-story addition would occupy a great deal of additional space on the campus. (T. 6501).
Expanding the central plant, including replacement of all old or outdated boilers, chillers, cooling towers, and medical gas components, many of which have previously reached the end of their useful life, and adding 50 percent redundancy of all central plant equipment to account for future failures (T. 6496-6497);
Completely replacing the hospital’s HVAC system in order to meet current code, as the current air handling system cannot handle the 20-25 air changes per hour required by code for operating rooms, or the six air changes per hour required in patient rooms. (T. 6520-6521).
Removing and installing new ductwork, because the existing ductwork is internally lined, which makes cleaning of those ducts very difficult. (T. 6524-6526).
Replacing all plumbing because it is deteriorating and fails on a regular basis. (T. 6526).
Removing the existing medical gas piping and installing new piping, because larger pipes are required now than when that piping was originally installed. (T. 6527).
Bringing emergency power components up to code, because larger conduit and wires, as well as more electrical panels, are required today than when the hospital was constructed. (T. 6526).
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Even after expending the astronomical sums of money necessary to accomplish the above
improvements, the hospital would still retain a number of deficiencies that are simply impossible
to address. For example, even if the hospital’s ceilings were dropped to 7.5 feet, it would still
be impossible to fit adequate air ducts into the interstitial space above the ceiling because that
space would also have to accommodate a variety of MPE and technical components, including
electrical conduits, medical gas piping, plumbing piping, and drop-in lights. (T. 6522-6523).
Trinity would therefore have to get variances from regulatory bodies because it could not meet
current code. (T. 6523). Thus, Trinity would have undertaken an expensive, time-consuming
renovation, but would still be left with areas of the hospital that would not meet current code.
(T. 6519-6527). In addition, there would still be issues with site access, site location, and site
circulation that would not be resolved no matter how many dollars Trinity were to spend on the
campus. (T. 6530). Mr. Carlisle testified that, because of all these considerations, renovating the
campus so that it would be viable for the next 30 years would certainly be more expensive than
moving to the 280 site. (T. 6531).
The Opponents focused on a document at the hearing entitled Facility Condition
Assessment prepared by the Parsons consulting group in December of 2007, suggesting that the
assessment identified an inexpensive renovation alternative that would allow Trinity to remain at
its Montclair campus. (Exh. TMC 46). The Parsons report recommends that, between 2008 and
2017, Trinity should spend $65,000 to correct health hazards and life safety issues, $459,000 to
correct code violations, $70,000 to handle functionality issues, and $13,211,000 to replace
components of MPE systems that have exceeded their service life. (Exh. TMC 46). Brookwood
continues to argue that Trinity should remain on its current campus and relies upon the Parsons
report in its brief to this Court. (Brookwood brief, 84-85.)
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The Parsons report is not a comprehensive evaluation of the problems with the Montclair
Facility, nor does it provide a budget for renovation of the facility so that it can continue
operations for the next 30 years. Indeed, if a full renovation of the campus could be analogized
to major surgery, the Parsons report would suggest application of a Band-Aid. Gordon Carlisle
commissioned the Parsons report knowing that a CON application to relocate Trinity had been
filed, and in order to determine for budgeting purposes what repairs or replacements would be
essential to keep the facility functional until Trinity could relocate. (T. 1973-1974). In other
words, as Sean Dardeau testified, the Parsons report is a list of the minimum actions that Trinity
must take to maintain current viability pending a relocation. (T. 1011). In addition, as pointed
out by Chris Ross, the Parsons report addresses only MPE issues, and does not address the
operational deficiencies of the hospital that would need to be corrected over the course of a true
renovation. (T. 641).
The Opponents argued at the hearing that a master plan for renovation and expansion
commissioned by Baptist and created by The Ritchie Organization (“TRO”) in 2004 (the “TRO
Master Plan”) (Exh. TMC 41) supported their assertion that Trinity should remain at the
Montclair campus. Brookwood again makes this argument in its brief to this Court, despite the
clear findings of the CON Review Board and ALJ, fully supported by the evidence, that
relocation to the 280 hospital is the more appropriate alternative. (AR 3242). (“[T]he Applicant
made a prima facie showing that a relocation to the Highway 280 facility would be a more cost-
effective alternative to the renovation of the Montclair campus.”) Chuck Penuel, an architect
who testified on behalf of St. Vincent’s, stated that the TRO Master Plan shows that there are
several feasible methods for expanding and renovating the campus at Montclair. When asked
about the cost of the project, however, Penuel stated “it's probably representative from a — I
64
guess from a project-by-project comparison, I could not speak to whether that cost would be
more or less right now.” (T. 5966-5967) (emphasis added). Mr. Penuel also admitted that he
has done no independent cost analysis to determine what it would cost to implement the TRO
plan in today’s dollars. (T. 5995). In reality, the 2004 TRO Master Plan projected construction
costs of $218 million in 2004 dollars, while construction costs for the 280 relocation project are
projected to be only $144 million in 2009 dollars. (Exh. TMC 89 at 3). In addition, any direct
comparison of the costs of the two projects would be misleading because the TRO did not
address the renovation of several hundred thousand square feet of the Montclair facility, whereas
the 280 hospital would constitute all new space. (T. 6478).
3. Relocation to the 280 Facility Would be More Cost Effective than Trinity’s Former Option of Relocating to Irondale.
The CON Review Board and ALJ found that relocation to the 280 site would also be
more cost effective than relocation to Irondale would have been. (AR 3242). It is important to
note, as a preliminary matter, that relocating Trinity to a site in Irondale, Alabama, is no longer a
viable alternative. Trinity surrendered its CON to construct and operate a hospital in Irondale on
December 1, 2008, the same date on which it also submitted a letter of intent to relocate to the
280 site. (Exh. TMC 1 at Exh.1). Even if Trinity were to determine suddenly that Irondale was
the most suitable alternative for its relocation (which is not the case), Trinity would be required
to go back through the laborious process of obtaining a CON to relocate to Irondale. Given the
time and money that have already been devoted to relocating Trinity, pursuing a new CON to
relocate to Irondale is simply not an alternative. Trinity has considered the alternative of
relocating to Irondale in the past, however, and has determined that it would be more costly than
relocating to the 280 hospital.
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The evidence showed that one of the reasons that Trinity ultimately decided not to
relocate to Irondale was that it would be more costly than relocation to the 280 hospital. A
comparison of the CON application submitted by Trinity in the Irondale case to its application in
this case reveals that relocation to the 280 hospital would be less costly than relocation to
Irondale:
Irondale 280 hospital
Total Cost of Construction $233,817,000 $208,000,000
First Year Annual Operating Costs9
$318,000,0000 $275,000,000
Total Project Cost $576,986,000 $555,680,437
(Exh. TMC 1; TMC 57; TMC 93).
Further, CHSPSC has determined that the costs set out in Trinity’s CON application for
Irondale were likely significantly understated. The Irondale application was prepared by
Trinity’s former owners, Baptist and Triad, and not by Trinity’s current ownership. (Exh. TMC
57). After Birmingham Holdings, LLC, purchased Trinity and stepped into the shoes of Triad in
its joint venture with Baptist to operate Trinity in Birmingham, Trinity undertook an independent
evaluation of the cost of the Irondale replacement hospital. (T. 1546-1547). Trinity’s
construction department concluded that the costs projected in the Irondale CON application were
9 There was some confusion during the hearing as to the first year operating costs for the 280
hospital as compared to the Irondale project. There was testimony that the first year annual operating costs are more at 280 than Irondale, as the CON application for the 280 hospital states that the first year costs for that project will be $275,680,437, while page 13 of the Irondale CON Application (Exh. TMC 57) states that the first year costs for that project would be $261,098,000. (T. 3361-3362). It was later clarified, however, that that figure in the Irondale CON application was a mistake, and that the correct figure, which is stated on page 106 of the Irondale application, is $318,836,930. (T. 3410). Thus, in terms of the first year annual operating costs alone, the 280 project represents savings of $43,000,000 over the Irondale project. (T. 2422-2425).
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most likely understated because the Irondale project required that Trinity (1) purchase 150 acres
of land in Irondale, (2) significantly lower the grade of a ridge at the top of that site, (3) bring
infrastructure to the site, and (4) build an MOB that would be expensive to construct because of
site constraints. (T. 1581, 2040-2041).
The Opponents asserted in the contested case hearing, and have asserted again in multiple
filings with this Court, that Trinity never intended to build the Irondale project as contemplated
in the Irondale CON application. In support of that argument, they point to a document entitled
“Trinity Replacement Analysis” drafted by Gordon Carlisle, which compares various options for
bed size and square footage both at the Irondale site and at the 280 site. (Exh. STV 358). The
Opponents note that one of those options is to build a 325-bed, 60,000 square foot hospital at the
Irondale site for approximately $256,000,000. In addition, the Opponents point to an email from
Gordon Carlisle to Marty Schweinhart, Senior Vice President of Operations at CHSPSC, setting
forth a list of positive and negative attributes of the 280 site, in which Gordon Carlisle identifies
as one “negative” associated with the 280 site the ability at Irondale to reduce construction costs
by constructing less space.10 (Exh. BMC 322).
Gordon Carlisle testified that he created the “Trinity Replacement Analysis” document
when David Miller, Division I President of CHSPSC, asked him to determine how Trinity could
build a hospital in Irondale for less than the cost stated in the CON application. (T. 2384). That
document reflects Carlisle’s judgment that the best means of reducing the cost of the project was
to relocate fewer beds, construct less square footage, or a combination of both. (T. 2386). When
10 Gordon Carlisle testified that the positive and negative list was created as a tool to use in negotiations with Daniel over the purchase of the 280 hospital. (T. 2030). In fact, when Marty Schweinhart forwarded the email to David Miller, he stated that the list was being developed “in preparation for our discussions with Daniel on the Digital Hospital site.” (Exh. BMC 322). Such a list would have included any possible negative attributes of the 280 site for purposes of negotiating the purchase price of the 280 hospital down; and, therefore, has little, if any, probative value for the instant proceeding.
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the 325-bed option was analyzed, however, it was determined that there would not be sufficient
space for the services the hospital provides, and that the hospital would actually end up turning
patients away for lack of capacity. (T. 2387-2388). Further, it was determined that building a
hospital of such a reduced size in Irondale would not provide a sufficient return on Trinity’s
investment. (T. 2387).
The evidence showed that the cost savings associated with the relocation project,
including that construction can be completed for only $144 million due to the amount of
construction already undertaken, as well as the $40 million in tax incentives from the city of
Birmingham, are truly remarkable. The project would be $181 million less expensive than new
construction of a hospital comparable to the 280 facility on a greenfield site in Birmingham. The
project would also be unequivocally less costly than a renovation of the Montclair facility, as
well as the former option of relocating to the Irondale site. Relocation of Trinity is also a more
cost effective means of bringing acute care hospital beds to the residents of the 280 corridor than
construction of a new acute care hospital, with a corresponding addition of acute care beds to
already overbedded Jefferson County. Trinity’s relocation to the 280 facility is thus the most
cost-effective alternative both for Trinity and for the community at large, thus supporting the
CON Review Board’s decision to grant the CON.
C. Relocation to the 280 Hospital is the Most Appropriate Alternative for Trinity.
The CON Review Board and ALJ found that there is no better alternative for Trinity than
relocation to the 280 hospital. (AR 3243-3239). All other options pale in comparison to the
opportunity to make that facility its new home. The 280 hospital is extremely attractive to
Trinity because of the amount of work already completed at the facility, the unparalleled quality
of the workmanship that went into that construction, and the impressive technological
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capabilities of the facility, which are, even today, state-of-the-art, despite their installation in
2002. The hospital is already 65% complete, and would be operational more quickly than a new
facility built from scratch on a greenfield site. The 280 hospital, if completed, would rank
among the top hospitals in this nation in terms of quality and capabilities. Allowing Trinity,
which is in desperate need of replacement facilities, to harness the hospital’s full potential makes
all the sense in the world. Veteran construction expert Ed Smith observed regarding the 280
hospital that, “It’s a fantastic physical plant they have in place, the structure, the building
envelope, and the mechanical systems. It’s as good as any I’ve seen on healthcare projects in the
United States as it’s been constructed. When completed, I think it will be second to none in
terms of its use for patient care.” (T. 2581).
1. Relocation to the 280 Facility is the Most Appropriate Alternative for Trinity Because of the Amount and Quality of the Work Already put into the Hospital.
The 280 hospital is truly an impressive facility, with positive qualities too numerous to
count. The following is a list of just some of the factors that make it the most appropriate choice
to serve as Trinity’s relocation hospital:
The structure of the 280 hospital, which is approximately 1,000,000 square feet, is already in place, and the building is currently approximately 65% complete. (T. 3883).
Once final CON approval is obtained and construction begins, it will take only 16 to 18 months to complete construction, including building the parking deck that will service the hospital. (T. 2589-2590).
The building shell and major infrastructure is complete, including elevators, plumbing risers and distribution, air handling equipment and HVAC duct risers, and electrical systems switchgear, panels and distribution. (Exh. TMC 90). The central energy plant that provides steam, chilled water, heating water and emergency generator services is fully functional, requiring very little additional cost. Id.
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Over $200 million has already been invested in the facility by HealthSouth. (T. 1825).
The hospital has been constructed to an unusually high standard of quality, reflecting the fact that HealthSouth’s goal in initially constructing the facility was to build a world-class hospital in terms of patient care and functionality, as well as to efficiently use the latest technologies. (T. 1902, 1909). HealthSouth rejected its contractor’s “value engineering” suggestions, i.e. to downgrade certain portions of the project to cut costs. Such decisions will actually add to the operational capabilities of the facility. (T. 1962).
The natural beauty of the property has been preserved, as HealthSouth chose to keep the trees on the site instead of leveling them. (T. 1914). Dave Nebergall, the President of the Inverness Neighborhood Association, toured the hospital and expressed his belief that the beautiful environmental surroundings of the hospital would be an asset of the hospital from a patient perspective. (T. 2445-2446).
High grade finishes have been used on the building to make it less clinical and more hotel-like. (T. 1914-1917).
David Miller, President of Division I of CHSPSC, testified that the quality of the 280 hospital’s construction surpasses the level of construction that due to cost constraints Trinity would be able to achieve today in a newly constructed hospital. (T. 1584).
The building acquired the name “Digital Hospital” because there are Siemens technological systems throughout, the medical and MPE systems are set up to be constantly monitored, and those systems are integrated. (T. 2883).
Category 6 cable, the highest level fiber optic cable distributed for data processing, was installed in the building. (T. 2884). There is redundancy built into the fiber optic cables in case a line is cut. (T. 1914-1917).
There are direct communication closets stacked on certain floors, which constitutes a very modern feature for a hospital. (T. 2884).
Way-finding will also be improved at the 280 hospital. The proposed facility is easy to navigate, in part because there is only one set of public elevators and one can only travel either up, down, left or right. (T. 3881).
The 280 hospital will create opportunities for infection control innovation., incorporating washing stations in each patient room for visitors and staff (T. 3744), suspension of all equipment from the ceiling, which will have the added benefit of reducing infection rates (T. 868), and a sub-sterile corridor, through which all operating rooms would be entered. (T. 867).
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The aforementioned features of the 280 hospital, as well as many other positive factors identified
by numerous witnesses, helped persuade Trinity that relocation to the 280 site is the best
alternative for Trinity’s continued viability, as well as for the health care-related needs of the
community at large.
2. Any Perceived Problems with the 280 Hospital Are Either Immaterial or Easily Remediable.
In its brief, Brookwood makes the same arguments that were made to the ALJ that certain
perceived “problems” with the 280 hospital warrant a finding that the 280 Hospital is not an
appropriate alternative. (Brookwood brief, 105-107.) However, as Trinity explained to the ALJ
and CON Review Board, any perceived problems with the 280 hospital are either immaterial or
easily remediable.
At the contested case hearing, the Opponents proffered Exhibit BMC 322, an April 15,
2008, email from Gordon Carlisle to Marty Schweinhart at Community Health Systems
Professional Services Corporation containing a list of the positive and negative attributes of the
280 hospital. That list was created as potential leverage for Trinity in its negotiations with Daniel
for the purchase of the facility, however, and not as a recitation of issues considered major by
Trinity. (Exh. BMC 322 at 1). Indeed, the list was created during the very initial stage of
analysis of the hospital by Trinity, and simply represented Mr. Carlisle’s initial impressions. Id.
In most cases, Carlisle explained, further analysis and investigation showed that there were
relatively simple ways to correct those perceived problems. Mr. Carlisle further testified that, for
every replacement hospital his company has built or renovated from 1999 through 2008 (Exh.
TMC 92), he could have created a similar list of positive and negative factors, as he has yet to
find the perfect site for a replacement hospital. (T. 2038-2040). In each case, the decision has
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been made to relocate because the negative attributes were far outweighed by the positive
attributes of the site, as is certainly the case here. Id.
One of the “negatives” listed in Mr. Carlisle’s memo was that the 280 hospital has
“limited first floor space.” Mr. Carlisle testified that upon first touring the 280 site, he was
concerned that there was no room for clinical space on the ground floor of the hospital. The
reason that Trinity would ordinarily want most services on the ground floor of a hospital, Carlisle
explained, is that that is the most economical way to construct a building. (T. 2001-2002). Here,
however, the building has already been constructed. (T. 2262). Also, because there are 19-20
elevators scattered throughout the building, one is never too far from an elevator, and one can
move quickly vertically around the building. (T. 2005). Way-finding will also be easy inside the
building because each department will take up basically a whole floor. (T. 2005-2006). In
addition, because the parking deck can be built so that patients can park on the appropriate level
of the deck and enter directly into the area of the hospital that they need to access, functionally it
is as if the first four floors of the hospital are on the ground floor. (T. 2003-2004). That is
because patients and visitors will be able to park conveniently near the department they are
visiting. Id. ESA architect Richard Miller testified, moreover, that for the services that are on the
first floor, primarily the emergency department, there is adequate space. (T. 2868). Gordon
Carlisle testified that he is comfortable that first floor space will not present a problem should
Trinity be permitted to relocate. (T. 2006).
The aforementioned email from Carlisle to Schweinhart also identifies “poor layout of
existing nursing stations” as a “negative’ attribute of the facility. As Mr. Carlisle testified, that
comment meant that there is inefficient space in the nursing stations, due largely to the curvature
of the building. (T. 2006-2007). Normally, Mr. Carlisle would have constructed a rectangular
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building, because that is the most efficient use of space, and thus less space need be constructed.
Id. That is an issue, Mr. Carlisle testified, when the company is planning to construct a new
facility; however, because the building has already been constructed, it is not a problem going
forward. (T. 2008). In addition, there is not a direct line of sight from the nursing stations into
the patient rooms. (T. 2008). During the build-out of the hospital, however, Trinity will lower
the walls of the stations that block visibility, and expand the stations so that nurses can see into
the corridor. (T. 2008). Health care architect Richard Miller testified that lowering the walls of
the nursing station will increase visibility tremendously. (T. 2871). Mr. Carlisle confirmed that
the contemplated modifications to the nursing stations are included in the CON application’s cost
estimate. (T. 2008).
The Opponents focused as well at the contested case hearing on Gordon Carlisle’s
statement in his email to Marty Schweinhart that parking at the 280 site would be expensive.
First, construction of a parking deck is not even a reviewable activity under the CON rules. (T.
4382). In other words, should Trinity choose today to build a new parking deck on its existing
campus, it would not have to obtain a CON. Id. Thus, the cost of the parking deck at the 280
hospital is really irrelevant to the issue of whether Trinity should receive a CON to relocate. In
any case, when Mr. Carlisle wrote “expensive parking,” he meant that a deck would be
expensive to build as compared to surface parking, and not that parking would be expensive for
patients or visitors. CHSI-affiliated hospitals typically utilizes surface parking, if possible,
because it is less costly than building a deck. (T. 2010). Use of parking decks is common in the
Birmingham area market, however, and all the major hospitals in the area use them. (T. 2011).
Furthermore, the manner in which the garage will be constructed will alleviate some of the
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typical complaints concerning parking garages, in that sunlight will stream in from two sides of
the deck, and the deck will have spacious 16-foot ceilings. (T. 2877).
The Opponents also insinuated that there will be insufficient parking at the 280 hospital.
That contention is patently false. There will be 2,205 spaces available, with 2,000 in the deck
and 205 in surface parking lots. (T. 3002). There will be surface parking for the emergency
room directly in front of the hospital, with overflow emergency parking in the deck. (T. 2998).
Richard Miller testified that a rule of thumb in the hospital construction industry is that four
parking spaces are needed per bed, which accounts for physicians, staff, patients, and visitors.
(T. 2878-2879). Using that recognized guideline, only some 1,600 spaces would be needed for
the 398-bed replacement hospital. (T. 2879). Taking into account the possible future expansion
of the 280 hospital by, say, 50 beds, the total number of parking spaces needed would be
increased to 1,800. Id. The number of spaces planned (2,205) therefore exceeds the rule-of-
thumb calculation by some four hundred. As summarized by Richard Miller, the number of
spaces that will be built is more than adequate to support the hospital. (T. 2878-2880). In fact,
the number of spaces needed will be even less for a 372-bed hospital.
In his email to Marty Schweinhart, Gordon Carlisle also listed “site restrictions” as a
negative attribute of the 280 hospital. Gordon Carlisle testified that he meant that there is not a
lot of room outside of the building for the hospital to grow. (T. 2371). Carlisle explained,
however, that after studying the building, CHSPSC is confident that there is enough shell space
already built into the existing structure for each department of the hospital to grow as needed
over time. Id. The architectural schematics utilize only 90% of the hospital’s area for the initial
build-out, so there is 10% of the entire useable area of the structure available for growth. Id.
Richard Miller explained that his firm, ESA, a national leader in healthcare architecture, has
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worked on other high-density hospital construction sites such as at Vanderbilt University, which
has no available land for additions, and that in such situations additions are built vertically. (T.
2885). Making Carlisle’s preliminary “site restriction” comment even less material is a
development that occurred after he wrote it. Fifteen additional acres were purchased by Trinity
from Daniel on the opposite side of Cahaba River Road from the hospital, usable for functions
that do not need to be in or connected to the hospital, such as MOBs. (T. 2015).
An additional “negative” listed in Gordon Carlisle’s April 15, 2008, email was that MOB
space at the 280 site will be expensive. Gordon Carlisle acknowledged that the cost of MOB
space will be increased because a parking deck will have to be built for the MOB, the cost of
which will be rolled into the lease rate. (T. 2016). The Opponents also seized upon Carlisle’s
observation that it would be “difficult to place MOB with good access to hospital.” (Exh. BMC
322). St. Vincent’s architect, Chuck Penuel, testified that the placement of the MOB at the 280
site will cause increased travel times to the hospital, along with way-finding issues, as the MOB
and hospital will be connected by a parking deck. (T. 5978, 5979).
As an initial matter, it is important to recognize that MOB construction is non-reviewable
under Alabama CON law, and MOBs are thus not part of the 280 relocation project for purposes
of CON review. (T. 4012, 4384). Consideration should not be given to the issue of MOBs or
other non-clinical space in considering the merits of Trinity’s CON application. In any event, as
explained by several of Trinity’s witnesses, the construction and operation of MOBs on the 280
site will not present any difficulty. For example, Bill Heburn stated that he has no doubt that
MOBs of sufficient square footage can and will be built on the campus. Engineers and architects
have analyzed that issue and assured him that it will not be a problem. (T. 3893-3894).
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With regard to the increased cost of the MOB space related to the deck requirement, Mr.
Carlisle testified that that is a typical problem for Birmingham area hospitals. (T. 2018). Like
those hospitals, Trinity will simply have to determine how much of the cost of the parking
structure it can absorb, and how much the tenants must bear. Id. The Opponents’ claims that
there is insufficient space on the campus for MOBs was supported by no actual evidence.
Gordon Carlisle confirmed that there is room on the property Trinity will purchase to build 700-
800,000 square feet of MOB space, and that there is additional room on land currently owned by
Daniel, but available if needed, to build an additional 500,000 square feet of MOB space. (T.
2306). Mr. Penuel’s assertion that way-finding from the MOB to the hospital will be difficult is
entirely speculative given that Trinity has not even settled on final plans for how the MOB space
will be built out. Carlisle did, however, identify several options for how MOBs could be
configured on the 280 site, which are as follows:
Option 1: Construction of a three-story parking structure with six levels of medical office space on top of that structure totaling 150,000 square feet at a cost of $150 per square foot. (T. 2291, 2301).
Option 2: Construction of MOB space on top of the nine-story parking structure that will be attached to the hospital. Potentially, as much medical office space could be placed there as desired, but that is not Trinity’s preferred option, and Trinity has not pursued it. (T. 2292).
Option 3: Utilize the 11th floor of the hospital, which is currently shown as shell space in ESA’s architectural schematics, as medical office space. That approach would provide 37,000 square feet of space, and would cost $80 to $90 per square foot to build out. (T. 2292-2293, 2309).
Option 4: Purchase the nearby Nexity Bank building, tear it down, and build MOB space in its place. (T. 2293).
Option 5: Construct MOBs on the 15-acre parcel behind Cahaba River Road, which would cost $165 to $170 per square foot to construct. To access those MOBs, one would enter off of HealthSouth Parkway and instead of turning left at the roundabout to go to the hospital, one would go past that turn-off before turning into the entrance to the 15-acre property. (T. 2293-2294, 2310).
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Option 6: Construct an MOB on the 100 acres of property owned by Daniel adjacent to the 280 site. (T. 2295).
Another “negative” feature of the 280 hospital identified in Carlisle’s email was his
perception that it was originally designed as a rehabilitation hospital. Mr. Carlisle’s assumption
was based on the fact that the nursing stations appeared to look like stations in a rehab hospital.
(T. 2137-2139). Mr. Carlisle’s initial impression was just wrong. Nothing in the hospital’s
initial construction was scaled back in terms of acute care hospital support and clinical services.
(T. 2860). In fact, the 280 hospital was built to house the services and programs contained in
HealthSouth’s former Highlands Hospital, which was an acute care hospital, not a rehabilitation
hospital. (T. 1891-1892). Jay Grinney, current CEO of HealthSouth and an expert on
rehabilitation hospitals, testified that the idea that the 280 hospital was designed as a rehab
hospital is “ludicrous” and “absurd.” (T. 1841-1842). Mr. Grinney testified that the hospital
incorporates components such as an emergency department, 30 operating rooms, and space for
certain diagnostic and imaging equipment that would never be found in a rehab hospital. (T.
1841-1842). Furthermore, Mr. Grinney testified that he was unaware of any rehabilitation
hospital that has as many beds as the 280 hospital. (T. 1891).
Another “negative” of the 280 hospital, the Opponents claimed at the hearing, is that
there is no space currently allocated in ESA’s architectural schematics for the linear accelerators
used in Trinity’s radiation oncology program. The original HealthSouth design for the hospital
did not include space for linear accelerators. (T. 1931). The cost of moving the linear
accelerators is not included in the CON costs. (T. 2174). Although Trinity will unquestionably
continue its radiation oncology program, the provision of those services is not part of this CON
application because Trinity has not made a final determination regarding whether those services
will be provided on an inpatient or outpatient basis.
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Paul Graham testified that the two existing linear accelerators would continue to be used
after the relocation. (T. 3191-3192). Noel Falls testified that he was told, and it is stated in the
CON application, that Trinity intends to relocate oncology services to the 280 site. (T. 4384).
Gordon Carlisle testified that regardless of what setting is chosen for the linear accelerators,
Trinity does not intend to discontinue Trinity’s oncology services upon relocation. (T. 2024-
2028). Bill Heburn testified that there will be oncology services provided at the new site. (T.
3892).
Oncology services could be provided at the 280 hospital on either an inpatient or
outpatient basis. If offered as an inpatient service, linear accelerator vaults could be built in the
courtyard between the hospital and the parking deck, adjacent to the oncology department on the
ground floor and off to the side of the building. The cost would be approximately $1,000,000
per vault. (T. 1946-1947, 1959). The vaults could also be placed in the existing building after
completing some reinforcement work to accommodate the vault’s weight. (T. 3024-3025). In
the alternative, Richard Miller testified, the linear accelerators could be placed on the first floor
of the hospital where the emergency room is currently contemplated to be located, and the
emergency room could then be located on the second floor of the hospital as originally
envisioned in HealthSouth’s architectural plans. (T. 2958-2959). The evidence showed
conclusively, in sum, that Trinity would provide radiation oncology services at the 280 facility.
Radiation oncology services could also be provided on the 280 campus on an outpatient
basis, with the linear accelerators located within an MOB. This is a very common method for
providing such services. Mr. Heburn testified that he always assumed that the linear accelerators
would be placed in an outpatient setting, since the accelerators he has seen recently are housed in
that manner. (T. 4051). Richard Miller testified that an off-site cancer center would actually be
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preferable for Trinity. He explained that for a high-volume hospital the size of the 280 facility,
cancer centers are often placed off-site. (T. 2882). Vanderbilt University Medical Center and
Centennial Medical Center in Nashville both have cancer centers in an outpatient setting. (T.
2881). Patients prefer an outpatient setting for a cancer center because it allows them to avoid
the hubbub of the main hospital. (T. 2882).
In summary, Brookwood argues that Trinity should not be permitted to relocate because
of a limited number of imperfections with the 280 hospital, all of which have been analyzed by
Trinity and determined to be easily addressed or correctable, if not altogether immaterial. These
criticisms are somewhat like arguing that visitors should not be allowed to tour the Empire State
Building because there are a few nicks in the paint. The real story, as stated by Richard Miller,
one of the country’s foremost healthcare architects, is as follows, “I don’t have any question
that it will be a first grade, state-of-the-art hospital when completed…I think it’s in the top
tier of the top 5 percent of the hospitals you would find in this country…in the 42 years I’ve
been doing this, I’ve never seen an opportunity like this.” (T. 2890) (emphasis added).
3. Relocation to the 280 Facility is a More Appropriate Alternative than Renovation of Trinity’s Existing Campus.
The CON Review Board and ALJ found that relocation to the 280 hospital is also a more
viable and appropriate alternative than renovation of the Montclair site. (AR 3242). As
acknowledged by Chuck Penuel, an architect who testified on behalf of St. Vincent’s, a threshold
decision in determining whether to renovate an existing facility or to relocate is whether it makes
sense to renovate. (T. 5991). Penuel testified that some of the factors that the client should
consider are the relative costs involved in the two approaches, the disruption to patient
operations that would be caused by renovation, the length of time it would take to renovate a
facility that must be tackled in phases, potential implications of renovation for infection control
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and the safety and health of patients, the comparative end-product of each option, and the
location of the existing versus the potential site. (T. 5991-5994). Trinity has considered each of
those factors, and has determined that relocation is a superior alternative. The CON Review
Board agreed and issued Trinity a CON to pursue this superior alternative.
Evidence was presented showing that renovation of the existing hospital is an
unacceptable alternative because of the length of time it would take to accomplish. Chris Ross,
Ed Smith, Jason Hard, and Gordon Carlisle all testified that it would take more time to renovate
the existing Montclair facility than to complete the build-out of the 280 hospital. (T. 726, 1922,
2061- 2062, 2591). There are multiple examples at other facilities of the extended length of time
required to renovate an operating hospital. Garry Gause, CEO of Brookwood, testified that when
Brookwood’s renovation of its 20-room emergency department involved two rooms at a time
over the course of eight phases, which prolonged construction and was very difficult. (T. 5455-
5456). In addition, in October of 2007, Brookwood requested a modification to a previously
granted CON, in part so that the project could be completed in one phase of construction instead
of multiple phases. (Exh. TMC 120). Describing the inconvenient and time-consuming nature
of phased renovation, Brookwood stated in its Request for Project Modification as follows:
…[t]he approved project involved renovation and construction that will impinge on many active areas of the hospital. It would have required complicated phasing to minimize disruption to patient care as departments would need to be relocated to accommodate construction activities and then relocated again to their final destinations within the hospital. The modification project will be developed in an area of the Brookwood campus that is not being utilized for patient care. As a result, the project can be completed in 14 fewer months, all components will be completed without interruption, and departments can be relocated to the new patient tower in a single movement.
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Id. As an additional example, Jason Hard testified that when renovation of Cooper Green Mercy
Hospital (“Cooper Green”) began at the same time as the construction of the new UAB Women’s
and Infant’s Facility, both projects were completed at approximately the same time, despite the
fact that the UAB facility was 200,000 square feet larger than Cooper Green. (T. 1923-1924).
The evidence exhibited that renovation of Trinity’s existing hospital would be
unsatisfactorily prolonged, if not altogether infeasible, for the following reasons:
Renovation would have to be undertaken in multiple phases, and possibly on nights and weekends. (T. 979).
Despite the fact that phasing would be necessary in order to create room to accomplish renovation, as well as to keep the hospital open and operational, phasing would be nearly impossible because of the size of the hospital.
There is no space on the campus, either temporary or permanent, where certain departments could be moved while renovating; the surgery and imaging departments would be particularly difficult to phase. (T. 722-727).
Gordon Carlisle testified that, because of the need to phase the project, it would take a decade to
renovate the Montclair site. (T. 2061) (emphasis added). According to Carlisle, should Trinity
undertake renovation of the existing hospital so that it could remain viable for an additional 30
years, it would take much longer to do so than to build out the 280 site. (T. 6532).
Renovation is also an untenable alternative because it would be unduly disruptive to
patient care. Trinity’s entire purpose, the only reason that it exists, is to provide excellent patient
care. Any alternative that works counter to that purpose is not a true alternative. See In the
Matter of the Gables at Green Pastures, 1999 WL 1080154 (Ohio Ct. App. December 2, 1999)
(holding CON was properly granted to replace 112-bed long term care facility and finding
renovation infeasible where the facility’s plumbing, HVAC, and electrical systems needed to be
replaced because “Any consideration of removing and replacing these systems while the
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structure is occupied by long term care residents conjures up extremely complicated, hazardous,
near impossible conditions”).
Dr. Tom Eagan, Jr., a cardiologist at Trinity who is also on Trinity’s Board of Trustees,
expressed serious concern regarding the effect renovation would have on patient care. (T. 249).
Renovation of the hospital while it remained operational would create infection control issues
and possible disruption of services. (T. 1922). For example, Dr. Garry Grayson, a psychiatrist
at Brookwood, testified that when the psychiatric unit at Brookwood was renovated,
Brookwood’s psychiatric patients were forced to step over construction debris while workmen
rebuilt the unit on which those patients were being treated. (T. 4790). Ironically, Dr. Grayson
supplied that evidence for the purpose of arguing that such renovation is possible, and that
Trinity should pursue it; however, it is Trinity’s position that, if renovation presents a danger to
patients’ health or a disruption to their healthcare services, it is unacceptable. Gordon Carlisle
testified that “[renovation] would be very costly, very disruptive. It would be a nightmare trying
to keep the hospital in operation while I did that. It would disrupt operations in every way
imaginable.” (T. 6501). In contrast, if Trinity is permitted to complete construction at the 280
facility while simultaneously continuing the operations of the Montclair facility, no such threats
to patient care would be posed. (T. 980).
Renovation of the existing campus is not an appropriate alternative for Trinity because,
after it sunk millions of dollars into such a project, many of the operational inefficiencies that
currently exist at the campus would still remain. Renovating and adding on to the Montclair
campus in the past has produced an illogical and patient-unfriendly arrangement of services. (T.
371). It is reasonable to assume that continuing a renovation approach would only exacerbate
that problem. The end result of further renovating the Montclair campus would be that
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inefficiencies inherent in the layout of the hospital would still exist, and the hospital will still be
vastly inferior to the 280 facility. (T. 1359, 2062-2063, 2065). As summarized by Bill Heburn
“…we can invest in that facility [the Montclair hospital] two or $300 million, and at the end of
the day, we’d have a 50-year old building with two or $300 million invested in it, looking at
what it looks like in another 40 or 50 years…it just doesn’t make economic sense to put that kind
of capital in a building that you cannot really 100 percent renovate.” (T. 3864). In other words,
it simply does not make sense to renovate the Montclair hospital.
Brookwood argues that the TRO plan refutes the ALJ and CON Review Board’s finding
that relocation is a better alternative than renovation of the existing campus. (Brookwood brief,
83.) Brookwood is simply re-arguing the evidence and asking this Court to substitute its
judgment for that of the ALJ and CON Review Board. Nonetheless, a review of the entire body
of evidence shows that implementation of the “TRO Master Plan,” (Exh. TMC 41) is not an
appropriate alternative for Trinity and that the ALJ and CON Review Board’s decision was
supported by substantial evidence. Even Baptist, the entity that commissioned the TRO plan,
determined that the it was not a viable alternative because (1) Baptist did not have the funding to
execute it and (2) the plan called for construction of new clinical buildings across the street from
the existing campus on the former John Carroll field, which would have created staffing
inefficiencies in which Baptist did not want to invest. The same inefficiencies would result if
Trinity sought to implement that plan now. In addition, Trinity does not own the John Carroll
field property; instead, it is owned by Trinity’s direct competitor, Baptist. Id. Furthermore, the
TRO Master Plan does not even contemplate a truly comprehensive renovation, failing as it does
to address several hundred thousand square feet of the building. (T. 6478).
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In the final analysis, renovation of the Montclair hospital would constitute an undue
burden on Trinity that would likely contribute to its ultimate closure. (Exh. TMC 47 at 14). As
stated by architect Chris Ross in concluding that renovation is infeasible and that relocation is
required:
The existing problems and deficiencies…would be difficult to overcome. The problems range from small nuisance items to overwhelming major problems. Although some are fixable, many will never be able to be resolved. The MPE issues and floor to floor heights will be difficult to overcome. The functional and phasing problems of the building are too difficult to overcome to be adequately resolved. The tight floor to roof heights and incomplete sprinkler in some of the building, the configuration and age of all major mechanical equipment and building systems make renovation for most hospital functions very unattractive. Finally, and most important, an attempted reuse of this facility, especially without a large expanse of new interior space, would not benefit the patient as well as a replacement facility would provide for them. A new physical plant is recommended soon.
(Exh. TMC 47 at 15).
There was testimony in the contested case hearing offered to support the Opponents’
argument that, because St. Vincent’s and Brookwood have chosen to handle the aging of their
facilities by renovating and expanding on their existing campuses, Trinity should be required to
do the same. Although St. Vincent’s and Brookwood are certainly entitled to renovate on their
own campuses, and while that may well have been an appropriate choice given their particular
set of circumstances, renovation and expansion at Trinity’s current campus is not the best
alternative for Trinity. (T. 4378-4379, 1501, 1508).
There are several factors that make renovation at the Montclair campus less desirable
than a comparable renovation at Brookwood or St. Vincent’s campus. For example, unlike
Brookwood and St. Vincent’s, the Montclair hospital has not been renovated and updated
periodically over the years. During the 1990s and early 2000s when Baptist was the sole owner
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of Trinity, Baptist used the profits from the Montclair Hospital to build new hospitals in the area,
rather than reinvesting that capital back into the Montclair Facility for renovations and
expansions. (T. 2480-2481). When Trinity came to be owned by the joint venture between
Baptist and Triad, the decision was made that relocation was the best alternative for the hospital;
consequently, no major renovation activities were undertaken during that time, as it was assumed
that the hospital would be relocated in the near future. The same assumption has endured since
that time.
Because there have been few large-scale renovations to Trinity’s current campus since its
construction in the 1960s, it would be extremely difficult to renovate at the facility today. Any
worthwhile renovation would require massive changes to the entire area of both the 1966 and
1982 towers. (T. 6520-6527). In particular, the problems with the MPE systems in those
buildings would require the replacement of the entire systems, resulting in major disruptions to
patient care. Id. In the cases of St. Vincent’s and Brookwood, in contrast, because those
hospitals’ owners have renovated periodically, focusing on one portion of the hospital at a time,
it has been feasible to renovate in place. In Trinity’s case, however, it is simply too late —the
hospital is too far gone to renovate. It would be unjust to hold the current Trinity owners
responsible for the decisions of past owners not to undertake periodic renovations.
An additional distinction between Trinity and the Opponents involves the issue of
location. St. Vincent’s and Brookwood are both highly visible hospitals located directly off
Highway 31, a major artery that runs through the city of Birmingham. By way of contrast,
Trinity is located one-half mile off Montclair Road, a low-traffic, residential street, and because
it is located on top of a steeply graded, tree-covered hill, is not visible from the road. (Exh. TMC
47 at 5). Once a growth area, the neighborhoods surrounding Montclair now have a declining
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population. (Exh. TMC 311 at 2). It makes little sense from a financial or strategic perspective
to spend hundreds of millions of dollars to renovate Trinity’s existing hospital when, in the end,
it will still be located on a sleepy residential road, invisible from the street level, in an area of
town with a declining population.
The very existence of the “Replacements” provision of the Acute Care Hospitals Section
of the State Health Plan indicates SHPDA’s recognition that there are certain circumstances
under which replacement of a hospital is warranted. Trinity meets the requirements of that
section. The fact that other hospitals in the area have chosen not to take advantage of that
section, or do not meet its requirements, is irrelevant to the issue of whether Trinity should be
permitted to relocate.
Furthermore, it is somewhat disingenuous for Brookwood to assert that Trinity should
renovate at its current location rather than relocate. In 2002, when Trinity, under former
ownership by Baptist, filed a CON application to build a Heart and Women’s Tower across the
street from its Montclair campus, Brookwood opposed that effort due to the alleged detrimental
impact the project would have on Brookwood. (Exh. STV 1). Should this Court reverse the
CON Review Board’s decision to grant Trinity its CON to relocate and Trinity choose to seek a
CON to renovate at its current campus, there is little doubt that Brookwood would oppose that
effort as well. Trinity cannot weather the time and money involved in another such battle—its
doors will be closed before the first cranes roll onto the campus.
4. Relocation to the 280 Facility is a More Appropriate Alternative than Trinity’s Relocation to Irondale Would Have Been.
The CON Review Board and ALJ found that relocation to the 280 facility is a more
appropriate alternative than Trinity’s relocation to Irondale would have been. (AR 3242.) The
Opponents focused much of their attention in the contested case hearing on the Irondale
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alternative, and Brookwood again focuses on Irondale in its brief to this Court. But Irondale is
no longer an alternative for the relocation of Trinity. The decision to relocate Trinity to Irondale
was made when the hospital was owned by the joint venture between Baptist and Triad. One of
the main attractions of the Irondale location was that, in the joint venture’s estimation, it would
not draw the sort of vehement CON opposition that a site closer to the Birmingham city center
would attract. (T. 474). That is because the distance between Irondale and any other
Birmingham area provider is such that it seemed unlikely that Trinity’s competitors would argue
that an Irondale hospital would adversely affect them. (T. 476-477). That belief was cemented
when Trinity received assurances from Tenet that Brookwood would not oppose a CON
application filed by Trinity to relocate to Irondale.11
When Birmingham Holdings, LLC, purchased Trinity, it inherited the decision to move
to Irondale, and the October 2007 contested case hearing that came with it. (T. 175). CHSPSC,
in its role as management consulting company, then began an independent evaluation of the
Irondale alternative. (T. 1546-1547). In the meantime, in January of 2008, Trinity first learned
of the possibility of purchasing the 280 hospital for $40 million. (T. 1576-1577). Trinity
ultimately determined that the 280 hospital alternative was the best alternative for the continued
viability of the hospital and from an overall healthcare planning perspective.
There were many factors that influenced Trinity’s ultimate determination that Irondale
was not an appropriate location for its replacement hospital. First, there is little in the way of
development in the Irondale area, as compared to the 280 corridor, which has a rapidly growing
population. (T. 47, 2041). It simply makes better health-care planning sense to relocate to an
area with a large, burgeoning population. Second, the 280 location could become operational
11 Tenet ultimately went back on its word, and Brookwood opposed Trinity’s Irondale project, as
discussed below.
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more quickly than the Irondale site. The hospital is already 60-65% complete and does not have
to be built from the ground up. (T. 3883). Once construction begins, the 280 hospital can be
completed in only 16 to 18 months. (T. 1149-1150). In addition, according to James Spann,
President of Trinity’s Board of Trustees, in order for the Irondale site to have been viable, Trinity
would have had to alter Grants Mill Road, currently a windy two-lane road, into a straight, four-
lane road, which would have been a 10-year project. (T. 613- 614). Third, the 280 hospital,
which is almost one million square feet in size, has more square footage than Trinity would have
built at Irondale. (T. 1992). Finally, the 280 site was built to a much higher standard, with
resultant enhanced operational and technological capabilities, than Trinity would have been able
to incorporate into an Irondale facility.
Upon determining that the 280 site was a superior alternative to Irondale, Trinity
surrendered its CON to relocate to Irondale on December 1, 2008. (Exh. TMC 1 at 1). Thus, in
order for Trinity to now be able to move to Irondale, Trinity would have to secure a new CON.
That is simply not possible. First, Trinity has determined that Irondale is not the best alternative
for Trinity, and so it would no longer consider moving there. Second, the time and expense
involved in obtaining a new CON to relocate to Irondale makes Irondale an infeasible
alternative, particularly given Trinity’s current precarious existence.
The Opponents nevertheless argue that Irondale was a superior alternative to the 280 site
and again attempt to re-try the case in this Court. They contend that Irondale was closer to
Trinity’s patient epicenter. (T. 4369). However, the Irondale site was not selected in the first
place because of its proximity to Trinity’s patient epicenter.12 In reality, the Irondale site was
12 The fact that Trinity’s patient epicenter is near Irondale does not literally mean that its
patients all reside in a cluster surrounding the Irondale area. The term “patient epicenter” is a concept used to determine the migration of patient populations over time, and which is
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selected because it was a large enough site, in an area of population growth, that was located
near an interstate. (T. 4375). The Opponents also argued that Trinity would not have been
required to adapt to the parameters of an existing building if Trinity had built a new structure
from the ground up at Irondale. (T. 5984). They suggested that Trinity could have developed
surface parking, instead of a parking deck, and made way-finding easier by having a large first
floor footprint with separate entrances for different services.13 (T. 5986). But the 280 hospital is
a superior option for Trinity precisely because it already exists and because it was built to
specifications that Trinity could never afford to match today.
As in the case of renovation, it is curious, to say the least, that Brookwood has chosen to
tout the alternative of Trinity’s relocation to Irondale as a superior alternative, given that
Brookwood vehemently opposed that effort. Given Brookwood’s position in that proceeding that
Trinity’s relocation to Irondale would detrimentally impact Brookwood, and that the project was
not financially feasible, it is disingenuous for Brookwood to now assert that Irondale represents a
more appropriate alternative for Trinity’s relocation than the 280 site. (T. 477-478).
Ironically, had Brookwood not opposed Trinity’s relocation to Irondale, Trinity would in
all likelihood be in the process of relocating to Irondale currently. (T. 476-478). Trinity’s CON
application to relocate to Irondale was filed on Nov 3, 2006. (Exh. TMC 174). The Irondale determined by taking the geographic average of the origin of all of the hospitals’ patients. (T. 4368). The fact that Trinity’s patient epicenter is near Irondale means that half of its patients are to the east of Irondale and half are to the west, but those groups are not equally divided in terms of density. (T. 4368-4369). There is a small but dense cluster of Trinity patients to the west of the Irondale site, and a large, geographically dispersed area of patients to the east of the site. Id. Thus, the fact that the 280 site is not at the exact center of Trinity’s patient epicenter has little probative value.
13 As previously discussed, the fact that the 280 hospital has a smaller foot print on the first floor will not be an issue because the hospital’s parking deck will be constructed so that patients can park on the level of the deck corresponding to the level of the hospital where they are going, and thus it will be as convenient, if not more, than if those services were on the ground floor.
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project would have proceeded much more quickly without a lengthy CON battle with
Brookwood, and would have already been in the construction phase long before the 280 hospital
became available sometime around January of 2008. The Irondale project would have been too
far along at that point to even consider the option of relocation to the 280 site.
D. There are Code Deficiencies at the Montclair Hospital that Cannot Feasibly be Corrected.
Trinity’s existing hospital on Montclair Road requires replacement to meet minimum
licensure and certification requirements. Chris Ross, principal at C. Ross Architecture LLC, was
retained by Trinity to survey the Montclair hospital and create a report regarding difficulties or
problems with that facility. (Exh. TMC 47). Ross reviewed the Montclair facility under the
Alabama Department of Public Health’s (“ADPH”) regulations, the 2006 AIA Guidelines, and
the Americans with Disabilities Act Guidelines. (T. 647-648). Mr. Ross found multiple
violations of those codes. The following, which includes information from Mr. Ross’ Building
Evaluation of Trinity’s campus, explains the code deficiencies existing at the Montclair campus:
The hospital is only approximately 85% sprinkled, despite the fact that since 1988, the Standard Building Code has required that hospitals be 100% sprinkled. (T. 656).
o Although Trinity has grandfathered status under that code, should Trinity undertake any major renovations, the Alabama Department of Public Health will require that it bring the whole smoke zone in which the renovation area is located up to code. (T. 656-659, 714).
o Sprinkling such areas would cause massive disruptions to the areas of the hospital where the installation of that equipment occurred.
The Montclair hospital does not comply with the ADA’s Guidelines.
o There are not a sufficient number of handicapped accessible patient bathrooms in the hospital. (T. 663).
o There are no ADA accessible bathrooms in patient rooms outside of the Women’s Center, which has recently been renovated and thus complies with the ADA. (T. 663).
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o Neil King, an architect retained by St. Vincent’s who toured the Montclair hospital, agreed that the typical patient bathrooms in the facility are not ADA compliant. (T. 5393).
o In order for a patient in any area of the hospital other than the Women’s Center to utilize handicapped accessible restrooms, he or she must go to the main lobby. (T. 777).
o The typical patient room bathrooms are so small that it is impossible to renovate them to meet ADA requirements. (T. 828).
o The ADA requires sinks in all patient rooms, not just in patient bathrooms. However, due to the small size of the patient rooms, it is impossible to install sinks in them. (T. 691).
o The width clearances of the elevators on the campus are too small under the ADA, but cannot be retrofitted to achieve compliance. (T. 708-709).
The Montclair hospital does not meet code requirements for fire caulking. (T. 716-717).
o Current codes require the use of fire caulk systems at all rated wall penetrations, the top of rated wall systems, and through rated floor and roof systems. (Exh. TMC 47).
o Although recent renovations have utilized fire caulk, all of the existing gyp board mud seals from the time of original construction of the hospital are still in place. (Exh. TMC 47).
o Upon renovation of areas without fire caulk systems, those systems would have to be installed, which would be a massive project that would constitute an undue burden upon the hospital. (Exh. TMC 47).
There are multiple code violations at Montclair caused by space constraints.
o Current code requires 200 square feet per bed for special care beds, but only one of Trinity’s 50 special care beds meets that requirement. (T. 697-698).
o The code for neonatal intensive care units now requires much larger square footage per bassinet than Trinity provides. (T. 699-700).
o Of the 10 original operating rooms, six do not meet the minimum code requirement of 400 square feet. (T. 701).
o Two operating rooms designated for cardiac surgery that were constructed in 1982 have only 520 square feet, as compared to the 600 square feet currently required by code. (T. 702).
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o Post Anesthesia Care Units (“PACU”) are required by code to be at least 80 square feet in size; however, Trinity’s PACU’s are only 40 square feet. (T. 703).
The kitchen at the Montclair hospital is in the beginning of a near complete below-grade waste line failure, which would have to be corrected in phases and would therefore create substantial problems related to providing food services to patients. (T. 705-706).
Public bathrooms have no air supply. (T. 829-830).
There is one air exchange per hour in Trinity’s patient rooms, instead of the six air exchanges per hour required by code, and there is no way for Trinity to renovate its facility to meet that standard. (T. 685-689).
The code requirement that there be one roof access per building cannot be met in Trinity’s 1982 tower. (T. 714).
In 2007, another licensed architect, John Klein, toured the Montclair facility and prepared
a report regarding its deficiencies. (Exh. TMC 45). In that report, Mr. Klein noted various Life
Safety Code violations at the hospital, including the following:
The fire egress corridors often are congested with waiting patients on stretchers or beds, supplies, and equipment due to the lack of patient holding areas and storage space throughout the facility Id. at 11. However, there is insufficient available space in the hospital to improve that situation. Id.
Because the spaces above the ceilings where no fire suppression systems exist are full of other services, such as ductwork, chilled and hot water piping, and plumbing, it is impossible to correct that problem because of the lack of physical space to install the piping. Id.
o Since ceilings are currently installed as low as they should be, lowering them is not a feasible alternative. Id.
o Ceiling replacements also involve removal and replacement of many other devices such as lighting fixtures, HVAC diffusers and grilles, fire alarm devices, speakers, and telemetry antennas. Id.
In the original hospital building, the Life Safety and Critical emergency systems are not properly separated, as required by code. Id. at 12. In order to correct that code violation, a complete demolition and replacement of the electrical system would be required, resulting in years of inconvenience and down-time for that part of the campus. Id.
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Thus, both Mr. Ross and Mr. Klein, after having conducted separate and independent studies of
the Montclair hospital, found that there were certain code violations that could not be corrected
short of complete demolition and rebuilding of the hospital.
Brookwood asserts that Mr. Ross’ report is unreliable because he referred to it as a
“condemnation report” during his testimony, suggesting that his analysis lacked objectivity and
that his conclusions were predetermined. (Brookwood brief, 24.) Gordon Carlisle testified,
however, that Trinity’s construction team does not use the term “condemnation report,” and that
that term was one coined by Mr. Ross. (T. 2068). Mr. Carlisle testified that Mr. Ross was asked
to objectively review the Montclair hospital and to write a report about the building, its useful
life, and any problems associated with it. (T. 2105). The ALJ and CON Review Board heard
this same argument and rejected it as unpersuasive.
In response to Mr. Ross’s determinations regarding the irreparable code violations at the
Montclair hospital, the Opponents argued at the contested case hearing that Trinity has passed its
inspections by the Alabama Department of Public Health and other accrediting agencies, and that
it is thus not in technical violation of any code provisions. (T. 740). Under the Opponents’
convenient but absurd interpretation of the rule, before it could relocate Trinity would have to
wait until the hospital was so outdated, and its MPE systems so decrepit, that the hospital was
shut down by regulatory authorities. A hospital does not have to be in imminent danger of
closure for code violations to deserve authorization to build a replacement hospital. Even Dan
Sullivan, Brookwood’s health care planning expert, rejected that as the standard to qualify for a
replacement hospital. (T. 5800). And, as admitted by Brookwood’s architectural expert, Neil
King, Trinity could not rebuild the existing Montclair hospital today on a greenfield site in
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Birmingham because there would be numerous deficiencies and violations of current codes. (T.
5474).
During the contested case hearing, Neil King testified that the code violations at Trinity
could be remedied by renovating the hospital in place. King opined that Trinity’s being only
85% sprinkled can be fixed by installation of the balance of the sprinklers when Trinity
renovates those areas of the hospital that are not currently sprinkled. (T. 5432). Mr. King fails
to recognize, however, that as noted in the John Klein report, there is insufficient interstitial
space in those areas to install the balance of the sprinklers needed. (Exh. TMC 45).
With regard to fire caulking, Mr. King states that the Joint Commission requires that fire
caulking deficiencies be noted by the facility before the inspection, and he assumes that because
Trinity passed the inspection, there is no issue. (T. 5437-5438). However, Mr. Ross included
photographs of gyp mud seals in his report, testifying that the gyp mud seals, instead of the fire
caulk required by current code, are at almost all floor penetrations. (Exh. TMC 74 at 35; T. 715-
718). Mr. Ross testified that the gyp mud seals are not as effective as the fire caulk seals in
preventing fire and smoke from penetrating a smoke wall for a full hour. Id. Mr. Ross explained
that, if Trinity renovates areas without fire caulking in place, it will have to be added. Id.
With regard Trinity’s not meeting the ADA’s requirement that 10 percent of patient
bathrooms be ADA accessible, Mr. King stated that Trinity would be exempt if compliance
would result in its giving up a significant amount of patient room area. (T. 5415, 5442). He
testified that Trinity will not have to come into compliance with that requirement unless it
renovates those areas. (T. 5442). Mr. King is arguing in effect that Trinity invoke its
grandfathered status to remain non-compliant with the ADA’s requirement for a minimum
number of patient restrooms for the handicapped, where the alternative is to relocate to the 280
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hospital and have 100% handicapped-accessible restrooms. That position is a prime example of
the Opponents encouraging mediocrity, and discouraging progress and best practices.
While some of the code violations at the Montclair facility could, technically, be
remedied, the cost of doing so would be an unreasonable burden upon Trinity. The standard for
a replacement hospital does not require a hospital to show that there is no amount of money that
would correct a code violation. For example, Trinity could address the fact that the Life Safety
and Critical emergency systems are not properly separated in the 1966 building, as required by
code, but it will require a complete demolition and replacement of the electrical system. (Exh.
TMC 45). Likewise, the problem with the typical patient bathrooms being so small that they
violate ADA requirements could be remedied, but it would involve knocking out the walls on the
patient floors and reconfiguring the patient rooms and bathrooms, resulting in fewer patient
rooms. (T. 828).
To be sure, there are several code violations that could not be addressed short of
demolishing the building and reconstructing it. For example, the current AIA Guidelines, used
by ADPH, require six air changes per hour in patient rooms. (Exh. TMC 47 at 6). Currently,
Trinity’s patient rooms get one air change per hour. Id. It would be impossible for Trinity’s
patient rooms to come into compliance with that requirement because there is no way to install
the ductwork required for the increased volumes of airflow needed on those floors due to the lack
of interstitial space. Id. Thus, Trinity’s Montclair hospital requires replacement to meet
minimum licensure standards.
E. There are Operational Deficiencies at the Montclair Hospital that Cannot be Feasibly Corrected.
The Montclair hospital is an aging facility that has reached the end of its useful life. The
building was designed in 1959, construction began in 1962, and the hospital was opened in 1966.
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(T. 937). The West Tower was completed in 1982. (T. 652). There has been a shift in
healthcare delivery from inpatient care to outpatient care since the time the hospital was built in
the 1960s. (Exh. TMC 27). For example, the Average Length of Stay for an inpatient in the
1960s was nine days, while it is now 5.2 days. (Exh. TMC 27). In the 1960s, less than 1% of
surgeries performed at the hospital were outpatient procedures; currently, 60% of hospital-
affiliated surgeries are performed on an outpatient basis. Id. While today CT scanners and MRIs
are commonly used to diagnose various health problems, those pieces of equipment were not
even invented until the 1970s. Id.
The age of the facility and the multitudinous changes in the delivery of healthcare,
combined with the lack of capital reinvestment in the building over time, have caused physical
plant deficiencies that have, in turn, created operational problems for the hospital. Those
operational problems include, but are not limited to, the following:
The hospital is spread out over a number of floors and across attached additions. In a typical surgery, a patient starts out on the ground floor at admissions, goes to the tenth floor for pre-surgery preparation, goes to the second floor for the actual surgical procedure, and finally goes to the fifth floor for recovery. (T. 910).
The labor and delivery department is on the second floor, while post-partum services are on the fourth floor. (T. 710).
MRIs are located in the same area as the oncology department, instead of near the imaging department, because that is the only space where there is room for that equipment. (T. 711).
Cardiac services are unconsolidated and instead scattered all over the hospital. (T. 245).
Patients have trouble finding their way through the hospital. (T. 323). Way-finding problems at the hospital lower patient satisfaction, and frustrate families as well. (T. 3731). Although Trinity has attempted to improve signage to combat way-finding issues, patients and families still become confused about where to report for various procedures. (T. 3731-3732).
On a scale of one to ten, throughput at the current site represents about a “four.” (T. 3728, 3729).
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Because the hospital is diffused over such a large area, the staff is consequently spread extremely thin. (T. 248).
Significant manpower must be employed to move patients throughout the sprawling hospital over the course of a visit. (T. 3805).
If one includes the 560 beds for which Trinity has a license, the hospital has 1100 square feet per bed; considering only the approximately 350 beds that are in operation, the hospital has 1600 square feet per bed. (T. 668). The industry standard today is 2220 square feet per bed. (T. 668).
There is a general lack of storage space for equipment, and it is thus often necessary to store surgical equipment in the hallways. (T. 859).
Three of the operating rooms have storage areas behind them and the only way to access those storage areas is through the three operating rooms themselves. (T. 860-861).
o Some surgeons will not allow staff members to come into those operating rooms to enter the storage rooms while the surgeons are performing a procedure, which causes delays for the surgeons in other operating rooms that need that equipment. (T. 860-861).
o That situation also results in distraction and aggravation for surgeons operating in those operating rooms. There is a storage room, for example, behind Dr. Garry Turner’s operating room, and he testified that it agitates him when individuals have to come retrieve equipment out of the storage room while he is in the middle of an operation. (T. 1356-1357).
The operating rooms are too small. (T. 878).
o Modern equipment that did not exist at the time the ORs were built takes up much of the area of the already small ORs, thus rendering patient care difficult. (T. 349-353).
o Some ORs are so small that certain physicians, such as orthopedists and bariatric surgeons, cannot operate in them. (T. 858-862).
o Trinity has already renovated the ORs that could be expanded (because they were nearest the outside wall of the hospital). (T. 367-368).
o Other ORs, such as OR number 7 where Dr. Turner performs head and neck procedures, has remained basically the same since it was built. (T. 1358). Dr. Turner testified that he has personally met with architects regarding renovation of that OR and that there is nothing that can be done to sufficiently address these issues that would not take excessive time, be inefficient, and waste money. (T. 1358).
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The labor and delivery rooms, as well as the conventional labor rooms, are too small. Although the units have been remodeled fairly recently, the rooms, which should be 300 square feet according to code, are only about 225 square feet in size. (T. 712-713). Trinity also has some conventional labor rooms that are approximately 10 feet by 10 feet in area, which is extremely small. Id.
The patient rooms at the Montclair hospital are diminutive by today’s standards. In the original 1966 tower, there are private and semi-private rooms. (Exh. TMC 47 at 7).
o The semi-private rooms are, for the most part, being used as private rooms. Id. The rooms that have been converted from semi-private to private are 12 feet 7 inches from head to footwall and 15 feet 6 inches from side to side. Id.
o The rooms which were originally built as private rooms are much smaller. They are 12 feet seven inches from head to footwall, but only 9 feet 6 inches from side to side, and are exactly the minimum square footage allowed under code for a patient room. Id.
o Trinity utilizes Hill-Rom beds, which are 7 feet ten 10 inches long, and 3 feet 5 inches wide. (T. 691). Code requires that there be over three feet between beds in a semi-private room, and also three feet in between the bed and the wall in all rooms. (T. 691). In addition, 2001 ADA Guidelines require hand wash sinks inside patient rooms for utilization by staff members and physicians. (T. 692). However, it would be extremely crowded to maintain the required clearances on the sides of the bed and to also put a sink in the private rooms. Indeed, it would be impossible to do so in the rooms that are still utilized as semi-private rooms, and there is no way to renovate those rooms to accommodate those requirements. (T. 692-693).
o In the 1982 patient tower, the patient rooms are actually smaller than in the 1966 tower. (T. 694). The head to foot wall dimension is 10 feet 6 inches, and the rooms are 9 feet 6 inches from side to side, creating a total of about 100 square feet. (T. 694-695). Code requires that patient rooms measure at least 120 square feet. (T. 695). Although Trinity is grandfathered and does not technically have to meet that code requirement, the market demands a room larger than 100 square feet. (T. 695).
The inpatient admission areas are too small. There are four portals for surgery admission: early morning admission, one-day surgery admission, the emergency department, and inpatient admission. (T. 851-854). Trinity has to have an early morning admission area separate from a one-day admission area because neither space is large enough alone to accommodate both services, resulting in duplication of staffing. Id. Trinity staff members often have to search for patients that present at the wrong admissions area. Id. In addition, referring physicians’ offices are often unaware of where to tell their patients to present at Trinity for surgery. Id.
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There are nine ORs that have only one point of ingress and egress. (T. 854). It is better to have an adjacent sub-sterile room in between sterile and non-sterile areas, i.e., a controlled environment where staff and physicians must wear masks and the correct attire. (T. 865).
In four of the ORs in one-day surgery that do not have sub-sterile rooms, if a physician or staff member drops an implement, he or she must go out into the hallway to sterilize it. (T. 863).
The ORs are so small that the nurses have only one or two feet to maneuver without contaminating the sterile field. (T. 864).
Three of the ORs do not have appropriate ventilation, meaning that the air does not blow down from the ceiling directly over the sterile area and then exit from the floor below. (T.855).
Because of the lack of storage space at Montclair, surgical equipment is rolled into and out of ORs on carts, requiring that a circulating nurse pick up equipment parts, such as cords, off the floor. (T. 869).
Four of five cooling towers failed in 2009, and Trinity had to make corresponding repairs in excess of $100,000. (T. 950).
The HVAC system at the Montclair campus is outdated, inefficient, and operating at about 60% efficiency. (T. 960).
Trinity staff members must manually monitor the temperature and humidity in the ORs, unlike in modern facilities where those functions are computerized. (T. 961).
Trinity has scheduled $102,000 worth of repairs just for the air handling units. (T. 1023).
The boilers, chillers, cooling towers, internal plumbing, and switch gear are all antiquated and need to be replaced. (T. 974).
The Vocera system, which is an intercom-like system used mainly by anesthesiologists to communicate from different areas of the hospital, works only intermittently because of interference created by the physical plant. (T. 954-957).
The nurse call system does not work well because there are dead spaces in the building where individuals being signaled do not receive their pages. Trinity has received lower patient satisfaction scores as a result of this issue. (T. 3755, 3756).
The hospital’s 40 elevators, one or more of which are down at any given time, present operational problems. (T. 950).
The elevators are analog, and thus slower compared to modern electronic elevators. (T. 707-708).
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Patients and visitors have become trapped in the elevators (Exh. TMC 276) or had arms or legs caught in the elevator doors. (T. 3738).
Replacement of an elevator costs $100,000. (T. 3089).
The elevators are too small. When a patient is on a ventilator, for example, the patient must be taken on one elevator by a nurse with some equipment, while a second nurse takes an elevator with additional equipment. (T. 3734-3735).
The public elevators and the elevators for staff and patients are all in the same areas, and members of the public often board patient elevators already occupied by patient gurneys. (T. 3733).
The patient parking deck, which descends underground from the entrance at ground level, is not attached to the main hospital and is confusing for patients. (T. 2136). There is no way to build adequate parking at the Montclair site to access the building. (T. 2136).
The operational problems inherent in the ailing Montclair plant would be remedied by
relocation to the 280 hospital. At the 280 hospital, related services will be arranged rationally
and consolidated in close proximity to each other, increasing patient throughput efficiencies. (T.
3742). For example, at the 280 hospital, all surgery-related services, including pre-admission
testing, will be located on the fourth floor. Id.
Way-finding will also be improved at the 280 hospital. Bill Heburn testified that the
proposed facility is easy to navigate, in part because there is only one set of public elevators and
one can only travel either up, down, left or right. (T. 3881). In addition, there is a clear
separation for the front of the hospital, which is public, and the back of the hospital, which is
reserved for physicians and for patients who have been admitted to the hospital. (T. 2868).
Patients, furthermore, will be able to come directly into the hospital from the parking deck on the
floor where they are going for services. (T. 2866). For example, if a patient is coming in for
obstetrical services, the patient could park on the floor of the parking deck corresponding to the
third floor of the hospital, and walk straight inside to the women’s services unit. (T. 2839).
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In addition, the 280 hospital will create opportunities for infection control innovation.
For example, there are already washing stations in each patient room for visitors and staff. (T.
3744). All equipment will be suspended from the ceiling, which will have the added benefit of
reducing infection rates. (T. 868). Ventilation in all ORs will be appropriate. (T. 868).
Moreover, each operating room will have an entrance from a sub-sterile corridor, and an exit into
a common corridor. (T. 867).
The 280 hospital houses top-of-the-line mechanical and electrical systems. There are
redundancies in the heating, cooling, and emergency power systems. (T. 3883-3884). With
regard to the MPE systems at the 280 hospital, Richard Miller testified that “if 10 is good, we
have a 12.” (T. 2882). Miller stated that it should be extremely efficient to run the MPE systems
because they are all integrated and set monitored automatically and constantly. (T. 2883).
The lack of space available at the Montclair facility would be remedied at the 280
hospital. For example, all ORs would be a minimum of 600 square feet. (T. 2836). In addition,
the patient rooms would be larger, and there would be sufficient storage space to house the
hospital’s equipment.
At the 280 site, access from the parking deck to the hospital will be very good because
the parking deck will be attached to the hospital. (T. 1105). Patients will be able to park on the
floor of the deck corresponding to the floor of the hospital where the services they need are
located, and enter that department directly from the deck. (T. 2839).
Brookwood and St. Vincent’s argued in the hearing that Trinity’s operational problems
are no worse than those at their respective hospitals, and, in yet another attempt to re-try its case,
Brookwood again repeated this argument in its brief to this Court. (Brookwood brief, 103.) For
example, Dr. Glen Wells, a urologist at Brookwood, testified that there are way-finding problems
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on Brookwood’s campus, and that patients sometimes complain about the parking situation there.
(T. 4734-4735). Dr. Jeffrey Wade, an orthopedic surgeon at Brookwood, testified that there are
way-finding problems at Brookwood and that he wishes the operating rooms were larger. (T.
4935-4937). Dr. McLain, a Brookwood rheumatologist, testified that there are areas of
Brookwood that need renovation, just as there are at Trinity. (T. 5218). Neil King,
Brookwood’s architectural expert, testified that Brookwood and Trinity are almost the same size
in terms of total area. (T. 5402, 5403). Brookwood and Trinity apparently have approximately
the same percentage of sprinkled versus unsprinkled areas. (T. 5404). Brookwood, like Trinity,
also has some semi-private rooms despite the fact that private rooms are now the industry
standard. (T. 5420).
It is unclear what point the Opponents are attempting to make through this evidence. The
fact that other hospitals have operational problems is irrelevant to the issue here of whether
Trinity should be permitted to relocate and improve its hospital. It defies reason to suggest that,
because there are operational problems at Brookwood and St. Vincent’s, Trinity should be
content to wither away in an outdated hospital. Does the fact that Brookwood and St. Vincent’s
also have operational problems mean that there should be no progress by any other hospitals, or
that other hospitals should stop trying to become better facilities? (T. 1522). The Opponents
effectively assert that Trinity should be content with mediocre facilities, and they accordingly
urge rejection of a project that presents a unique opportunity for innovation and excellence.
In addition, despite St. Vincent’s opposition to Trinity’s project, the St. Vincent’s-St.
Clair Hospital recently applied for and received a CON to build a replacement hospital for many
of the very same reasons that Trinity seeks to replace its hospital. (Exh. TMC 286 Attachment
B). John O’Neil testified that the current St. Vincent’s-St. Clair Hospital was not sustainable
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from a physical facility standpoint. (T. 6072). The hospital was constructed in the 1960s, and
there has been almost no reinvestment into its physical plant since that time. (T. 6073). Due to
the age, condition, and configuration of the facility, significant modification would be necessary
to renovate the hospital. (T. 6091). In addition, renovation of St. Vincent’s current St. Clair
facility would be inefficient and would disrupt patient care. However, by constructing a
replacement hospital, St. Vincent’s-St. Clair can continue patient care without disruption at the
current location while the new facility is built. (T. 6094). Mr. O’Neil’s testimony begs the
question as to why one of his hospitals, which is not even as old as the Montclair facility, is
appropriate for replacement while Trinity’s—based on identical rationale—is not.
The Opponents asserted at the contested case hearing that the many awards Trinity has
received at its present location indicate that Trinity’s physical facilities must be sufficient.
Brookwood repeated this argument in its brief to this Court. (Brookwood brief, 82-83.) Trinity
has, in fact, received a multitude of awards for the excellent quality of patient care it provides,
and Trinity is proud of those accomplishments, which include the following:
2009 HealthGrades Rankings o Best Rated in the Birmingham Area for Overall Cardiac Services o Best Rated in the Birmingham Area for Coronary Interventional Procedures o Recipient of the HealthGrades Cardiac Surgery Excellence Award in 2009 o Ranked Among the Top 10% in the Nation for Cardiac Surgery in 2009 o Ranked Among the Top 5 in Alabama for Overall Cardiac Services - Ranked 2 o Ranked Among the Top 5 in Alabama for Cardiac Surgery - Ranked 3 o Ranked Among the Top 5 in Alabama for Cardiology Services - Ranked 5 o Ranked Among the Top 5 in Alabama for Coronary Interventional Procedures -
Ranked 4 o Five-Star Rated for Cardiac Surgery in 2009 o Five-Star Rated for Coronary Bypass Surgery in 2009 o Five-Star Rated for Treatment of Heart Failure 4 years in a row (2005-2009)
American Heart Association/American Stroke Association Achievements o 2008 Get With the Guidelines Bronze Award for Performance Achievement in
Quality Improvement Program. o 2008 Get with the Guidelines Bronze Award for Performance Achievement in
Stroke
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o 2009 Get with the Guidelines Silver Award for Performance Achievement in Stroke
o 2008-2009 Get with the Guidelines Silver Award for Performance Achievement in CAD
o 2008-2009 Get With the Guidelines Silver Award for Performance Achievement in HF
o Primary Stroke Center accredited by The Joint Commission (on going project, not yet achieved)
o 2009 Get With the Guidelines Gold Award for Performance Achievement in HF(Qualified)
o 2009 Get With the Guidelines Gold Award for Performance Achievement in Stroke (Qualified)
Gastroenterology (“GI”) o 2009 HealthGrades Rankings
Best Rated in the Birmingham Area for GI Medical Treatment Ranked Among the Top 5 in Alabama for GI Medical Treatment Five-Star Rated for Treatment of Pancreatitis - 5 years in a row (2005 -
2009) Respiratory Care
o 2008 and 2009 Quality Respiratory Care Recognition from American Association for Respiratory Care
o 2008 Clinical Site of the Year Recognition from Virginia College o 2008 and 2009 Certificate of Participation from American Proficiency Institute
Bariatric Surgery o Center of Excellence in Bariatric Surgery 2006- awarded by the American Society
of Metabolic and Bariatric Surgery (Exh. TMC 34).
In addition to the awards, Trinity also received a Commission on Cancer certification in
June of 2006. (Exh. TMC 32). Jane Northcutt, Chief Quality Officer at Trinity, testified that the
Commission on Cancer is sponsored by the Alabama College of Surgeons and certifies hospitals’
cancer programs. (T. 3722). Furthermore, Trinity has been ranked one of the Top 100 Hospitals
in America in both orthopedics and cardiology. (Exh. TMC 1 at 53). In addition, Trinity excels
at infection control. The current infection rate at Trinity at the time of the contested case
hearing, according to Mike May, Director of Surgical Services, is 1.2%, as compared to an
average of two percent nationwide. (T. 888). Furthermore, Andy Romine testified that the
nurses at Trinity meet the appropriate standard of care for the treatment of the hospital’s patients.
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(T. 3819). Thus, Trinity has provided evidence establishing that the quality of care provided at
its hospital is excellent.
The Opponents argued to the Agency that, because Trinity has received these awards, it is
not reasonable to believe that it could have irremediable physical plant deficiencies. This
argument is shallow and baseless. The fact that Trinity has deserved and received such awards,
despite its outdated and inadequate facilities, is simply a testament to the determination, skill,
and knowledge of the professionals at that hospital. By way of analogy, if a physician unblocks
a choking victim’s trachea in a crowded restaurant with a pen knife, that does not mean that the
pen knife was therefore a great medical instrument. It means that the physician was an excellent,
knowledgeable doctor who was able to perform exceptionally with the tools that he had, no
matter how insufficient. Given what Trinity’s staff has been able to accomplish in its current
sub-standard facility, it is impressive to imagine the new heights of patient care Trinity’s
professionals could achieve if they had access to the modern, state-of-the-art facilities at the 280
hospital.
Thus, the age of the Montclair Facility has resulted in operational deficiencies which can
be remedied only by relocation to the 280 hospital. The lack of space in the building, the
inefficient, irrational location of services within the building, and the ancient MPE systems
cannot be remedied short of demolishing the hospital and constructing it anew. Relocation to the
280 facility will remedy the operational problems present at the current site, as well as provide
opportunities for increased operational efficiencies.
IV. TRINITY COMPLIES WITH THE CON RULES’ CRITERIA FOR ISSUANCE OF A CON.
Chapter 6 of the CON Rules, §§ 410-1-6-.01 et seq. contain 16 criteria, many of which
have multiple subparts, that should be considered in determining whether an applicant should
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receive a CON. For purposes of this brief, Trinity will concentrate on those criteria that were the
focus of the most evidence at the Agency level and the most discussed by the Opponents in their
filings with the Agency and this Court: the financial feasibility of the project, the locational
appropriateness of the project, the need for the project, the probable effect of the project on
existing providers, community support for the project, access for the medically underserved, and
the appropriateness of the applicant.14 The CON Review Board and ALJ weighed all of the
evidence relating to these criteria (in addition to the other criteria) and found that there was
substantial evidence to support granting Trinity a CON to replace and relocate its hospital.
Brookwood is now asking this Court to re-weigh this evidence in an effort to re-try its case,
which is not permitted under the limited review provided by the AAPA.
A. Trinity’s Proposed Relocation to the 280 Hospital is Financially Feasible.
The CON Review Board and ALJ determined that this project is financially feasible.
(AR 3233, 3207). Despite Brookwood’s allegation to the contrary based entirely on the
testimony of one witness, Trinity will have no problem whatsoever in funding the proposed
project, and the project will be successful financially. (Brookwood brief, 124.) CON Rules §
410-1-6-.05(1)(a) states that, in determining whether there is a need for a proposed project,
consideration must be given to the “financial feasibility of the proposed change in service of the
facility.” President of Division I-Operations, Community Health Systems Professional Services
Corporation, David Miller, testified that he has no doubt about the company’s ability to fund the
proposed project. He stated as follows:
We're very fortunate to be in kind of a strong position today. We have substantial cash and cash equivalents available to us. We have access to credit facilities that have not been exercised as yet.
14 The ALJ’s recommended order that was adopted by the CON Review Board addresses all of
the CON criteria relevant to this project.
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Our company has a real strong cash flow from day-to-day operations. And as a publicly traded company, we have access to the equity market should that be necessary. So there are four or five different sources of funding that we would be able to access to pay for this transaction. (T. 1596).
Treasurer and Vice-President of Finance, Jim Doucette, also testified that he had no
doubt whatsoever concerning the company’s ability to fund the proposed project in the ordinary
course of business. (T. 4312). Mr. Doucette testified that Trinity has several sources of funding
at its disposal, including the following:
1. Cash Flows. In 2008, cash flows from CHSI’s affiliated hospitals were about $1.57 billion. (T. 4305). Between 2010 and 2013, the company’s cash flows are projected to be $4.3 billion. Id. Doucette testified that CHSI affiliated hospitals are projected to make $3.15 billion in capital expenditures from 2010-2013, and that the company expects the bulk of that amount to come from cash flows from operations. (T. 4304). The remaining $1.5 billion is sufficient to cover the remaining obligations, including debt service of CHSI’s affiliated hospitals. (T. 4306). Further, Mr. Doucette testified that the $280 million needed to fund the relocation of Trinity to the 280 hospital is a typical expenditure for the relocation of CHSI-affiliated hospitals, and that Trinity’s parent companies have included other such replacement hospitals in its financial models. (T. 4306-4307). In addition, not all of the expenditures associated with the project would become due in the same fiscal year, allowing Trinity and its parent companies to spread the cost of the project over the 18-month time frame for completion of construction. (T. 4308). Doucette testified that the Trinity project would represent less than 10 percent of all capital expenditures for CHSI-affiliated hospitals 2010-2013. (T. 4309). He stated, furthermore, that cash flows from operations of CHSI-affiliated hospitals should be sufficient to fund the project, as they are forecasted to be approximately $500 million at the end of 2009. (T. 4309).
2. Credit. Trinity’s parent companies have the ability to borrow up to $660 million under an outstanding revolving credit facility. (T. 4310). Trinity’s parent companies also have the ability to borrow $250 million against an existing facility that has previously been pledged to a bank. Id.
3. Accounts receivable. Trinity’s parent companies have the ability to borrow up to $1.5 billion under an accounts receivable securitization lending program. Id.
During cross-examination of David Miller and Jim Doucette, counsel for St. Vincent’s
questioned whether Trinity’s parent companies do in fact have sufficient funds to finance the
relocation project. Counsel pointed out, by reference to CHS’s 10-K and 10-Q forms, that
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Trinity’s parent companies carry slightly under nine billion dollars in debt (T.4314), that the
parent companies and affiliated hospitals have $2.35 billion in cash obligations from 2010 to
2012 (T. 4328), and that it has $6.8 billion in cash obligations between 2013 and 2014. (T.
4329). Opposing counsel asserted that Trinity’s parent companies and affiliates will need to use
its cash to pay down certain portions of its debt that are at a higher interest rate, instead of
investing it in capital expenditures such as the replacement hospital. (T. 4341-4343). In
addition, counsel pointed out that there are certain limitations on future borrowing capacity
imposed by Trinity’s parent companies’ and affiliated hospitals’ present loan agreements. (T.
4322-4323).
Nothing in the picture painted by opposing counsel even remotely suggests that the
proposed project is not financially feasible or that the company cannot routinely fund it. Indeed,
if Trinity had qualms about its ability to fund the project, it seems unlikely that it would be
pursuing it in the first place. Jim Doucette testified that the amount of debt the parent companies
are currently carrying is a direct result of the merger of CHSI’s indirect subsidiary into Triad in
2008. (T. 4315). On the flip side, Mr. Doucette explained, the Triad merger will result in
heretofore unmatched levels of revenue for CHSI and its affiliates. (T. 4305). With regard to the
assertion that Trinity’s parent companies will have to use its cash flows from operations to pay
back certain debt, Mr. Doucette testified that, on the contrary, out of the approximately $3 billion
that was borrowed at an 8.9% interest rate, there is only $75 million of that amount that Trinity’s
parent companies are even permitted to buy back. (T. 4342-4343). Mr. Doucette also explained
that, although there are some limitations imposed by Trinity’s parent companies’ credit facilities,
such as that they would not be permitted to borrow 200 billion dollars and give that money away
to charity, there are many other provisions of those facilities that allow Trinity’s parent
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companies to borrow the money needed to grow its business. (T. 4323). Indeed, so long as
Trinity’s parent companies comply with the limitations set forth in its credit facility agreements,
it can borrow funds without even having to seek the bank’s approval. (T. 4323-4324).
In addition to David Miller and Jim Doucette, Trinity’s former CFO and current CAO,
Paul Graham, testified that the proposed project is financially feasible. (T. 3125). Mr. Graham
created the financial pro forma submitted with the CON application. (Exh. TMC 1 at 109; Exh.
TMC 78). Mr. Graham reached his projections for admissions and total patient days by starting
with Trinity’s 2009 budget figures and by assuming that, during 2010 and 2011, there will be a
continuing decline in admission volumes of about 3% per year, which is the current trend. (T.
3098). Graham then predicted that starting in 2012, the first year of operation of the replacement
hospital, there would be a gradual increase in admissions of 3% per year. He also assumed that,
beginning in 2012, there would be a 5% increase in productivity at the hospital, and that Trinity
would be able to negotiate higher rates of reimbursement at the new facility. (T. 3098-3099,
3394). Mr. Graham calculated Trinity’s outpatient projections presented in the CON in a similar
manner. Mr. Graham stated that, at Trinity’s existing campus, outpatient volumes have
continued to trend up slightly, and so he assumed an approximate 2% increase in outpatient
volumes each year until 2012. (T. 3104). Mr. Graham assumed that, upon Trinity’s relocation to
the 280 site, it would experience a continued moderate growth in outpatient visits of about 2%
annually. (T. 3104).
Based upon the information in the pro formas submitted with the CON application, Mr.
Graham concluded that the 2012 operating expenses for the 280 hospital would be approximately
$275.7 million, and that net operating revenues would equal approximately $304 million, with a
resulting EBITDA of $28.1 million and a 10% operating margin. (Exh. TMC 78; T. 3123-
109
3124). Mr. Graham created a revised pro forma in about June 2009, after the submission of the
CON application, to further reflect the most recent financial trends of the hospital since the filing
of the application. (Exh. TMC 79). That updated pro forma predicts that, at the 280 hospital,
Trinity will have an EBITDA of $26.5 million. Id. Mr. Graham concluded that the project was
therefore unquestionably financially feasible. (T. 3132).
Brookwood’s entire argument is based upon the testimony of Rick Knapp, an accountant
who testified on behalf of Brookwood. Mr. Knapp testified that, based on Trinity’s financial
projections for the 280 hospital, the project is not financially feasible. (T. 6664). Mr. Knapp
argued that Trinity’s financial projections understate the salaries and wages for the hospital, as
well as supply costs. He argued that salaries and wages are understated in Trinity’s CON
financials by $12.6 million. (T. 6668). Knapp reasoned that the salary and wage costs are
understated because they do not include a 3% inflation rate, and also do not reflect the increased
projected volume after relocation in relation to Trinity’s variable labor cost. (T. 6672). Mr.
Knapp also asserted that the supply costs listed in the CON application are understated by $9.3
million. (T. 6668). He argued that Trinity’s supply costs should have been increased by a 4%
per year inflation rate, and also that they should have been increased to reflect the higher volume
projected upon relocation to the 280 hospital. (T. 6678-6680). Knapp therefore concluded that, if
the $12.6 million in labor and wage expenses and $9.3 million in supplies that he determined
Trinity had underestimated are subtracted from the $11 million pre-tax income forecasted in the
CON application for Year 2 of the project, the pre-tax income for that year will actually be
negative $10.8 million, and that the project is thus not financially feasible. (T. 6668, 6680-
6681).
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Rebutting that erroneous conclusion, Mr. Graham testified that Mr. Knapp’s assumptions
regarding salary and wage rates, as well as supply costs, were unwarranted. Mr. Graham
explained that it would not be appropriate to apply an increased inflation rate to salaries and
wages at Trinity, because those figures are actually currently trending downward. (T. 6835,
6836). With regard to the assertion that he had failed to take into account the effect of increased
volumes on variable labor costs, Mr. Graham testified that he assumed in creating Trinity’s
projections that there will be an increased level of employee productivity associated with the
relocation. (T. 6833). Such an assumption is reasonable given the improvements in operating
efficiencies and improved staff satisfaction that will result from the relocation.
With regard to Mr. Knapp’s assertions concerning Trinity’s supply costs, Mr. Graham
testified that those costs have actually declined as a result of the recent economic recession,
which has allowed Trinity to negotiate lower supply costs with many vendors. (T. 6837).
Further, the acceleration of physician attrition at Trinity of late has resulted in lower supply
costs. For example, if a neurosurgeon leaves Trinity and relocates to St. Vincent’s, Trinity’s
supply costs might decrease by $2 million, due to the fact that Trinity no longer has to purchase
the expensive supplies related to spinal implants. (T. 6837-6838). In addition, Mr. Graham
testified that Mr. Knapp’s assertion that supply costs vary with volume is incorrect as a blanket
statement because some supply costs, such as the cost of cleaning the hospital, are actually fixed
and not dependent on volume. (T. 6838-6839). Mr. Graham testified, moreover, that even
assuming 90% of Trinity’s supply costs are variable, he believes that he actually overstated the
supply costs of the hospital in Trinity’s CON submission by $2 million to $3 million. (T. 6839).
It is reasonable to assume that Mr. Graham, who has served as Trinity’s CFO for the past five
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years,15 is more knowledgeable concerning Trinity’s own wage and supply costs than an outside
accountant like Mr. Knapp.
Mr. Knapp also testified that Trinity’s projections for patient admissions in its CON
application indicate that the project is not financially feasible. That application projects 15,218
admissions by Year 2 of the project, which represents 300 more admissions than projected in
Trinity’s 2009 budget. (Exh. TMC 1 at 109). Mr. Knapp argued that those admissions projected
by Trinity would be insufficient, and that Trinity would need to generate approximately 20,000
admissions by the second year of the project to make the project financially feasible. (T. 6689).
However, Mr. Knapp’s testimony in the instant case conflicts with his testimony in the Irondale
hearing. Trinity’s application for the Irondale CON projected approximately 20,000 admissions
for the second year of that project. In that case, however, Mr. Knapp testified that, even with
20,000 admissions, that project was not financially feasible. (T. 6762). It is thus unclear what
number of admissions would satisfy Mr. Knapp, or indeed if he will always pick a number higher
than the forecast. One thing clear is that Mr. Knapp is not uncomfortable offering contradictory
testimony even when presented with similar circumstances.
The substantial evidence clearly supports the CON Review Board’s finding that this
project is financially feasible.
B. The Location of the 280 Hospital is an Appropriate Site for Trinity’s Relocation Hospital.
There is a state-of-the-art hospital sitting vacant, at this moment, in the very area of
Birmingham where a hospital is needed most. The hospital is located on the border of the city of
Hoover, which is the largest city in Alabama without a hospital, and also on the border of Shelby
15 Mr. Graham transitioned from the position of CFO to Chief Administrative Officer at Trinity in
the summer of 2009.
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County, which has 160,000 residents but only one hospital, and that one located on the other side
of the county. The available hospital is positioned near the intersection of two of the major
roadways in the area: Highway 280 and Interstate 459. It is an extremely fortuitous confluence
of events that there is one hospital, Trinity, in dire need of relocation, and a vacant hospital
building, the 280 hospital, located in the area where there exists the greatest community need.
In order to determine whether there is a need for a proposed project, CON Rules
§ 410-1-6-.05(1)(f) requires that “evidence of the locational appropriateness of the proposed
facility or service such as transportation accessibility, manpower availability, local zoning, and
environmental health,” be considered. The following factors render the 280 hospital site an
excellent location for Trinity:
The 280 site will have excellent transportation accessibility. There are two entrances into the hospital from Highway 280 traveling toward the hospital from I-459, and there are three different ways of entering the 280 campus when traveling north on Highway 280 from Inverness toward the hospital campus. (T. 4165-4166).
The 280 site is geographically accessible to Trinity’s entire service area because of its proximity to the intersection of all major Birmingham area arteries, including I-459, I-65, Highway 280, Highway 119, Shelby County Road 17, and Valleydale Road. (T. 4172).
There is nothing in the topography of the land surrounding the 280 site that would prevent access to the hospital. (T. 4411).
The former “Digital Hospital” is one of the most well-known sites in the state, which will result in a higher level of patient familiarity with the location of the hospital. (T. 336, 480).
The 280 site will allow for adequate manpower to operate the hospital. The vast majority of Trinity’s current employees would continue to operate the hospital upon relocation, and the Highway 280 location would not serve to impede those employees from continuing to work for Trinity. (Exh. TMC 1 at 87).
The 280 site complies with all local zoning requirements. (Exh. TMC 14).
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With regard to environmental health, construction and operation of the facility will occur in strict compliance with all applicable statutes, rules, and regulations. (Exh. TMC 1 at 87).
The 280 corridor contains a rapidly growing population, with resultant new businesses and expanding residential developments. (T. 1582, 2465).
Despite the rapidly growing population along the 280 corridor, residents of that area do not have immediate access to an acute care hospital, or to certain specialty services that only a hospital could provide. (T. 2528).
Despite the fact that Shelby County has approximately 160,000 residents, there is no facility in Shelby County with the ability to treat head trauma. (T. 420). The Jefferson County hospital closest to Shelby County, Brookwood, does not take neuro-surgery call on weekends. (Exh. TMC 134). Thus, patients in Shelby and Jefferson Counties who suffer head trauma on the weekend are treated either at UAB or Trinity. (T. 410-420). Neurosurgeon Zen Hrynkiw testified that currently there is no neurosurgical coverage down the Highway 280 corridor to Alex City. (T. 420).
The 280 location will allow ambulances coming down the 280 corridor from southern Jefferson and northern Shelby Counties to reach a hospital more quickly, while avoiding the traffic associated with Highway 280 between the I-459/Highway 280 interchange and downtown Birmingham. (T. 496-497; 1475-1476).
Currently, ambulances transporting emergency patients from the 280 corridor to Birmingham area hospitals must travel directly past and beyond the empty Digital Hospital an additional five or more miles to reach Brookwood, St. Vincent’s, or UAB. (Exh. STV 422).
Relocation to the 280 site would result in more referrals to Trinity. Trinity is currently losing referrals because referring physicians are hesitant to refer their patients to a physician at Trinity for fear that their patients do not know how to access Trinity. (T. 357-358). Relocation to the well-known 280 hospital would remedy such concerns. (T. 357-358).
All of the above factors, when considered in combination, make the 280 site an excellent
location for Trinity’s replacement hospital. The CON Review Board and ALJ evaluated all of
this evidence and found that this location was appropriate.
The Opponents insinuated in the hearing that the 280 site is an inappropriate location for
Trinity because Trinity would be moving away from its patient epicenter. Brookwood repeats
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this argument in its brief to this Court, asking this Court to re-weigh the evidence that has
already been evaluated by the ALJ and CON Review Board. (Brookwood brief, 81, 126.) As
Trinity explained at the ALJ hearing, the term “patient epicenter” means the geographic average
of where Trinity’s patients are located. Thus, there are roughly the same number of patients to
the north, south, east, and west of that point. (T. 4368). The “geographic epicenter” of Trinity’s
patients is not a point around which all of Trinity’s patients are clustered. In fact, while there is a
small but dense population of Trinity’s patients to the west of its patient epicenter, there is a
much larger geographic area to the east of Trinity’s patient epicenter throughout which its
patients are dispersed. (T. 4368-4369). Trinity’s patient epicenter is shaped in that manner
because of the difficulty of accessing the Montclair hospital from any direction other than the
east. (T. 534). The fact that Trinity is moving further away from where that epicenter is
currently located does not mean it will suddenly be difficult for Trinity’s existing patients to
access the hospital if its relocates to Highway 280. Nor does it mean that Trinity’s patient
epicenter will change in a short period of time.
Several witnesses for the Opponents argued that although a hospital, or certain
component services of a hospital, is needed on the 280 corridor, the ideal location for such a
hospital would be further southeast on the 280 corridor, past the 280 hospital. For instance, Dr.
Wells, a physician at Brookwood, testified that a hospital would be better situated at Chelsea or
at Double Oak Mountain than at the 280 site. (T. 4755). Dr. Powell, also a Brookwood
physician, agreed that Chelsea or Childersburg would be better locations for a hospital than the
280 site. (T. 5170).
Even if a hospital would be better situated a few miles down the 280 corridor from the
280 hospital, a point which Trinity does not concede, that does not mean that the CON Review
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Board’s decision to issue this CON was in error. The 280 hospital was constructed where it
stands. It is there. Even assuming that there is some ideal location for a hospital two miles
further down the road, it utterly defies common sense to suggest that the 280 hospital should be
demolished and a new hospital constructed from the ground up at that hypothetical better site.
Such an idea flies squarely in the face of logical healthcare planning.
In reality, however, the 280 site is an ideal location for a hospital on the 280 corridor
because it is far enough southeast of the city center that it is easily accessible to citizens of the
280 corridor, including the Chelsea and Childersburg areas, but it is also still accessible to the
citizens of Birmingham and other municipalities to the north of I-459. The 280 site thus allows
Trinity to continue to serve its existing patients while providing better access for the underserved
residents of the 280 corridor who currently do not have ready access to an acute care hospital.
The Opponents to the project also argued that traffic on Highway 280 is often congested,
and that the 280 site is therefore not an appropriate location for a hospital. Brookwood repeats
this argument in its brief to this Court. (Brookwood brief, 103-05.) The ALJ gave consideration
to this argument, as reflected in his recommended order that was adopted by the CON Review
Board. (AR 3231-3229). Despite any traffic concerns, it was determined that the evidence
supported “a finding of a substantially unmet public requirement of the replacement of the
hospital” “consistent with the orderly planning with the state and community furnishing
comprehensive health care.” (AR 3229).
At the hearing, the Opponents argued that during rush hour, Highway 280 can become
congested with traffic, and that locating a hospital at the 280 site could exacerbate that problem.
However, Trinity presented compelling evidence that, after Trinity and Daniel take certain
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remedial measures, the 280 hospital will be “traffic neutral,” meaning that it will not result in any
greater traffic issue on Highway 280 than would otherwise exist.
It is important to note, when considering the issue of traffic at the 280 site, that the shift
changes at Trinity do not occur during peak travel times. Andy Romine, Trinity’s Chief Nursing
Officer, testified that the 800 Trinity employees who he oversees are on 12-hour shifts that begin
at 6:30 a.m. and end at 6:30 p.m., at which time the night shift begins. (T. 3830, 3831). In
addition, those 800 staff members’ shifts are spread out over different days of the week, and
there are only about 200 clinical staff members coming in for a given morning shift, and 20%
fewer than that coming in for any given evening shift. (T. 3830, 3831). Trinity employees
traveling to and from the hospital at the beginning and end of their shifts will therefore not affect
the rush hour traffic on Highway 280. (T. 3814-3815).
In addition, Trinity retained a traffic specialist, Daryl Skipper of Skipper Consulting, Inc.,
to study the effect that locating the hospital at the 280 site would have on traffic on Highway
280. Mr. Skipper has been a registered engineer in Alabama since 1977. (T. 4122). He
specializes in traffic engineering and transportation planning, and has been responsible for the
traffic planning for various governmental entities as well as several large-scale developments in
Birmingham, including The Summit development on Highway 280, as well as the Whole Foods
Market development on Highway 280. (T. 4127, 4130). Trinity retained Mr. Skipper to study
any potential traffic impact that the proposed 280 hospital might have on access both to Cahaba
River Road and Highway 280, and to determine whether there were any infrastructure, roadway,
or traffic control improvements that would be needed to mitigate any negative traffic impact that
the hospital might have. (T. 4136). Mr. Skipper’s traffic study concludes that, with certain
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proposed improvements, the hospital will not worsen the traffic on Highway 280. (Exh. TMC
113 A; T. 4145).
After determining that there would be some increase in traffic volumes resulting from
Trinity’s relocation to the 280 site, Skipper proposed several improvements to the roadways
surrounding the site, which, if implemented, would make the 280 hospital traffic neutral. Those
suggested improvements16 are as follows: (1) construct an additional westbound left-turn lane on
US Highway 280 at Grandview Park going towards I-459 from Inverness in addition to the one
left turn lane that currently exists (T. 4153); (2) construct two additional northbound left-turn
lanes on Grandview Parkway at Highway 280 to provide three left-turn lanes, a through lane, and
a right-turn lane exiting the medical center (T. 4155); (3) construct a westbound right turn lane
on Cahaba River Road at the eastern-most secondary access (T. 4156); (4) construct an
eastbound left-turn lane on Cahaba River Road at the eastern-most secondary access (T. 4158);
(5) construct a northbound right turn lane on Cahaba River Road at Highway 280 (T. 4159); (6)
construct a median in front of the unsignaled left-turn lane from the access road in front of the
hospital onto 280, so that drivers will be forced to go to the traffic light to turn left to go towards
downtown (T. 4162). The unsignaled left-turn lane would still be available for left turns by
emergency vehicles, but installing the median would make the intersection safer for ordinary
drivers. (T. 4163).
Mr. Skipper testified that construction of the improvements would be handled so as to
minimize disruption to Highway 280. In compliance with Alabama Department of
Transportation (“ALDOT”) requirements, if the work being done is minor, it would be
16 The suggested improvements are included in BE&K’s estimate of the cost of the
project, with the exception of the improvements at the intersection of Highway 280 and Cahaba River Road improvements, which will cost approximately $25,000. (T. 4283; TMC 273).
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accomplished between 9:00 a.m. and 3:00 p.m.; if the roadwork were major, it would be
completed at night. (T. 4167-4168). Mr. Skipper testified that there is nothing unmanageable
about making the improvements suggested, and that they would all constitute routine, relatively
short-term projects. (T. 4170, 4234). Furthermore, ALDOT would independently review the
impact that Trinity’s project would have on traffic on Highway 280, and the project would
undergo three distinct levels of review at ALDOT’s district, division, and Design Bureau levels.
(T. 4286).
In a half-hearted rebuttal to Mr. Skipper’s testimony, the Opponents presented two older
traffic studies, both of which include the unremarkable observation that traffic on Highway 280
can become congested at certain times of day. The first report, the US Highway 280 Analysis
and Visual Relation Study from June 2005 performed by the University Transportation Center
for Alabama, states that “[t]he Hugh Daniel Drive to I-459 segment is a congested suburban
corridor with densely-space intersections and driveways…The close spacing of these
oversaturated signalized intersections has a cumulative impact on traffic as queues from
downstream intersections interfere with upstream operations.” (BMC 195 A at vi). The other
report, which was authored by Sain Associates for ALDOT in 2001, also outlines the traffic
problems on Highway 280, stating that many of the traffic signals on the highway are at or near
capacity. (Exh. BMC 195(B) at 24). That said, Trinity does not dispute the fact that traffic is
congested on Highway 280 during certain peak hours. Mr. Skipper’s study shows, however, that
with the improvements outlined above, the 280 hospital will not make that traffic problem any
worse. It is not Trinity’s responsibility to improve the traffic issues on Highway 280, but Trinity
will make the improvements necessary to insure that the 280 hospital’s operations do not
exacerbate the traffic problems.
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The 280 site is an excellent location for Trinity’s replacement hospital. The hospital will
be geographically accessible from all directions, as opposed to the Montclair Facility, which is
easily accessed only from the east. Relocation to the 280 site will place Trinity in the exact area
where emergency services and certain specialty services such as neurotrauma are currently
unavailable. Relocation to the 280 site places Trinity squarely in an area of population growth,
allowing its services to be best utilized by the citizens of Jefferson and Shelby counties.
C. Trinity’s Proposed Relocation Project Would Meet the Need for an Acute Care Hospital in Southern Jefferson and Northern Shelby Counties.
The CON Review Board and ALJ found that there is “a substantially unmet public
requirement of the replacement of the hospital. The need for the replacement facility is
consistent with orderly planning with the state and community furnishing comprehensive health
care.” (AR 3229). This finding was consistent with the evidence presented showing that there is
a true need for a hospital on the 280 corridor. Under CON Rules § 410-1-6-.06(1)(a), one
criterion for determining whether a need for the proposed project exists is the following:
The need that the population served or to be served has for the services proposed to be offered, expanded, or relocated, will be considered. Specific data supporting the demonstration of need shall be reasonable, relevant, and appropriate. In cases involving the relocation of a facility or service, the extent to which a 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 affected persons to obtain needed health care will be examined in determining whether there is a need for the proposed facility or service.
Population statistics indicate that the southern Jefferson and northern Shelby County
areas are experiencing a population explosion. The hospitals on the 280 corridor, Brookwood
and Coosa Valley Medical Center, are both significantly distanced from the area of population
growth in southern Jefferson and northern Shelby counties. Shelby Baptist Medical Center,
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located in Alabaster, is also a significant distance from that population growth. The lack of an
acute care hospital represents a danger to the citizens of that area. The lack of emergency
services in outlying areas, such as Chelsea, means that patients can have travel times of 45
minutes to an hour to reach the downtown Birmingham hospitals during peak traffic hours.
Trinity proposes to relocate its hospital from an area of town saturated with acute care hospitals
to the area of the county where residents need it most. Trinity’s relocation will meet the need in
the area without increasing the number of beds in the county. Existing beds will, instead, be
better utilized, as they will be located in a high-growth and high-need area.
1. The Need for an Acute Care Hospital on the 280 Corridor is Supported by Population Statistics.
Demographic statistics corroborate the need for a hospital in the northern
Shelby/southern Jefferson county area. Shelby County is the fastest growing area in the state,
and the eleventh fastest growing county in the United States. (Exh. TMC 339). According to
Armand Balsano, a health care management consultant who testified on behalf of St. Vincent’s,
from 2000 to 2007 Shelby County’s population grew by approximately 20%. (T. 6389).
However, Shelby Baptist Medical Center is the only hospital in the county, which is home to
approximately 160,000 people. (T. 5104). Within a 10-mile radius of the 280 hospital, there
was a 2009 population of 369,399 persons, with 79,934 of those residents between years of age
55 and 84. In that same radius, in 2014 there will be a population of 377,300, with 88,733
persons falling in the 55 to 84 age bracket. (Exh. TMC 368). However, there is currently no
hospital within that 10-mile radius. In zip code 35242, which represents the area surrounding the
280 corridor in Shelby County near the 280 hospital, the total population was 44,173 in 2008; is
projected to be 49,385 in 2012; and is projected to be 57,524 in 2017. (TMC 131 at 4). That is
an increase of 30.2% between 2008 and 2017. Id. The population in that zip code of persons
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ages 65 and older was 3,609 in 2008, will be 5,011 in 2012, and is projected to be 7,684 by 2017,
a change between 2008 and 2017 of 112.9%. Id. The following map shows the contours of zip
code 35242 (Exhibit TMC 131, 3):
2. The Absence of an Acute Care Hospital in Southern Jefferson and Northern Shelby Counties is a Danger to Area Residents.
The current unavailability of acute care services on the 280 corridor is a threat to the
health of its residents. Several community witnesses testified regarding the inadequacy of
emergency services on the Highway 280 corridor, and the concomitant danger for residents of
the area. For example, Jackie Ponder, a Chelsea resident, testified that following a
tonsillectomy, the stitches in her mouth randomly burst one morning, and she asked her husband
to drive her to the emergency room at UAB, which was the hospital where the tonsillectomy had
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been performed. (T. 2323-2335). Ms. Ponder testified that she was bleeding on the drive from
Chelsea to downtown Birmingham, losing a significant amount of blood while in transit. (T.
2323-2335). Mr. Ponder testified as follows:
I wouldn't be here if I didn't think that we needed a hospital. We need a hospital out there. I—my own situation I would think shows that. Of course, no one here knows, and no one here was sitting around to be spattered by my blood, but it wasn't pretty. And my heart was pounding out of my chest, and I was scared. And even to this day, I get teary eyed about it. So it's not something I want to talk about. So I wouldn't have come here and done that without — you know, without that reason, that I truly am passionate in my belief that we need a hospital for some people out there.
(T. 2353-2354). Ms. Ponder further testified that a free-standing emergency department
(“FED”), such as the one for which Brookwood has submitted a CON application to construct
and operate at the corner of Highway 280 and Highway 119, would have been insufficient to
address her emergency, which required that she undergo surgery once she reached the hospital, a
service that would not have been available in an emergency room without operating room
capabilities. (T. 2323-2335).
Dave Nebergall, another community witness who resides in the Greystone Founders
neighborhood, testified that, after fracturing three ribs, he had to be transported in extreme pain
by ambulance from Greystone past the 280 hospital and all the way up Highways 280 and 31 to
St. Vincent’s. (T. 2448-2449, 2450). With regard to that ambulance ride, Mr. Nebergall stated,
“It was not very pleasant. When you have broken ribs, you blink your eyes and you hurt…I was
in a lot of discomfort.” (T. 2450). Mr. Nebergall testified that he would have asked the
ambulance driver to take him to the 280 hospital if it had been operational. (T. 2451). In
addition, Mr. Nebergall testified that should the 280 hospital become operational, he would
instruct his wife to take him there in the event that he suffered a heart attack. (T. 2451). Bill
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Sweet, President of the Inverness Masters Homeowners Association, also testified that he would
instruct his wife to have him taken to the 280 hospital in the event that he suffered a heart attack.
(T. 2467-2468).
Trinity’s relocation to the 280 hospital would save lives. The Fire Chief of the City of
Birmingham, Mr. Ivor Brooks, also testified that there is a need for a hospital on the 280
corridor. (T. 3681). Chief Brooks testified that there is a Birmingham Fire and Rescue Service
(“BFRS”) station, Station 32, directly across the street from the 280 Hospital. The BFRS
responds to calls in the area bounded by Highway 280, Highway 119, Grants Mill Road, I-459,
and Sicard Hollow Road. (T. 3677-3678). Operating a hospital at the 280 site, according to
Chief Brooks, would reduce travel time for BFRS responders taking emergency patients from the
280 corridor to a hospital. (T. 3681-3682). Faster transport is significant because the more
quickly a patient with a severe injury, including a heart attack, stroke, or trauma, reaches the
emergency room, the better that patient’s chances of survival. (T. 3681-3682, 3684).
Chief Brooks further testified that, if the 280 Hospital were operational, BFRS units
dropping off patients at the hospital would be back in service much more quickly than they
currently are when they take patients to downtown Birmingham hospitals. Chief Brooks testified
that a unit is “in service” when it is capable of responding to emergency calls. For instance, if
there was an accident at Highway 280 and Highway 119, it would take the responding BFRS unit
approximately one and one-half to two hours to take the patient to St. Vincent’s and then return
to “in-service” status. (T. 3686). Currently, moreover, once the ambulance from Fire Station 32
is out of service, the next closest BFRS unit, which is located on Highland Avenue near
downtown Birmingham, must travel to Station 32 to cover that station’s calls. (T. 3687). If
another accident occurs in the 280 corridor area covered by Station 32 before the Highland
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Avenue unit has reached Station 32, the response time to that accident would be greatly
increased. (T. 3686-3688).
Chief Brooks testified further that Brookwood and St. Vincent’s are often on emergency
or critical care diversion. (T. 3689-3696). He explained that those diversions can cause
increases in travel times for BFRS if the responding unit is already en route to a particular
hospital when it is notified that the hospital is on divert, or if the unit has to pass hospitals in
order to get to one that is not on divert. (T. 3693). According to the LifeTrac Divert Log for
2008, which tracks the number of hours Birmingham area hospitals remain on diversion for
various services, Brookwood was on emergency diversion for about 1091 total hours. In
contrast, Trinity was on emergency services diversion for only about 224 total hours. (Exh.
TMC 135). For the portion of 2009 for which there is record evidence, the LifeTrac Divert Log
shows that Brookwood was on emergency diversion for 513 total hours, while Trinity was on
emergency diversion for only 183 total hours. (Exh. TMC 136). Further, in 2009, St. Vincent’s
was on Critical Care diversion for 1610 hours, as compared to Trinity’s 321 hours. (Exh. TMC
136). The following graphs were utilized as demonstrative aids in the hearing and are visual
representations of the 2008 and 2009 Divert Logs (TMC 135, 136):
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0
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In addition, if a patient has sustained a traumatic injury that does not require a Level 1
trauma center, BFRS takes the patient to the closest hospital. Trinity, as a Level 3 Trauma
Center, often receives trauma patients who do not require Level 1 treatment. If Trinity relocated
to 280, trauma patients injured in southern Jefferson and northern Shelby County not requiring a
Level 1 trauma center could receive care much more quickly than under the current system,
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where such patients are often transported from the 280 corridor to Trinity at Montclair. (T.
3707).
3. Trinity’s Relocation to the 280 Hospital Would Address the Current Misdistribution of Acute Care Hospitals in Jefferson County.
Another reason that an acute care hospital is needed on the Highway 280 corridor is that
there is a misdistribution of acute care beds in Jefferson County. The following map shows the
location of all Jefferson County hospitals (Exh. STV 423):
As explained by Rick Knapp, a health care consultant who testified on behalf of
Brookwood, the majority of hospital resources in the Birmingham area are in the city’s center
and the immediately surrounding areas. (T, 6371). Dan Sullivan, another health care consultant
for Brookwood, as well as John O’Neil, St. Vincent’s CEO, agreed that Birmingham hospitals
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are clustered near each other. (T. 5738, 6059). In fact, there are eight hospitals north of
Birmingham’s Lakeshore Drive (where Brookwood is located), but there are no hospitals south
of Lakeshore. (Exh. STV 423).
As stated by Baptist in a presentation to the SHCC regarding its proposed amendment to
allow for the construction and operation of a Hospital in Hoover, “The Birmingham/Hoover
MSA equals 5,300 square miles. However, 80 percent of the licensed hospital beds serving the
MSA are concentrated within a five-mile radius of Birmingham’s south side.” (Exh. TMC 130
at 24). Further, St. Vincent’s, UAB, and St. Vincent’s East are all currently within 10 minutes of
Trinity’s Montclair campus. (T. 1367-1369).
George Hairston, former Chief Executive Officer of Southern Nuclear Operating
Company, testified that it is important to have a hospital outside the immediate area where all of
the Birmingham area hospitals are currently clustered. Under present circumstances, Hairston
explained, if there was a catastrophic event that impeded the clustered hospitals’ capacity to
function, there would be no hospital outside of that small area to care for area residents. (T.
1473-1474). The clustering of hospitals also means that while residents around Birmingham’s
city center and immediately abutting areas have more than ample access to acute care hospitals,
residents of southern Jefferson and northern Shelby Counties do not have sufficient access to
acute care services.
Trinity’s relocation would ameliorate the current misdistribution of beds in Jefferson and
Shelby Counties. The proposed project would move Trinity further away from the main cluster
of Jefferson County hospitals. (See Exh. STV 422, reproduced below). As a result of the
proposed project, Trinity would move from its current location, which is three miles away from
St. Vincent’s, to the 280 site, which is 7.6 miles away from St. Vincent’s; from its current
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location 4.1 miles from UAB Highlands, to 7.6 miles away from UAB Highlands; from its
current location 3.9 miles from UAB, to eight miles from UAB; from its current location 4.1
miles from Cooper Green, to 8.3 miles away from Cooper Green; from its current location 7.6
miles from Princeton-Baptist to 15.3 miles from Princeton-Baptist; and from its current location
that is 9.7 miles from St. Vincent’s East to 15.6 miles away from St. Vincent’s East. (Exh. STV
422). Thus, as a result of the proposed relocation, Trinity would have greater geographical
separation from all the other Jefferson County hospitals, other than Brookwood. (T. 6064).
However, Trinity is moving only 0.5 miles closer to Brookwood than it is located at its current
site. Id. St. Vincent’s exhibit 422, reflecting driving distances between existing hospitals and
the proposed 280 site, is reproduced below:
In addition to removing it from the existing cluster of Birmingham-area hospitals,
Trinity’s relocation would serve the needs of the exploding population on the 280 corridor
without increasing the number of beds in the area. Trinity’s existing beds would, instead, be
better utilized because they would be located in a high-growth area. See Dep’t of Cmty Health,
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Div. of Health Planning v. Gwinnett Hosp. Sys., Inc., 262 Ga. App. 879, 989 (Ga. App. 2004)
(upholding ALJ’s decision granting CON to consolidate and relocate two Atlanta hospitals where
relocation of beds would have a positive impact on the health care delivery system in the service
area by repositioning existing beds and services to areas of higher demand and population
growth and reducing excess hospital beds).
4. The City of Hoover Alone Needs Over 200 Acute Care Hospital Beds.
Beyond the general need for a hospital on the 280 corridor in the northern
Shelby/southern Jefferson County area, there is also a specific need for a hospital in or near
Hoover, Alabama. That need is evidenced by Baptist’s and Brookwood’s proposed amendments
to the State Health Plan. (Exh. TMC 130). Brookwood filed its proposed amendment with the
SHCC in August of 2008, which would have allowed for a 140-bed acute care hospital to be
constructed and operated in any municipality of 60,000 or more residents with no hospital. (Exh.
TMC 130). The only city that would meet that description for the foreseeable future is Hoover.
(T. 4503). The Brookwood proposal suggested construction of an acute care hospital slightly
north of the intersection of Highway 280 and Highway 119, with services including cardiology
and obstetrics. If the amendment were granted, Baptist, Brookwood, or any other hospital
provider could have applied for a CON to construct the Hoover hospital. (Exh. TMC 130).
In connection with Brookwood’s proposed amendment, Dan Sullivan (also Brookwood’s
healthcare consultant in this case) created a report on behalf of Brookwood entitled “Assessment
of the Future Need for an Acute Care Facility in the 280 Corridor” (Exh. TMC 131), which was
distributed to the SHCC. Sullivan stated as follows in that report:
Growth patterns are greater on the eastern side of Hoover. Hoover is Alabama’s sixth largest city and has a growing population with no hospital provider currently located within its city limits. Considering population growth trends, road systems, and the
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location of existing hospitals, it is our conclusion that a hospital location in East Hoover would offer the greatest enhancement in access to hospital services. There will be 15,000 additional patient days just as a result of population growth.
(Exh. TMC 131) (emphasis added).
According to Mr. Sullivan’s report, although Jefferson County has 12 hospitals, there is
only one in Shelby County (Shelby Baptist Medical Center) and few in the counties west of
Shelby. Id. at 1. The report states that Highway 280 is a major travel corridor through northern
Shelby and southern Talladega County, and that many patients currently travel along that
corridor to Jefferson County hospitals. Id. at 1.
The Brookwood proposal involved construction of a hospital on the east side of Hoover
in Shelby County (the same side of Hoover where the 280 hospital is located). (Exh. TMC 131 at
7). Mr. Sullivan’s report stated that because of utilization rates, road access patterns, and
population trends, the likely service area for that hospital would include the zip codes along
Highway 280 from Cahaba Heights to Sylacauga. Id. at 7. Taking into account demographic
trends, current utilization, projected use rates, and projected average length of stay, the report
concludes, “…the total gross bed need in the proposed service area is expected to grow from 204
beds in 2012 to 272 beds by 2017. A bed need of this magnitude can readily support the
development of a new hospital in Hoover.” Id. at 15 (emphasis added). That bed need
calculation was based solely on non-tertiary discharges because the Hoover hospital, as
envisioned by Brookwood, would have been a community hospital. (Exh. TMC 131 at 19).
Such projections strongly suggest that Trinity would have no trouble reaching 60 percent
occupancy upon relocation, since Trinity will attract some of those patients from Hoover in
addition to the patients that, as a tertiary care hospital, it normally draws from outside the
immediate area.
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Garry Gause, Brookwood’s CEO, testified before the SHCC in support of Brookwood’s
proposed amendment to the State Health Plan to allow for a hospital in Hoover. Advocating for
a new hospital in Hoover, Mr. Gause stated to the SHCC as follows:
On an average day in 2008, Hoover residents represent about 101 patients in the area hospitals here in the Birmingham MSA. So as you can see, the patient population for a proposed facility exists. It’s out there right now. And Hoover residents are being transported and choosing to be admitted to facilities that aren’t within the city limits. That also shows the quantity of patients that are available for a facility if it were to be within the city limits of Hoover…So with that, I would just like to reinforce that there is a need for a hospital in Hoover.”
(Exh. TMC 132 at 31) (emphasis added).
In a convenient but predictable reversal of positions, Mr. Gause maintained in the hearing
on this project that there is not a need for an acute care hospital in Hoover. Mr. Gause claimed
that the impetus for Brookwood’s proposed amendment to the State Health Plan was that
Hoover’s mayor began to take a public stance that Hoover was the only city of its size in
Alabama without a hospital and that its citizens had to leave the city limits to obtain healthcare
services. (T. 5540-5541). The mayor then held a press conference in conjunction with Baptist
stating that they would pursue a hospital for Hoover. (T. 5541-5542). Mr. Gause explained that,
even though Brookwood did not really believe there was a need for a hospital in Hoover, it felt it
had to respond to Baptist’s proposal because Hoover was within Brookwood’s primary service
area. (T. 5542). Mr. Gause thus acknowledged that, despite the fact that he did not believe there
was a need for a hospital in Hoover, he led Brookwood in seeking an amendment to the State
Health Plan allowing for the addition of new acute care beds in Hoover and testified under oath
that a Hoover hospital was needed.
There are two possible explanations for the contradictions between Mr. Gause’s
testimony before the SHCC and his testimony in the instant case. One is that, as Mr. Gause now
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maintains, he does not believe that there is a need for a hospital in Hoover, but nevertheless
chose to pursue the Hoover hospital amendment anyway in order to protect Brookwood’s
interest. Embracing that possibility, however, would require one to conclude that Mr. Gause
chose to purposely mislead the SHCC, the very body entrusted with Alabama’s health care
planning, and to falsely state the need for a hospital where there was not one, all in order to
protect Brookwood’s financial interests. If that is the case, then it would call into doubt the
veracity of Mr. Gause’s testimony in the instant proceedings. If Mr. Gause were willing to
mislead the SHCC by testifying untruthfully that there was a need for a hospital in Hoover, it
stands to reason that he is also capable of testifying in this proceeding that there is not a need for
a hospital on the 280 corridor, when, in fact, there is such a need. Further, if Mr. Gause would
overstate the need for a hospital in Hoover in order to protect Brookwood’s interests, there is no
reason to think he would not overstate the detrimental impact the 280 project may have on
Brookwood.
The second possibility is that when Brookwood pursued the amendment to permit a
hospital in Hoover, it did so because its analysis showed that there was, in fact, a need for such a
hospital. If that is the case, Brookwood’s true position is consistent with Trinity’s position in the
instant case that there is a need for a hospital on the 280 corridor near the Jefferson and Shelby
County border. Accepting this second possibility, however, would also mean that Mr. Gause’s
contention in the instant case that Brookwood did not really believe there was a need for a
hospital in Hoover, but pursued an amendment to the State Health Plan nonetheless to protect
itself against Baptist, is false. Again, such a mistruth would call into question the reliability of
Mr. Gause’s testimony in this case.
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The SHCC approved Brookwood’s amendment, in a vote of 16 to 0, demonstrating its
belief that an acute care hospital is needed in Hoover. (T. 4497, 4515). However, Governor
Riley ultimately denied the proposed amendment. (Exh. TMC 294). In his correspondence
announcing his decision, the Governor stated that he was vetoing the amendment because he was
aware of the possibility that the Digital Hospital on Highway 280 could become operational after
being purchased by Trinity. (Exh. TMC 294). In addition, the Governor stated that he was
denying the Hoover hospital amendment because it would result in the addition of new beds to
the complement of existing beds in the county, with resultant increased costs to Medicaid. (Exh.
TMC 294). Trinity’s project addresses that concern of the Governor’s, because Trinity proposes
simply to relocate existing beds, while simultaneously reducing its bed complement, as opposed
to adding new beds to the county. (T. 4717). Because the State Health Plan was not amended,
Brookwood’s healthcare consultant admitted on cross-examination, the only way that additional
acute care beds may be placed in Hoover is through the relocation of existing beds in the county,
such as Trinity proposes to accomplish with this project. (T. 5818).
5. The Need for the 280 Hospital is Evidenced by Brookwood’s Near Purchase of the Hospital.
An additional indicator of the need for a hospital on the 280 corridor is that in 2005
Brookwood’s parent corporation, Tenet, came within days of purchasing the 280 hospital. Jay
Grinney, the CEO of HealthSouth, testified that Tenet actually entered into a letter of intent for
the purchase of the 280 facility. (T. 1829). During 2005, Brookwood contributed to the carrying
costs of the hospital, such as keeping the HVAC system running, and contracted with the
construction firm Brasfield and Gorrie to stay onsite in anticipation of remobilizing construction
when Tenet purchased the site (T. 1830, 1908). A Tenet document entitled “Communications
Timeline for Digital Hospital Announcement July 20, 2005,” discusses such details as how and
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by whom the press release and press conferences would be handled. (Exh. TMC 329). That
document states that the internal deadline to complete the transaction with HealthSouth was July
21, 2005. Id.
Internal Brookwood documents reveal that one motivation for Brookwood’s almost-
consummated purchase of the 280 hospital was the need for an acute care hospital in that area.
For example, in a document entitled “Post-Transaction analysis,” drafted during Tenet’s
negotiations with HealthSouth, Garry Gause wrote to Trevor Fetter, CEO of Tenet, as follows:
The facility’s site at the intersection of two major thoroughfares is ideal, as it allows the company an ability to “reach” into markets currently not served by Brookwood. It also moves us into an area of the city that is experiencing heavy growth due to shifts in both the general population and physicians.
(Exh. TMC 308). In addition, a power point presentation prepared by Mr. Gause entitled “Tenet
Proposed Acquisition HealthSouth Digital Hospital” dated May 5, 2005, discloses that one
justification for Tenet’s purchase of the 280 hospital was that “the population in the Birmingham
MSA has moved to the south and east over time, into Shelby County.” (Exh. TMC 314 at 8).
Furthermore, the document “Brookwood Talking Points, Medical Executive Committee and
Board,” also drafted in anticipation of Tenet’s purchase of the 280 hospital, states: “Our
community really needs this new hospital….” That document also states, “The new hospital will
offer improved health care access for a rapidly growing area of the state. “ (Exh. TMC 338 at 1).
Garry Gause testified that Brookwood’s near-purchase of the 280 hospital does not
evidence the need for a hospital on Highway 280. Gause contended at the hearing that
Brookwood’s decision to buy the 280 hospital was a prophylactic measure, i.e., to prevent other
hospitals that had shown interest in the hospital, such as St. Vincent’s, UAB, and Baptist, from
doing so, because the 280 hospital is in Brookwood’s primary service area. (T. 5533-5534). Mr.
Gause testified that the operation of the 280 hospital by any hospital other than Brookwood
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would have a serious negative impact on Brookwood. It stands to reason, however, that if
Brookwood was truly concerned that a competitor’s purchase of the 280 facility would inflict
serious damage, Brookwood would have followed through with the purchase from HealthSouth.
6. The Opponents’ Submission of CON Applications to Construct and Operate Free Standing Emergency Departments Indicates the Need for Emergency Services in the southern Jefferson/northern Shelby County area.
Another development that undercuts the Opponents’ assertion that there is no need for
acute care services in southern Jefferson and northern Shelby counties is that Brookwood has
filed a CON application, and St. Vincent’s has filed a Letter of Intent, to operate a freestanding
emergency department (“FED”) in northern Shelby County, evidencing their collective belief
that there is a need for emergency services in that area. Brookwood’s July 23, 2008, application
is to construct and operate a FED near the intersection of Highways 280 and 119. (Exh. TMC
207). That CON application states:
The ED will be located on a site near the intersection of Highways 119 and 280, which will maximize accessibility for residents of the proposed service area. Growing traffic congestion in the area makes travel for emergency services increasingly difficult and poses a health risk to area residents. Travel is particularly difficult for the elderly and those without adequate financial resources.
Id. at 5. Brookwood’s FED application goes on to state:
Related to the growth in population is the increasing traffic congestion in the area, which results in difficulty in accessing emergency care...there are no existing hospitals—and therefore, no emergency departments—within the proposed service area. The lack of emergency services in the community combined with the size of the population in the service area is sufficient to warrant the development of emergency services.
(Exh. 207 at 13).
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St. Vincent’s also recognized the need for emergency services on the 280 corridor when
it filed a letter of intent on May 28, 2008,17 to construct and operate an FED on the campus of St.
Vincent’s Health and Wellness Center in Shelby County. (Exh. TMC 211). That campus is also
near the intersection of Highway 280 and Highway 119. Id.
Officials for St. Vincent’s publicly stated that their application to construct and operate
an FED on Highway 119 and Highway 280 is intended to be a first step in development of a full
service hospital on Highway 119. (Exh. BMC 400). Similarly, Brookwood’s proposed FED is
intended, according to Dan Sullivan, to be part of a sequential development of healthcare
services in north Shelby County. (T. 5812). Thus, the Opponents have admitted by their actions
that a need exists for acute care services on the Highway 280 corridor, either immediately or at
some time in the near future.
In addition, even if Brookwood or St. Vincent’s were to obtain a CON for an FED on the
280 corridor, it remains uncertain whether that project would ever reach fruition. The Alabama
Department of Public Health currently has no licensure rules regarding FEDs, and so it is not
likely that such an FED can be licensed in Alabama any time in the near future. (Exh. TMC
210).18 Thus, the only way such emergency services will be available on the 280 corridor will
be through the relocation or addition of acute care hospital beds.
17 St. Vincent’s filed LOIs renewing its statement of intent to file a CON application for
an FED on November 20, 2008, and on March 27, 2009. 18 In any event, an FED is not a suitable alternative to a hospital on the 280 corridor,
because it cannot address the need for the full range of emergency room services. FEDs are, in fact, potentially dangerous because they do not have the ancillary services needed for true emergencies, such as operating rooms, nor are specialists kept on hand to treat acute emergency patients. (T. 1370-1371). As Brookwood admits in its own CON application, “Protocols will be in place for the rapid transport of patients who require inpatient or specialized services.” (Exh. TMC 207). Thus, if an acute emergency patient was first brought by ambulance to an FED, and the FED was unable to treat that patient, the patient would have to be loaded back into the ambulance to be taken to a full service hospital.
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7. The Fact that Jefferson County has an Excess number of Acute Care Beds is Immaterial to the Instant Relocation Project.
The Opponents both argued to the ALJ and CON Review Board that there is no need for
Trinity’s project because Jefferson County is currently “overbedded” according to the most
recent statistical update to the Acute Care section of the State Health Plan. Both Brookwood and
St. Vincent’s continue to make these arguments in this appeal. (Brookwood brief, 35; St.
Vincent’s brief, 2.)
At the contested case hearing, Armand Balsano, St. Vincent’s healthcare consultant,
testified that there are 1,927 beds that are available in Jefferson County on a daily basis. (T.
6244). By his calculation, if all Jefferson County hospitals were operating at a 75% occupancy
rate, there would be 819 empty beds available on any given day. (T. 6246). There is also an
excess under the State Health Plan of 1,510 beds in Jefferson County, and an excess of 27 beds
in Shelby County. (T. 6246). But Jefferson County is unique. The SHPDA methodology does
not account for the fact that patients are coming into Jefferson County from all over the state of
Alabama to receive healthcare services. (T. 5814). For example, UAB’s service area is the
entire state of Alabama, but that reality is not reflected in the acute care bed need methodology.
(T. 5815). Furthermore, because Trinity is simply relocating beds that already exist, and is
actually lowering its own bed count, the issue of the utilization of existing facilities weighs much
less heavily than it might if Trinity were applying for new acute care beds.
Thus, there is a need for an acute care hospital in southern Jefferson and Northern Shelby
counties. That need has arisen due to population growth on the 280 corridor, as well as the mal-
distribution of acute care hospitals in Birmingham, which are all in close proximity to one
another and huddled around the city center. Despite its protests, Brookwood’s actions -- filing
its proposed Hoover hospital amendment, pursuing ownership of the 280 Facility, and filing a
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CON application for an FED on the 280 corridor – strongly suggest that Brookwood agrees that
there is a need for acute care services in southern Jefferson/northern Shelby counties.
D. Any Detrimental Impact the Project Might Have on Existing Providers is Outweighed by the Positive Impact the Project Will Have on Jefferson and Shelby Counties.
In determining whether or not a project should be approved, the probable effect the
project will have on the medical service area, including any impact the project may have on
existing providers of like services, must be considered. CON Rules § 410-1-6-.06(1)(e) states
that:
The probable effect of the proposed facility or service on existing facilities or services providing similar services to those proposed shall 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 shall 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.
There are 16 separate criteria in the CON Rules, many of which contain multiple
subparts, that the ALJ must consider in determining whether or not to approve this project. The
“probable effect” that Trinity’s project will have on existing providers in the community is one
of those 16 factors. The ALJ’s determination that Trinity’s project will have some detrimental
impact on St. Vincent’s and Brookwood does not end the inquiry. That detrimental impact must
then be weighed against any positive impact of the project indicated by examination of the other
15 factors in the CON Rules. The ALJ and CON Review Board weighed the evidence and
balanced the factors in concluding that the CON should be awarded. See State Health Planning
and Development Agency v. Baptist Health System, Inc., 766 So. 2d 176, 179-181) (Ala. Civ.
App. 1999) (upholding grant of CON for project which would have $1,000,000 annual
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detrimental impact on Baptist where project would improve accessibility for residents who had
to drive 20-60 minutes to receive services); Health Care Authority of the City of Huntsville v.
SHPDA, 549 So. 2d 973, 976 (Ala. Civ. App. 1989) (upholding CON Review Board’s decision
to grant CON to Humana despite Huntsville Hospital’s assertion that it would lose approximately
24% of its open heart surgery volume if Humana’s proposed project was implemented, and
stating that “…Even if this allegation [regarding detrimental impact] were found to be true, this
factor by itself would not require the Board’s decision to be set aside. This is only one factor of
many which should be considered in awarding or denying a certificate of need. Just because a
project may detrimentally impact a provider does not mean that it should not be granted.”).
After weighing the potential detrimental impact against all of the positive factors in favor of the
project, the CON Review Board and ALJ determined that the CON should be issued, in
compliance with applicable Alabama law. (AR 3206). There was ample evidence to support the
Agency’s determination.
As acknowledged by Dan Sullivan, Brookwood’s healthcare consultant, the detrimental
impact of a project must be weighed against the positive impact of the project on the community
at large in order to determine the probable effect of the project. (T. 5762). The fact that the
Opponents might give up a modest amount of market share as the result of Trinity’s project must
be weighed against, for example, the Highway 280 corridor residents’ need for an acute care
hospital, the ability of this project to prevent the gross waste of a state-of-the-art hospital, and the
boost the project will give to Birmingham’s economy in an economic recession. Probable effect
is, in the end, one factor to be considered among many. It cannot and should not weigh more
heavily than the needs of the community, the conservation and best utilization of the
community’s healthcare resources, or the improvement of health care in this area.
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1. St. Vincent’s Detrimental Impact Analysis Has Little Probative Value.
At the contested case hearing, St. Vincent’s focused heavily on the alleged detrimental
impact of Trinity’s project. Armand Balsano, a health care planning consultant who testified on
behalf of St. Vincent’s, undertook a detrimental impact study by considering market share of
area hospitals in a seven-mile ring around the 280 hospital, and all those zip codes touched by
that ring. (T. 6276-6277). Balsano testified that, in the area he considered around the 280 site,
Brookwood has 36% of the market, St. Vincent’s has 22%, UAB has 12%, Shelby Baptist has
8%, and Trinity has 5%. (T. 6292). Balsano assumed that Trinity would gain some market share
in that area upon relocation to the 280 hospital, and posited three different scenarios regarding
the possible market shift. Balsano testified that, if Trinity increased its market share in those zip
codes to 25% upon relocation, St. Vincent’s would lose 714 discharges. If Trinity were able to
increase its market share to 35%, Balsano surmised, St. Vincent’s would lose 1,068 cases; and if
Trinity were to gain 45% of the market, St. Vincent’s would lose 1421 cases. (T. 6304-6306).
Balsano then translated those projected losses into dollar amounts by first determining
that St. Vincent’s currently has a per patient contribution margin19 of $3,604, and then adding
33% to that amount to account for outpatient services, which have historically represented one-
third of St. Vincent’s total revenue. (T. 6309). Balsano concluded that, under the 25% market
share scenario, the first-year impact of the 280 hospital on St. Vincent’s would be $3,422,000,
and the 10-year impact in net present dollars would be $27,100,000; under the 35% market share
scenario, the impact in year one on St. Vincent’s would be $5,119,000, and the 10-year impact in
net present dollars would be $40,700,000; and under the 45% market share scenario, there would
19 St. Vincent’s “contribution margin” represents St. Vincent’s variable inpatient revenue minus
variable inpatient expense.
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be a $6,811,000 impact on St. Vincent’s in the first year of the project, with a 10-year impact in
net present dollars of $54,100,000. (Exh. STV 422).
Although Mr. Balsano’s testimony indicates that St. Vincent’s could experience
detrimental impact as a result of Trinity’s’ relocation to the 280 corridor, his detrimental impact
projections have limited probative value for several reasons. First, Mr. Balsano failed to include
in his analysis those patients that Trinity would lose as a result of the relocation project and the
gains that could result to St. Vincent’s-Birmingham as a result of a relocation. (T. 6401). While
Balsano assumed that patients living close to the 280 site would become patients of Trinity upon
its relocation because of its proximity to their residences, he failed to account for Trinity’s
current patients who live near the Montclair location and who would, under his proximity theory,
become patients at St. Vincent’s (among other area hospitals) following Trinity’s relocation. (T.
6402).
Second, Balsano’s methodology rests on the assumption that, after Trinity’s relocation
and subsequent gain in market share in the area around the 280 facility, St. Vincent’s will
experience future losses of market share from its current baseline in the same zip codes where
Trinity will gain market share. However, in order for this analysis to have any probative value,
one must assume that St. Vincent’s current market share would have remained constant into the
future. (T. 6583). It is uncertain, however, whether St. Vincent’s market share in those areas
would remain in 2013 at its current level, even absent a relocation by Trinity. In other words,
Ms. Balsano’s analysis attempts to “protect” future market share that is simply speculative and
uncertain.
Third, Balsano’s analysis assumes that all additional patients obtained by Trinity as a
result of its relocation will be former patients plucked from other area hospitals. Balsano’s
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methodology fails to account for those patients Trinity will gain as a result of population growth
or population aging in the area surrounding the hospital. (T. 6586).
In addition, the in terrorem scenarios created by Mr. Balsano regarding Trinity’s
relocation to the 280 site are not supported by the history of the Birmingham healthcare market.
If, for example, Trinity were to obtain a 45% market share in the “seven-mile ring” as predicted
in one scenario by Mr. Balsano, Trinity’s discharges would have to increase to approximately
22,000. (T. 6408-6410). However, Trinity had approximately 22,000 discharges annually in the
late 1990s and early 2000s. Id. When Trinity had that level of discharges, other hospitals,
including St. Vincent’s, were not going out of business; on the contrary, they were thriving. Id.
And, even if such an aggressive projection were to come true, it would mean nothing more than
that Trinity would have simply regained market share it has lost to Brookwood, St. Vincent’s,
and others in recent years.
St. Vincent’s is currently operating at about an 11% to 12% Earnings Before Interest
Taxes Depreciation and Amortization (“EBITDA”) margin. (T. 6800). Even assuming that
Trinity would gain 45% of the market share in the zip codes examined by Balsano, St. Vincent’s
would still be operating at about an 8% to 9% EBITDA margin. (T. 6802). In addition, under
that scenario, St. Vincent’s would sustain a loss of only approximately 3% of its operating
expense base. (T. 6803). Paul Graham testified that most hospitals in the Birmingham area have
been confronted with and successfully navigated a loss similar to that amount in the past year
due simply to the economic downturn. (T. 6803).
Wilma Newton, Chief Financial Officer of St. Vincent’s, also testified that Trinity’s
project would have a detrimental impact on St. Vincent’s, and that the negative effect would
exacerbate the difficult financial situation St. Vincent’s is currently facing. She testified that St.
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Vincent’s net income for 2006 was $9 million, despite a budgeted net income of $20 million; for
2007 was a loss of $9.5 million with a budgeted net income of $21 million; and for 2008 was
$3.5 million as compared to a budgeted net income of $10 million. (T. 6157). St. Vincent’s
average net income for the period 2006 through 2008, according to Ms. Newton, was $3 million.
(Exh. STV 498).
Ms. Newton testified that if Trinity were allowed to relocate to the 280 site, St. Vincent’s
current financial troubles would be exacerbated so that St. Vincent’s might have to scale back or
shut down certain programs that do not generate revenue for the hospital. (T. 6050). In addition,
Ms. Newton testified that St. Vincent’s-St. Clair and St. Vincent’s-East, which are less profitable
hospitals, rely on the profits from St. Vincent’s-Birmingham, and that this project would damage
all of those hospitals by reducing the profits of their Birmingham sibling. (T. 6150). In addition,
Ms. Newton testified that St. Vincent’s might have to lay off staff members and give up certain
community programs that it sponsors. (T. 6177). She testified that the detrimental impact on St.
Vincent’s might even result in the hospital becoming unable to make needed repairs to its current
campus. Id.
Paul Graham refuted Ms. Newton’s pessimistic analysis by pointing out that the
measurement of net income (as utilized by Ms. Newton) does not provide an accurate reflection
of how St. Vincent’s is actually faring operationally. (T. 6781-6782). Graham testified that
admissions can increase at a hospital while the hospital’s net income simultaneously declines,
and vice-versa. (T. 6793). For example, net income takes into account line items such as how
the hospital’s investments in the marketplace have fared, which is totally unrelated to how the
hospital is actually operating. (T. 6782-6783). And even accepting net income as a metric for St.
Vincent’s financial strength, St. Vincent’s financial situation is not nearly as dire as suggested by
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Ms. Newton. Despite somewhat lower net income figures in years past, St. Vincent’s net income
in 2009 was $11,800,000. In addition, in its CON application to add 37 acute care beds to its
Birmingham hospital, St. Vincent’s projected $15.5 million in net income in Year 1 of the
project, and $19.3 million in net income in Year 2. (Exh. TMC 385 at. 11).
Tellingly, St. Vincent’s did not raise this argument in its brief to this Court, effectively
conceding that the detrimental impact to its hospital is not at issue in this case.
2. Brookwood’s Projected Detrimental Impact Analysis is Inaccurate.
At the contested case hearing, Brookwood presented similar evidence of the alleged
detrimental impact of the 280 hospital. Dan Sullivan, Brookwood’s healthcare consultant,
testified that Trinity’s relocation to the 280 site would result in a shift of some of Brookwood’s
existing patients to Trinity because: (1) Trinity would be moving away from the population it has
traditionally served and its historic patient epicenter (T. 5713, 5733) to within one-half mile of
Brookwood’s patient epicenter (T. 5735); (2) Trinity would attract new physicians whose referral
patterns would draw patients from the area surrounding the 280 Hospital (T. 5723); (3) the
access roads to the 280 site are different than those to the Montclair site, thus allowing Trinity to
draw more patients from southern Jefferson County and northwestern Shelby County (T. 5727),
including ambulances with emergencies patients that will stop at the 280 site because of its
location (T. 5724); and (4) Trinity’s CON application projects only 1% growth in population per
year, but Trinity will grow at 7% per year, so some of that growth must come from patients who
are currently aligned with other hospitals, since it will not all come from population growth (T.
5736).
Mr. Sullivan conducted a detrimental impact study regarding the effect of the proposed
project on Brookwood. (Exh. BMC 205). Sullivan examined the current market share of
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Birmingham area hospitals in a “5-mile radius” surrounding the 280 hospital, including all zip
codes touched by that radius. Id. Sullivan concluded that, if Trinity’s current market share in
that area --which he identified as 8.3% -- increased to 30%, Brookwood’s market share would
drop from its current 34.3% to 26.2%, and Brookwood would lose over 2,025 discharges.20 Id.
Additionally, Sullivan projected that, if Trinity’s market share increased to 40% in the “5-mile
radius” surrounding the 280 hospital, Brookwood’s market share would drop to 22.4%, and
Brookwood would lose 2,957 discharges. Id.
Like the testimony presented by Mr. Balsano on behalf of St. Vincent’s, Mr. Sullivan’s
impact analysis has limited probative value because of important factors that his analysis simply
ignores. Sullivan’s analysis, like Balsano’s, assumes that without Trinity’s relocation,
Brookwood’s current market share would remain constant between now and 2013, and also fails
to account for population growth or population aging, both of which will contribute to the total
number of inpatient admissions. (T. 6583, 6586). In addition, Mr. Sullivan provided no
justification for his assumptions that Trinity would gain 30 to 40 percent market share in the area
surrounding the 280 hospital, as opposed to any other percentage market share. (T. 5856). Mr.
Sullivan’s “five-mile radius” methodology for calculating the detrimental impact on Brookwood
also seriously and artificially inflates the projection because the area used for his impact study
was actually larger than a five-mile radius. Sullivan included in his analysis the entirety of every
zip code touched by that 5-mile radius. (T. 5847). By broadening the area for which market
share percentage was considered, the impact on Brookwood in terms of discharges lost was
20 Garry Gause testified that after Carraway Medical Center underwent a syndication,
Brookwood’s admissions decreased by almost 1,500. However, there appears to have been no measurable detrimental impact at Brookwood such as having to cease certain services or implement a reduction in force. (T. 5521-5522).
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greatly inflated. (T. 5848). Mr. Sullivan, like Mr. Balsano, also failed to take into account those
patients Brookwood would gain as a result of Trinity’s relocation.
Noel Falls, an expert in healthcare planning who testified on behalf of Trinity, analyzed
the difference between the area considered by Brookwood, which included all zip codes touched
by the five-mile radius surrounding the 280 hospital, and an actual five-mile radius around the
hospital. (Exh. TMC 143 N). Falls found that comparing Sullivan’s purported five-mile radius
to an actual five-mile radius, Sullivan overstated the 2013 population by 116,000 inhabitants, and
overstated discharges by almost 13,000. (T. 6577- 6579). Falls found that, utilizing a true five-
mile radius around the 280 hospital, and even assuming that Trinity gained a 30% market share
in that area, Brookwood would lose 960 discharges, instead of the 1,986 posited by Mr. Sullivan.
Assuming Trinity achieved a 40% market share and again using an actual five-mile radius,
Brookwood would lose 1,401 discharges, compared to the 2,899 posited by Sullivan. (T. 6577-
6579).
In addition, Mr. Sullivan also inflated the detrimental impact Trinity’s project would have
on Brookwood by isolating the area around the 280 hospital where Brookwood is the majority
provider, and analyzing the effect of Trinity’s relocation in that area only. If Mr. Sullivan had
looked at the entire Jefferson and Shelby County area, even accepting the 19,000 to 20,000
additional admissions Brookwood speculates that Trinity will gain as a result of relocation, those
lost admissions would still not result in a significant detrimental impact to Brookwood. (T.
6554).
Rick D. Knapp testified on behalf of Brookwood regarding the monetary detrimental
impact Trinity’s relocation to the 280 hospital would allegedly have on Brookwood. In order to
determine that financial impact, Knapp multiplied Brookwood’s contribution margin of $3,311
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by the number of projected lost inpatient discharges, and then multiplied that number by 50.3,
which is the ratio of Brookwood’s outpatient contribution margin to its inpatient contribution
margin. (T. 6700). Mr. Knapp concluded, utilizing Dan Sullivan's first scenario of a 30%
market share gain by Trinity, that the total annual pre-tax adverse impact on Brookwood would
be $12,200,000. (T. 6700). Utilizing Sullivan's 40% market share gain hypothetical, Knapp
calculated that Brookwood would suffer a total annual pre-tax detrimental impact of
$17,900,000. (T. 6707). Garry Gause testified that the effect of such an adverse impact would
be that: (1) Brookwood would donate less money to charity; (2) Brookwood would have to re-
evaluate product lines that do not result in a profit for the hospital; (3) emergency and specialty
services coverage would be decreased; (4) employees would not receive raises; (5) Brookwood
could not invest in capital equipment; and (6) Brookwood may become unable to compete on a
service line basis with the other facilities in the community. (T. 5552-5553).
The evidence indicates, however, that Brookwood’s current financial performance is
quite strong and that its “sky is falling” contentions are overstated. Paul Graham testified that
Brookwood’s EBITDA margin has been around 10% to 11% since 2005, as compared to
Trinity’s lower EBITDA margin, which is between 3% and 5%. (T. 6785-6788). Even if Rick
Knapp’s most dire speculations were correct, and Brookwood actually suffered a detrimental
impact of $17,900,00 due to Trinity’s relocation, Brookwood’s EBITDA margin would be
reduced only to 5% or 6%. (T. 6790). In addition, lower admissions do not necessarily mean
lower profit for the hospital. Brookwood could take certain actions to mitigate the impact that a
loss of inpatient admissions would otherwise have on the hospital’s finances, including
consolidating management structure of non-core operations, analyzing funds spent on labor
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costs, standardizing supplies, improving contract negotiations, and making productivity
improvements. (T. 6792- 6794).
In addition, Brookwood’s detrimental impact analysis seems to imply that Brookwood
has some sort of protected “right” to the residents of the 280 corridor, and that all admissions
gained by Trinity must result in a corresponding decline in admissions at Brookwood or some
other hospital. (T. 3902-3903). Brookwood assumes that it has a claim to all of the residents of
its Primary Service Area, which it defined throughout the course of the contested case hearing as
the 280 corridor. In making this hyperbolic argument, Brookwood stubbornly refuses to
acknowledge that the majority of the residents of the 280 corridor are not, in fact, Brookwood’s
patients.
Brookwood’s own internal documents recognize that there are many patients in the 280
corridor who are not current patients of Brookwood’s. For example, in a presentation entitled
“Proposed Acquisition of the HealthSouth Digital Hospital” prepared in anticipation of Tenet’s
purchase of the 280 hospital, Garry Gause described Brookwood’s plan for filling the beds at the
280 hospital as “incremental growth, not cannibalization.” (Exh. TMC 315 at 7). By this
statement, Mr. Gause could have meant nothing else but that, by occupying the 280 hospital,
Brookwood would be gaining new patients, not drawing existing patients from Brookwood’s
current campus. Confirming his view later in the same presentation, Mr. Gause stated that
“Brookwood penetration [is] currently limited in south Jefferson, Shelby, Chilton, and Talladega
Counties.” Id. (emphasis added). In addition, another document prepared in anticipation of
Tenet’s purchase of the 280 hospital -- from Trevor Fetter to Garry Gause entitled “Post-
Transaction analysis” -- shows Brookwood’s enthusiasm for the prospect of a new market: “The
facility’s site at the intersection of two major thoroughfares is ideal, as it allows the company an
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ability to “reach” into markets currently not served by Brookwood. It also moves us into an area
of the city that is experiencing heavy growth due to shifts in both the general population and
physicians.” (Exh. TMC 308). Moreover, in a “talking points” document drafted in anticipation
of Brookwood’s acquiring the 280 hospital, Mr. Gause writes:
“Q: Will this hospital compete with Brookwood? Will it destabilize Brookwood from a staffing or physician perspective? A: No. Brookwood Medical Center is approximately four miles from the new hospital. The two hospitals will serve different service areas, and their services will complement each other. Physicians will have an added choice to refer patients to another high quality facility, and employees will have greater opportunities to work between the two hospitals.
(Exh. TMC 347).
3. The Proposed Project’s Alleged Detrimental Impact on the Opponents Would be Minimal.
Furthermore, the current unparalleled success of the Opponents’ hospitals suggests that,
even if those institutions were to lose some modest measure of market share as a result of
Trinity’s relocation, they will not be irretrievably damaged. See In the Matter of Mill Run Care
Center and New Albany Care Center v. Arbors East and Arbors at Hilliard, 1994 WL 714613 at
* 3 (Ohio Ct. App. December 20, 1994) (finding no adverse impact where existing providers in
the area were experiencing high occupancy rates).
And Brookwood is indeed experiencing extremely high levels of utilization. CEO Gause
testified that Brookwood provides care for approximately 40,000 people in its emergency
department annually. (Gause, 5507). In fact, according to Mr. Gause, Brookwood is seeing so
many patients in its emergency department that it is experiencing capacity issues. (T. 5604).
Furthermore, Mr. Gause testified that Brookwood has experienced tremendous growth in its
orthopedics services, as well as in some of its other subspecialty services. (T. 5528). According
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to Dr. Jeffrey Wade, a surgeon at Brookwood, Brookwood has the most active surgical volumes
in the state. (T. 4937). Wade also testified that Brookwood is the state’s largest outpatient
provider. (T. 4966).
St. Vincent’s is also experiencing high utilization levels. In fact, St. Vincent’s has
applied for an additional 37 beds at its Birmingham campus under a provision of the State Health
Plan that allows for a hospital to obtain additional acute care beds if its census reaches 80% for a
sustained period of time, regardless of whether the standard needs methodology indicates a need
for additional acute care beds in the county. (Exh. TMC 385). Commenting on St. Vincent’s
robust patient load, CEO John O’Neil testified as follows:
…we have seen a significant growth at St. Vincent’s in our primary care base, in our surgical base. We have some specialists that take call 24/7 that other facilities don’t, which has led to the growth of inpatient [services]…we have a tremendous lack of critical care beds. In fact, we go on critical care diversion on a consistent basis because we don’t have enough beds to put our critically ill patients in.
(T. 6085-6086).
The Opponents’ “sky is falling” theme is repeated in their claim that they will be so
severely impacted by Trinity’s proposed project that they will have to discontinue certain charity
work and service lines. In reality, however, both Brookwood and St. Vincent’s are currently
bursting at the seams. They have more patients than they can possibly care for, resulting in
many hours spent on diversion status, and currently pending projects to provide greater capacity.
Each of the hospitals enjoys a good location, good facilities, and an excellent reputation. (T.
3449-3453). Despite their impressive success, the Opponents assert that should Trinity’s project
be granted and its admissions return to the level of less than 10 years ago, their respective
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hospitals will be placed in severe jeopardy. The Opponents’ concerns ring hollow, however,
given their current level of success.
In any case, Trinity’s CON projections for the first two years of the 280 project showed
that Trinity’s relocation will have little effect on other providers. Trinity’s CON application
estimated that, by the second year of operations at the 280 hospital, Trinity’s admissions will
increase from 14,954 admission in 2009 to 15,218 in 2013; that its outpatient visits will increase
from 116,014 in 2009 to 130,550 in 2013; and that its patient days will increase from 84,880 in
2009 to 87,049 in 2013. (T., Exh. 1 at 90). Such modest advances in Trinity’s volume over the
first two years of operation of the 280 hospital would have a minimal impact, especially when
dispersed across all 13 area hospitals.
The Opponents argued in the hearing, and Brookwood again argues in its brief to this
Court, that Trinity understated its projections for the 280 facility. Dan Sullivan opined that
Trinity’s projections are unreasonably low and therefore understate the impact that its project
will have on Brookwood. He testified that, in its Irondale CON application, Trinity projected an
increase of over 40,000 patient days, an occupancy rate of 78%, and 23,000 admissions after
relocation. (T. 5766). In the instant case, Trinity projects an increase of 5,500 patient days, 60%
occupancy, and 15,000 admissions, even though the 280 corridor is a more populous area than
Irondale. (T. 5716, 5767). Mr. Sullivan opined that it would not make sense for Trinity to spend
in excess of $200 million to build a hospital that would have such modest, incremental growth.
(T. 5764). It is worth noting that Mr. Sullivan testified in the Irondale case that Trinity had
overstated its projections. (T. 5839).
Brookwood argues in its brief (Brookwood brief, 59), as both Opponents did at the
contested case hearing, that the utilization projections in a memorandum authored by Shan
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Carpenter (Exh. BMC 334), Vice President of Finance at Community Health Systems
Professional Services Corporation, are more accurate than Paul Graham’s utilization projection
pro forma that was included in the CON application. (T. 5769). That memo predicts a greater
increase in Trinity’s volumes upon relocation to the 280 hospital than in the pro forma created by
Paul Graham that was included in the CON application. Mr. Carpenter’s memo predicts that in
Year 1 of operations, there will be 17,000 admissions at the 280 hospital, as compared to the
CON estimate of 14,633 in the first year. (T. 3353-3354). For Year 2, Carpenter’s memo
projects 17,970 admissions, while the CON application projects 15,218 admissions. (T. 3354).
Mr. Carpenter assumes 5% annual growth, while Mr. Graham assumes 4% growth. Id.
It is reasonable to conclude that Mr. Graham’s projections are more accurate than Shan
Carpenter’s. Carpenter’s projections were more a “table-top” exercise than an in-depth analysis
of the future performance of the 280 hospital. Mr. Carpenter has never worked in Birmingham,
and is not familiar with the workings of the hospitals in that market. (T. 3416). In contrast, Mr.
Graham has been working in the Birmingham healthcare community for 18 years. He was
formerly the director of finance for what is now St. Vincent’s-East, and worked there for seven
years. He was employed by Trinity as its CFO for the past five years. It stands to reason that
Mr. Graham would have better knowledge of the conditions on the ground at Trinity and in
Birmingham’s healthcare market, given that experience, than would Mr. Carpenter, who drafted
his projections without any specific knowledge of the facility’s circumstances.
The relatively modest number of admissions projected for the first two years of Trinity’s
operations at the 280 site reflects certain assumptions made by Paul Graham based upon
Trinity’s current reality and short-term future at the present site.21 Mr. Graham assumed that
21 In creating the utilization projections contained in the CON application, Mr. Graham
considered Trinity’s summary financial statement for 2007 through 2009 (T. 80-82), inpatient payor mix
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there would be 60% capacity upon relocation to the 280 hospital. (T. 3434). He also considered
the loss of physicians at Trinity throughout 2007 and 2008. (T. 3307). Mr. Graham accounted
for the dwindling admissions at the current hospital over the past three years. (T. 3305).
Additionally, he took stock of the loss of excitement about the project resulting from the long
succession of CON battles that have preceded the present project. (T. 4521). Taking into
account all of those considerations, Mr. Graham projected a continued 3% annual decline in
inpatient admissions in the intermediate years leading up to the first year of the 280 hospital’s
operation. (T. 3306).
Mr. Graham then assumed a 4% annual market growth in the first two years of operation.
(T. 3334). In making that projection, Mr. Graham assumed reasonably that Trinity will not
retain all of its patients once it relocates to the 280 hospital. (T. 3433-3434). He assumed that
Trinity will attract more emergency patients at the 280 site, which will mean more self-pay
patients, but that that gain/loss will be offset to some degree by a favorable payor mix for other
types of patients. (T. 3290). Mr. Graham’s projections for the 280 site are thus more reasonable
than those projected either by Mr. Carpenter or the Opponents because they take into account the
current conditions on the ground at Trinity.
In addition, because Trinity is a tertiary care hospital, Trinity’s relocation likely will not
result in the detrimental impact on the Opponents that they posit. A tertiary acute care hospital
provides specialized care through specialty physicians, equipment, and facilities, and typically
has a much larger geographical service area than a community hospital. (T. 6540).
for fiscal year 2007 (Exh. TMC 105), inpatient payor mix for 2008 (Exh. TMC 106), outpatient payor mix for 2007 (Exh. TMC 107), outpatient payor mix for 2008 (Exh. TMC 108), inpatient census by day indicating patient number and bed location (Exh. TMC 109), as well as his personal knowledge. (T. 3094-3095)
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As acknowledged by Dan Sullivan in the contested case hearing regarding the since-
abandoned Irondale CON, Trinity is such a regional referral center. (Exh. BMC 198(b), p. 684-
685). Additionally, in the hearing in this case, Noel Falls testified that Trinity's patients are
geographically distributed, and that their residences are not clustered around the existing hospital
site. (T. 6542). In fact, only 15% of Trinity’s discharges come from a five to seven mile radius
around its current location on Montclair Road. (T. 4414). By way of contrast, 30% of Trinity’s
patients reside within 10 miles of the 280 hospital. For some specialty services, Trinity’s
patients originate from all over the state; for example, Trinity’s psychiatric patients are drawn
from a 150-mile radius. (T. 4769).
Trinity’s status as a tertiary acute care hospital is significant. Because Trinity does not
primarily draw its patients through proximity, but instead through referrals from other physicians
for the specialty services offered at the facility, the fact that Trinity will be relocating to the 280
site does not mean that Trinity will automatically gain a significant number of new patients from
the area immediately surrounding the 280 facility, particularly in the first few years of operation.
(T. 4445-4446). Trinity’s primary and secondary service areas have remained static since 1993,
due in large part to the fact that the hospital is difficult to access from any area other than the
East, and thus referral patterns have been established between Trinity physicians and physicians
in the outlying communities to the hospital’s east. (T. 4443). Trinity does not have a large
referral network surrounding the 280 site, and currently has only an 8% market share in the 26
zip codes within a 10-mile radius of the 280 site. That market share will not change overnight.
(T. 4455-4456). Even Glen Wells, M.D., a physician at Brookwood, admitted that the impact
from Trinity’s relocation will not be immediate. (T. 4752). Instead, once Trinity relocates to
the 280 site, new referral patterns will slowly become established because of the increased
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accessibility of the site from the north, south, and west, but it will take time for those patterns to
mature. The most immediate influx of new patients to Trinity as a result of the relocation will be
for emergency and non-tertiary services, such as obstetrics, which are more driven by the factor
of proximity. (T. 4407-4408).
The Opponents further argued at the contested case hearing that they will be
detrimentally impacted because Trinity will attempt to lure the Opponents’ physicians to the 280
hospital. Brookwood again asserted this argument in its brief to this Court. (Brookwood brief,
69-73.) As evidence, Brookwood points to the recent announcement by Dr. Larry Lemak, an
orthopedic surgeon at Brookwood, that he will be joining Trinity’s medical staff. (T. 6344). Dr.
Lemak represents a unique case, however, in that the 280 hospital was originally designed by
HealthSouth with the understanding that Dr. Lemak would be one of the surgeons who operated
there, and HealthSouth solicited his assistance in designing the operating rooms. That sort of
experience is unique and cannot be generalized to the conclusion that Trinity will funnel away
many of Brookwood’s physicians upon relocation to the 280 hospital.
Trinity will not recruit a significant number of new physicians to its staff overnight. The
issuance of the CON has been on appeal for more than 16 months, and physicians are not likely
to join Trinity’s medical staff in anticipation of relocating to the 280 hospital until they are
assured that the CON will stand. (T. 4525). In addition, after the appellate review of this CON
is complete, there will still be a 16 to 18-month construction period to complete construction of
the hospital. Id. Once the hospital is built, there will be logistical challenges in moving the
hospital and its staff to the new campus, as well as the usual start-up operational issues
experienced by any new hospital. (T. 5840). It is likely that most physicians will adopt a wait
and see approach to the new Trinity campus while those events are unfolding. In addition, many
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physicians would be dissuaded from relocating to the new Trinity campus simply because of
lease obligations for their existing office space, and the risk that they will lose patients if they
relocate their practice. (T. 4525). It also cannot be assumed that Trinity’s competitors will sit
back and do nothing; instead, Brookwood and St. Vincent’s can be expected to vigorously
compete to retain the physicians on their staff. (T. 4525-4526).
There are no formal recruiting efforts currently underway to recruit physicians to the 280
hospital. (T. 3402). As explained by Trinity Board member George Hairston, Trinity hopes to
recruit some new physicians who have just completed their residencies, as well as some
physicians from outside of the Birmingham area. (T. 1535-1538). Trinity also hopes to attract
doctors to the facility that will keep privileges at multiple hospitals. (T. 3312).
It is possible, of course, that Trinity will regain some physicians who have departed the
hospital of late to join the staffs of the Opponents’ hospitals. (T. 1535-1538). As Paul Graham
testified in response to a question regarding whether Trinity will recruit and target physicians in
the market who do not currently practice at its hospital, “There will be some of that...probably no
more than is going on with people in the market with our physicians currently, though. I think
that goes on in the normal course of business, whether you’re in the newest facility in the city or
in our facility.” In other words, attempts to recruit doctors from other hospitals are part of the
healthcare sector’s natural landscape.
If Trinity were to recruit physicians away from other hospitals, that would be no different
than attempts, often successful, by other hospitals to lure away Trinity’s physicians. As an
example, in a memorandum Garry Gause drafted in anticipation of Tenet’s purchase of the 280
hospital, Gause observed that “Carraway neurosurgeons Zeiger and Craddock can be diverted to
a new location, but Brookwood does not have the capacity to provide an option….” (Exh. TMC
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301 at 2). Communicating with the Tenet Board of Directors, CEO Trevor Fetter announced
“[w]e have targeted physician practices and individual providers projected to generate the
incremental and transitional volume at the Digital Hospital.” (Exh. TMC 311). Two of the
physician groups mentioned as “targets” were Cardiovascular Associates (“CVA”), a large
cardiology group located at Trinity, and the Seale Harris Clinic, a large internal medicine group
that recently left Trinity for St. Vincent’s. Id. Similarly, a presentation prepared by Garry Gause
predicted that new volume was attainable at the 280 hospital by “moving physicians and patients
from competing facilities,” including CVA and Seale Harris. (Exh. TMC 314 at 11).
Brookwood’s protests regarding the alleged, speculative impact of Trinity’s project therefore
seems hypocritical given that facility’s past intentional efforts to recruit Trinity’s physicians.
4. There are Several Probable Positive Effects that the Proposed Project Would Have on the Opponents and on the Provision of Healthcare in Jefferson County in General.
Because CON Rules § 410-1-6-.06(e) by its terms requires consideration of the "probable
effect" of a project on existing facilities, it is requisite that not only the detrimental effect of a
project be considered, but also the positive effects. (T. 6585). The Opponents, by focusing on
the detrimental impact they speculate the 280 project will have on their facilities, have
considered only half the equation. (T. 6586).
The CON Review Board and the ALJ considered evidence showing that Trinity’s
relocation is likely to have several positive effects on existing providers in the community. First,
upon Trinity’s relocation, some physicians practicing at the current Montclair campus will
decide not to move with Trinity to the 280 hospital, and will join the medical staffs at other
hospitals. For example, David McLain, M.D., a physician at Brookwood, testified that he was
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acquainted with a physician on the staff at the Montclair campus who was planning to join the
medical staff at St. Vincent’s East if the Trinity relocation project is approved. (T. 5225).
In addition, after Trinity relocates, Brookwood and St. Vincent’s will inherit some of
Trinity’s existing patients who do not wish to travel to the 280 site. (T. 4707). Those
individuals are likely to be emergency and non-tertiary care patients, for whom the location of a
hospital is more significant. For example, Alvin Rutledge, a current Trinity patient and a
resident of the Kellogg Springs neighborhood near the Montclair campus, testified that he would
not continue to utilize Trinity as his hospital after its relocation because it will no longer be close
to his residence. (T. 4803). Even though he did not address it in his probable effect analysis,
Dan Sullivan testified that Trinity will lose patients from the northern part of their current service
area, and that St. Vincent’s, St. Vincent’s East, and UAB will benefit from that loss.22 (T. 5834).
John O’Neil also opined that St. Vincent’s East stands to gain patients as a result of Trinity’s
relocation, and Dr. David McLain expressed his belief that St. Vincent’s East as well as St.
Vincent’s-St. Clair would gain patients from Trinity’s relocation. (T. 5237, 5238, 6065).
Employing Armand Balsano’s and Rick Knapp’s methodology for determining detrimental
impact, the number of patients that area hospitals will gain as a result of Trinity’s relocation
could be multiplied by a contribution margin to determine the positive financial impact of the
280 project on existing providers. (T. 6447). But neither Mr. Balsano nor Mr. Knapp included
such positive factors in their analysis.
Another positive effect that Trinity’s project will have on existing providers is that it will
promote competition. As Garry Gause acknowledged, “market forces improve quality.” (T.
5573). Dr. Jeffrey Wade of Brookwood apparently would agree based on his testimony that,
22 Interestingly, Mr. Balsano, St. Vincent’s health care planning expert, also neglected to
include these positive effects in his detrimental impact analysis.
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should Trinity be permitted to relocate to the 280 site, the physicians at Brookwood would have
to become more efficient in response to that competition. (T. 4973-4974).
The positive effect of competition in healthcare was heralded by a Joint Statement of the
Department of Justice and the Federal Trade Commission released on September 15, 2008,
which included the following observation: “market forces tend to improve the quality and lower
the costs of health care goods and services. They drive innovation and ultimately lead to the
delivery of better health care.” (Exh. TMC 293 at 2) (emphasis added). With regard to the
positive benefits of competition, the report continued as follows:
…vigorous competition among health care providers promotes the delivery of high-quality, cost-effective health care. Specifically, competition results in lower prices and broader access to health care and health insurance, while non-price competition can promote higher quality. Competition has also brought consumers important innovations in health care delivery. For example, health plan demand for lower costs and patient demand for a non- institutional, friendly, convenient setting for their surgical care drove the growth of Ambulatory Surgery Centers. Ambulatory Surgery Centers offered patients more convenient locations, shorter wait times, and lower coinsurance than hospital departments. Technological innovations, such as endoscopic surgery and advanced anesthetic agents, were a central factor in this success. Many traditional acute care hospitals have responded to these market innovations by improving the quality, variety, and value of their own surgical services, often developing on or off-site ambulatory surgery centers of their own.
Id. at 3.
The agencies took note of a study of the effects of new single-specialty hospitals by the
Medicare Payment Advisory Committee (MedPAC), which found that certain community
hospitals responded to competition by improving efficiency, adjusting their pricing, and
expanding profitable lines of business. In addition to administrative and operational efficiencies,
the MedPAC Report identified several other examples of improvements sparked by the entrance
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of a specialty hospital into a market, including extended service hours, improved operating room
scheduling, standardized supplies in the operating room, and upgraded equipment. Id. at 9.
Likewise, the agencies recognized the detriment worked upon healthcare systems by anti-
competitive behavior by hospitals. Their report states:
…CON laws can be subject to various types of abuse, creating additional barriers to entry, as well as opportunities for anticompetitive behavior by private parties. In some instances, existing competitors have exploited the CON process to thwart or delay new competition to protect their own supra-competitive revenues. Such behavior, commonly called “rent seeking,” is a well-recognized consequence of certain regulatory interventions in the market. For example, incumbent providers may use the hearing and appeals process to cause substantial delays in the development of new health care services and facilities.
Id. at 6. (emphasis added).
To be clear, Trinity is not arguing against CON laws. Instead, Trinity’s point is that
CON laws were not designed to insulate providers from the positive effects of competition.
CON laws, rather, are designed to provide orderly and effective healthcare planning for
communities and to ensure the delivery of cost-effective and high-quality healthcare.
Relocation would give Trinity a fair chance to compete on a level playing field with the
other hospitals in the area. As it currently exists, Trinity cannot compete for physicians and
patients with hospitals that have more modern, updated facilities. (T. 360). From 1998 to 2005,
when Trinity was owned by Baptist, the Montclair Facility was the only profitable Baptist
hospital. Baptist used those profits to capitalize its network of other hospitals, such as Baptist-
Shelby, and Princeton-Baptist. The profits made on Montclair Road were removed to the
corporate level and redistributed to those other hospitals, and none was reinvested in the
Montclair hospital. Those were all decisions made long before Trinity’s current owners were
even in Birmingham. Dr. McLain of St. Vincent’s offered this pertinent observation: “So I think
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any hospital, you go through these cycles where you're at the top of the world and then you're at
the bottom of the heap and then you just keep trying to improve. And it's not -- you never stay
still. I mean, any group that stays still is going to -- you know, is going to fade away.” (T.
5220).
Ultimately, the CON Review Board found that the positive impact of Trinity’s project
outweighs any perceived or real detrimental impact that might be alleged by any individual
provider. The project will positively impact the community by (i) improving patient care
through the betterment of Trinity’s physical facility, (ii) making Trinity more accessible
geographically and more easily identifiable, (iii) placing beds where acute care services are
actually needed in the area, (iv) providing quicker access to emergency services for residents
who need it, (v) improving staff satisfaction, (vi) catalyzing an economic boon for the city of
Birmingham, and (vii) improving patient outcomes. (T. 6593-6594). This project’s probable
positive effects ultimately outweigh any impact that might result to the individual hospitals of
Brookwood or St. Vincent’s because it will take a facility at the end of its useful life and transfer
its staff and physicians to a state-of-the art hospital that will otherwise be demolished and lost to
the community forever. (T. 6596).
E. There Has Been an Overwhelmingly Positive Community Reaction to Trinity’s Project.
CON Rules § 410-1-6-.06(1)(f) provides that, in determining whether a project is needed,
community reaction to the facility should be considered. The CON Review Board and ALJ
found “that there is substantial community support for the project.” (AR 3206). The evidence
presented at the hearing showed that the reaction of a majority of the community to the proposed
project has been overwhelmingly positive. Bill Heburn, Chief Development Officer at Trinity,
testified that he has given over 100 tours to community members, neighborhood groups,
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religious groups, staff members, and politicians, and no one has ever made a negative statement
about the project. (T. 3884). Mr. Heburn’s testimony is reflective of the fact that many groups,
including physicians, neighborhood groups, business leaders, and politicians have all expressed
support for Trinity’s relocation to the 280 hospital.
1. Physicians and Other Community Members Support the Proposed Project.
Physicians in the Birmingham area have expressed support for the relocation project.
According to David Miller, Trinity’s medical staff is “overwhelmingly supportive” of the
project. (T. 1591-92). More than 100 physicians wrote letters of support for Trinity’s project,
some of whom practice both at Trinity and at the Opponents’ facilities. (Exh. TMC 7 & 8).
Every member of the group practice Cardiovascular Associates wrote a letter of support for the
project, even though many of those physicians have privileges at several different hospitals,
including Brookwood and St. Vincent’s. (T. 234-236). In addition, Jane Northcutt, Chief
Quality Officer at Trinity, testified that many physicians have expressed their support for the
project to her, and no physician has expressed opposition. (T. 3745).
In addition, there has been a positive reaction to the project from the Jefferson and Shelby
County communities in general. Much of that community support, according to David Miller
and James Spann, stems from the fact that the project would put into operation the 280 hospital,
which has stood dormant for eight years as a potential, but still unusable, asset. (T. 480, 1591-
1592).
Charlie Tickle, President of Daniel Corporation, testified regarding the strength of
community support for the project. Tickle testified that Daniel built the Greystone residential
development, as well as several other such developments, on the 280 corridor. Mr. Tickle
testified that residents of those neighborhoods have often expressed concern to him regarding the
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lack of healthcare services on the Highway 280 corridor. (T. 1156). When Daniel purchased the
entire HealthSouth campus, Tickle testified, there was tremendous community support for the
idea that the uncompleted Digital Hospital would be actually used as a hospital. (T. 1127-1128).
Tickle stated that many home owners associations from communities on the 280 corridor have
expressed their support for the project to Daniel. (T. 1154).
Several community members testified in support of the project during the contested case
hearing. As previously mentioned, Jackie Ponder, a resident of the Chelsea community, testified
about her experience in attempting to obtain emergency medical care after she began
hemorrhaging blood at her home in Chelsea, and was driven to UAB in downtown Birmingham
for treatment. (T. 2323-2335). Ms. Ponder testified that a full-service hospital is needed on
Highway 280 to address true emergencies, which often require surgery, and cannot be handled at
a primary care clinic or an FED. (T. 2323-2335). Dave Nebergall, a member of the Greystone
Founders Neighborhood Association Board, also testified in support of the project. Mr.
Nebergall related that there are 957 homes in his neighborhood, and that he has been privy to
positive reactions regarding Trinity’s relocation project. (T. 2452-2453). Mr. Nebergall went
on a tour of the 280 hospital, and was very impressed with the views from the patient rooms, as
well as with the mechanical systems already in place. A third community witness, Bill Sweet,
serves as President of the Inverness Master Homeowners Association, which includes 800
homes. Mr. Sweet expressed the view that Trinity’s project would be beneficial for the city of
Inverness because the existence of the hospital would make homes more marketable. (T. 2458).
In addition, he testified that a wide range of Trinity personnel could make the Inverness
community their home, as the housing prices in Inverness range from subsidized housing up to
million dollar homes. (T. 2462-2463). Mr. Sweet further testified that he does not believe the
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project will add significant additional traffic to Highway 280. (T. 2464). After personally
touring the 280 hospital, Sweet was impressed with the modernity of the structure, the
duplication of MPE systems, and the patient rooms. (T. 2461-2462).
Sixty-six emergency medical services (EMS) providers wrote personal letters of support
for the 280 project, and 52 EMS personnel signed a petition in its support. (Exh. TMC 10).
Furthermore, a large group of EMS workers attended a tour of the 280 hospital, and expressed
their positive support for the project. (T. 3026).
2. The Jefferson County Business Community Supports Trinity’s Proposed Relocation, Due in Large Part to the Positive Economic Impact that Project Would Have on the Area.
Birmingham’s business sector has expressed support for the project. Twenty-four key
business leaders wrote letters of support (Exh. TMC 7 & 8), including the President of the
Birmingham Business Alliance. (Exh. TMC 275). Trinity’s proposed relocation to the 280
hospital enjoys the business community’s support for many reasons, not the least of which is that
it will serve as a catalyst for further development of the property adjacent to the hospital. (T.
1591-1592). The 280 hospital is located on the campus acquired by Daniel Corporation from
HealthSouth. Trinity’s build-out and operation of the hospital will be a catalyst for Daniel’s
planned development of the overall campus, called Cahaba Center, that would be an economic
boon for the local economy.
As explained by veteran commercial developer Charlie Tickle, Daniel’s CEO, in Phase I
of the Cahaba Center project, 50,000 to 100,000 square feet of retail space, a major four-star
hotel, a smaller 250-room hotel, and a 150,000 square foot MOB would be built. (T. 1146-
1149). Phase I would be completed within 12 - 18 months, which is the same time frame as
completion of the hospital. (T. 1149-1150). In additional phases, Daniel plans to develop up to
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one million square feet of additional retail space, and a 350-unit apartment complex. (T. 1150-
1151). The total capital expenditure contemplated by Daniel for all phases of the 10-year project
is $600 million to $800 million. (T. 1151). The Daniel development that would be catalyzed by
the 280 hospital was named as one of Governor Riley’s “Bright Spots in Alabama.” (Exh. TMC
277).
Trinity commissioned Dr. Keivan Deravi to conduct an economic impact study regarding
the 280 hospital and the Daniel development it would spawn. (Exh. TMC 18). Dr. Deravi has a
Ph.D. in economics and serves as Professor of Economics at Auburn University at Montgomery.
(T. 3464-3465). For the past 20 years, Dr. Deravi has worked with the governors and finance
directors of the state of Alabama to develop the state’s annual budgets, (T. 3474, 3475), and he is
the architect of the Alabama Economic Forecasting Model, which is used to generate forecasts
for the state’s major economic variables. (Exh. TMC 13 O). Dr. Deravi has produced economic
impact and feasibility studies in connection with numerous major projects in Alabama, including
manufacturing facilities for ThyssenKrupp Steel and Stainless USA, EADS (a planned airbus
engineering and assembly center near Mobile, Alabama), North America, Inc., Hyundai, Toyota,
Honda, and Mercedes-Benz. Id.
Dr. Deravi was asked to study the entire Cahaba Center development, including the 280
hospital -- which he considers the key to the whole development’s success -- and to analyze the
potential for job and income growth from that overall development. (T. 3482, 3504). Dr.
Deravi arrived at his conclusions regarding the economic impact of the project by using an
economic model he created that measures the direct impact of the project; then uses a multiplier
to add in the indirect impact (which takes into account the additional suppliers and network of
businesses and transactions that would be necessary in order to maintain and sustain the
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development); and in turn considers the induced impact (the impact created when all of the direct
and impacted employees purchase goods and services) of the project. (T. 3485-3490).
Professor Deravi makes a distinction in his economic impact study between the
construction impact of the Cahaba Center development, which is transitory, and its operations
impact, which is permanent. (T. 3509-3510). From construction in Phase I, Deravi concluded,
12,639 jobs will be created, and there will $395 million in earnings. (Exh. TMC 18). In Phase II
of the project, construction will be responsible for 5,479 more jobs, and $175 million in earnings.
Id. According to Dr. Deravi’s model, the total construction impact of the project for all phases
would be the creation of 17,800 jobs and $570 million in earnings. Id. The following tables
illustrate Dr. Deravi’s economic impact analysis for Phases I & II of construction:
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With regard to the operations impact of the project, Deravi forecasts that in Phase I, 6697
jobs would be created, and there would be $282 million in earnings. Id. In Phase II, the impact
of operations would be 2,800 jobs, and a $124.4 million positive impact to the region’s overall
economy. Id. Adding together the impact of Phases I and II, therefore, Economist Deravi
predicted from his model that the total operational impact would be $405 million in earnings and
9,450 jobs. Id. The following charts illustrate Dr. Deravi’s economic impact analysis for
operations in Phases I and II of development:
169
170
In addition, Dr. Deravi forecasts that the project will yield tax revenues over a 15-year
period of $142 million for the city of Birmingham, $37 million for Jefferson County, and $48
million for Jefferson County schools. Dr. Deravi concluded that the 280 hospital and Cahaba
Center development would be a “mega project” for the City of Birmingham, on the order of the
Mercedes-Benz plant in Tuscaloosa, Alabama. (T. 3532).
In rebuttal to Dr. Deravi’s economic impact study, Brookwood offered testimony from
Dr. Stephen Craft, a professor of marketing at Birmingham Southern College. (T. 5280). Dr.
Craft has never taught a course in economics and, by his own admission, has no expertise in
analyzing economic impact. Id. He described his experience as “measurement.” (T. 5282). Dr.
Deravi, by way of contrast, has conducted economic development impact studies for several
“mega-projects” in Alabama, such as the Hyundai and Mercedes-Benz plants.
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Craft testified that Dr. Deravi’s economic impact study overstates the impact of Trinity’s
project. (T. 5239). He argued that only a small portion of the economic impact of the Cahaba
Center is related to the hospital, (T. 5249), and that none of the construction in Phase II of the
Cahaba Center development should be considered because it does not depend upon the build-out
and operation of the 280 hospital. (T. 5251). In making this assertion, however, Craft ignores
the testimony of the President of Daniel, Charlie Tickle. Mr. Tickle testified unequivocally that,
without the hospital as the anchor for the Cahaba Center development, the development that
would eventually occur on that property would be much smaller in scale and would take place
over a much longer time period. Dr. Craft did not explain why his view on this point should be
accepted over than of Mr. Tickle, a distinguished and experienced developer.
Dr. Craft also criticized the multiplier used by Dr. Deravi in formulating his economic
impact analysis. The multiplier in such an analysis is used to determine the indirect effect of a
project on the local economy. The multiplier takes into account the “leakage” of the project,
meaning the amount of money from the project that will “leak” over into other areas outside of
the one being studied. Dr. Craft asserted that the multiplier used by Dr. Deravi was too high, (T.
5257), arguing that because the 280 site is on the Jefferson/Shelby County line, the multiplier
should be lower. (T. 5266). Craft argued that, in calculating the economic impact of the
construction operations associated with Phase I of the development, Dr. Deravi should have used
a multiplier of 1.2 instead of the 1.47 that Dr. Deravi utilized. To calculate the economic impact
of operations during Phase I, Dr. Deravi used a multiplier of 1.47 for the conversion of direct
payroll to total earnings, and a multiplier of 2.4 for the conversion of direct payroll to total
output. Dr. Craft argued that multipliers of 1.2 and 1.6, respectively, were more appropriate.
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Craft’s criticisms regarding the multipliers used by Dr. Deravi bordered upon comical.
Craft apparently pulled the lower multipliers he suggested out of thin air, but for certain he
inexplicably disregarded reliable information specifically regarding the economic impact of
hospitals. Indeed, he testified that although there was data available concerning the appropriate
multipliers for hospital projects from the federal Bureau of Labor and Statistics, he chose not to
use those numbers. (T. 5290-5291, 5303). In any event, Craft’s testimony is not deserving of
credit over that of Dr. Deravi, the most experienced and able economic forecaster in Alabama.
Dr. Craft suggested that Dr. Deravi’s analysis was flawed because he considered the
positive impact of the proposed project without also considering its cost. (T. 5257). Craft
argued that Deravi should have considered the cost of rehabilitating the current Montclair site in
preparing it for whatever its new use would be after the hospital relocated. Craft asserted that the
cost of such rehabilitation would be half the cost of renovation, although he was unable to
identify any source for that interesting theory. In addition, Craft admitted that he did not
consider the counterbalancing positive economic impact that would result from the rehabilitation
of the Montclair site due to the funds that would be injected into that project. (T. 5315). Dr.
Craft also admitted that his analysis did not consider the economic cost to the city of
Birmingham of demolishing a largely completed structure with over $200 million of capital
already invested in it. (T. 5326).
In sum, Dr. Deravi’s testimony established beyond question that the 280 hospital, on its
own and as a catalyst for development of the overall Daniel project, would have a huge positive
impact on the local economy for years to come. The Opponents’ contrary evidence was – to
invoke a term one of Brookwood’s doctors used to describe Trinity at its current location –
“laughable.”
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The Opponents also argued in the hearing that, if Trinity is permitted to relocate, there
will be a negative economic impact on the area surrounding the Montclair hospital. That
contention is based in large part on a statement in a memorandum authored by Gordon Carlisle
that there would be little viable use for the Montclair hospital once Trinity relocated. But even if
the Montclair hospital cannot be used for medical purposes, there is no reason why that property
cannot be converted for some productive, alternative use. Carlisle testified that, for example, the
site could be used for construction of apartments or housing, which would be consistent with the
residential character of the area. (T. 2145). There was evidence as well that the city of
Birmingham and others will assist Trinity in marketing the property after relocation. Patricia
Todd, a House of Representatives member whose district includes the Montclair site, testified:
“I’m going to do whatever I can to make that a viable revenue-producing location if Trinity were
to move.” (T. 5342). She also testified that she would do everything possible to ensure that the
site does not remain vacant over a long period of time or become the object of vandalism. (T.
5342). In addition, Tracy Morant Adams, Director of the Division of Economic Development
for the city of Birmingham, testified that the city will lend its support for the re-development of
the Montclair site if the hospital is permitted to relocate. (T. 1426). She testified that the city
will partner with Trinity to market the property and find a good and viable use for it. Id. Ms.
Adams believes that the possibility of finding a suitable use is very strong, noting that the city
has already received inquiries about converting the site to some type of mixed-use development.
(T. 1427). Thus, there is little merit to the Opponents’ assertion that the relocation of Trinity will
have a negative economic impact on the city of Birmingham, which would hardly have provided
a substantial economic development incentive package had it believed that the project was not in
the city’s best interest.
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Brookwood again asserts this argument in its brief to this Court. However, the CON
Review Board approved Trinity’s CON to relocate from the Montclair site after considering all
of this evidence, and that decision is due to be affirmed.
3. Governmental Leaders Support Trinity’s Proposed Project.
In addition to physicians, community members, and business leaders, governmental
officials have also expressed support for Trinity’s relocation to the 280 hospital. Governor
Riley, according to James Spann, toured the 280 facility and was very favorably impressed. (T.
492). Bill Heburn stated that Governor Riley toured the building for over an hour and was
enthusiastic about the project. (T. 3885-3886). Afterwards, Governor Riley wrote to Mr.
Heburn, confirming that he was impressed with the project and that he looked forward to
continuing to work with Mr. Heburn on the development of the site. (Exh. TMC 274). In
addition, as aforementioned, Governor Riley denied the Hoover hospital amendment proffered
by Brookwood in part due to the anticipation that the 280 hospital would be available as a
superior option for the 280 corridor. (Exh. TMC 294).
Local city and county governments have also been supportive of the project. Charlie
Tickle testified that City of Birmingham officials have expressed and offered their support for
the 280 site’s being used as a hospital. (T. 1139-1140). One reason for that enthusiasm is that it
is estimated that the proposed replacement facility will generate, on an annual basis,
approximately $6,200,000 in local sales and ad valorem taxes, $1,500,000 in state taxes, and
$9,500,000 in federal taxes. (Exh. TMC 1 at 54). Tracy Morant Adams, the City of
Birmingham’s Director of Economic Development, testified that she, as well as the Birmingham
City Council, are very excited about Trinity’s relocation because it would avoid the loss of jobs
that would occur if Trinity were forced to close, and would also create new jobs at the 280
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location. (T. 1417-1418, 1425). The Birmingham City Council expressed its support for the
project by voting unanimously to approve $55 million in tax incentives for the Cahaba Center
development, with $40 million earmarked for Trinity’s hospital development, and $15 million
for Daniel’s additional development projects on the campus. In fact, the City Council president
recessed a Council meeting so that the members could attend the press conference announcing
that Trinity would pursue relocation to the 280 hospital. (T. 1426).
Greg Canfield, a member of the Alabama House of Representatives representing House
District 48, also testified in support of the project. Representative Canfield’s district follows the
280 corridor, and Canfield represents a small portion of the City of Birmingham, approximately
one-half of Mountain Brook, one-half of Vestavia Hills, Brook Highlands, Greystone, Vandiver,
and Dunnavant. (T. 3145-3146). The 280 site is almost precisely in the center of his district.
Expressing strong support for Trinity’s CON application, Representative Canfield testified as
follows:
I think that this is really an issue that’s important to the district that I represent. The area has grown rapidly, especially in the area of North Shelby County. The U.S. Census data has shown that from the period 2000 to 2008, that there’s been a 31 percent increase in population during that time in Shelby County. Most of that has been experienced in the North Shelby County district. So it’s a very rapidly growing area in the state of Alabama. I’m hearing from a number of my constituents in support of having an acute care hospital located in the district along the 280 corridor. And that’s why I’m in support of this application. I think that you also have a very important component that’s not always a part of a consideration like this, and that is the economic development opportunities and the positive impact that this particular application offers for the region.
(T. 3147-3148).
In addition, Representative Canfield testified that the Highway 280 area is underserved
because, despite the substantial population that resides there, there is not an acute care hospital
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along the 280 corridor. (T. 3149). Canfield further testified that major construction companies
in the area do not have very many projects underway now in that area, and that the project would
be a very substantial economic growth opportunity. (T. 3150). According to Canfield, his
constituents are also concerned about the negative aesthetic impression, as well as the negative
economic impact, that the 280 hospital structure may have if it remains dormant and unfinished.
(T. 3152). He further testified that demolishing the uncompleted but very valuable structure
would be an opportunity lost, and that the most productive use of the site is to bring it to
completion as an acute care hospital. (T. 3153).
4. Community Members Opposing the Project Because Trinity Will Be Moving Away From Their Neighborhoods Will Still Have More Than Adequate Access to Acute Care Hospitals if Trinity Relocates.
Brookwood argues in its brief that there is “significant opposition from community
leaders” in the Montclair area who want “Trinity to stay right where it is.” (Brookwood brief,
113.) After evaluating all of this evidence, the CON Review Board and ALJ found that “it
appears that while the residents in and around the current location of Trinity at its Montclair
campus will be affected by the move, there will still be adequate access to alternative hospitals
within a reasonable distance.” (AR 3227).
At the contested case hearing, Brookwood presented eight community witnesses in
opposition to Trinity’s project. Each was a resident of the area generally surrounding the
Montclair campus. All the witnesses expressed a desire to keep Trinity nearby for convenience.
None of the witnesses expressed a willingness to follow Trinity to the 280 site. Like those
witnesses, many of the individuals in the neighborhoods surrounding Trinity will choose other
hospitals in the area if Trinity is permitted to relocate. Approximately 15% of Trinity’s PSA is
comprised of the area surrounding the current Montclair campus. Should Trinity relocate,
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Trinity’s patients residing near the existing hospital who do not wish to visit Trinity at the 280
hospital will have several alternate hospitals available. Indeed, St. Vincent’s, UAB, and St.
Vincent’s East are all within a 10 minute drive or less of Trinity’s Montclair campus. (T. 1367-
1369).
For example, Alvin Rutledge, President of Kellogg Springs Neighborhood Association,
testified that he will not continue to use Trinity if it relocates, but testified that he could readily
go to UAB, St. Vincent’s, or St. Vincent’s East instead. He acknowledged, in fact, that St.
Vincent’s East is as close to his home as Trinity. (T. 4810). Similarly, Robert L. Walker, Jr.,
President of the Wahouma Neighborhood Association and Vice-President of the East Lake
Community Association, testified that although his current cardiologist, Dr. Tom Eagan, Jr., is
on the staff at Trinity, he would not follow Trinity to the 280 hospital. Instead, he would seek a
referral from Dr. Eagan for a doctor near his neighborhood. Mr. Walker explained that St.
Vincent’s East is roughly the same distance from his home as Trinity. (T. 4818). Richard
Rutledge, who lives in the Roebuck Springs, a South Roebuck neighborhood, testified that St.
Vincent’s East is only two miles from his home, and that in an emergency at home, he would go
to St. Vincent’s East instead of Trinity (even in its current location) because of its proximity. He
testified that if Trinity closed, residents of his neighborhood would go to St. Vincent’s East,
Brookwood, UAB, or St. Vincent’s-Birmingham. (T. 4880). Jenice Allen, President of the
Roebuck Neighborhood Association, testified that if Trinity relocated, she would no longer use it
as her hospital, and that some of her neighbors would begin using St. Vincent’s East if Trinity
relocated, as it is actually closer to Roebuck than Trinity’s current site. Valerie Abbott, a
member of the Birmingham City Counsel, candidly acknowledged that the residents of
Birmingham are “spoiled” because there is such an abundance of healthcare options near the city
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center. (T. 4926; 5196; 5209). See Mid-Ohio Health Planning Federation v. Certificate of Need
Review Board, 1982 WL 4084 at * 5 (Ohio Ct. App. April 1, 1982) (CON granted allowing
hospital to relocate was proper where staff considered the needs of the medically underserved
and found that existing hospital facilities located within the immediate area would adequately
and conveniently handle the future needs of indigent persons currently using the hospital after
the hospital was relocated).
Ultimately, the community support for Trinity’s proposed project has been
overwhelming. Physicians support the project because of the advancements to healthcare
delivery that could be achieved at the 280 facility. Residents of the area surrounding the 280
hospital support the project because of the need for acute care services in their area, as well as
the fact that Trinity will put the incredible asset that is the 280 hospital to use. The business
community supports the project because of the economic impact of the hospital’s development
in midst of an economic recession. Government leaders support the project because they
recognize that the project is what is best for their constituents, both in terms of the provision of
healthcare and the economy of the area. In short, the community stands strongly and vehemently
behind Trinity’s project.
F. Trinity’s Project will Increase the Overall Accessibility of Trinity’s Services for All Potential and Existing Patients, Including the Medically Underserved.
The CON Rules require that all proposed projects be accessible to the medically
underserved. CON Rules § 410-1-6-.07(1) provides that:
The contribution of the proposed service or facility in meeting the health related needs of traditionally medically underserved groups (for example, low income persons, racial and ethnic minorities, women, and handicapped persons) particularly those needs identified in the appropriate state plan will be considered. This purpose is to ensure that the medically underserved will receive
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equal access to care, that the project will be accessible to the whole community, and that the community needs the proposed project.
The CON Review Board and ALJ found that “Trinity [currently] provides excellent access to
medically underserved groups[, and] will continue to provide good access to medically
underserved groups” upon relocation to the 280 hospital. (AR 3220).
In determining whether the proposed service will be accessible, CON Rules § 410-1-6-
(1)(a) provides that the extent to which the medically underserved currently use the applicant's
services in comparison to the percentage of the population in the applicant's service areas which
is medically underserved, and the extent to which the medically underserved are expected to use
the proposed services, should be considered. Noel Falls testified that the purpose of the rule is to
ensure that the medically underserved, including low income persons, racial or ethnic minorities,
women, and handicapped persons will receive equal access to care, and that the proposed
services will be accessible to the entire community. (T. 4409).
Trinity currently provides a generous amount of charity care at its Montclair campus.
Trinity reported charity care in the following amounts for 2006-2008:
2006 2007 2008
Uncompensated Care $12,488,471 $22,867,152 $28,076,000 Community Service $761,386 $736,850 Data not available (Exh. TMC 1 at 112-113). Former Trinity CEO Paul Graham testified that Trinity has a written
charity care policy (Exh. TMC 50) that dictates whether or not a patient qualifies for charity care,
and at what level of relief they qualify. (T. 3067). The policy is “generous” relative to industry
standards, and includes patients all the way up to 400% of the Federal Poverty Level, as
compared to 250% - 300% at most hospitals. (T. 3067-3068). Trinity’s charity care policy
includes a Statement of Community Partnership for Education and Referrals, which sanctions
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participation in certain community events such as health fairs and nursing clinics. Participation
in those activities will not change as a result of Trinity’s relocation. (T. 3084-3085).
Graham’s testimony supports the CON Review Board’s finding that Trinity shoulders a
large share of the charity care burden in Jefferson County. (T. 3219). Trinity draws some
indigent patients from counties without a county hospital, such as St. Clair and Clay Counties (T.
3068-3069), and also by virtue of being a teaching hospital. (T. 3219). In fact, Trinity’s
residency program actually encourages treatment of indigent patients, since residents handle
unattached patients, who are more likely to be uninsured. (T. 3060). Dr. Hrynkiw testified,
moreover, that with the exception of UAB, Trinity intakes the highest number of neuro-trauma
patients in the area – patients who tend to be indigent and whose treatment is often long-term and
very expensive. (T. 422). Trinity also treats a significant number of indigent psychiatric and
heart patients. (T. 2500).
In addition, Trinity participates in the Medicaid waiver program. (T. 3219). The
program was created in 1998 when participating hospitals in the Jefferson County and
surrounding area banned together and submitted a bid to Medicaid to operate the program. The
program provided for a flat fee to be paid to the hospital from the Medicaid program for
everything involved in the delivery of Medicaid recipients’ newborns. (T. 3074). Mr. Graham
testified that the Medicaid waiver program provides pregnant women on Medicaid with a choice
of several doctors to provide prenatal care and to deliver their baby, instead of being able to
obtain such services only at the county hospital, Cooper Green, or UAB. (T. 3076-3077). In a
given year, Trinity delivers 500 - 600 babies under the Medicaid waiver program. (T. 3077).
The evidence compellingly demonstrated that Trinity shoulders a larger burden of charity
care than certain other area hospitals, specifically St. Vincent’s. For instance, Paul Graham
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testified that St. Vincent’s, which has opposed this project, has never attempted to join the
Medicaid waiver program for expectant mothers. (T. 3078, 6812). Furthermore, while 2.5 to 3%
of Trinity’s gross revenue is comprised of charity care, St. Vincent’s charity care represents only
1% of their overall gross revenue. Thus, for every dollar of charity care St. Vincent’s writes off,
Trinity writes off $1.60. (T. 6807-6808). In addition, while approximately 8 - 10% of Trinity’s
gross revenues are derived from Medicaid, only approximately 2% of St. Vincent’s gross
revenues come from Medicaid. (T. 6809).
CON Rules § 410-1-6-.07(1)(c) provides that, in determining whether an applicant will
provide sufficient access to services for the medically underserved, the extent to which the unmet
needs of Medicare, Medicaid, and medically indigent patients are proposed to be served by the
applicant is to be considered. Here, Trinity projects uncompensated care of $36,469,403 in the
first year of its operations at the 280 hospital, and $39,680,574 in the second year. (Exh. TMC 3
at 2; T. 3218-3217). Trinity projects community service for the medically underserved of
$773,693 in the first year of operation after completion of the project, $812,377 in the second
year, and $852,996 in the third year. Id. Trinity projects that, as a gross percentage of its
revenue, Medicaid will represent 5.6%, Medicare will represent 45.8% and Charity Care will
represent 0.5% for the first two years of operation. (Exh. TMC 3 at 2). Paul Graham testified
that Trinity’s intention is that charity care will continue to increase upon the hospital’s relocation
to the 280 site. (T. 3073).
Additionally, relocating Trinity to the 280 site would improve access to all patients,
including the medically underserved. (T. 4412). Although Trinity currently serves a very large
area, its present facility is difficult to access from the north, south, and west. One indication that
low income groups cannot readily access Trinity is the Montclair hospital’s low emergency room
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volume of 25,000 visits per year. (T. 6560). At the 280 site, the hospital will be close to all
major roadway systems in the area, providing better access for all medically underserved
individuals in the area.
Relocation to the 280 site also will allow Trinity to provide services to the medically
underserved populations near the 280 site. (T. 4420). James Spann testified that there are low
income communities in proximity to the 280 site, such as Dunnavant, that Trinity will serve once
relocated. (T. 525). Within a three-mile radius of the 280 site are 3,200 households with
incomes of less than $35,000 a year,23 5,000 residents who are 65 and older, 1,700 African-
Americans, 1,200 persons of Asian descent, and 1,000 Hispanic persons. (Exh. TMC 368). In
the six-mile radius surrounding the 280 hospital, there is a total population of 155,000 persons,
with 67,000 households. Approximately 15,000 of those households have an income of less than
$35,000 per year, and 18,000 inhabitants are 65 or older. There also are 11,000 African
Americans and 22,000 other racial and ethnic minorities in that six-mile radius. (Exh. TMC 368).
In the 10-mile radius surrounding the 280 site, there are 20,000 - 30,000 households with an
income of less than $35,000 annually. (T. 4416).
With regard to those indigent patients that Trinity already serves, the Chairperson of the
Trinity Medical Staff, Dr. Rebecca Byrd, testified that many of those patients come from towns
like Oneonta, Pell City, and Sylacauga on the 280 corridor. (T. 2499-2501). In addition, Dr.
Byrd stated, with regard to indigent patients being referred from areas east of the 280 site, that
the establishment of the referral patterns of those indigent patients to Trinity has occurred over
several years, and will not automatically cease because of Trinity’s relocation. (T. 2499-2501).
Dr. Hrynkiw also testified that he intends, upon relocation to the 280 site, to keep seeing the
23 The Federal Poverty Level for a family of four was $40,000 per year at the time this
evidence was presented to the Agency.
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indigent neuro-trauma patients he already accepts. (T. 422). However, even for those indigent
patients currently utilizing Trinity who reside close to the current hospital location and who
choose not to utilize Trinity once it relocates, there is no shortage of other hospitals in the
surrounding area that they can access. (Exh. St. Vincent’s 422, 423; AR 3227).
During the hearing and in Brookwood’s brief to this Court, the Opponents insinuated that
Trinity’s relocation is motivated by the desire to distance itself from its charity care patients.
Dan Sullivan testified that the areas surrounding Trinity have the highest concentration of
Medicaid patients in Trinity’s primary service area. (T. 5740). Mr. Sullivan opined that Trinity
is attempting through its relocation project to abandon the patients it has traditionally served and
shirk its responsibility to those patients onto other hospitals. (T. 5746).
Strongly disputing this unfounded contention, Paul Graham testified that the motivation
for Trinity’s relocation is not to favorably affect its payor mix. Mr. Graham explained that
approximately one-half of Trinity’s Medicaid patients are admitted through the Medicaid waiver
program. Many of those mothers come from outlying areas, and Trinity’s relocation will not
affect the likelihood of their continuing to use Trinity. Id. Dr. Byrd, the President of Trinity’s
Medical Staff, testified that no one -- not the physicians, Trinity’s administration, or the
hospital’s financial planners -- has expressed a desire to relocate in order to distance the hospital
from indigent patients. (T. 2498). Dr. Byrd confirmed that, in her experience, the charity
patients seen at Trinity do not come from the area directly surrounding the hospital. (T. 2499).
She testified that many charity patients come to the hospital from outlying regions to obtain the
specialty services Trinity offers. (T. 2500). She testified that “I hope every one of my patients
goes wherever we go. And I don't think any physician at Trinity is trying to get away from a
group of patients.” (T. 2499).
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The opponents have also insinuated that Trinity is relocating to the 280 hospital to
capture the wealthy patient base along the Highway 280 corridor. The Opponents make much
of a demographic analysis prepared by Noel Falls for CHSPSC delineating the demographics of
the 280 hospital as compared to the Irondale site, at a three-mile and a six-mile radius. (Exh.
BMC 342, BMC 343). That analysis shows that the population and median income surrounding
the 280 site is greater than at the Irondale site. Id. The Opponents advance that analysis as proof
that Trinity is simply relocating to “cherry-pick” all the affluent patients on the 280 corridor.
The Opponents also assert that the population of the 280 area is more affluent than the
population surrounding Trinity’s current campus. The stark reality is that a hospital is a
business, and a hospital that goes out of business serves no one. (T. 523). The impetus for
Trinity’s decision to relocate, as previously addressed, is the failing physical facility at Montclair
and the dire straits that Trinity finds itself in with regard to patient admissions and physician
attrition. The move is not motivated by the relative wealth of the areas surrounding the
respective sites, as Trinity’s current campus abuts the neighborhood of Mountain Brook, one of
the wealthiest communities in the country. (T. 3340). Instead, once the initial determination was
made that relocation of the hospital was necessary, the next issues were to identify (1) where
there is a need for medical services and (2) what relocation site would represent the best location
for a hospital to meet that need. As a business, the hospital cannot relocate to an area that does
not have a growing population. (T. 2527). Even David McClain, a physician at Brookwood,
testified that it makes sense for Trinity to relocate to an area of rapid population growth. (T.
5235). In fact, when Brookwood was negotiating with HealthSouth for the purchase of the 280
hospital, it stated in internal documents that that purchase was justified by the population growth
along the 280 corridor. (Exh. TMC 308, 314). It is hypocritical, if not disingenuous, that
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Brookwood would now assert that Trinity’s relocation to serve that burgeoning population is
somehow nefarious in nature.
Thus, Trinity’s relocation will increase the accessibility of its services to the medically
underserved. The improved geographic accessibility of the 280 site would make Trinity
accessible to more underserved citizens than Trinity’s current Montclair Site. Trinity, today,
provides an inordinate amount of charity care to the indigent members of this community, and
would continue to do so, consistent with its Christ-centered mission, upon relocation to the 280
hospital. (AR 3220-3216).
G. Trinity is an Appropriate Applicant.
The Opponents focused attention throughout the hearing on Trinity’s decision not to
relocate to Irondale. The Opponents have framed an argument that, because Trinity chose not to
relocate to Irondale and instead to pursue relocation to the 280 site, Trinity is not an appropriate
applicant under the CON Rules. Brookwood again makes this argument repeatedly in its brief to
this Court. The “appropriate applicant” inquiry under the CON Rules focuses, however, on the
issue of “the ability of the person to render adequate service to the public,” and Trinity is more
than able in that regard. The CON Review Board and ALJ found that Trinity was an appropriate
applicant under the applicable rules, and this finding was supported by substantial evidence.
(AR 3215-3214).
CON Rules § 410-1-6-.09 requires that each CON applicant under consideration be an
“appropriate applicant.” That section states:
Determination shall be made that the person applying is an appropriate applicant, or the most appropriate applicant in the event of competing app1ications, for providing the proposed health care facility or service, such determination to be established from the evidence as to the ability of the person, directly or indirectly, to
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render adequate service to the public, including affirmative evidence as to the following:
(a) Professional capability of the facility proposing the capital expenditure…
(b) Management capability of the facility providing the capital expenditure.
(c) Adequate manpower, including health personnel and management personnel, to enable the facility to offer the proposed service.
(d) Evidence of the existence of the applicant's long-range planning program and an ongoing planning process.
(e) Evidence of existing and on-going monitoring of utilization and the fulfilling of unmet or undermet health needs in the case of expansion.
(f) Evidence of communication with all planning, regulatory, utility agencies and organizations that influence the facility's destiny.
CON Rules § 410-1-6-.09. Trinity presented ample and compelling evidence that, upon relocation to the 280 site, it
will be able to render exemplary services to the public. (AR 3214; Exh. TMC 1 at 54; T. 2502-
2503). With regard to the professional capability of the facility, as well as the issue of adequate
manpower, Trinity presented evidence that it intends to transfer its existing professional staff and
all other employees from the Montclair facility to the 280 facility, and that Trinity’s staff will
remain largely unchanged after relocation. (Id.) Because that staff has provided exceptional
service to its patients at the Montclair site, it will be able to provide those same services, and
most likely at an even higher quality, at the 280 site. (Id.)
In addition, Trinity presented evidence that the management capability of the facility is
excellent. (AR 3214). Trinity is currently managed, and will continue to be managed upon
relocation, by Community Health Systems Professional Services Corporation, which is one of
the nation’s leading operators of general acute care hospitals. (Exh. TMC 1 at 54). The
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organization’s affiliates own, operate, or lease more than 121 hospitals in 29 states, with an
aggregate of more than 18,000 licensed beds. (Exh. TMC 77). Mr. Jay Grinney, CEO of
HealthSouth, testified that CHSI “has an excellent reputation, as does Mr. [Wayne] Smith
[Chairman, President & CEO of CHSI], in the healthcare industry.” (T. 1843-1844). George
Hairston, a member of Trinity’s Board of Trustees, as well as the former CEO of Southern
Nuclear Operating Company, described Trinity as a “class outfit.” (T. 1477). Dr. Rebecca Byrd,
Chairperson of Trinity’s Medical Staff, testified that Community Health Systems Professional
Services Corporation manages Trinity well, that she is confident in Trinity’s leadership, that the
company has a good business reputation, and that she would trust Trinity to excel at managing
the hospital at the 280 location. (T. 2502-2503).
Trinity has also presented evidence that it is an appropriate applicant in that it has
developed a long-range planning program, and the proposed project is consistent with that plan.
In addition, Trinity has presented evidence that it will cooperate and communicate with all
planning, regulatory, and other agencies and organizations that will influence the facility's
destiny. (TMC 1 at 71, 87).
As noted above, the Opponents have pursued, at length, the irrelevant argument that
Trinity is not an “appropriate applicant” because it chose to pursue relocation to the 280 hospital
instead of relocation to Irondale. The chain of events that transpired involving Trinity and
Irondale has no bearing on the ability of Trinity “to render adequate service to the public.”
Brookwood has alleged that Trinity officials were untruthful with the CON Review
Board at its May 2008 meeting approving Trinity’s relocation to Irondale. They have alleged --
falsely to be sure -- that Trinity knew at the time of that meeting that it would not relocate to
Irondale, but nevertheless assured the CON Board that it would in order to obtain a CON. The
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actual facts, however, refute any claim of misconduct and instead show that Trinity did nothing
more than prudently consider its business options and move carefully and thoughtfully as matters
developed.
Birmingham Holdings, LLC, purchased Trinity on July 25, 2007.24 The Irondale
contested case hearing took place between October and November of 2007. Between July and
October, the new Trinity administration was still attempting to get its bearings in the
Birmingham hospital market. Trinity was attempting to work out operational issues related to
the transition of ownership, including a massive IT conversion involving the hospital’s clinical
and business computers. (T. 3850-3851). In addition, the hospital had to undergo multiple
surveys in association with the change of ownership. (T. 3850). Also underway was a physician
syndication of the hospital. (T. 3852). In addition, during that time period, the new
administration began to conduct an independent evaluation regarding the merits of the Irondale
site.
After being approached by Daniel at the beginning of January 2008, Trinity began to
analyze the option of relocating to the 280 site. David Miller testified that he believed that it was
a wise business decision to evaluate the 280 hospital during the spring of 2008 because Trinity
had not yet received a CON to relocate to Irondale, and needed to be prepared with a backup
plan. Trinity CEO Bill Heburn first went to tour the 280 hospital on February 5, 2008,
accompanied by Paul Graham and Sean Dardeau. The purpose of the visit was to evaluate the
hospital as another alternative in determining the ultimate best location for Trinity. (T. 3872).
In June of 2008, Birmingham Holdings, LLC, purchased Baptist’s membership interest in
Affinity Hospital, LLC, thus becoming Trinity’s sole owner. Gordon Carlisle’s building team
24 For an organizational chart reflecting the corporate structure of CHSI and its affiliates,
including Birmingham Holdings, LLC, see Exh. TMC 37.
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came to the conclusion in the summer of 2008 that the space program contemplated in the
Irondale project could be adapted to the 280 hospital. (T. 1991). The final decision to relocate
Trinity to the 280 site, however, was not made until September of 2008. (T. 2173). Those are
the facts.
The Opponents’ contention that Trinity misled Irondale’s mayor, failing to timely inform
him of Trinity’s decision that it would not relocate to Irondale, is baseless. Bill Heburn visited
Mayor Alexander on September 30, 2008, to advise him that Trinity no longer intended to
relocate to Irondale. At that time, Mr. Heburn also informed Mayor Alexander of Trinity’s
intention to honor the land lease. Any suggestion that the decision not to relocate to Irondale had
been made well before that time, but that Trinity had nevertheless allowed Irondale to continue
preparations and expend funds in anticipation of Trinity’s relocation, was not substantiated by
the evidence. Again, the evidence reflects that no final decision was made to relocate to the 280
hospital until September of 2008. Paul Graham, Bill Heburn, and Noel Falls all independently
testified that a final decision had not been made to relocate to the 280 hospital until middle-to-
late September of 2008. (T. 3400, 4064, 4361).
Companies, even hospitals, change their minds. When considering an enormous capital
investment, there are many factors and circumstances that may redirect a hospital from one
course of action to another. For instance, in May of 2005, Brookwood applied for a CON to
construct two new three-story patient towers. (Exh. TMC 119). The first tower was to contain
new private patient rooms. Id. The second was to house new ORs, a new peri-operative care
unit, and a new central sterile supply unit. Id. The total cost of the project was estimated to be
almost $64 million. Id. That CON was granted. Id. On November 1, 2007, Brookwood
changed its mind and was granted a CON for a project modification to build a single five-story
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patient tower in place of the two three-story towers. (Exh. TMC 120). Beds and services then
offered in the Women's Plaza were to be moved to the patient tower. Id. The patient tower was
also to have space for physician's offices. Id. The new project cost was projected to be over $72
million. Id. In the meantime, Brookwood also received a CON for a cardiac catheterization lab
expansion. That CON was later combined with the five-story patient tower project. (Exh. TMC
219 at 4-6). Between November of 2007 and October of 2008, Brookwood proceeded to
complete numerous phases of that development, including certain ER phases, the cardiovascular
unit, and two new ORs, but no progress was made on the women's center portion of the project.
(Exh. TMC 119 at 2). In December 2008, Brookwood changed course again and announced that
it had scaled back its plans for a new women's center because of the downturn in the economy
and in Birmingham's healthcare market. During the contested case hearing regarding the instant
project, Garry Gause for the first time announced that Brookwood would begin construction of
that women’s tower in December of 2009. (T. 5563).
Brookwood’s women’s tower project is significant in illustrating that it is not uncommon
for hospitals to modify, change, or discard plans to make certain capital improvements and
investments. There was nothing nefarious about Brookwood’s changing its mind. There were
simply extenuating factors that made Brookwood’s original plan untenable. The same holds true
for Trinity. The fact that Trinity changed course away from the Irondale relocation plan, and
chose instead to pursue the 280 option, does not even remotely suggest that Trinity is not an
appropriate applicant. It simply reflects the fact that, in its final analysis, Trinity determined that
the 280 hospital was the best alternative, both from an institutional and a community need
perspective.
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V. THE BOARD’S DECISION TO DENY OPPONENTS’ MOTIONS FOR RECONSIDERATION WAS SUPPORTED BY THE RECORD AND WITHIN THE BOARD’S DISCRETION.
In addition to the CON Issuance Order, the CON Review Board issued an order denying
Brookwood’s and St. Vincent’s motions for reconsideration. The CON Review Board weighed
the evidence and found that Brookwood and St. Vincent’s evidence of 16 additional documents
confirming that Trinity negotiated to purchase the digital hospital and finally struck a deal in
later 2009 was not material. After reviewing the contested case proceeding, the 16 documents,
taking additional evidence, and hearing arguments of counsel, the CON Review Board did not
act arbitrarily or capriciously in denying reconsideration.
Brookwood argues that the CON Review Board’s refusal to re-open the contested case
hearing based upon the additional 16 documents produced by Trinity was erroneous,
unreasonable, arbitrary, and capricious. The CON Review Board’s decision to deny the
Opponents’ Motions for Reconsideration “shall be taken as prima facie just and reasonable,” and
“a presumption of correctness attaches to [the CON Review Board’s] decision because of its
recognized expertise in a specific, specialized area.” Ala. Code § 41-22-20(k); Sylacauga Health
Care Center, Inc. v. Alabama State Health Planning Agency, 662 So. 2d 265, 267 (Ala. Civ.
App. 1994).
The CON Review Board evaluated the 16 documents that were the basis for the
Opponents’ Motions for Reconsideration and “implicitly determined that the 16 documents were
not ‘significant relevant and material’ information that would change its decision to grant Trinity
the CON.” Court of Civil Appeals opinion, 21. The additional 16 documents were clearly
cumulative to the evidence presented to the ALJ and did not warrant re-opening the contested
case hearing.
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SHPDA Rule § 410-1-8-.09(2)(a) provides for reconsideration under the same grounds
provided in Alabama Code § 41-22-20 (k). SHPDA Rule § 410-1-8-.09 (2)(b) provides for
reconsideration by the CON Review Board “if the party requesting reconsideration presents any
significant relevant and material newly discovered information not previously considered by
SHPDA which, with reasonable diligence, could not have been discovered in time to be
presented before SHPDA made its decision.” (Emphasis added.) Further, SHPDA Rule 410-1-8-
.12 provides for reconsideration only if “good cause” is shown:
The purpose of the hearing on the request for reconsideration is to determine whether good cause has been shown by the person requesting the reconsideration hearing. The only evidence to be considered by the Certificate of Need Review Board is the record of the prior public hearing on the application, the written evidence of good cause submitted by the requester, and any other written evidence filed by an applicant or intervenor to the case which refutes the written evidence of good cause. The Certificate of Need Review Board will consider all written evidence and will, in its discretion pursuant to 410-1-8-.09(3), by a majority vote of a quorum of its members present, determine whether good cause has been proven. Following a determination that good cause has been proven, the request for reconsideration will be granted and the application for the Certificate of Need will be heard at the next regularly scheduled meeting of the Certificate of Need Review Board, with the applicant having the burden of proof. Following a determination that good cause has not been found, the request for reconsideration will be denied.
(Emphasis added.)
Trinity filed the 16 documents with the CON Review Board. (AR 4594-4497). The
parties briefed and argued the issue. The CON Review Board considered the 16 documents and,
after determining that the 16 documents did not constitute “significant relevant and material
evidence” that presented “good cause” for a new trial, denied reconsideration (AR 4739).
In reviewing the CON Review Board’s determination that the 16 documents did not
constitute “significant relevant and material evidence” that presented “good cause” for
reconsideration, this Court is required to give great deference to the CON Review Board’s ruling.
See SHPDA Rule § 410-1-8-.12; State Health Planning & Dev. Agency v. W. Walker Hospice,
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Inc., 993 So. 2d 25, 29 (Ala. Civ. App. 2008). See, e.g., Weeks v. Danford, 608 So. 2d 387, 388-
389 (Ala. 1992 (“In order to be entitled to a new trial on the ground of newly discovered
evidence, the movant must show that the evidence was discovered after trial, that it could not
have been discovered with due diligence prior to trial, that it is material to the issue and not
merely cumulative or impeaching, and that it is of such a nature that a different verdict would
probably result if a new trial were granted.”) (Emphases added); Ex parte Pierson, No. 2090085,
2010 Ala. Civ. App. LEXIS 242 (Ala. Civ. App. Aug. 27, 2010 (looking to procedures in civil
trial courts to interpret administrative rule).
At the ALJ hearing, Trinity produced voluminous documentary evidence and live witness
testimony that showed:
The possibility of completing the vacant digital hospital arose in early 2008 (T. 1578, 1621-24, 1631-34, 1676, 1810, 3869-71, 3924-25; STV 328);
Trinity explored that possibility, but struck no deal before September 2008 (T. 1673-74, 1990-91, 3979, 4077; BMC 325); and
On September 30, 2008, Trinity publicly announced its intent to move to the digital hospital and filed a letter of intent to do so with SHPDA (AR 9).
Brookwood and St. Vincent’s argued on reconsideration that the 16 documents
contradicted Miller’s and Heburn’s testimony at the digital hospital ALJ hearing about Trinity’s
decision process for the digital hospital.
A. The 16 Documents Confirm Miller’s Testimony that He Had Not Decided to Go to the Digital Hospital Before Late September 2008.
First, Brookwood’s counsel asked Miller at the digital hospital CON hearing if Trinity
was still committed to going to Irondale at the time the CON Review Board met on May 21,
2008 to consider granting the Irondale CON:
Q. But why my question was, was on May 21st, 2008, when the CON Review Board hearing was there in Montgomery and heard the presentation from
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your attorney, with representatives of CHS in attendance, that said we’re going to Irondale, was CHS 100 percent committed to go to Irondale?
A. I -- I would say that it was probably 98 percent, something like that.
(T. 1621.)
Brookwood argued that Miller’s testimony was contradicted by a note from a March 26,
2008 meeting (one of the 16 documents) with Daniel stating, “shoot for end of April deal.” (AR
4720.) Brookwood failed to quote an additional part of the March 26, 2008 note, stating: “deal
contingent on CON, government help, assistance on old site and possibly new site,” (AR 4531)
or another of the 16 documents that confirmed that on June 27, 2008 -- four days after the
Irondale CON issued -- there still was no deal because Daniel was driving too hard a bargain:
“Marty, for a property that has been sitting idle for many years, the seller is trying to extract too
many concessions from us, the first qualified buyer they have seen in a long time.” (AR 4521.)
Further, Brookwood failed to deal with the email produced at the ALJ hearing showing that no
deal was reached until the last week of September 2008 -- three months after SHPDA issued the
Irondale CON. (Exh. BMC 414). Taken as a whole, this March 26, 2008 note was merely
cumulative of the evidence the ALJ reviewed regarding Trinity’s decision process during 2008.
See Weeks, 608 So. 2d at 388-89.
Second, Brookwood argued that a May 1, 2008 email discussing hiring a lobbying firm
for the digital hospital project (one of the 16 documents) contradicted Miller’s testimony above
that he had not made the decision to move to the digital hospital as of May 21, 2008. (AR 4720.)
The email about hiring a lobbyist firm, however, is consistent with Trinity’s testimony that it was
conducting due diligence to determine if the digital hospital location would receive community
support before it committed approximately $555 million to that project. See SHPDA Rule § 410-
1-6-.06 (1)(f) (“The applicant may at its option, submit endorsements from community officials
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and individuals expressing their reaction to the proposal.”) (Transcript Sept. 15, 2010 CON
Review Board Meeting, 23, 31-33.) Moreover, a close reading of the email shows that CHSPSC
was making plans for engaging lobbyists, including the Fine and Geddie firm, “if” Trinity
decided to move to the digital hospital location. (AR 4537-4536.) This evidence was merely
cumulative of the evidence the ALJ reviewed that Trinity was conducting due diligence to see if
a move to the digital hospital was realistic and prudent. See Weeks, 608 So. 2d at 388-89.
Third, Brookwood argued that a September 3, 2008 email asking about Trinity’s efforts
to get Brookwood to drop its appeal of the Irondale CON (one of the 16 documents) contradicted
Miller’s testimony that he had been uncertain about the move to the digital hospital or to Irondale
at the time he had his counsel ask Brookwood to drop its appeal of the Irondale CON. (AR
4720-19.) Miller testified at the digital hospital ALJ hearing as follows:
Q. All right. The reason you didn’t want Brookwood to appeal was not because you wanted to go to Irondale; it was because you wanted to go to 280 and not have to file another CON.25
A. I’m not sure I agree with that.
Q. Now, when you wrote that, when you had your lawyer write that letter -- or somebody at CHS had them write it -- you weren’t going to Irondale were you?
A. It was one of the possibilities.
Q. No, look at the date on here, Mr. Miller, August the 19th. Now, you tell me that you were going to Irondale on August the 19th?
A. I’m telling you that that was still a possibility.
(T. 1673).
25 As previously explained, Brookwood’s counsel was referring to SHPDA Rule 410-1-
10-.03, which provides a procedure where a CON holder can apply to SHPDA for a change in location of a CON without going through an entirely new CON process.
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In Talley v. Kellogg, 546 So. 2d 385 (Ala. 1989), the Alabama Supreme Court reversed a
trial court’s grant of a new trial based upon new evidence, in part, because the new evidence was
merely impeaching. The Court explained that “[n]ewly discovered evidence which merely tends
to discredit an adverse party or his witnesses will not avail as a ground for a new trial, as such
testimony may be discovered in almost every case, and there must be an end to litigation.” Id. at
388 (internal punctuation omitted).
At the Trinity ALJ hearing, Brookwood tried and failed to impeach Miller with the letter
his counsel wrote to Brookwood regarding the appeal of the Irondale CON. (T. 1673.) Its re-try
of the same argument based on the September 3 email shows that it is cumulative of its prior
impeaching evidence and thus inadequate for two reasons. See Campbell v. Williams, 638 So. 2d
804, 814-15 (Ala.) (“[T]he newly discovered evidence would have served only to impeach [the
expert witness’s] testimony as to the proper standard of care. Because the plaintiff’s other expert
witness also testified as to the proper standard of care, we cannot say that a new trial probably
would result in a different verdict. Therefore, the trial court did not abuse its discretion in
holding that the newly discovered evidence provided insufficient grounds for a new trial.”), cert.
denied, 513 U.S. 868 (1994). The CON Review Board did not err in denying Brookwood’s and
St. Vincent’s motion for new trial.
In any event, far from announcing a decision to move to the digital hospital, the
September 3 email raised a number of questions regarding the digital hospital possibility with
Paul Smith, vice president of operations of division 1 of CHSPSC, including what economic
incentives Trinity should pursue, who would likely oppose the move, “Any impact on our threat
to take legal action against Tenet/Brookwood?”, and whether Trinity should hire the Fine and
Geddie lobbying firm. (AR 4500.) Brookwood again failed to cite to the confidential email
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showing that Miller made the decision to move to the digital hospital in the last week of
September 2008. (See Exh. BMC 414). Miller’s testimony that Irondale was still a possibility
on August 19th was accurate because no deal for the digital hospital had been struck as of
August 19, 2008, as the record clearly shows. Because this evidence merely is cumulative and
would not change the outcome by the ALJ, the CON Review Board’s denial of reconsideration
was supported by the record and was not arbitrary or capricious. See Weeks, 608 So. 2d at 388-
89.
B. The Record Confirms Heburn’s Testimony that He Did Not Negotiate with Daniel, Make the Decision to Move to the Digital Hospital, or Know of the Decision Until the Last Week of September 2008.
Brookwood argued, as part of its request for reconsideration, to the CON Review Board
that a May 1, 2008 email in which Heburn discussed hiring lobbyists for Miller (one of the 16
documents) contradicted Heburn’s testimony at the ALJ hearing for the digital hospital CON that
he was not involved in the negotiations with Daniel and did not make the decision on the digital
hospital (AR 4718-4717):
Q. Okay. So, now, in between your visit to the [digital hospital] facility in February of 2008 and the date of this e-mail in May of 2008, you were pretty much out of the loop as far as looking at the 280 site; is that fair to say?
A. That’s correct.
(T. 3947.)
Q. All right. And up until about September 28th or September 29th, you weren’t really in the loop on the negotiations with Daniel and the kind of vetting of the 280 site; is that --
A. I was not actively involved in any of that.
Q. Who told you that the 280 site had been chosen and Irondale was out?
A. Probably David Miller.
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. . . .
Q. Weren’t you pretty surprised, Mr. Heburn?
A. Well, I think it was a -- a sound business judgment in my own mind. I wasn’t thinking about a whole lot of anything. We were essentially three months into a new purchase, a very difficult IT conversion that took 24 hours a day of not only my time, but most every body was trying to convert the hospital. I really didn’t pay a whole lot of attention to any of this.
Q. So you’re tell[ing] me that you weren’t paying much attention to the relocation of your hospital to Irondale?
A. That decision was not going to be mine.
(T. 3971-72) (emphases added).
Consistent with Heburn’s testimony, the record shows that Miller conducted the
negotiations with and struck a deal with Daniel. This is clear from, for example, the June 27,
2008 memo in which Miller said Daniel was asking for too many concessions (AR 4521) and the
confidential document dated the last week of September in which Miller announced the deal to
move to the digital hospital. (Conf. App. B-1.) The May 1, 2008 email is cumulative and would
not change the result. See Weeks, 608 So. 2d at 388-89.
Second, Brookwood and St. Vincent’s argued that Heburn’s being copied on emails about
Miller’s due diligence and his asking of questions about the digital hospital contradicted
Heburn’s testimony that he did not know about the digital hospital decision until the September
30th time frame:
Q. Well, let’s see. You said that you found out that you weren’t going to Irondale September 28th, 29th, during that time frame, correct?
A. Somewhere around there for sure.
(T. 3979) (emphases added).
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Heburn was indeed copied on a number of emails discussing Miller’s efforts to reach a
decision on the digital hospital, but, as the record shows, Miller did not strike that deal until the
last week of September 2008. (Exh. BMC 414). Indeed, if Heburn learned of the decision on the
day it was made, it would have been in the last week of September time frame.26 This evidence
is cumulative. See Weeks, 608 So. 2d at 388-89.
In addition to being merely cumulative to Trinity’s evidence at the digital hospital ALJ
hearing, the 16 documents would not change the CON Review Board’s decision to deny
reconsideration.27 The purported “fraud” -- Trinity’s alleged decision to go to the digital hospital
before SHPDA issued the Irondale CON on June 23, 2008 -- did not happen. That Miller
investigated, planned, hired consultants, and requested reports to obtain the information to make
the $555 million decision to move to the digital hospital are good business practices, not material
evidence of fraud. And whether Heburn was copied on 16 emails or 1600 does not change the
fact that Trinity decided to move to the digital hospital three months after SHPDA issued the
Irondale CON. See Campbell, 638 So. 2d at 814-15 (holding no new trial was warranted because
“we cannot say that a new trial probably would result in a different verdict”); 12 James Wm.
Moore et al., Moore’s Federal Practice ¶ 59.13[2][d][ii] (3d ed. 2011) (“The evidence
discovered must be of a nature that would probably change the outcome of the case.”). Miller
made that decision in the last week of September 2008, and it was announced publicly that week
as well. (Exh. BMC 414). The Denial of Rehearing Order is not arbitrary, capricious, or
26 Even if Brookwood could have proved an inconsistency with the 16 documents, and it
has not, the subject matter of the inconsistencies (e.g., decision process as of August 19, 2008, degree of Heburn’s involvement), would nonetheless have been merely cumulative. See Talley, 546 So. 2d at 388.
27 Obviously, the 16 documents did not change the CON Review Board’s actual decision because the Board did, in fact, review them before making that decision. (AR 4739; Transcript Oct. 20, 2010 CON Review Board Meeting).
200
unreasonable, and should be affirmed under the limited appellate review authority granted this
Court by the AAPA.28
CONCLUSION
SHPDA’s orders are supported by substantial evidence, and the presumption of
correctness has not been overcome. The orders allowing Trinity to relocate its hospital
operations from the obsolete Montclair facility to the digital Hospital should be affirmed.
Respectfully submitted this 6th day of April, 2012.
/s/ Robert E. Poundstone IV One of the Attorneys for Affinity Hospital, LLC d/b/a Trinity Medical Center
OF COUNSEL: Bobby Segall ([email protected]) COPELAND, FRANCO, SCREWS & GILL, P.A. 444 South Perry Street Montgomery, Alabama 36104 Direct Telephone: (334) 420-2956 Direct Facsimile: (334) 834-3172 Robert E. Poundstone IV ([email protected]) BRADLEY ARANT BOULT CUMMINGS LLP The Alabama Center for Commerce 401 Adams Avenue, Suite 780 Montgomery, Alabama 36104 Direct Telephone: (334) 956-7645 Direct Facsimile: (334) 956-7845
28 Trinity adopts and incorporates the administrative record into this brief. Trinity also
adopts and incorporates each record and citation and argument in each section of this brief into every section of this brief, including the appendices.
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David R. Boyd ([email protected]) BALCH & BINGHAM LLP Post Office Box 78 Montgomery, Alabama 36101-0078 Direct Telephone: (334) 269-3138 Direct Facsimile: (866) 736-3854 Carey B. McRae ([email protected]) Jennifer H. Clark ([email protected]) BRADLEY ARANT BOULT CUMMINGS LLP One Federal Place 1819 Fifth Avenue North Birmingham, Alabama 35203 Telephone: (205) 521-8000 Facsimile: (205) 521-8800
202
APPENDIX A
Requirements for Issuance of CON under Ala. Code § 21-22-266.
After weighing all the evidence, including live testimony at the contested case hearing,
ALJ Hampton and the CON Review Board made the following findings required by Ala. Code § 21-22-266. These findings were supported by substantial evidence, and this Court may not substitute its judgment for SHPDA to re-weigh the evidence. These findings cannot be overturned under the limited appellate review provided by the Alabama Administrative Procedure Act (“AAPA”).
Requirement CON Review Board and
ALJ Findings Examples29 of Evidence Supporting Findings
from Voluminous Administrative Record
That the proposed facility or service is consistent with the latest approved revision of the appropriate state plan effective at the time the application was received by the state agency (Ala. Code § 22-21-266(1).)
Requirements under State Health Plan (Ala. Admin. Code § 410-2-4-.14):
Most cost-effective or otherwise most appropriate alternative
Reasonableness of square footage, construction cost, and equipment cost for types and volumes of patients to be served
“[T]he proposed facility to be relocated at the Highway 280 site is consistent with the latest approved revision of the [State Health Plan] as of the date of this application, provided the Applicant makes appropriate concessions for the ‘60 percent rule’.” (AR 3210). “The Applicant made a prima facie showing that a relocation to the Highway 280 facility is the most cost-effective alternative if relocation is to take place.” (AR 3243). “The Applicant established that the relocation of the Trinity facility to the Highway 280 location is the most appropriate alternate.” (AR 3241). “The Applicant
Most cost-effective or otherwise most appropriate alternative Relocation to Highway 280 is most cost-effective and appropriate alternative because:
280 hospital is 60-65% completed structure with over $200 million already invested in it. (T. 1517-1518.)
Trinity is basically acquiring hospital for free. Cost of purchase of 280 hospital building is offset by tax incentives from City of Birmingham. (TMC Exhs. 16 & 17; T. 3878-3879; T. 1420-1421.)
The Highway 280 facility will provide 92,000 square feet of “shell space” for the future growth of the hospital (T. 2419) with mechanical, plumbing and electrical systems in place (T. 2889) which will result in further cost savings.
Trinity can complete 280 hospital for $144 million when new construction of same facility would cost $300 million. (T. 2854-2855.)
Renovation would be substantially more expensive than relocation to 280 hospital. (T. 719; 726-728; 965-973; 979; 1501-1502; 1921, 2591; 2065; 6531-6532; Exh. TMC 47 at 14.)
Relocation to 280 hospital is more cost
29 These charts contain examples of the evidence supporting SHPDA’s findings. For a
more complete discussion of the evidence, see Sections III and IV of this brief.
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Applicant same as owner of facility being replaced
Evidence of need for project
established, by the evidence, that as a relocation to the Highway 280 site, the proposed square footage, construction costs per square foot and the cost of fixed equipment will be appropriate and reasonable for the types and volumes of patients to be served.” (AR 3239). “Affinity Hospital is the legal entity which owns Trinity Medical Center. If Trinity is relocated, the ownership will not change.” (AR 3239). “The Applicant demonstrated that the existing facility at Montclair needs replacement to meet licensure and certification requirements.” (AR 3239). “The Applicant presented substantial evidence of operational problems at the Montclair facility.” (AR 3237).
effective and appropriate than relocation to Irondale because the 280 hospital is already 60-65% completed and has shell space for future growth. (T. 1517-1518; 2419; 2889).
Reasonableness of square footage, construction cost, and equipment cost for types and volumes of patients to be served Construction costs to complete Highway 280 hospital including site development, road improvements, a parking garage and furnishing the interior estimated at approximately $144,000,000 - (Exh. TMC 91) Trinity’s first-year operating costs for the project will be $275,000,000 and Trinity expects that those costs will be offset by revenue produced by the ongoing operation of the hospital. (Exh. TMC 1) The square footage of the Highway 280 facility is adequate to accommodate the beds and that the cost per square foot is $154.76. (Exh. TMC l at p. 106) The cost of fixed equipment is $72,000,000 at a maximum. (Exh. TMC 1 at p. 12). Evidence of need for replacement: Code deficiencies at Montclair campus necessitate replacement and relocation:
The hospital is only approximately 85% sprinkled, despite the fact that since 1988, the Standard Building Code has required that hospitals be 100% sprinkled. (T. 656).
o Although Trinity has grandfathered status under that code, should Trinity undertake any major renovations, the Alabama Department of Public Health will; require that it bring the whole smoke zone in which the renovation area is located up to code. (T. 656-659, 714).
o Sprinkling such areas would cause massive disruptions to the areas of the hospital where the installation of
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that equipment occurred.
The Montclair hospital does not comply with the ADA’s Guidelines.
o There are not a sufficient number of handicapped accessible patient bathrooms in the hospital. (T. 663).
o There are no ADA accessible bathrooms in patient rooms outside of the Women’s Center, which has recently been renovated and thus complies with the ADA. (T. 663).
o Neil King, an architect retained by St. Vincent’s who toured the Montclair hospital, agreed that the typical patient bathrooms the facility are not ADA compliant. (T. 5393).
o In order for a patient in any area of the hospital other than the Women’s Center to utilize handicapped accessible restrooms, he or she must go to the main lobby. (T. 777).
o The typical patient room bathrooms are so small that it is impossible to renovate them to meet ADA requirements. (T. 828).
o The ADA requires sinks in all patient rooms, not just in patient bathrooms. However, due to the small size of the patient rooms, it is impossible to install sinks in them. (T. 691).
o The width clearances of the elevators on the campus are too small under the ADA, but cannot be retrofitted to achieve compliance. (T. 708-709).
The Montclair hospital does not meet code requirements for fire caulking. (T. 716-717).
o Current codes require the use of fire caulk systems at all rated wall penetrations, the top of rated wall systems, and through rated floor and
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roof systems. (Exh. TMC 47). o Although recent renovations have
utilized fire caulk, all of the existing gyp board mud seals from the time of original construction of the hospital are still in place. (Exh. TMC 47).
o Upon renovation of areas without fire caulk systems, those systems would have to be installed, which would be a massive project that would constitute an undue burden upon the hospital. (Exh. TMC 47).
o There are multiple code violations at
Montclair caused by space constraints.
o Current code requires 200 square feet per bed for special care beds, but only one of Trinity’s 50 special care beds meets that requirement. (T. 697-698).
o The code for neonatal intensive care units now requires much larger square footage per bassinet than Trinity provides. (T. 699-700).
o Of the 10 original operating rooms, six do not meet the minimum code requirement of 400 square feet. (T. 701).
o Two operating rooms designated for cardiac surgery that were constructed in 1982 have only 520 square feet, as compared to the 600 square feet currently required by code. (T. 702).
o Post Anesthesia Care Units (“PACU”) are required by code to be at least 80 square feet in size; however, Trinity’s PACU’s are only 40 square feet. (T. 703).
The kitchen at the Montclair hospital is in the beginning of a near complete below-grade waste line failure, which would have to be corrected in phases and would
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therefore create substantial problems related to providing food services to patients. (T. 705-706).
Public bathrooms have no air supply. (T. 829-830).
There is one air exchange per hour in Trinity’s patient rooms, instead of the six air exchanges per hour required by code, and there is no way for Trinity to renovate its facility to meet that standard. (T. 685-689).
The code requirement that there be one roof access per building cannot be met in Trinity’s 1982 tower. (T. 714).
Life Safety Code violations at Montclair facility necessitate replacement and relocation:
The fire egress corridors often are congested with waiting patients on stretchers or beds, supplies, and equipment due to the lack of patient holding areas and storage space throughout the facility Id. at 11. However, there is insufficient available space in the hospital to improve that situation. (Exh. TMC 45.)
Because the spaces above the ceilings where no fire suppression systems exist are full of other services, such as ductwork, chilled and hot water piping, and plumbing, it is impossible to correct that problem because of the lack of physical space to install the piping. Id.
o Since ceilings are currently installed as low as they should be, lowering them is not a feasible alternative. Id.
o Ceiling replacements also involve removal and replacement of many other devices such as lighting fixtures, HVAC diffusers and grilles, fire alarm devices, speakers, and telemetry antennas. Id.
In the original hospital building, the Life
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Safety and Critical emergency systems are not properly separated, as required by code. Id. at 12. In order to correct that code violation, a complete demolition and replacement of the electrical system would be required, resulting in years of inconvenience and down-time for that part of the campus. Id.
Operational problems at Montclair campus necessitate replacement and relocation:
The hospital is spread out over a number of floors and across attached additions. In a typical surgery, a patient starts out on the ground floor at admissions, goes to the tenth floor for pre-surgery preparation, goes to the second floor for the actual surgical procedure, and finally goes to the fifth floor for recovery. (T. 910).
The labor and delivery department is on the second floor, while post-partum services are on the fourth floor. (T. 710).
MRIs are located in the same area as the oncology department, instead of near the imaging department, because that is the only space where there is room for that equipment. (T. 711).
Cardiac services are unconsolidated and instead scattered all over the hospital. (T. 245).
Patients have trouble finding their way through the hospital. (T. 323). Way-finding problems at the hospital lower patient satisfaction, and frustrate families as well. (T. 3731). Although Trinity has attempted to improve signage to combat way-finding issues, patients and families still become confused about where to report for various procedures. (T. 3731-3732).
On a scale of one to ten, throughput at the current site represents about a “four.” (T. 3728, 3729).
Because the hospital is diffused over such a large area, the staff is consequently spread extremely thin. (T. 248).
Significant manpower must be employed to
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move patients throughout the sprawling hospital over the course of a visit. (T. 3805).
If one includes the 560 beds for which Trinity has a license, the hospital has 1100 square feet per bed; considering only the approximately 350 beds that are in operation, the hospital has 1600 square feet per bed. (T. 668). The industry standard today is 2220 square feet per bed. (T. 668).
There is a general lack of storage space for equipment, and it is thus often necessary to store surgical equipment in the hallways. (T. 859).
Three of the operating rooms have storage areas behind them and the only way to access those storage areas is through the three operating rooms themselves. (T. 860-861).
o Some surgeons will not allow staff members to come into those operating rooms to enter the storage rooms while the surgeons are performing a procedure, which causes delays for the surgeons in other operating rooms that need that equipment. (T. 860-861).
o That situation also results in distraction and aggravation for surgeons operating in those operating rooms. There is a storage room, for example, behind Dr. Garry Turner’s operating room, and he testified that it agitates him when individuals have to come retrieve equipment out of the storage room while he is in the middle of an operation. (T. 1356-1357).
The operating rooms are too small. (T. 878). o Modern equipment that did not exist
at the time the ORs were built takes up much of the area of the already small ORs, thus rendering patient care difficult. (T. 349-353).
o Some ORs are so small that certain physicians, such as orthopedists and
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bariatric surgeons, cannot operate in them. (T. 858-862).
o Trinity has already renovated the ORs that could be expanded (because they were nearest the outside wall of the hospital). (T. 367-368).
o Other ORs, such as OR number 7 where Dr. Turner performs head and neck procedures, has remained basically the same since it was built. (T. 1358). Dr. Turner testified that he has personally met with architects regarding renovation of that OR and that there is nothing that can be done to sufficiently address these issues that would not take excessive time, be inefficient, and waste money. (T. 1358).
The labor and delivery rooms, as well as the conventional labor rooms, are too small. Although the units have been remodeled fairly recently, the rooms, which should be 300 square feet according to code, are only about 225 square feet in size. (T. 712-713). Trinity also has some conventional labor rooms that are approximately 10 feet by 10 feet in area, which is extremely small. Id.
The patient rooms at the Montclair hospital are diminutive by today’s standards. In the original 1966 tower, there are private and semi-private rooms. (Exh. TMC 47 at 7).
o The semi-private rooms are, for the most part, being used as private rooms. Id. The rooms that have been converted from semi-private to private are 12 feet 7 inches from head to footwall and 15 feet 6 inches from side to side. Id.
o The rooms which were originally built as private rooms are much smaller. They are 12 feet seven inches from head to footwall, but only 9 feet 6 inches from side to side, and are exactly the minimum square footage allowed under code
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for a patient room. Id. o Trinity utilizes Hill-Rom beds,
which are 7 feet ten 10 inches long, and 3 feet 5 inches wide. (T. 691). Code requires that there be over three feet between beds in a semi-private room, and also three feet in between the bed and the wall in all rooms. (T. 691). In addition, 2001 ADA Guidelines require hand wash sinks inside patient rooms for utilization by staff members and physicians. (T. 692). However, it would be extremely crowded to maintain the required clearances on the sides of the bed and to also put a sink in the private rooms. Indeed, it would be impossible to do so in the rooms that are still utilized as semi-private rooms, and there is no way to renovate those rooms to accommodate those requirements. (T. 692-693).
o In the 1982 patient tower, the patient rooms are actually smaller than in the 1966 tower. (T. 694). The head to foot wall dimension is 10 feet 6 inches, and the rooms are 9 feet 6 inches from side to side, creating a total of about 100 square feet. (T. 694-695). Code requires that patient rooms measure at least 120 square feet. (T. 695). Although Trinity is grandfathered and does not technically have to meet that code requirement, the market demands a room larger than 100 square feet. (T. 695).
The inpatient admission areas are too small. There are four portals for surgery admission: early morning admission, one-day surgery admission, the emergency department, and inpatient admission. (T. 851-854). Trinity has to have an early morning admission area separate from a one-day admission area because neither
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space is large enough alone to accommodate both services, resulting in duplication of staffing. Id. Trinity staff members often have to search for patients that present at the wrong admissions area. Id. In addition, referring physicians’ offices are often unaware of where to tell their patients to present at Trinity for surgery. Id.
There are nine ORs that have only one point of ingress and egress. (T. 854). It is better to have an adjacent sub-sterile room in between sterile and non-sterile areas, i.e., a controlled environment where staff and physicians must wear masks and the correct attire. (T. 865).
In four of the ORs in one-day surgery that do not have sub-sterile rooms, if a physician or staff member drops an implement, he or she must go out into the hallway to sterilize it. (T. 863).
The ORs are so small that the nurses have only one or two feet to maneuver without contaminating the sterile field. (T. 864).
Three of the ORs do not have appropriate ventilation, meaning that the air does not blow down from the ceiling directly over the sterile area and then exit from the floor below. (T.855).
Because of the lack of storage space at Montclair, surgical equipment is rolled into and out of ORs on carts, requiring that a circulating nurse pick up equipment parts, such as cords, off the floor. (T. 869).
Four of five cooling towers failed in 2009, and Trinity had to make corresponding repairs in excess of $100,000. (T. 950).
The HVAC system at the Montclair campus is outdated, inefficient, and operating at about 60% efficiency. (T. 960).
Trinity staff members must manually monitor the temperature and humidity in the ORs, unlike in modern facilities where those functions are computerized. (T. 961).
Trinity has scheduled $102,000 worth of repairs just for the air handling units. (T. 1023).
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The boilers, chillers, cooling towers, internal plumbing, and switch gear are all antiquated and need to be replaced. (T. 974).
The Vocera system, which is an intercom-like system used mainly by anesthesiologists to communicate from different areas of the hospital, works only intermittently because of interference created by the physical plant. (T. 954-957).
The nurse call system does not work well because there are dead spaces in the building where individuals being signaled do not receive their pages. Trinity has received lower patient satisfaction scores as a result of this issue. (T. 3755, 3756).
The hospital’s 40 elevators, one or more of which are down at any given time, present operational problems. (T. 950).
The elevators are analog, and thus slower compared to modern electronic elevators. (T. 707-708).
Patients and visitors have become trapped in the elevators (Exh. TMC 276) or had arms or legs caught in the elevator doors. (T. 3738).
Replacement of an elevator costs $100,000. (T. 3089).
The elevators are too small. When a patient is on a ventilator, for example, the patient must be taken on one elevator by a nurse with some equipment, while a second nurse takes an elevator with additional equipment. (T. 3734-3735).
The public elevators and the elevators for staff and patients are all in the same areas, and members of the public often board patient elevators already occupied by patient gurneys. (T. 3733).
The patient parking deck, which descends underground from the entrance at ground level, is not attached to the main hospital and is confusing for patients. (T. 2136). There is no way to build adequate parking at the Montclair site to access the building. (T. 2136).
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Montclair hospital is at the end of its useful life. (T. 937; 652; Exh. TMC 27.)
That less costly, more efficient or more appropriate alternatives to such inpatient service are not available, and that the development of such alternatives has been studied and found not practicable (Ala. Code § 22-21-266(2).)
“That this application is the less costly, more efficient or more appropriate alternative to the provision of inpatient services, and clearly other alternatives have been studied and found not to be practicable.” (AR 3210).
See Evidence Examples contained above in discussion of Ala. Code § 22-21-266(1).
Renovation of the Montclair facility would be more expensive than relocation to 280 hospital. (Exh. TMC 47 at 14; T. 719; 726-728; 1921; 2065; 2591.) This was supported by numerous exhibits and the testimony of Chris Ross of C. Ross Architecture, LLC, Ed Smith of BE&K Building Group, and Jason Hard of Brasfield & Gorrie.
Renovation of the Montclair campus would require at least the following:
The building of brand new space in which to locate various departments while renovating the existing space, which would be costly and time-consuming. (T. 6483).
Significant “phasing” of the project, which would lead to additional costs and loss of time. (T. 6517-32).
Brining up to code various renovated spaces that, but for the renovations, would not have to be made code-compliant because Trinity’s age gives it grandfathered status. These codes include the Alabama Department of Public Health’s (“ADPH”) regulations, the 2006 Architectural Institute of America (“AIA”) Guidelines, and the Americans with Disabilities Act (“ADA”) Guidelines. (T. 6472-6474).
The construction and building out of seven new and additional floors of space, including:
o a two-story addition that would serve as an emergency room and a cancer center (T. 6489);
o a five-story addition, wherein the first floor would be support space,
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the second floor an expansion of the surgical department, the third floor a women’s services center, and the fourth and fifth floors housing for 60 additional medical/surgical beds that would be needed to bring the hospital’s bed count back up to 398 beds because of the loss of beds that would occur in the existing buildings after conversion of all semi-private patient rooms to private patient rooms (T. 6492-6495).
Bringing the patient rooms in the existing patient tower up to code (T. 6494-6495).
Adding a parking deck with 300 parking spaces to replace the parking spaces that would be lost when the five-story addition was built where parking spaces exist currently (T. 6499).
Tearing down the nursing school in order to build the 300-space parking deck (T. 6498-6500).
Moving and reconstructing the road on the campus leading to the loading dock in order to ensure access to the dock, since the five-story addition would occupy a great deal of additional space on the campus. (T. 6501).
Expanding the central plant, including replacement of all old or outdated boilers, chillers, cooling towers, and medical gas components, many of which have previously reached the end of their useful life, and adding 50 percent redundancy of all central plant equipment to account for future failures (T. 6496-6497);
Completely replacing the hospital’s HVAC system in order to meet current code, as the current air handling system cannot handle the 20-25 air changes per hour required by code for operating rooms, or the six air changes per hour required in patient rooms.
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(T. 6520-6521).
Removing and installing new ductwork, because the existing ductwork is internally lined, which makes cleaning of those ducts very difficult. (T. 6524-6526).
Replacing all plumbing because it is deteriorating and fails on a regular basis. (T. 6526).
Removing the existing medical gas piping and installing new piping, because larger pipes are required now than when that piping was originally installed. (T. 6527).
Bringing emergency power components up to code, because larger conduit and wires, as well as more electrical panels, are required today than when the hospital was constructed. (T. 6526).
Trinity’s access issues relating to its Montclair location can only be remedied through relocation. Evidence established that Trinity’s current campus is extremely difficult to locate. (T. 158; 356; 468-469; 1352-1353; 3736; 3812; 3857
If Trinity does not relocate from its Montclair facility, it will likely close. Trinity’s closure would overwhelm the capacity of Birmingham area hospitals. (T. 2496; 4527; 5526; 5027.)
Relocating to the 280 hospital is more cost effective and a better alternative than relocating to Irondale:
Relocating to Irondale is no longer a viable alternative because Trinity surrendered its CON to relocate to Irondale. (Exh. TMC 1 at Exh. 1.)
Relocating to Irondale would be more costly than relocation to the 280 hospital. (Exhs. TMC 1; TMC 57; TMC 93.)
Relocating to 280 reduces the number of beds in Jefferson County, while the relocation to Irondale would increase the number of beds.
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That existing inpatient facilities providing inpatient services similar to those proposed are being used in an appropriate and efficient manner consistent with community demands for services (Ala. Code § 22-21-266(3).)
“That existing hospitals in Jefferson County, Alabama that provide similar services to those which the Applicant proposes to perform at the replacement facility are being utilized in an appropriate and efficient manner consistent with the community's demand.” (AR 3210).
Brookwood is experiencing high levels of utilization. Brookwood provides care for approximately 40,000 people annually in its emergency department (T. 5507) and has also experienced tremendous growth in its orthopedics services as well as in some of its other subspecialty services. (T. 5528) Brookwood has the most active surgical volumes in the state (T. 4937) and is the state's largest outpatient provider. (T. 4966.) St. Vincent's is experiencing high utilization levels. St. Vincent's has applied for an additional 37 beds at its Birmingham campus under a provision of the State Health Plan that allows for a hospital to obtain additional acute care beds if its census reaches 80% for a sustained period of time regardless of whether the standard needs methodology shows a need for additional acute care beds in the county. (Exh. TMC 385) St. Vincent's has had significant growth in its primary care base and surgical beds and has a lack of critical care beds. (T. 6086.)
That in the case of new construction, alternatives to new construction (e.g., modernization and sharing arrangement) have been considered and have been implemented to the maximum extent practicable (Ala. Code § 22-21-266(4).)
“That alternatives to new construction have been considered and implemented to the maximum extent practicable. This proposal utilizes (in part) an incomplete existing structure.” (AR 3210).
See Evidence Examples contained above in discussion of Ala. Code § 22-21-266(1) & 22-21-266(2).
That patients will experience serious problems in obtaining inpatient care of the type proposed in the absence of the proposed new service. (Ala. Code § 22-21-266(5).)
“In the absence of this facility, patients in southern Jefferson and northern Shelby counties, as well as certain patients to the north, south and west of Trinity's existing campus, will experience serious problems in obtaining needed healthcare. The proposed relocation would improve
Brookwood and St. Vincent’s evidence showed need for an additional 202 beds in the City of Hoover by year 2013 and/or that there is a need for a hospital in Hoover. (Exh. TMC 132, at p.31) Evidence from Birmingham Fire and Rescue of lengthy travel time for service from 280 corridor. (T. 3681-2; TMC 135) All Birmingham area hospitals are clustered. There is no hospital on Highway 280 between Brookwood and Sylacauga. (T. 5230).
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access to, and availability of, emergency room services for patients in the region by making Trinity more accessible for all patients due to the hospital's proximity to all of the area's major roadways, as well as to those underserved patients residing in the immediate area around the Highway 280 site and further down the Highway 280 corridor.” (AR 3209).
280 corridor and Shelby County is the fastest growing area in the state of Alabama. Shelby County is the 11th fastest-growing county in the U.S. (T. 4497).
Review Criteria for Issuance of CON under CON Rules
Chapter 6 of the CON Rules, §§ 410-1-6-.01 et seq. contain review criteria, many of which have multiple subparts, that should be considered in determining whether an applicant should receive a CON. After weighing all the evidence, including live testimony at the contested case hearing, ALJ Hampton and the CON Review Board made the following findings under SHPDA’s review criteria. These findings were supported by substantial evidence, and this Court may not substitute its judgment for SHPDA to re-weigh the evidence. These findings cannot be overturned under the limited appellate review provided by the AAPA.
Review Criteria CON Review Board and
ALJ Findings Examples of Evidence Supporting Findings from Voluminous Administrative Record
Consistency with State Health Plan (§ 410-1-6-.02)
Requirements under State Health Plan (Ala. Admin. Code § 410-2-4-.14):
Most cost-effective or otherwise most appropriate alternative
Reasonableness of square footage, construction cost, and equipment cost for types and volumes of
“The Applicant made a prima facie showing that a relocation to the Highway 280 facility is the most cost-effective alternative if relocation is to take place.” (AR 3243). “The Applicant established that the relocation of the Trinity facility to the Highway 280 location is the most appropriate alternate.” (AR 3241). “The Applicant established,
See Evidence Examples contained above in discussion of Ala. Code § 22-21-266(1)
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patients to be served
Applicant same as owner of facility being replaced
Evidence of need for project
by the evidence, that as a relocation to the Highway 280 site, the proposed square footage, construction costs per square foot and the cost of fixed equipment will be appropriate and reasonable for the types and volumes of patients to be served.” (AR 3239). “Affinity Hospital is the legal entity which owns Trinity Medical Center. If Trinity is relocated, the ownership will not change.” (AR 3239). “The Applicant demonstrated that the existing facility at Montclair needs replacement to meet licensure and certification requirements.” (AR 3238). “The Applicant presented substantial evidence of operational problems at the Montclair facility.” (AR 3237).
Addressing the Provisions of Applicant’s Long-Range Development Plan (§ 410-1-6-.03)
“The Applicant is found to have appropriately addressed the proposed project as it relates to the Applicant's long-range development plan for its facility, and the proposal is consistent with that development plan.” (AR 3234).
Relocation to the 280 hospital is consistent with Trinity’s long-range development plans to continue providing quality care to the Birmingham area with a medical staff of superior caliber while expanding medical staff and services when and where appropriate. (T. 1561-1562).
Availability of Alternatives (§410-1-6-.04)
“[T]he Applicant has demonstrated that the ‘proposed replacement is the most cost-effective or otherwise the most appropriate’ alternative.” (AR 3234).
See Evidence Examples contained above in discussion of Ala. Code § 22-21-266(1) & 22-21-266(2).
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Need for the Project (§410-1-6-.05)
Considerations:
Financial feasibility Specific Data Impact on Overall
Health Community Nonpatient Objectives
(teaching and research)
Locational Appropriateness
Licensure Requirements
Medical Education
“The Applicant's proposal is financially feasible, and the parent company of the Applicant will pay for the relocation from its cash flow in the ordinary course of business.” (AR 3233). “The Applicant presented specific data supporting its demonstration of need for the proposal, and that data was reasonable, relevant and appropriate.” (AR 3233). “Trinity is a teaching hospital that provides residencies in internal medicine, general surgery, pathology and radiology, and it also has a transitional year residency program. After relocation to the Highway 280 facility, Trinity will continue to serve as a teaching hospital. The relocation of the hospital will not adversely impact any of Trinity's nonpatient objectives. (AR 3232). The Applicant established that the proposed relocation site has the manpower available to build and operate the new facility. That location meets all local zoning ordinances and is appropriate even considering environmental health as a factor.” (AR 3231). “This location is one which has an abundance of highway access as such relates to general accessibility via I-459 and Highway 280.” (AR
Brookwood and St. Vincent’s evidence showed need for an additional 202 beds in the City of Hoover by year 2013 and/or that there is a need for a hospital in Hoover. (Exh. TMC 132, at p.31). Evidence from Birmingham Fire and Rescue of lengthy travel time for service from 280 corridor. (T. 3681-2; TMC 135). All Birmingham area hospitals are clustered. There is no hospital on Highway 280 between Brookwood and Sylacauga. (T. 5230). 280 corridor and Shelby County is the fastest growing area in the state of Alabama. Shelby County is the 11th fastest-growing county in the U.S. (T. 4497). Trinity is a teaching hospital with five residency programs. Trinity will continue to be a teaching hospital at its new location. (T. 1584; 1598-1599; 3053-3058).
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3231). “The evidence established that if built, the new replacement facility would meet the licensing requirements.” (AR 3230). “Trinity is a teaching hospital hosting 90 residents per year under its current program. The replacement facility will do nothing to deter that teaching and should enhance Trinity's teaching capability by an improvement in the facility.” (AR 3230).
Additional Need Criteria (§ 410-1-6-.06)
Considerations:
Need of Population to be Served
Population Data Current and Projected
Utilization of Other Facilities
Impact on Other Facilities
Community Reaction
“The relocation of Trinity to the Highway 280 campus will meet the needs of residents along the Highway 280 corridor.” (AR 3227). “[E]xisting facilities are being utilized in an appropriate manner sufficient to justify approval of Trinity's project.” (AR 3227). “There is significant positive reaction to this proposal.” (AR 3220).
Brookwood is experiencing high levels of utilization. Brookwood provides care for approximately 40,000 people annually in its emergency department (T. 5507) and has also experienced tremendous growth in its orthopedics services as well as in some of its other subspecialty services. (T. 5528) Brookwood has the most active surgical volumes in the state (T. 4937) and is the state's largest outpatient provider. (T. 4966.) St. Vincent's is experiencing high utilization levels. St. Vincent's has applied for an additional 37 beds at its Birmingham campus under a provision of the State Health Plan that allows for a hospital to obtain additional acute care beds if its census reaches 80% for a sustained period of time regardless of whether the standard needs methodology shows a need for additional acute care beds in the county. (Exh. TMC 385) St. Vincent's has had significant growth in its primary care base and surgical beds and has a lack of critical care beds. (T. 6086.) If Trinity relocates to 280, it will be moving geographically further away from every single hospital in Jefferson County except one – Brookwood. Trinity will only be ½ mile closer to Brookwood at 280 location.
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All Birmingham area hospitals are clustered. There is no hospital on Highway 280 between Brookwood and Sylacauga. (T. 5230). 280 corridor and Shelby County is the fastest growing area in the state of Alabama. Shelby County is the 11th fastest-growing county in the U.S. (T. 4497).
Overwhelming community support
200 letters of support from community members
111 letters of support from physicians (many of whom work at Brookwood and St. Vincent’s)
24 letters of support from community business leaders, including the following who attended the hearing in support of project:
o Mayor William Bell o Tracy Morant Adams o Rep. Greg Canfield o Rep. Mike Hubbard o Charles Nailen o Quentin Riggins o Jay Reed
Testimony at ALJ and CON Review
Board hearing from numerous witnesses supporting project
Access by Underserved (§ 410-1-6-.07)
“Trinity currently provides a generous amount of charity care at its Montclair campus.” (AR 3219). “Trinity reported charity in significant amounts for 2006-2008, and it has a written charity care policy (Exh. TMC 50) that dictates
Trinity currently provides a generous amount of charity care at its Montclair campus. (TMC 50; T. 3066-3068) Trinity reported charity in significant amounts for 2006-2008, and it has a written charity care policy (Exh. TMC 50) that dictates whether a patient qualifies. (T. 3067) This policy is generous and includes patients up to 400 percent of the federal poverty level. Its policy also
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whether a patient qualifies. (T. 3067) This policy is generous and includes patients up to 400 percent of the federal poverty level. Its policy also includes a statement regarding community education which facilitates participation in community events such as health fairs and nursing clinics. It is expected that such shall continue unchanged if Trinity is allowed to relocate. (T. 3084-85)” (AR 3219). “Trinity shoulders a large share of the charity care burden in Jefferson County.” (AR 3219). “The evidence shows that 2.5 to 3 percent of Trinity's gross revenue is comprised of charity care, which is significant in the Birmingham market. Approximately 8-10 percent of Trinity's gross revenues are derived from Medicaid, again a very significant number in its market.” (AR 3218). “In addition, Trinity participates in the Medicaid waiver program. This program was created in 1998 when participating hospitals in Jefferson County and the surrounding areas banded together and submitted a bid to Medicaid to operate the program. (T. 3074) The program provided for a flat
includes a statement regarding community education which facilitates participation in community events such as health fairs and nursing clinics. It is expected that such shall continue unchanged if Trinity is allowed to relocate. (T. 3084-85). Trinity shoulders a large share of the charity care burden in Jefferson County. It draws some indigent patients from counties without a county hospital, such as St. Clair and Clay counties (T. 3068-3069) and also by virtue of being a teaching hospital (T. 3059-3060). Trinity participates in the Medicaid waiver program. (T. 3074) In a given year, Trinity delivers 500-600 babies under the Medicaid waiver program. (T. 3077) The evidence shows that 2.5 to 3 percent of Trinity's gross revenue is comprised of charity care, which is significant in the Birmingham market. Approximately 8-10 percent of Trinity's gross revenues are derived from Medicaid, again a very significant number in its market. (Exh. TMC 1 Relocation to the Highway 280 site would allow Trinity to provide services to the medically underserved populations near the Highway 280 site, and there are low income communities near this site. In the ten-mile radius surrounding the Highway 280 site, there are 20,000 to 30,000 households with incomes of less than $35,000 annually. (T. 4416) Trinity's application indicates that it will offer a range of means by which patients will have access to the proposed services including charity care for patients meeting the hospital's charity care policy requirements, Medicaid, Medicare, the Medicaid waiver program, and community health fairs and clinics. (Exh. TMC 1; T. 3084-3085).
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fee to be paid to the hospital from the Medicaid program for everything involved in the delivery of Medicaid recipients' newborns. (T. 3074) The Medicaid waiver program provides pregnant women on Medicaid with a choice of several doctors to provide prenatal care and deliver their babies instead of only being able to obtain such services at the county hospital, Cooper Green, or at UAB. (T. 3076-3077) In a given year, Trinity delivers 500-600 babies under the Medicaid waiver program. (T. 3077)” (AR 3218). “Relocation to the Highway 280 site would allow Trinity to provide services to the medically underserved populations near the Highway 280 site, and there are low income communities near this site.” (AR 3217). “Trinity will continue to provide good access to medically underserved groups.” (AR 3220).
Relationship to Existing Health Care System (§ 410-1-6-.08)
“Trinity is an integral component of the existing health care system of Jefferson County and its surrounding counties. Trinity has contributed significantly to the regional reputation of the Birmingham medical community and its relocation project, by allowing Trinity to continue to serve the community, would help
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ensure that the needs of area residents are adequately addressed, thereby improving the overall quality and accessibility of care within the area's health care system. (Exh. TMC 1 at 90) In addition, while the existing healthcare system in Birmingham is comprised of many high-quality facilities, there are still residents in southern Jefferson and northern Shelby Counties who have inadequate, or at least inconvenient, access to acute care and emergency services. Trinity's proposed hospital would bring services to those residents. This proposal would, therefore, fill a limited need that is currently unmet in the existing healthcare system. The replacement facility should improve the overall level of, and access to, health care in the Medical Service Area.” (AR 3215).
Appropriate Applicant (§ 410-1-6-.09)
“Trinity has established that, upon relocation to the Highway 280 site, it would be able to render adequate service to the public. Because that staff provided adequate service to its patients at the Montclair site, it will be able to provide those same services, and most likely at a higher quality, at the Highway 280 site because of an improved facility.” (AR 3214). “Trinity's management
Trinity will transfer its existing professional staff and all other employees from the Montclair facility to the Highway 280 facility and Trinity's staff will remain largely unchanged after relocation. (Exh. TMC 1 at 87) CHSPSC will continue its management and consulting services to Trinity. (Exh. TMC I at 54) The organization's affiliates own, operate or lease more than 120 hospitals in 29 states, with an aggregate of more than 18,000 licensed beds. (Exh. TMC 77) In Trinity's leadership, the company has a good business reputation and Trinity will excel at managing the hospital at the Highway 280 site. (T. 2502-2503)
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capability of the facility is excellent.” (AR 3214).
Construction and Design (§ 410-1-6-.14)
“The replacement hospital is designed to be constructed with the objective of maximizing cost containment, protection of the environment, and conservation of energy. In fact, the use of a 13 -story existing structure originally designed as a hospital, as compared to the construction of replacement hospital on a greenfield site, should save millions of dollars in construction and energy costs and also limit environmental impact.” (AR 3213).
Evidence of cost containment 280 hospital is 60-65% completed
structure with over $200 million already invested in it. (T. 1517-1518.)
Trinity is basically acquiring hospital for free. Cost of purchase of 280 hospital building is offset by tax incentives from City of Birmingham. (Exhs. TMC 16 & 17; T. 3878-3879; T. 1420-1421.)
The Highway 280 facility will provide 92,000 square feet of “shell space” for the future growth of the hospital (T. 2419) with mechanical, plumbing and electrical systems in place on its opening (T. 2889) which will result in further cost savings.
Trinity can complete 280 hospital for $144 million when new construction of same facility would cost $300 million. (T. 2854-2855.)
The Highway 280 hospital will be designed to reduce energy dependence and utilize, as much as practicable, such features as high R-factor insulated construction materials, passive cooling/heating techniques, and energy efficient windows and exterior doors. (Exh. TMC 1 at 104)
Conformity with local zoning, building codes, and protection of environment (§ 410-1-6-.15)
“Trinity has obtained zoning certification to complete construction of the Highway 280 hospital and to operate that hospital. (Exh. TMC 14) The site is properly zoned for all its intended uses. (T. 1163) In addition, Trinity has certified in its CON application that the Highway 280 hospital will confirm to all applicable building codes, and presented substantial and compelling testimony that the
Zoning approval obtained (Exh. TMC 14 & T. 1163.)
Certification to comply with building codes within CON application (Exh. TMC 1 at 114.)
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Highway 280 hospital will comply with all state statutes and regulations for the protection of the environment.” (AR 3212).
Compliance with State Licensure Rules, Regulations, and Standards (§ 410-1-6-.16)
“Trinity certified in its CON application that Trinity and its agents will construct and operate the Highway 280 hospital in compliance with appropriate state licensure rules, regulations and standards.” (AR 3212).
Certification in CON application (Exh. TMC 1 at 114.)
Quality of Care at Existing Facility (§ 410-1-6-.17)
“Trinity has established by the evidence that the quality of care at the current hospital site is excellent.” (AR 3211).
Trinity's Board is entrusted with the mission of ensuring that quality health care is provided at Trinity, and that quality is the Board's number one priority. (T. 555) Trinity has received numerous awards for quality care:
2009 HealthGrades Rankings o Best Rated in the Birmingham
Area for Overall Cardiac Services
o Best Rated in the Birmingham Area for Coronary Interventional Procedures
o Recipient of the HealthGrades Cardiac Surgery Excellence Award in 2009
o Ranked Among the Top 10% in the Nation for Cardiac Surgery in 2009
o Ranked Among the Top 5 in Alabama for Overall Cardiac Services - Ranked 2
o Ranked Among the Top 5 in Alabama for Cardiac Surgery - Ranked 3
o Ranked Among the Top 5 in Alabama for Cardiology Services - Ranked 5
o Ranked Among the Top 5 in Alabama for Coronary Interventional Procedures - Ranked 4
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o Five-Star Rated for Cardiac Surgery in 2009
o Five-Star Rated for Coronary Bypass Surgery in 2009
o Five-Star Rated for Treatment of Heart Failure 4 years in a row (2005-2009)
American Heart Association/American Stroke Association Achievements
o 2008 Get With the Guidelines Bronze Award for Performance Achievement in Quality Improvement Program.
o 2008 Get with the Guidelines Bronze Award for Performance Achievement in Stroke
o 2009 Get with the Guidelines Silver Award for Performance Achievement in Stroke
o 2008-2009 Get with the Guidelines Silver Award for Performance Achievement in CAD
o 2008-2009 Get With the Guidelines Silver Award for Performance Achievement in HF
o Primary Stroke Center accredited by The Joint Commission (on going project, not yet achieved)
o 2009 Get With the Guidelines Gold Award for Performance Achievement in HF(Qualified)
o 2009 Get With the Guidelines Gold Award for Performance Achievement in Stroke (Qualified)
Gastroenterology (“GI”) o 2009 HealthGrades Rankings
Best Rated in the Birmingham Area for GI Medical Treatment
Ranked Among the Top 5 in Alabama for GI Medical Treatment
Five-Star Rated for Treatment of Pancreatitis
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- 5 years in a row (2005 - 2009)
Respiratory Care o 2008 and 2009 Quality
Respiratory Care Recognition from American Association for Respiratory Care
o 2008 Clinical Site of the Year Recognition from Virginia College
o 2008 and 2009 Certificate of Participation from American Proficiency Institute
Bariatric Surgery o Center of Excellence in Bariatric
Surgery 2006- awarded by the American Society of Metabolic and Bariatric Surgery
(Exh. TMC 34).
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APPENDIX B
Brookwood’s Allegations Shown in the Administrative Record
Highlights of Evidence in Administrative Record Litigating Allegations
1. Misrepresenting payor mix/submitting payor mix information in CON application known to be false
ALJ Hearing Transcript Portions
T. 3277-3316 T. 3349-3397
Exhibits
STV 376 STV 328 BMC 373
Arguments to CON Review Board on
September 15, 2010
p. 45
Questioning of Trinity Witnesses at ALJ Hearing STV: A. So are you saying we can’t rely on the percentages that you put in the application on page 108? A. I’d say you can’t read the charity care line and assume that that’s all of our charity care dollars that are involved in our – at the hospital. (ALJ Hearing, T. 3288.)
Q. Now you said in your CON application no changes were made to the payor mix, correct? A. Yes. Q. And according to this, Mr. Carpenter thinks you’re wrong about that, doesn’t he? A. Yes. Q. And he says, wow, this is going to cause a positive increase, the 280 project, in both volumes and payor mix. And then down below, he actually sets out the payor mix changes he expects to happen. Is that correct? A. Yes. Q. And according to Mr. Carpenter, he’s expecting a change in the Medicaid percentage, basically to get cut in half; is that correct? A. That’s what he’s assuming. Q. Okay. And he’s – he’s – he’s projecting that self-pay is going to go down by 40 percent; is that correct? A. Correct. Q. And you didn’t do any of that in your financial projections, did you? A. No. (ALJ Hearing, T. 3315-3316.)
Arguments made to CON Review Board
BMC: The opening of the new hospital is expected to cause a positive increase in both volumes, payor mix, as well as a decrease in bad debt expense. Sure. They’re going to cut Medicaid in half. They’re going to cut self-pay almost in half. And let me tell you what? You won’t find this in the CON application. This is not in the CON application. (Transcript of Sep. 15, 2010 CON Review Board Hearing, 45.)
2. Instructing architect to condemn facility
ALJ Hearing Transcript Portions
T. 1648-1654 T. 2104-07
Questioning of Trinity Witnesses at ALJ Hearing BMC: Q. Well, Mr. Ross testified that he was due – he was to do a condemnation report. You ever heard of a condemnation report? A. Just generically, a
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Arguments to CON Review Board on
September 15, 2010
pp. 47-49
condemnation report? Yes, sir. Q. And what is that? A. To say that a building or some structure is probably not fit for use for an extended period of time. Q. All right. Let me show you – while we’re on that, let me show you what the CON application says. It says right here -- and I'll represent to you that Mr. Ross is the one that did that report you just saw and he testified is a condemnation report. Look under local study. It says, Chris Ross, a principal with C. Ross Architecture, LLC, was commissioned to conduct an independent facilities evaluation of Trinity Medical Center to render opinions regarding access, functionality, and general condition of the facility. Does that sound like a condemnation report to you? A. No, sir. Q. And then going back to #325, if we can for a minute. Going back here, this is – the application says it’s an independent study. He testified it’s a condemnation report. And then in the report itself – and let me ask you if you’re aware of this, Mr. Miller. Mr. Ross, on page 10, he says in that second paragraph – this is Mr. Ross. This is what he said was his condemnation report. He said, The most major – the most important major issue not covered in this report is the mechanical, plumbing, electrical situation. And he says a report under separate cover would outline these issues. Now, Mr. Ross testified that one was to be done by CHS but he’s never seen it. Do you know where that report is? A. No, sir. Q. That sounds like a pretty important report, though, doesn’t it? A. It sounds like it would help everyone make the decision, yes. Q. Well, would you think it would be good business to say in a certificate of need that you're going to file with the State that you've commissioned an architect to do an independent study and evaluation when he was sent out and told to do a condemnation report? A. I don’t know what he was told. I’ve never spoken to the man. I don’t know the man. Q. Well, I know you don’t know him, but do you equate an independent study with a condemnation report? A. No. if you—the way you’ve described it, it would appear as though someone was told to do something and reach a certain conclusion, not his own conclusion. Q. And that’s not the way y’all want to conduct business, is it? A. No, sir. (ALJ Hearing, T. – 1649-1654.)
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BMC: Q. Let me ask you about the Ross report. And you heard the question asked earlier about whether it was a condemnation report. And that’s what Mr. Ross said. And he indicated he was asked to come out and find out what the deficiencies were in the facility. Is that what he was asked to do? A. He was asked to review the building and write a report talking about the building, its useful life, and, you know, what were its detriments moving forward. Did Mr. Ross do any of these reports on any of these hospitals? A. Mr. Ross really doesn't do architectural -- Q. No. I mean, I'm talking about -- A. Oh, did he do reports? Q. Due diligence, yes, sir. A. I believe he did due diligence on Big Bend, Tooele, Marion, Greenville, Northeast, Bedford County, and Southside. So everything except Cedar Park and Gateway. 23 Q. Okay. Did he find that there were deficiencies in all of those hospitals? A. Yes. Q. Did he recommend replacing all those 4 hospitals? A. All of those hospitals on this list were replaced because we bought those hospitals from communities, and our purchase agreement with that community was they would sell us the hospital at a certain price if we would commit to replacing the hospital. So there was really never a question did the hospital need to be replaced. Before we bought it, we said we would replace it. Q. Right. I hear you. But did the Mr. Ross find they all needed to be replaced in his due diligence report? A. In those due diligence reports, that's not the focus of his report. The focus is, you know, I would tell him we're going to replace this hospital in five years. We know that Joint Commission, code agencies, the State will continue to walk through this building and check us every year. We need to make sure we're compliant. So he's really looking at it from a code standpoint and telling us what meets code, what doesn't, what kind of dollars do we have to spend in the interim until the hospital is replaced to keep in good standing with all the agencies that would be reviewing the building. Q. Well, that's the same thing he did in this case, too, isn't it? A. Well, again, it's different. In this case, we knew that we wished to replace the hospital and we were going to submit a CON. And we were looking for him to write a report about the condition of the existing facility that had already been well
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documented in the previous CON submittal. It was more of a formality, you know, to update that report.(T. 2104-2107.) Arguments made to CON Review Board
BMC: So October the 29th, they had this architect go out there to the facility, spend eight hours out there; and he gives them a report saying you can’t renovate. You can’t bring it up to license. So at the hearing that we had, I thought, well, you know a good question might be to ask the guy when did he find out they were not going to go there. So I asked him. And in the application – Let me say this first. In the CON application, they say they commissioned this architect t—not hired – they commissioned him to do an independent facility evaluation. They signed that application and swear to it. This is an independent evaluation. That’s what they present to you and to the State. When I asked him just a simple question, now, did you know or were you told by CHS or Trinity Medical Center or anybody else that they had already made the decision to replace the hospital? He says, They told me they wanted to replace the hospital. They wanted me to write a condemnation report. Now, does that sound like the kind of folks that you want to approve to have a hospital? They decide to move. They call an architect, say they want an independent evaluation but get a condemnation report. (Transcript of Sep. 15, 2010 CON Review Board Hearing, 48-49.)
3. Misrepresentations to CON Review Board on 5/21/08 regarding relocation to Irondale
ALJ Hearing Transcript Portions
T. 1577-92 T. 1621-24 T. 1631-34 T. 1661-1662 T. 1667-1670 T. 1673-74 T. 1676 T. 1810-1813 T. 1990 T 3979 T. 4077 T. 4092-94
Questioning of Trinity Witnesses at ALJ Hearing
BMC: Q. But what my question was, was on May 21st, 2008, when that CON Review Board hearing was there in Montgomery and heard the presentation from your attorney, with representatives of CHS in attendance, that said we’re going to Irondale, was CHS 100 percent committed to go to Irondale? A. I – I would say that it was probably 98 percent, something like that. (ALJ Hearing, T. 1620-21.)
BMC: Q. Let’s look at what Mr. Carlisle says about Irondale, your property man: providing our agreement with the City of Irondale, if we don’t build a hospital. It sounds like a month – over a month before the CON Board hearing, you had some of your
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T. 3398-3400 T. 3869-71 T. 3924-25
Exhibits
BMC 324 BMC 325 STV 328 BMC 198A
Arguments to CON Review Board on
September 15, 2010
p. 43
Arguments to CON Review Board on October
20, 2010
p. 168
people already talking about not building it down there. A. Again, they’re pointing out one possibility, yes, sir. (ALJ Hearing, T. 1661-1662.)
ALJ Examination: ALJ Hampton: I have a couple for you. I believe you said, Mr. Miller that you became interested in the digital site, the 280 site, in January of 2008. The Witness: Yes, sir. (ALJ Hearing, T. 1810.)
BMC: Q. All right. Did you go down to Montgomery for the CON Review Board hearing on May 21st, 2008? A. Yes, I did. Q. All right. Now, did you know at that time, May 21st, 2008, that CHS was intending to abandon the Irondale project and explore this Highway 280 project? A. I knew at the time that – that it was being looked at, discussions were being held. I think it’s on the record that I went on a tour of the facility with – with two other folks from the hospital in February or March. I believe February of ’08. But it was right after the Daniel Corporation purchased it. Obviously, we weren’t the decision-makers for the company as far as something like that. So was I generally aware that it was being considered? Yes. Q. Yeah. And were you generally aware that it was being considered pretty hard? A. I knew it was being looked at. You know, again, I wasn’t aware of the cost involved or, you know, was the City going to come out with a set of plans. In May, did I know that, frankly, that was ultimately where we were going with this? No. Q. All right. When was it that you first learned that Irondale was going to be scrapped and then Highway 280 was going to be the project? A. I can’t remember an exact date. I mean, I think we announced this probably the beginning of October in 2008, if that’s what the record would show. Within the few weeks or the month before that, it was becoming pretty evident. (ALJ Hearing T. 3398-3400.)
Arguments made to CON Review Board
BMC: But then what did they do in May? May 21st, they came down here and made a presentation to you. After they said all these things, made all these visits, they came right here and said we’re going to Irondale. And you gave them the right to go to Irondale. And they were here, and they represented they were going. But look at the memo that the president – the division
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president wrote to Wayne Smith on the day of the hearing that they were here, that they told you they were going to Irondale. What did they say? The two things in the note that we got – and believe me, it wasn’t easy to get any of these documents; but they say, We got a favorable decision today. We got a decision. We can go to Irondale. And then, look. What does the president say? Status of potential site change. They were not going to Irondale. They told you they were, and they were not going. And who knows what they’ll do with 280. If you approve it, they’ll probably offer it for sale the next day. (Transcript of Sep. 15, 2010 CON Review Board Hearing, 43-44.)
4. Submitting suppressed patient volume numbers in CON application
ALJ Hearing Transcript Portions
T. 3316-3349 T. 3454-3458
Exhibits
STV 328 STV 336 BMC 312 BMC 217-A, 217-B BMC 370 BMC 322 BMC 323 BMC 334
Questioning of Trinity Witnesses at ALJ Hearing
STV: Q. Now, when it comes to the volume increases, you’re projecting what increase in admissions when you move out to 20? About a 2 percent? Is that what you said? A. I believe it was about a 4 percent from the baseline that would have declined the two years previous to that. (ALJ Hearing T. 3316.)
Q. Well, Mr. Graham, isn’t it true that Trinity Medical Center has known for years, ever since it started looking for relocation sites, that if it moved down to the 280 corridor, it could attract patients from St. Vincent’s and Brookwood? A. I mean, it’s been told to us before; but, I mean, again, these are people evaluating a building, what you can do in the building and what it’s going to take to make it work. Are they – they’re saying fill 380 beds. Well, yeah, I mean, if we had to fill 380 beds, that would basically mean we would have to – to exceed the assumptions I made by almost 50 percent. If that’s the case and that’s what it takes to survive in that area, yeah, we’d have to take a lot of market share from people. And, you know, this market I think is not that fluid in that regard. I think a lot of times the physician migration and where physicians go is going to drive – is going to drive market share. It’s not – it’s not absolute that moving out there will – will help us maintain the level that even I’ve projected. It’s – it’s – I don’t think there’s any absolutes in that regard. (T. 3319-3321.)
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A. All right. So you said you’ve seen some Hammes reports. Have you seen the Hammes report that was prepared June 25, 2008, and is marked as St. Vincent’s #336? A. It’s not this one? Q. No. A. Okay. No, I’ve not seen it. Q. Nobody ever showed you that report? A. No. Q. Okay. Well, flip to the little – the marked, tabbed page here. A. Okay. Q. And what page is that, Mr. Graham? A. 26. Q. I want you to take a look for me under this scenario two, title Share Increase. Do you see that up at the top of the page? A. Yes. Q. All right. What kind of share – market share increases is Hammes using in this scenario? It’s in a little black box there. A. Okay. Where it says share change? Q. Yes. Share change from base year. A. Medical-surgical, 20 – year one, 20; year five, 10; year 10, five. Q. Okay. So Hammes is – at least in this model, they’re running a market share increase when Trinity moves to the 280 site of 20 percent the first year. (ALJ Hearing T. 3323-3324.)
5. Withholding documents Arguments made to CON Review Board on October
20, 2010
p. 165 pp. 166-67 p. 170
Arguments made to CON Review Board
STV: [W]e discovered, though, that Trinity had withheld a number of documents that were supposed to be turned over to us in the contested case hearing.” (10/20/10 CON Review Board meeting, p. 165)
STV: Clearly, we were entitled to these documents. Judge Hampton, the ALJ assigned to this case, ordered them to turn these documents over. They didn’t do so. We’ve been denied our opportunity to review those documents, to question their witnesses about them. Those documents point out numerous inconsistencies between what their witnesses said at the hearing and what those documents show.” (10/20/10 CON Review Board meeting, pp. 166-67)
BW: “So we just got this. And I understand why they didn’t give it to us. You know, I know why they didn’t want us to have it when we were here last time.”
6. Witnesses Providing Misleading Testimony
ALJ Hearing Transcript Portions
3971-72 1666-67
Questioning of Trinity Witnesses at ALJ Hearing BMC: Q. This is the CON application again: Trinity’s decision to relocate to the digital hospital keeps Trinity in close proximity to its staff members,
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its patients and other residents of the service area, and its physicians. Now that’s just not true, is it, Mr. Miller? It’s not going to move y’all closer to your existing patient population, is it? A. It doesn’t say it’s going to get any closer. It says it will remain in close proximity to the staff members, patients, and other residents in the service area. Q. Keeps them in close proximity. A. Yes. Q. Well, Irondale was going to be closer to your patients, wasn’t it? A. I think as the crow flies, yes, sir. Q. Well, let’s look at page 24 and see just how that works in terms of where they are. Here is where your CON application says where your patients are. You see in the upper right-hand corner, Mr. Miller? A. Yes. Q. It's got population epicenter -- and I represent to you that PSA means primary service area -- and patient epicenter. Do you see that? A. Yes. Q. All right. Now, Grants Mill Road, do you see that site? A. Yes. Q. That’s a whole lot closer to your existing patients than is the 280 site, isn’t it? A. It is closer, yes, sir. Q. Crow or otherwise, it’s a lot closer. A. Yes, sir. (ALJ Hearing, T. 1666-67.)
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Allegations of Irregularities
Shown in the Record – Highlights (All of the Allegations Were Rebutted and Decided Against Brookwood)
1. Payor Mix Brookwood Allegation (Pet. 62, 65)
“a. Trinity intentionally suppressed the expected patient volume at the proposed Hospital to be located in the Scrushy Building and blatantly misrepresented its expected payor mix (TMC 1, pp. 108, 109; BMC 217(A), p. 2).”
“• Submitted payor mix information in its CON Application known to be false and/or misleading at the time it was filed;”
Shown in the Record
(Trinity’s CON Application,. p. 108.)
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Questioning of Trinity Witnesses at ALJ Hearing
STV: “Q. So are you saying we can’t rely on the percentages that you put in the application on page 108?
A. I’d say you can’t read the charity care line and assume that that’s all of our charity care dollars that are involved in our – at the hospital.
(ALJ Hearing, T. 3288.)
Q. Now you said in your CON application no changes were made to the payor mix, correct?
A. Yes.
Q. And according to this, Mr. Carpenter thinks you’re wrong about that, doesn’t he?
A. Yes.
Q. And he says, wow, this is going to cause a positive increase, the 280 project, in both volumes and payor mix. And then down below, he actually sets out the payor mix changes he expects to happen. Is that correct?
A. Yes.
Q. And according to Mr. Carpenter, he’s expecting a change in the Medicaid percentage, basically to get cut in half; is that correct?
A. That’s what he’s assuming.
Q. Okay. And he’s – he’s – he’s projecting that self-pay is going to go down by 40 percent; is that correct?
A. Correct.
Q. And you didn’t do any of that in your financial projections, did you?
A. No.”
(ALJ Hearing, T. 3315-3316.)
Arguments made to CON Review Board
BMC: “The opening of the new hospital is expected to cause a positive increase in both volumes, payor mix, as well as a decrease in bad debt expense. Sure. They’re going to cut Medicaid in half. They’re going to cut self-pay almost in half. And
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let me tell you what? You won’t find this in the CON application. This is not in the CON application.”
(Trans. of Sept. 15, 2010 CON Review Board Hearing, 45.)
Brookwood’s Post-Trial Brief to ALJ Hampton
“In doing so, Graham reduced the net operating revenue for the proposed 280 Hospital by $14 million in Year Two due to lower reimbursement rates from the payor mix (T. Day 10, Paul Graham, pp. 3374-3376; compare Net Operating Revenue on BMC 217(A), p. 1 with BMC 217(B), p. 1).” (Brookwood Post-Trial Br. 32.)
ALJ Hampton’s Recommended Order
“These financial projections show virtually no change in Trinity's patient volumes or its patient mix as a result of its relocation.” (ALJ Order p. 30.)
“The undersigned finds that, upon relocation, Trinity would improve its admissions, overall volumes, its payor mix and its bottom line.” (ALJ Order p. 32.)
Additional record cites:
ALJ Hearing Transcript Portions T. 3277-3316 T. 3349-3397
Exhibits STV 376 STV 328 BMC 373
2. Architect’s Evaluation
Brookwood Allegation (Pet. 62, 65)
“b. Trinity claimed in its Application that architect Chris Ross was commissioned to conduct an “independent facilities evaluation” when, in fact, he was flat out told to condemn the facility (TMC 1, p. 92).”
“• Instructed its architect to condemn the facility, yet claimed in the CON Application that the architect performed an ‘independent evaluation’;”
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Shown in the Record
BMC: “Q. Well, Mr. Ross testified that he was due – he was to do a condemnation report. You ever heard of a condemnation report? Just generically, a condemnation report?
A. Yes, sir.
Q. And what is that?
A. To say that a building or some structure is probably not fit for use for an extended period of time.
Q. All right. Let me show you – while we’re on that, let me show you what the CON application says. It says right here -- and I'll represent to you that Mr. Ross is the one that did that report you just saw and he testified is a condemnation report. Look under local study. It says, Chris Ross, a principal with C. Ross Architecture, LLC, was commissioned to conduct an independent facilities evaluation of Trinity Medical Center to render opinions regarding access, functionality, and general condition of the facility. Does that sound like a condemnation report to you?
A. No, sir.
Q. And then going back to #325, if we can for a minute. Going back here, this is – the application says it’s an independent study. He testified it’s a condemnation report. And then in the report itself – and let me ask you if you’re aware of this, Mr. Miller. Mr. Ross, on page 10, he says in that second paragraph – this is Mr. Ross. This is what he said was his condemnation report. He said, The most major – the most important major issue not covered in this report is the mechanical, plumbing, electrical situation. And he says a report under separate cover would outline these issues. Now, Mr. Ross testified that one was to be done by CHS but he’s never seen it. Do you know where that report is?
A. No, sir.
Q. That sounds like a pretty important report, though, doesn’t it?
A. It sounds like it would help everyone make the decision, yes.
Q. Well, would you think it would be good business to say in a certificate of need that you're going to file with the State that you've commissioned an architect to do an independent study and evaluation when he was sent out and told to do a condemnation report?
A. I don’t know what he was told. I’ve never spoken to the man. I don’t know the man.
Q. Well, I know you don’t know him, but do you equate an independent study with a condemnation report?
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A. No. if you—the way you’ve described it, it would appear as though someone was told to do something and reach a certain conclusion, not his own conclusion.
Q. And that’s not the way y’all want to conduct business, is it?
A. No, sir.”
(ALJ Hearing, T. – 1649-1654.)
Arguments made to CON Review Board
BMC: “So October the 29th, they had this architect go out there to the facility, spend eight hours out there; and he gives them a report saying you can’t renovate. . . . . They call an architect, say they want an independent evaluation but get a condemnation report.” (Transcript of Sep. 15, 2010 CON Review Board Hearing, 48-49.)
Brookwood’s Post-Trial Brief to ALJ Hampton
“As it turns out, Ross was first contacted by Gordon Carlisle with CHS approximately one week to ten days before his visit wherein Carlisle asked him to give CHS a report listing the deficiencies and shortcomings of the existing Trinity campus (T. Day 2, pp. 754, 825). Ross plainly conceded that it was his understanding going into the ‘due diligence’ inspection that CHS wanted him to condemn the hospital (T. Day 2, p. 825).” (Brookwood’s Post-Trial Br. 63.)
ALJ Hampton’s Recommended Order
“The undersigned finds from the evidence that older, outdated facilities will not necessarily fail licensure requirements, and often this is because of ‘grandfather’ provisions.” (ALJ Order 16.)
Additional record cites:
ALJ Hearing Transcript Portions
T. 1648-1654 T. 2104-07
3. Relocation to Irondale
Brookwood Allegation (Pet. 62, 65-66)
“c. Trinity claimed that they decided to pursue the Scrushy Building ‘in response to input from community leaders, physicians, management, and staff members’ when it was only a select few individuals at CHS who made the decision and the
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Birmingham Trinity personnel were completely cut out of the loop of the decision making process (TMC I, p. 4).”
“• Threatened Brookwood with sanctions if Brookwood did not drop its appeal of the Irondale CON knowing full well that it was no longer planning to relocate to Irondale; “
“• Misled the Board on May 21, 2008, as to its true intentions on abandoning Irondale in favor of the Scrushy Building;”
“• Misled the City of Irondale and literally waited until the very last hours before its public announcement on moving to the Scrushy Building to tell the Mayor of Irondale – ‘we're sorry’;”
“• Is hiding behind a change of ownership when the truth is numerous concrete steps were taken to move to the Scrushy Building prior to the May 21 ,2008, Irondale Hearing;”
Shown in the Record
Questioning of Trinity Witnesses at ALJ Hearing
BMC: Q. But what my question was, was on May 21st, 2008, when that CON Review Board hearing was there in Montgomery and heard the presentation from your attorney, with representatives of CHS in attendance, that said we’re going to Irondale, was CHS 100 percent committed to go to Irondale?
A. I – I would say that it was probably 98 percent, something like that. (ALJ Hearing, T. 1620-21.)
BMC: Q. Let’s look at what Mr. Carlisle says about Irondale, your property man: providing our agreement with the City of Irondale, if we don’t build a hospital. It sounds like a month – over a month before the CON Board hearing, you had some of your people already talking about not building it down there.
A. Again, they’re pointing out one possibility, yes, sir. (ALJ Hearing, T. 1661-1662.)
ALJ Examination: ALJ Hampton: I have a couple for you. I believe you said, Mr. Miller that you became interested in the digital site, the 280 site, in January of 2008.
The Witness: Yes, sir. (ALJ Hearing, T. 1810.)
Arguments made to CON Review Board
BMC: “But then what did they do in May? May 21st, they came down here and made a presentation to you. After they said all these things, made all these visits, they came right here and said we’re going to Irondale. And you gave them the right to go to Irondale. And they were here, and they represented they were going. But look at the memo that the president – the division president wrote to Wayne Smith on the day of the hearing that they were here, that they told you they were going to Irondale. What did they say? The two things in the note that we got
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– and believe me, it wasn’t easy to get any of these documents; but they say, We got a favorable decision today. We got a decision. We can go to Irondale. And then, look. What does the president say? Status of potential site change. They were not going to Irondale. They told you they were, and they were not going. And who knows what they’ll do with 280. If you approve it, they’ll probably offer it for sale the next day.”
(Trans. of Sept. 15, 2010 CON Review Board Hearing, 43-44.)
Brookwood’s Post-Trial Brief to ALJ Hampton
“E. CHS's Decision to Scrap Irondale and Move to the 280 Hospital for Better Demographics Has Nothing to do With a ‘Substantially Unmet Public Requirement.’” (Brookwood’s Post-Trial Br. 24-29.)
ALJ Hampton’s Recommended Order
“3. On October 6, 2008, Trinity filed a letter of intent with SHPDA to surrender its awarded CON for relocation to Irondale in favor of the present application (AL2009-09) to relocate to US Highway 280 (“Highway 280”) near Interstate Highway 459 in Birmingham, Jefferson County, Alabama, to the unfinished "digital hospital" building. This resulted in the surrender of the Irondale CON.” (ALJ Order 3-4.)
“One exhibit consisted of the entire transcript from Trinity's Irondale contested case hearing. All of these exhibits were reviewed by the undersigned.” (ALJ Order 5.)
Additional record cites:
T. 1577-92 T. 1990 Exhibits T. 1621-24 T 3979 BMC 324 T. 1631-34 T. 4077 BMC 325 T. 1661-1662 T. 4092-94 STV 328 T. 1667-1670 T. 3398-3400 BMC 198A T. 1673-74 T. 3869-71 T. 1676 T. 3924-25 Arg. to CON Rev. Bd. p. 168 T. 1810-1813
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4. Patient Volume
Brookwood Allegation (Pet. 62, 66)
“a. Trinity intentionally suppressed the expected patient volume at the proposed Hospital to be located in the Scrushy Building and blatantly misrepresented its expected payor mix (TMC 1, pp. 108, 109; BMC 217(A), p. 2).”
“• Submitted suppressed patient volume numbers in its CON Application known to be false and/or misleading at the time it was filed;”
Shown in the Record
Questioning of Trinity Witnesses at ALJ Hearing
STV: “Q. Now, when it comes to the volume increases, you’re projecting what increase in admissions when you move out to 20? About a 2 percent? Is that what you said?
A. I believe it was about a 4 percent from the baseline that would have declined the two years previous to that. (ALJ Hearing T. 3316.)
Q. Well, Mr. Graham, isn’t it true that Trinity Medical Center has known for years, ever since it started looking for relocation sites, that if it moved down to the 280 corridor, it could attract patients from St. Vincent’s and Brookwood?
A. I mean, it’s been told to us before; but, I mean, again, these are people evaluating a building, what you can do in the building and what it’s going to take to make it work. Are they – they’re saying fill 380 beds. Well, yeah, I mean, if we had to fill 380 beds, that would basically mean we would have to – to exceed the assumptions I made by almost 50 percent. If that’s the case and that’s what it takes to survive in that area, yeah, we’d have to take a lot of market share from people. And, you know, this market I think is not that fluid in that regard. I think a lot of times the physician migration and where physicians go is going to drive – is going to drive market share. It’s not – it’s not absolute that moving out there will – will help us maintain the level that even I’ve projected. It’s – it’s – I don’t think there’s any absolutes in that regard.” (ALJ Hearing T. 3319-3321.)
“A. All right. So you said you’ve seen some Hammes reports. Have you seen the Hammes report that was prepared June 25, 2008, and is marked as St. Vincent’s #336?
. . . .
Q. All right. What kind of share – market share increases is Hammes using in this scenario? It’s in a little black box there.
A. Okay. Where it says share change?
Q. Yes. Share change from base year.
A. Medical-surgical, 20 – year one, 20; year five, 10; year 10, five.
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Q. Okay. So Hammes is – at least in this model, they’re running a market share increase when Trinity moves to the 280 site of 20 percent the first year.” (ALJ Hearing T. 3323-3324.)
Brookwood’s Post-Trial Brief to ALJ Hampton
“E. CHS Designed the 280 Hospital Based Upon Market Growth and Increased Patient Volume.” (Brookwood’s Post-Trial Br. 38-39.)
ALJ Hampton’s Recommended Order
“These financial projections show virtually no change in Trinity’s patient volumes or its patient mix as a result of its relocation.” (ALJ Order p. 30.)
“The undersigned finds that, upon relocation, Trinity would improve its admissions, overall volumes, its payer mix and its bottom line.” (ALJ Order p. 32.)
Additional record cites:
T. 3316-3349 T. 3454-3458 Exhibits STV 328 STV 336 BMC 312 BMC 217-A, 217-B BMC 370 BMC 322 BMC 323 BMC 334
5. The 16 Documents
Brookwood Allegation (Pet. 62, 65-66)
“d. Trinity intentionally withheld numerous documents in discovery from the Administrative Law Judge and Brookwood on no legal basis or grounds.”
“B. That the actions of Trinity in wrongfully withholding documents from production in discovery denied Brookwood a fair hearing in violation of due process oflaw and the statutes and rules and regulations governing the provision of health care services in the State of Alabama;”
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“● Wrongfully withheld numerous documents from production in discovery.”
Shown in the Record
Arguments made to CON Review Board
STV: [W]e discovered, though, that Trinity had withheld a number of documents that were supposed to be turned over to us in the contested case hearing.” (10/20/10 CON Review Board meeting, p. 165)
STV: Clearly, we were entitled to these documents. Judge Hampton, the ALJ assigned to this case, ordered them to turn these documents over. They didn’t do so. We’ve been denied our opportunity to review those documents, to question their witnesses about them. Those documents point out numerous inconsistencies between what their witnesses said at the hearing and what those documents show.” (10/20/10 CON Review Board meeting, pp. 166-67)
BW: “So we just got this. And I understand why they didn’t give it to us. You know, I know why they didn’t want us to have it when we were here last time.” (10/20/10 CON Review Board meeting, pp. 170)
The 16 Documents
Box 3, File 5, 4535-4497
6. Witness Testimony
Brookwood Allegation (Pet. 62, 66)
“e. Trinity witnesses provided misleading testimony during the Contested Case Hearing on several crucial issues and criteria set forth by SHPDA as being necessity for granting a CON.”
“• Swore under oath that the information contained in the CON Application was true, knowing that it contained misrepresentations and/or inaccurate information;”
Shown in the Record
Questioning of Trinity Witnesses at ALJ Hearing
BMC: Q. This is the CON application again: Trinity’s decision to relocate to the digital hospital keeps Trinity in close proximity to its staff members, its patients and other residents of
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the service area, and its physicians. Now that’s just not true, is it, Mr. Miller? It’s not going to move y’all closer to your existing patient population, is it?
A. It doesn’t say it’s going to get any closer. It says it will remain in close proximity to the staff members, patients, and other residents in the service area.
Q. Keeps them in close proximity.
A Yes.
Q. Well, Irondale was going to be closer to your patients, wasn’t it?
A. I think as the crow flies, yes, sir.
Q. Well, let’s look at page 24 and see just how that works in terms of where they are. Here is where your CON application says where your patients are. You see in the upper right-hand corner, Mr. Miller?
A. Yes.
Q. It’s got population epicenter -- and I represent to you that PSA means primary service area -- and patient epicenter. Do you see that?
A. Yes.
Q. All right. Now, Grants Mill Road, do you see that site?
A. Yes.
Q. That’s a whole lot closer to your existing patients than is the 280 site, isn’t it?
A. It is closer, yes, sir.
Q. Crow or otherwise, it’s a lot closer.
A. Yes, sir. (ALJ Hearing, T. 1666-67.)
Additional record cites
ALJ Hearing Transcript Portions
T. 3971-72
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CERTIFICATE OF SERVICE
I certify that on April 6, 2012, I electronically filed the foregoing with the Clerk of the
Court using the AlaCourt system which will send notification of such filing to the following
and/or that a copy of the foregoing has been served by United States Mail, properly addressed
and postage prepaid to the following:
Counsel for St. Vincent’s David Hunt Gilpin Givhan, P.C. Grandview II 3595 Grandview Parkway, Suite 400 Birmingham, AL 35243 Counsel for Brookwood James E. Williams C. Mark Bain MELTON ESPY & WILLIAMS, PC 255 Dexter Avenue Montgomery, AL 36104 Counsel for the State Health Planning and Development Agency Mark Wilkerson Dana Billingsley WILKERSON & BRYAN Post Office Box 830 Montgomery, AL 36101 /s/ Robert E. Poundstone IV Of Counsel
