BRIEF OF APPELLEE/RESPONDENT AFFINITY HOSPITAL, LLC. D/B/A TRINITY MEDICAL CENTER

Transcription

1 ELECTRONICALLY FILED 4/6/2012 4:13 PM CV CIRCUIT COURT OF MONTGOMERY COUNTY, ALABAMA FLORENCE CAUTHEN, CLERK IN THE CIRCUIT COURT OF MONTGOMERY COUNTY, ALABAMA BROOKWOOD HEALTH SERVICES, INC. d/b/a BROOKWOOD MEDICAL CENTER and ST. VINCENT S HEALTH SYSTEM; v. Appellants/Petitioners, 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, CASE NO.: CV CV (Consolidated cases) Appellees/Respondents. BRIEF OF APPELLEE/RESPONDENT AFFINITY HOSPITAL, LLC. D/B/A TRINITY MEDICAL CENTER Robert D. Segall COPELAND, FRANCO, SCREWS & GILL, P.A. 444 South Perry Street Montgomery, Alabama Direct Telephone: (334) Direct Facsimile: (334) Segall@copelandfranco.com April 6, 2012 David R. Boyd BALCH & BINGHAM LLP Post Office Box 78 Montgomery, Alabama Direct Telephone: (334) Direct Facsimile: (866) dboyd@balch.com Robert E. Poundstone IV BRADLEY ARANT BOULT CUMMINGS LLP The Alabama Center for Commerce 401 Adams Avenue, Suite 780 Montgomery, Alabama Direct Telephone: (334) Direct Facsimile: (334) BPoundstone@babc.com Carey B. McRae Jennifer H. Clark BRADLEY ARANT BOULT CUMMINGS LLP One Federal Place 1819 Fifth Avenue North Birmingham, Alabama Direct Telephone: (205) Facsimile: (205) CMcRae@babc.com JClark@babc.com i

2 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 II. III. ST. VINCENT S AND BROOKWOOD S 60% OCCUPANCY RATE ARGUMENTS FAIL BECAUSE TRINITY S CON FOR 372 BEDS RESULTS IN A 60% OCCUPANCY RATE 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 B. The CON Review Board Awarded Trinity a CON For Only 372 Beds Consistent with the 60% Provision TRINITY S PROJECT IS CONSISTENT WITH THE REPLACEMENT HOSPITAL PROVISIONS OF THE ALABAMA STATE HEALTH PLAN A. If Trinity is Not Permitted to Relocate, It Will Likely be Forced to Close B. Relocation to the 280 Hospital is the Most Cost Effective Alternative for Trinity Trinity can Realize Substantial Cost Savings by Relocating to the 280 facility Relocation to the 280 Hospital Would be More Cost Effective than Renovation of the Existing Trinity Campus Relocation to the 280 Facility Would be More Cost Effective than Trinity s Former Option of Relocating to Irondale i

3 C. Relocation to the 280 Hospital is the Most Appropriate Alternative for Trinity 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 Any Perceived Problems with the 280 Hospital Are Either Immaterial or Easily Remediable Relocation to the 280 Facility is a More Appropriate Alternative than Renovation of Trinity s Existing Campus Relocation to the 280 Facility is a More Appropriate Alternative than Trinity s Relocation to Irondale Would Have Been D. There are Code Deficiencies at the Montclair Hospital that Cannot Feasibly be Corrected E. There are Operational Deficiencies at the Montclair Hospital that Cannot be Feasibly Corrected IV. TRINITY COMPLIES WITH THE CON RULES CRITERIA FOR ISSUANCE OF A CON A. Trinity s Proposed Relocation to the 280 Hospital is Financially Feasible B. The Location of the 280 Hospital is an Appropriate Site for Trinity s Relocation Hospital C. Trinity s Proposed Relocation Project Would Meet the Need for an Acute Care Hospital in Southern Jefferson and Northern Shelby Counties The Need for an Acute Care Hospital on the 280 Corridor is Supported by Population Statistics The Absence of an Acute Care Hospital in Southern Jefferson and Northern Shelby Counties is a Danger to Area Residents Trinity s Relocation to the 280 Hospital Would Address the Current Misdistribution of Acute Care Hospitals in Jefferson County The City of Hoover Alone Needs Over 200 Acute Care Hospital Beds The Need for the 280 Hospital is Evidenced by Brookwood s Near Purchase of the Hospital 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 The Fact that Jefferson County has an Excess number of Acute Care Beds is Immaterial to the Instant Relocation Project ii

4 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 St. Vincent s Detrimental Impact Analysis Has Little Probative Value Brookwood s Projected Detrimental Impact Analysis is Inaccurate The Proposed Project s Alleged Detrimental Impact on the Opponents Would be Minimal 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 E. There Has Been an Overwhelmingly Positive Community Reaction to Trinity s Project Physicians and Other Community Members Support the Proposed Project 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 Governmental Leaders Support Trinity s Proposed Project 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 F. Trinity s Project will Increase the Overall Accessibility of Trinity s Services for All Potential and Existing Patients, Including the Medically Underserved G. Trinity is an Appropriate Applicant V. THE BOARD S DECISION TO DENY OPPONENTS MOTIONS FOR RECONSIDERATION WAS SUPPORTED BY THE RECORD AND WITHIN THE BOARD S DISCRETION A. The 16 Documents Confirm Miller s Testimony that He Had Not Decided to Go to the Digital Hospital Before Late September 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 CONCLUSION APPENDIX A APPENDIX B iii

5 CERTIFICATE OF SERVICE iv

6 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 (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 (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 (1) SHPDA Found that Trinity s CON is Consistent with the State Health Plan (Ala. Code (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 ). Renovation would be substantially more expensive than relocation to the 280 hospital. (T. 719; ; ; 979; ; 1921, 2591; 2065; ; Exh. TMC 47 at 14). 1

7 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 ; 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 $ (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.) 2

8 The Montclair hospital does not comply with the ADA s Guidelines. (T. 663, 5393, 777, 828, 691, ). 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, ; ; ). There are multiple code violations caused by space constraints and Life Safety Code Violations necessitating replacement and relocation. (T ; ; 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 (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; ; 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 (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 ) 3

9 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 ) 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 (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; ; 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 (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 ; TMC 135). Faster transport is significant in severe injuries and increases patient s chances of survival. (T , 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). 4

10 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). 5

11 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 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 ) 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, 6

12 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 highquality 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 7

13 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 FACTS 1 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 (AR ). 8

14 3) Community Health Systems Professional Services Corporation ( CHSPSC ) provides management and consulting services to Trinity pursuant to a management agreement. (T ). 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, 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 9

15 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: 10

16 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, (Exh. TMC 1, Ex. 3, 4.) 11

17 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: 12

18 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.) 13

19 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 ). 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 complete. (AR ). 2 For a comprehensive description of Trinity s proposed project, please see the recommended order at p (AR ). 14

20 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 ). 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, ) 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 ) 32) The contested case hearing began September 28, 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). 15

21 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 ). 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 ) 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, (AR 3640.) 16

22 40) On October 15, 2010, Opponents filed separate Requests for Reconsideration of the final order. (AR ; ). 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 ). 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 ; ) 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. 17

23 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 (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 18

24 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). 19

25 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 20

26 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 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 21

27 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 ); (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, ; ; 979; ; ; ; 1921; 2591; 2065; ; ; 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; ; ; 663; ; 692; ; ; 714; , ; 777; ; 910; ; 979; ; ; 1921; 2591; 2065; 5393; ; 3736; 3812; 3857; ; 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 ; 3684; ; 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 The Lloyd Noland project was an effort to increase staffed beds and increase the number of hospitals, 22

28 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 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 ). 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 ; ; 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. 23

29 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. 24

30 and the CON Review Boards may grant or deny, in whole or in part, the application for the CON. See Ala. Admin. Code (3)(b), and 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 (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 25

31 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 , 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 (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 (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. 26

32 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 ) 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 ) The fact SHCC had the authority to make the 60% provision mandatory by using the word shall in section (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. 27

33 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 ). 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 28

34 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: (T. 6420). 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. 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 ) 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 (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 29

35 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 ). 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 , 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 for replacement hospitals at the time it was filed. 30

36 CON complied with the 60% provision. This argument is disingenuous. Section (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 (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 (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 , which provides that the CON Review Board may grant or deny, in whole or in part, the application for the CON.... (Emphases added.) Section requires a provider of health services to obtain a CON from SHPDA to offer a new health service. Section (10) provides that 31

37 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 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 , 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, (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, , 89 L. Ed. 1700, 65 S. Ct (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. ). 32

38 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 (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, (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). 33

39 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. 34

40 Ala. Admin. Code 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 35

41 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 ). 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 ). 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 36

42 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 ). 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 ). 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 37

43 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 (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: (T. 425). 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. 38

44 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 , 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 ). 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 ). 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 (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 ). 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 39

45 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: (T. 374). 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. 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 ). 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 ). 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, , 2354; ). 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. 40

46 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 (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 (Exh. TMC 377). The following graph depicts Trinity s declining acute care discharges and market share from 2001 to 2008 (Exh. TMC 379): 41

47 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 (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 (Exh. 378): 42

48 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 43

49 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 44

50 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 ). 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 ). 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 ). 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 ). 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. 45

51 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 ). 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 ). 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, 46

52 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 ). The only hospitals in town that have aroundthe-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 ). 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 ). 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 ; 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: (T. 1463). 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. 47

53 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 48

54 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 ). 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 49

55 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 ). 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 buildout 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 ). 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 50

56 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 ). 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 ). The combination of the bargainbasement 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 ). 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, ). Building a parking deck instead of surface parking would increase the cost of the hypothetical project to $325,000,000. (T ). If, instead of building a facility to the 51

57 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, ). 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 52

58 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 ). 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 53

59 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 ). 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). 54

60 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 costprohibitive. (T ). 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 ). 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 ). 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. 55

61 (T ). 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 56

62 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. 57

63 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 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 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, 58

64 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 ; 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 ). 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 ). 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 59

65 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 ; 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 ). 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 ; 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 ). 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 ). Mr. Carlisle s conclusion flows from his determination that an allencompassing 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 ). 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 ). The construction and building out of seven new and additional floors of space, including: 60

66 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 ). Bringing the patient rooms in the existing patient tower up to code (T ). 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 ). 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 ); Completely replacing the hospital s HVAC system in order to meet current code, as the current air handling system cannot handle the air changes per hour required by code for operating rooms, or the six air changes per hour required in patient rooms. (T ). Removing and installing new ductwork, because the existing ductwork is internally lined, which makes cleaning of those ducts very difficult. (T ). 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). 61

67 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 ). 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 ). 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, ) 62

68 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 ). 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 costeffective 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 63

69 guess from a project-by-project comparison, I could not speak to whether that cost would be more or less right now. (T ) (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. 64

70 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 $318,000,0000 $275,000,000 Operating Costs 9 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 ). 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 ). 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 ). 65

71 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, ). 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 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 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. 66

72 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 ). 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 ). 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 67

73 capabilities of the facility, which are, even today, state-of-the-art, despite their installation in 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 ). 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. 68

74 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 ). High grade finishes have been used on the building to make it less clinical and more hotel-like. (T ). 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 ). 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). 69

75 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, ) 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, 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 ). In each case, the decision has 70

76 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 ). Here, however, the building has already been constructed. (T. 2262). Also, because there are 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 ). 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 ). 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 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 ). Normally, Mr. Carlisle would have constructed a rectangular 71

77 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 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 72

78 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 ). 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-ofthumb 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 ). In fact, the number of spaces needed will be even less for a 372-bed hospital. In his 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 73

79 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, 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 ). 74

80 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 ,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 , 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 , 2310). 75

81 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 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 ). 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 ). 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 ). 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 ). 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. 76

82 Paul Graham testified that the two existing linear accelerators would continue to be used after the relocation. (T ). 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 ). 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 , 1959). The vaults could also be placed in the existing building after completing some reinforcement work to accommodate the vault s weight. (T ). 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 ). 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 77

83 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 78

84 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 ). 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, , 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 ). 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. 79

85 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 ). 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 ). 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 (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 80

86 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 81

87 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, , 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). 82

88 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: (Exh. TMC 47 at 15). 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. 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 , 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 83

89 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 ). 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 ). 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 84

90 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 85

91 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 ). 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 ). In the meantime, in January of 2008, Trinity first learned of the possibility of purchasing the 280 hospital for $40 million. (T ). 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. 86

92 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 ). 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, fourlane road, which would have been a 10-year project. (T ). 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, (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 87

93 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 ). 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 ). Trinity s CON application to relocate to Irondale was filed on Nov 3, (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 ). 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. 88

94 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 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 ). 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 , 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). 89

95 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 ). The Montclair hospital does not meet code requirements for fire caulking. (T ). 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 ). o The code for neonatal intensive care units now requires much larger square footage per bassinet than Trinity provides. (T ). 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). 90

96 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 ). Public bathrooms have no air supply. (T ). 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 ). 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. 91

97 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 92

98 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 ). 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 ). 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

99 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

100 (T. 937). The West Tower was completed in (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 hospitalaffiliated 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 ). On a scale of one to ten, throughput at the current site represents about a four. (T. 3728, 3729). 95

101 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 ). 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 ). 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 ). 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 ). o Some ORs are so small that certain physicians, such as orthopedists and bariatric surgeons, cannot operate in them. (T ). o Trinity has already renovated the ORs that could be expanded (because they were nearest the outside wall of the hospital). (T ). 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). 96

102 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 ). 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 ). 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 ). 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 ). 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. 97

103 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 ). 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 ). 98

104 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 ). 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). 99

105 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 ). 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 100

106 on Brookwood s campus, and that patients sometimes complain about the parking situation there. (T ). 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 ). 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 101

107 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, ) 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 ( ) 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 102

108 o 2009 Get with the Guidelines Silver Award for Performance Achievement in Stroke o Get with the Guidelines Silver Award for Performance Achievement in CAD o 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 ( ) 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 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 (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. 103

109 (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, et seq. contain 16 criteria, many of which have multiple subparts, that should be considered in determining whether an applicant should 104

110 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 (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. 105

111 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 , 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 ). 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 (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 (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 106

112 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 (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 ). 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 ). 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 (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 ). 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 107

113 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 ). 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 , 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 (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

114 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 ). 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, ). 109

115 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 ). 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 ). 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 110

116 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

117 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 (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 ). 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). 112

118 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 ). 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 ; ). 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 ). Relocation to the well-known 280 hospital would remedy such concerns. (T ). 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 113

119 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 ). 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 114

120 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, ) The ALJ gave consideration to this argument, as reflected in his recommended order that was adopted by the CON Review Board. (AR ). 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 115

121 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 ). 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 (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 116

122 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 improvements 16 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). 117

123 accomplished between 9:00 a.m. and 3:00 p.m.; if the roadwork were major, it would be completed at night. (T ). 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. 118

124 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 (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, 119

125 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 (TMC 131 at 4). That is an increase of 30.2% between 2008 and Id. The population in that zip code of persons 120

126 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 (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 121

127 been performed. (T ). 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 ). 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 ). 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 ). 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 , 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 122

128 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 ). 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 ). 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 ). 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 , 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 123

129 Avenue unit has reached Station 32, the response time to that accident would be greatly increased. (T ). Chief Brooks testified further that Brookwood and St. Vincent s are often on emergency or critical care diversion. (T ). 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): 124

130 Critical Care Diversion Hours Brookwood St. Vincents Trinity 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2008 Emergency Department 250 Diversion Hours Brookwood St. Vincents Trinity 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

131 Critical Care Diversion Hours January February March April May June 2009 Brookwood St. Vincents Trinity Emergency Department 120 Diversion Hours January February March April May June 2009 Brookwood St. Vincents Trinity 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, 126

132 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 127

133 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 ). 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 ). 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 128

134 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, 129

135 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 130

136 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 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. 131

137 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 ). The mayor then held a press conference in conjunction with Baptist stating that they would pursue a hospital for Hoover. (T ). 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 132

138 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. 133

139 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 134

140 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, Id. Internal Brookwood documents reveal that one motivation for Brookwood s almostconsummated 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 ). Mr. Gause testified that the operation of the 280 hospital by any hospital other than Brookwood 135

141 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: (Exh. 207 at 13). 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. 136

142 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, 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 ). 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. 137

143 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 maldistribution 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 138

144 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 (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, ) (Ala. Civ. App. 1999) (upholding grant of CON for project which would have $1,000,000 annual 139

145 detrimental impact on Baptist where project would improve accessibility for residents who had to drive 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. 140

146 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 ). 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 ). Balsano then translated those projected losses into dollar amounts by first determining that St. Vincent s currently has a per patient contribution margin 19 of $3,604, and then adding 33% to that amount to account for outpatient services, which have historically represented onethird 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. 141

147 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 142

148 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 ). 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. 143

149 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 ). 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 ). 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 144

150 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 145

151 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 ). 146

152 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 ). Falls found that, utilizing a true fivemile 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 ). 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,

153 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 reevaluate 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 ). 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 ). 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 148

154 costs, standardizing supplies, improving contract negotiations, and making productivity improvements. (T ). 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 ). 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 149

155 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: (Exh. TMC 347). 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. 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 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 150

156 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: (T ). 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. 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 ). 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 151

157 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 (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 152

158 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 ). 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 ), inpatient payor mix 153

159 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 (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 ). 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 ) 154

160 As acknowledged by Dan Sullivan in the contested case hearing regarding the sinceabandoned Irondale CON, Trinity is such a regional referral center. (Exh. BMC 198(b), p ). 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 ). 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 ). 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 155

161 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 ). 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, ) 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 156

162 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 ). 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 ). 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 ). 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 157

163 301 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 (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 158

164 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. 159

165 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 ). 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: Id. at 3. 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 noninstitutional, 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. 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 160

166 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 anticompetitive behavior by hospitals. Their report states: Id. at 6. (emphasis added). 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 supracompetitive 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. 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 161

167 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 ). 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 (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, 162

168 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 ). 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 ). 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, ). 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 163

169 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 ). 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 ). 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 ). 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 ). 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 ). Mr. Sweet further testified that he does not believe the 164

170 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 ). 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 ). 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 ). Phase I would be completed within months, which is the same time frame as completion of the hospital. (T ). In additional phases, Daniel plans to develop up to 165

171 one million square feet of additional retail space, and a 350-unit apartment complex. (T ). 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 ). 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 166

172 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 ). 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 ). 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: 167

173 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: 168

174 169

175 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. 170

176 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. 171

177 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 , 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. 172

178 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. 173

179 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 ). 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 ). 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

180 location. (T , 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 ). 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: (T ). 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. 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 175

181 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, 176

182 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 ). 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 177

183 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 (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 178

184 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 (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 : Uncompensated Care $12,488,471 $22,867,152 $28,076,000 Community Service $761,386 $736,850 Data not available (Exh. TMC 1 at ). 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 ). Trinity s charity care policy includes a Statement of Community Partnership for Education and Referrals, which sanctions 179

185 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 ). 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 ), 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 ). In a given year, Trinity delivers 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 180

186 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 ). 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 (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 ). 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 181

187 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 ). 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 ). 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. 182

188 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). 183

189 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 184

190 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 ). 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 ). CON Rules 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 185

191 CON Rules 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. 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 ). 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 186

192 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 ). 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 ). 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 187

193 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, The Irondale contested case hearing took place between October and November of 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 ). 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

194 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 (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 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-tolate September of (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 189

195 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 (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. 190

196 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 (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. 191

197 SHPDA Rule (2)(a) provides for reconsideration under the same grounds provided in Alabama Code (k). SHPDA Rule (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 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 (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 ). 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 ; State Health Planning & Dev. Agency v. W. Walker Hospice, 192

198 Inc., 993 So. 2d 25, 29 (Ala. Civ. App. 2008). See, e.g., Weeks v. Danford, 608 So. 2d 387, (Ala ( 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 , 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, , , 1676, 1810, , ; STV 328); Trinity explored that possibility, but struck no deal before September 2008 (T , , 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 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 193

199 (T ) 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. 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, 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 produced at the ALJ hearing showing that no deal was reached until the last week of September 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 See Weeks, 608 So. 2d at Second, Brookwood argued that a May 1, 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, (AR 4720.) The 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 (1)(f) ( The applicant may at its option, submit endorsements from community officials 194

200 and individuals expressing their reaction to the proposal. ) (Transcript Sept. 15, 2010 CON Review Board Meeting, 23, ) Moreover, a close reading of the 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 ) 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 Third, Brookwood argued that a September 3, 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 ) Miller testified at the digital hospital ALJ hearing as follows: (T. 1673). 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. 25 As previously explained, Brookwood s counsel was referring to SHPDA Rule , 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. 195

201 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 ) Its re-try of the same argument based on the September 3 shows that it is cumulative of its prior impeaching evidence and thus inadequate for two reasons. See Campbell v. Williams, 638 So. 2d 804, (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 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 196

202 showing that Miller made the decision to move to the digital hospital in the last week of September (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 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 Brookwood argued, as part of its request for reconsideration, to the CON Review Board that a May 1, 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 ): (T ) Q. Okay. So, now, in between your visit to the [digital hospital] facility in February of 2008 and the date of this 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. 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. 197

203 .... 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 ) (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, is cumulative and would not change the result. See Weeks, 608 So. 2d at Second, Brookwood and St. Vincent s argued that Heburn s being copied on s 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). 198

204 Heburn was indeed copied on a number of s 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 (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 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, 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 s 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 (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 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). 199

205 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, /s/ Robert E. Poundstone IV One of the Attorneys for Affinity Hospital, LLC d/b/a Trinity Medical Center OF COUNSEL: Bobby Segall (segall@copelandfranco.com) COPELAND, FRANCO, SCREWS & GILL, P.A. 444 South Perry Street Montgomery, Alabama Direct Telephone: (334) Direct Facsimile: (334) Robert E. Poundstone IV (bpoundstone@babc.com) BRADLEY ARANT BOULT CUMMINGS LLP The Alabama Center for Commerce 401 Adams Avenue, Suite 780 Montgomery, Alabama Direct Telephone: (334) Direct Facsimile: (334) 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. 200

206 David R. Boyd BALCH & BINGHAM LLP Post Office Box 78 Montgomery, Alabama Direct Telephone: (334) Direct Facsimile: (866) Carey B. McRae Jennifer H. Clark BRADLEY ARANT BOULT CUMMINGS LLP One Federal Place 1819 Fifth Avenue North Birmingham, Alabama Telephone: (205) Facsimile: (205)

207 APPENDIX A Requirements for Issuance of CON under Ala. Code 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 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 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 (1).) Requirements under State Health Plan (Ala. Admin. Code ): Most costeffective or otherwise most appropriate alternative Reasonableness of square footage, construction cost, and equipment cost for types and volumes of patients to be served CON Review Board and ALJ Findings [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 Examples 29 of Evidence Supporting Findings from Voluminous Administrative Record 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 ) 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 ; T ) 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 ) Renovation would be substantially more expensive than relocation to 280 hospital. (T. 719; ; ; 979; ; 1921, 2591; 2065; ; 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. 202

208 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 ; 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 $ (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 , 714). o Sprinkling such areas would cause massive disruptions to the areas of the hospital where the installation of 203

209 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 ). The Montclair hospital does not meet code requirements for fire caulking. (T ). 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 204

210 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 ). o The code for neonatal intensive care units now requires much larger square footage per bassinet than Trinity provides. (T ). 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 belowgrade waste line failure, which would have to be corrected in phases and would 205

211 therefore create substantial problems related to providing food services to patients. (T ). Public bathrooms have no air supply. (T ). 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 ). 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 206

212 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). Wayfinding 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 ). 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 207

213 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 ). 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 ). 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 ). 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 ). o Some ORs are so small that certain physicians, such as orthopedists and 208

214 bariatric surgeons, cannot operate in them. (T ). o Trinity has already renovated the ORs that could be expanded (because they were nearest the outside wall of the hospital). (T ). 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 ). 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 209

215 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 semiprivate 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 semiprivate rooms, and there is no way to renovate those rooms to accommodate those requirements. (T ). 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 ). 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, oneday surgery admission, the emergency department, and inpatient admission. (T ). Trinity has to have an early morning admission area separate from a one-day admission area because neither 210

216 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). 211

217 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 intercomlike 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 ). 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 ). 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 ). 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). 212

218 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 (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). Montclair hospital is at the end of its useful life. (T. 937; 652; Exh. TMC 27.) See Evidence Examples contained above in discussion of Ala. Code (1). Renovation of the Montclair facility would be more expensive than relocation to 280 hospital. (Exh. TMC 47 at 14; T. 719; ; 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 ). 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 ). 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, 213

219 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 ). Bringing the patient rooms in the existing patient tower up to code (T ). 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 ). Moving and reconstructing the road on the campus leading to the loading dock in order to ensure access to the dock, since the fivestory 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 ); Completely replacing the hospital s HVAC system in order to meet current code, as the current air handling system cannot handle the air changes per hour required by code for operating rooms, or the six air changes per hour required in patient rooms. 214

220 (T ). Removing and installing new ductwork, because the existing ductwork is internally lined, which makes cleaning of those ducts very difficult. (T ). 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; ; ; 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. 215

221 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 (3).) 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 (4).) That patients will experience serious problems in obtaining inpatient care of the type proposed in the absence of the proposed new service. (Ala. Code (5).) 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). 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). 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 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 ) 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 ) See Evidence Examples contained above in discussion of Ala. Code (1) & (2). 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 ; TMC 135) All Birmingham area hospitals are clustered. There is no hospital on Highway 280 between Brookwood and Sylacauga. (T. 5230). 216

222 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 11 th fastest-growing county in the U.S. (T. 4497). Review Criteria for Issuance of CON under CON Rules Chapter 6 of the CON Rules, 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 Consistency with State Health Plan ( ) Requirements under State Health Plan (Ala. Admin. Code ): Most cost-effective or otherwise most appropriate alternative Reasonableness of square footage, construction cost, and equipment cost for types and volumes of CON Review Board and ALJ Findings The Applicant made a prima facie showing that a relocation to the Highway 280 facility is the most costeffective 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, Examples of Evidence Supporting Findings from Voluminous Administrative Record See Evidence Examples contained above in discussion of Ala. Code (1) 217

223 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 ( ) Availability of Alternatives ( ) 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). [T]he Applicant has demonstrated that the proposed replacement is the most cost-effective or otherwise the most appropriate alternative. (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 ). See Evidence Examples contained above in discussion of Ala. Code (1) & (2). 218

224 Need for the Project ( ) 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 ; 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 11 th 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; ; ). 219

225 Additional Need Criteria ( ) Considerations: Need of Population to be Served Population Data Current and Projected Utilization of Other Facilities Impact on Other Facilities Community Reaction 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). 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 ) 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 ) 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. 220

226 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 11 th 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 ( ) Trinity currently provides a generous amount of charity care at its Montclair campus. (AR 3219). Trinity reported charity in significant amounts for , 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 ) Trinity reported charity in significant amounts for , 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 221

227 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 ) (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 ). 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 ) and also by virtue of being a teaching hospital (T ). Trinity participates in the Medicaid waiver program. (T. 3074) In a given year, Trinity delivers 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 ). 222

228 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 ) In a given year, Trinity delivers 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 ( ) 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 223

229 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 ( ) 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 ) 224

230 capability of the facility is excellent. (AR 3214). Construction and Design ( ) Conformity with local zoning, building codes, and protection of environment ( ) 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). 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 Evidence of cost containment 280 hospital is 60-65% completed structure with over $200 million already invested in it. (T ) 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 ; T ) 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 ) 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) Zoning approval obtained (Exh. TMC 14 & T ) Certification to comply with building codes within CON application (Exh. TMC 1 at 114.) 225

231 Compliance with State Licensure Rules, Regulations, and Standards ( ) Quality of Care at Existing Facility ( ) Highway 280 hospital will comply with all state statutes and regulations for the protection of the environment. (AR 3212). 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). Trinity has established by the evidence that the quality of care at the current hospital site is excellent. (AR 3211). Certification in CON application (Exh. TMC 1 at 114.) 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 4 226

232 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 ( ) 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 Get with the Guidelines Silver Award for Performance Achievement in CAD o 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 227

233 - 5 years in a row ( ) 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 awarded by the American Society of Metabolic and Bariatric Surgery (Exh. TMC 34). 228

234 APPENDIX B Brookwood s Allegations 1. Misrepresenting payor mix/submitting payor mix information in CON application known to be false Shown in the Administrative Record ALJ Hearing Transcript Portions T T Exhibits STV 376 STV 328 BMC 373 Arguments to CON Review Board on September 15, 2010 p. 45 Highlights of Evidence in Administrative Record Litigating Allegations 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 ) 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 ) 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 T 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 229

235 Arguments to CON Review Board on September 15, 2010 pp 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 ) 230

236 231 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

237 3. Misrepresentations to CON Review Board on 5/21/08 regarding relocation to Irondale ALJ Hearing Transcript Portions T T T T T T T T T T 3979 T T documented in the previous CON submittal. It was more of a formality, you know, to update that report.(t ) Arguments made to CON Review Board BMC: So October the 29 th, 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, ) Questioning of Trinity Witnesses at ALJ Hearing BMC: Q. But what my question was, was on May 21 st, 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 ) 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 232

238 T T T 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 ) 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 The Witness: Yes, sir. (ALJ Hearing, T ) BMC: Q. All right. Did you go down to Montgomery for the CON Review Board hearing on May 21 st, 2008? A. Yes, I did. Q. All right. Now, did you know at that time, May 21 st, 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 ) Arguments made to CON Review Board BMC: But then what did they do in May? May 21 st, 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 233

239 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, ) 4. Submitting suppressed patient volume numbers in CON application ALJ Hearing Transcript Portions T T 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 ) 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 ) 234

240 5. Withholding documents Arguments made to CON Review Board on October 20, 2010 p. 165 pp p. 170 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 ) 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 ) 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 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, 235

241 236 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 righthand 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 )

242 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.) 237