Want to build a hotel with 150 rooms? No problem. If the market can't handle them, competition will out. Want to add 150 beds to a hospital? Hold on. With some exceptions, a certificate of need issued by the Department of Health is required before a healthcare provider can build or expand most healthcare facilities, such as hospitals, dialysis centers and nursing homes.
Application and Evaluation
An applicant for a certificate of need must establish that: (1) there is a need for the new or expanded facility in the geographic health-planning area, which usually is the county or a part of it; (2) the project is financially feasible; (3) the structure and process of the care at the proposed facility is appropriate; and (4) healthcare costs will be appropriately contained. The crucial step is often the first of these.
Whether a need exists may sound straightforward, but the determination is often hotly contested. Disputes can involve the identification of the appropriate service area and the existing healthcare facilities that may or may not already be meeting a need in that area, as well as the appropriate way to count patients who seek healthcare in that service area.
Often, applicants hire professional healthcare planning consultants to assist them with their applications. Lawyers may or may not be involved at this stage.
The Department's Certificate of Need Program may ask for follow-up information on any part of the application. Often a public hearing is requested, at which the applicants, members of the public and the applicant's regional competitors can give written statements to the Program in support or opposition. The application process usually is the only opportunity for the applicant and competitors to develop the factual record. Any later challenger to the grant or denial of a certificate of need, in most cases, will be limited to the information on the record already made.
The Program issues a written decision either granting or denying the application, along with a detailed written analysis of its decision. This entire evaluation can last months and sometimes more than a year.
Reconsideration
Inevitably, one of the parties is unhappy with the decision. A request for reconsideration usually is when litigation begins and lawyers get involved.
New information that could not have been brought to the Program's attention while the record was open or evidence that circumstances have materially changed since the record closed often are grounds for granting a request for reconsideration. The Program also may grant reconsideration if a party can show that the Program failed to follow its procedures.
Adjudicative Proceedings
The unhappy applicant or a competitor also may request an adjudicative proceeding, either directly or after a decision on reconsideration. Adjudica-tive proceedings are presided over by health law judges - administrative law judges who only preside over matters before the Department of Health. The program defends its decision against the complaining party; the healthcare facility that prevailed below also will be a party to the adjudicative proceeding in most cases.
The hearing is treated much like a trial, except the evidence usually is limited to the administrative record. The Program's decision is evaluated based on the information it had before it at the time of its decision. However, the health law judge may admit evidence that allows him or her to understand the information already in the record.
Often, parties will depose each other's experts or the Program's analysts, and these witnesses may be called at the hearing. The issues at the hearing typically involve whether the Program correctly applied the applicable statutory and regulatory criteria. The party who loses before the health law judge may then apply for judicial review under the Administrative Procedure Act.
Effective Representation
Representing a healthcare provider in certificate of need litigation requires a detailed understanding of a specific set of statutes and regulations. RCW Chapter 70.38 provides legislative authority and describes the Certificate of Need Program. The Department of Health has promulgated WAC Chapter 246-310, which covers the Certificate of Need Program's procedures. Washing-ton's Administrative Procedure Act, RCW Chapter 34.05, also comes into play, as does WAC Chapter 246-10, which regulates adjudicative proceedings under the Department of Health.
In addition, the Legislature recently authorized a task force to review and recommend changes to the Certificate of Need Program.1 As a result, significant aspects of the certificate of need regulatory scheme may change in the future. Lawyers with clients who want to expand or build a healthcare facility should carefully study the applicable law to determine whether the client must first obtain a certificate of need.
Ross Farr is an associate attorney with Ogden Murphy Wallace, P.L.L.C. where his practice focuses on certificate of need litigation and employment law. He can be reached at rfarr@omwlaw.com.
1 See Chapter 282, Laws of 2005. For further information on this task force and its work, visit www.hca.wa.gov/contf.
