day~ 1 ,r ll y: I ?gig Qu?f?! $5 35:12:} COMMONWEALTH of VIRGINIA Dcpm'mwm of Hurt/fl? Karen Remley. MD. MBA. FAAP 0 BOX 2445 TTY 7-1-1 OR State Health Commissioner RICHMOND. VA 23218 1-800-828-1120 September 12, 2011 VIA ELECTRONIC AND CERTIFIED U.S. MAIL Thomas J. Stallings, Esquire McGuireWoods One James Center 901 East Cary Street Richmond, Virginia 23219-4030 RE: CERTIFICATE OF PUBLIC NEED REQUEST NUMBER VA-7783 LEWIS-GALE MEDICAL CENTER City of Salem Planning District 5 Health Planning Region Introduction of Special Care Nursery Services Dear Mr. Stallings: In accordance with Article 1.1 of Chapter 4 of Title 32.1 (Section 32.1-102.I e! seq.) of the Code of Virginia, I have reviewed the application submitted in relation to the above-referenced proposed project. As required by Subsection ofVirginia Code 32.1- 1023, I have considered all matters, listed therein, that must be taken into account in making determinations of public need. 1 have received, reviewed and adopted the enclosed ?ndings. conclusions and recommended decision of Douglas R. Harris. .D., the adjudication of?cer who convened the informal fact-?nding conference held to discuss the application and who analyzed the administrative record pertaining to the proposed projects. Based on my review of the project and on the recommended decision made by the adjudication of?cer, I am denying the application for a COPN, captioned above. I ?nd that it is not necessary to meet a public need. I am mindful of the emotional challenge created when a needful infant is separated from its family in order to receive Special level nursery services at another hospital. I am mindful of the community support for the project proposed in the application. But I am also keenly aware of the effect proliferation of resources can have on neonatal services, VIRGINIA DEPARTMENT OF HEALTH Pratt-(Ibis You and Your Environment Thomas J. Stallings, Esq. September 12, 20] 1 Page 2 of 3 which depend on suf?cient volume in order to maintain clinical pro?ciency and overall quality of care. Special care nursery services, involving vulnerable and frail patients, should not be allowed to be duplicated when evidence strongly shows that suf?cient volume would not exist to support pro?ciency and quality in neonatal care delivery. The reasons for my decision include the following: The proposed project would unnecessarily duplicate existing services, such as those at Carilion Roanoke Memorial Hospital, the regional perinatal center for Perinatal Region II, exerting an adverse impact on the utilization and quality of existing services; (ii) The proposed project is inconsistent with applicable provisions of the State Medical Facilities Plan, as well as the public interests and purposes to which that plan is devoted; The project would result in at least a two-year ?nancial loss and its economic viability is readily questionable; (iv) The project would reduce the frequency and duration of medical tranSportation for only some infants in the Lewis-Gale system of hospitals in HPR i.e. infants delivered at and Despite many expressions of community support for the project, a dispassionate review of the facts in relation to the law indicates that the project would be duplicative of accessible services in existence, stands to harm the quality of exacting clinical care provided to frail infants, and is not needed. In accordance with Rule 2Az2 of the Rules of the Supreme Court of Virginia, 3 party to an administrative proceeding choosing to appeal a case decision must ?le, within 30 days after service of the case decision: a signed notice of appeal with ?the agency secretary.? I would consider such a notice suf?ciently directed if it were addressed and sent to my of?ce at the James Madison Building, Thirteenth Floor, 109 Governor Street, Richmond, Virginia 23219. Under the Rule, when service of a decision is ?accomplished by mail,? three days are added to the 30?day period. Sincerely, ren Remley, M.D., M.B.A., F.A.A.P. State Health Commissioner In accordance with Va. Code 22-4023, the signed original of these ?nal agency case decisions ?shall remain in the custody? of the Department. Thomas J. Stallings, Esq. September 12, 201 1 Page 3 of 3 Enclosure cc: Ishneila Moore, Esquire Assistant Attorney General Stephanie L. Harper, M.D., M.P.P., Director Alleghany Health District Erik O. Bodin, Director Division of Certi?cate of Public Need Douglas R. Harris. .D. Adjudication Of?cer COMMONWEALTH OF VIRGINIA Department of Health KAREN REMLEY. M.D.. M.B.A., F.A.A.P, STATE HEALTH COMMISSIONER DOUGLAS R. HARRIS. JD. ADJUDICATION OFFICER RECOMMENDATION TO THE STATE HEALTH COMMISSIONER REGARDING CERTIFICATE OF PUBLIC NEED or ?Certificate?) REQUEST NUMBER VA-7783 LEWIS-GALE MEDICAL CENTER City of Salem Planning District 5 Health Planning Region Ill Introduction of Special Care Nursery Services I. Introduction This document is a recommended decision, submitted to the State Health Commissioner ("Commissioner?) for her review, consideration and, should it meet with her concurrence, adoption. The recommended decision follows an informal fact-?nding conference conducted in accordance with the Virginia Administrative Process Act and Virginia Code 32.1-102.6, and re?ects full review of the administrative record regarding the application for a COPN, captioned above. This recommended decision is an effort to provide the Commissioner means to inform the applicant ?briefly and generally in writing of the factual or procedural basis? for a case decision on the application, as called for in the APAFI The recommended decision has been written with full realization of the need to make case decisions on applications for a Certi?cate in accordance with the statutory considerations set forth in Subsection of Virginia Code 32.1 ?102.3. The recommended decision has also been prepared in accordance with the administrative procedures contained in Virginia Code 32.1-102.6. Speci?cally, Va. Code 22-4019. 3 Specifically, in Va. Code 22?4019 (A). Adjudication Officer?s Recommendation Page 2 of 13 The Commissioner?s adjudication of?cer, in writing this recommended decision, seeks to heed the law by addressing all applicable statutory considerations (with which the Commissioner must make determinations of public need in Virginia), by concisely discussing the application, by gauging it against relevant considerations and applicable standards in law and regulation, and by referring to sufficient supporting information in the record. II. Authority and Procedural Historv Article 1.1 of Chapter 4 of Title 32.1 321-102.] et seq.) ofthe Code of Virginia (titled ?Medical Care Facilities Certi?cate of Public Need? and commonly referred to as the law?) addresses medical care facilities and provides that person shall commence any project without ?rst obtaining a issued by the Commissioner.?3 The COPN law de?nes ?project,? in part, to include an ?[i]ntroduction into an existing medical care facility of any new . . . neonatal special care . . . services . . . which the facility has never provide or has not provided in the previous 12 months.?4 The application proposing the current project falls within this de?nitional text, and has been submitted and duly reviewed pursuant to law. The presentation of this recommended decision follows an IFFC regarding the proposed project conducted on December 20, 2010, in Henrico County, pursuant to the APA and Code 32.1- 1026, and (ii) a review of the administrative record amassed in relation to the project conducted after the closing of that record, which occurred on January 28, 2011. The proposed project was discussed in detail at the IFFC, at which the applicant was represented by legal counsel, was afforded an opportunity to present the merits of its project and did so with evidence (including written exhibits and the testimony of sworn witnesses) and argument of its devising. A medical care facilities analyst from the Department of Health (?Department?), Division of Certi?cate of Public Need attended the IFFC and discussed that division?s staff analysis of the project.5 The IFFC was conducted in accordance with written guidelines and policies designed to ensure sound procedure, to uphold basic due process and to promote predictability and fairness in administrative proceedings conducted on COPN applications. (These guidelines and policies are set forth in a Department guidance document, readily accessible via the Internetf?) A certified transcript of the was created and made available to the applicant for review and for assisting in the post-IFFC submittal of information and briefings, additional documentary evidence, proposed ?ndings of fact and conclusions of law (with culminating argument) and rebuttal (as needed), according to an agreed- to schedule that ended with close of the record. 3 See Code ?32.1-102.3 (A). Code 32.1-1011, de?nition item 5. 5 DCOPN constitutes the division within the Department of Health that comprises the Commonwealth?s professional health facilities planning staff. 6 Va. Department of Health Guidance Document ADJ-003 (revised November I, 2002), available on Virginia?s Regulatory Town Hall Adjudication Of?cer?s Recommendation Page 3 of 13 For the purpose of brevity, the present document may rely on ?administrative precedent,? past deCISions of the Commissioner (incorporating adjudication of?cer?s recommendations prepared for his or her review) approving or denying applications for a COPN, to a degree consistent with the APA. Findings of Fact and Conclusions of Law The factual basis underlying the recommended decision made herein consists of evidence in the administrative record, including information contained in the application giving rise to this review, the transcript of the IFFC, documents prepared by the applicant?s counsel and a governmental analysis, a staff report prepared by DCOPN and dated October 19, 2010. I have reviewed the administrative record relating to the application. By reference, I hereby incorporate the DCOPN staff report into the present document for the limited purpose of providing corroboration of facts and basic analysis that support the evidentiary basis on which the present recommended decision rests. The DCOPN staff report was made available to the Commissioner when the present document was presented for her review and consideration. Findings of fact include: 1. Lewis-Gale Medical Center, LLC doing business as Lewis-Gale Medical Center is a Delaware, for-pro?t limited liability company that is part of the operations of the HCA Virginia Health System, which is af?liated with HCA Inc. a Delaware, for-pro?t corporation. 2. LGMC a 521-bed, tertiary medical care facility located in the City of Salem, PD 5, HPR 3. On July 1, 2010, Lewis-Gale submitted the application for a Certi?cate captioned and denoted above as COPN Request Number VA-7783, seeking approval of a project to establish special care nursery services with eight bassinets at LGMC, or, characterized differently, a project to establish an eight-bed, specialty-level, neonatal special care unit at LGMC. 4. The project proposed in the application (the ?Lewis-Gale project,? the ?proposed project? or the ?project?) would involve renovation of existing space in an existing normal newborn nursery at and the placement of eight specialty level newborn bassinets. Total capital costs for the project are estimated to total $3,400,000. These costs would be funded from accumulated reserves. 5. On October 19, 2010, DCOPN published a staff report on the proposed project. The report contains a staff recommendation that the Commissioner deny the project. 6. A. The Proposed Proiect in Relation to Speci?c Provisions of the Eight Statutory Considerations. Facts and conclusions8 regarding the project proposed by Lewis?Gale and relating 7 See Va. Code 22-4019 (subsection B, second sentence). 3 Some statements and conclusions, appearing below and in direct relation to one statutory consideration, may carry significance and relevance in relation to one or more other statutory considerations or items appearing under one or more of them. Adjudication Officer?s Recommendation Page 4 of 13 directly to the eight statutory considerations9 of public need, set forth and enumerated in Virginia Code 321-1023,10 as amended, and appearing in bold type below, include: 1. The extent to which the proposed service or facility will provide or increase access to needed services for residents of the area to be served, and the effects that the preposed service or facility will have on access to needed services in areas having distinct and unique geographic, socioeconomic, cultural, transportation, and other barriers to access to care. Lewis-Gale states that it recently ?renamed its facilities to em hasize the existing regional and cooperative nature of the HCA Virginia Health System in HPR The Lewis?Gale Regional Health System consists of four hospitals: LGMC, Lewis-Gale Hospital at Alleghany (in Low Moor, PD 5), Lewis-Gale Hospital at Montgomery (in or near Blacksburg, PD 4) and Lewis?Gale Hospital at Pulaski (in Pulaski, PD 4). If the Lewis-Gale project is approved, infants, originally cared for at one of the latter three hospitals and needing specialty level care, would be transferred to LGMC, as needed. Lewis-Gale emphatically characterize the motivation behind the proposed project as being ?homegrown,? and not stemming from the directives of HCA corporate management.1 LGMC is the tertiary core of a four-hospital health system serving PD Lewis-Gale anticipates growth in its obstetric volume and asserts that recent years? utilization re?ects a ?suppressed volume? due to the absence of special-level care at LGMC. '3 Since March 201 1, it has doubled the number of obstetricians on staff at LGMC, which now stands at eight. 14 The eighth is a physician in Lexington, approximately 50 miles north of Salem, where Carilion Stonewall Jackson closed its obstetrics service earlier this year.15 Lewis-Gale states that LGMC has ?almost double[d]? its obstetric volume since 2008, due in part to ?hav[ing] been successful in partnering appropriately with physicians who have chose to come to to deliver [babies] and due, in part, to taking ?outreach Opportunities.?16 In arguing that ?[t]here is a tremendous, on-going public need for NICU services at Lewis-Gale argues that ?the Commissioner has recognized [specialty?level NICU services] as being the standard of care in other parts of Virginia.?17 I believe this statement exaggerates the substance of prior case decisions, which are limited in their precedential value due to the administrative setting in which they were made. One of the Commissioner?s case decisions, which was issued by the immediately?previous Commissioner, and to which Lewis-Gale points to back up its bold assertion, contains (in the incorporated adjudication officer?s recommended decision) pertinent language. This language states that 9 As set forth here below, the considerations are those set forth in statute verbatim, except that the ?rst word of some discrete items have been capitalized, punctuation at the end of discrete items has been changed in a few instances for parallel treatment, and one usage of ?and" has been removed. 0 As amended, effective March 25, 2009. See Acts of Assembly, 2009, Chapter 175 (House Bill l598). Tr. at 20. ?2 IFFC Tr. at 94-98. '3 IFFC Tr. at 54. IFFC Tr. at 48-49. '5 IFFC Tr. at 43. "3 IFFC Tr. at 49. '7 Lewis-Gale Proposed Findings and Conclusions at 2 l. Adjudication Of?cer?s Recommendation Page 5 of 13 [a]ccess to some level of on-site specialty care . . . appears to be becoming the standard of care for hospitals providing substantial [volumes of] newborn care as safety has improved and technology and expectations have evolved[, and] specialty-level services are near being a standard of care at community hospitals with well-utilized obstetrical programs. [Italics added] 8 This language does not establish a standard of care, it only recognizes that, according to a community of health care providers who help determine such standards, in an appropriate setting where need can be observed and volumes can be sustained, special care nursery services may be approved while preserving the pro?ciency and quality of care across an area?s hospitals. Reliance on this language for determinative effect in the present case is misplaced. While the Lewis-Gale project would increase the ability of some parents to choose an alternative to Carilion Roanoke Memorial Hospital, the regional perinatal center for Perinatal Region II, it would not increase geographical or ?nancial access to needed services for residents. DCOPN states that lS apparent that approval of [the Lewis Gale project] will not improve access to these services by patients of any hospital other than ?19 Carilion Roanoke Memorial Hospital located less than ten miles from LGMC, has 30 subspecialty and 30 intermediate level bassinets, while Centra Virginia Baptist Hospital, in has 13 specialty level bassinets. Subspecialty level bassinets may be used for infants needing specialty level care. Infants in Lewis-Gale?s extended hospitals, the three Lewis-Gale hospitals other than LGMC, would require medical transport to the Roanoke-Salem area for specialty and subspecialty level care regardless of whether the project is approved. Denial of the Lewis-Gale project would prevent duplication of volume-sensitive services and tend to uphold the regionalized model of neonatal care that currently exists in HPR thereby preserve access to these needed services. 2. The extent to which the project will meet the needs of the residents of the area to be served, as demonstrated by each of the following: The level of community support for the project demonstrated by citizens, businesses, and governmental leaders representing the area to be served; The proposed project enjoys an atypically broad array of informed, enthusiastic support from nearly 70 leading citizens, business leaders and governmental leaders and of?cials who are not working 1n health care or otherwise stand to be professionally aftected by approval of the project. State senators supporting the Lewis-Gale project include R. Creigh Deeds, John S. Edwards, Phillip P. Puckett and Ralph K. Smith. Members of the House of Delegates supporting the project include William H. Cleaveland, Anne B. Crockett-Stark, Dave Nutter, Charles D. Poindexter and James M. Shuler. Congressman Morgan Grif?th has written twice to express support for the project. ?3 Case Decision dated April 3, 2007, approving neonatal special care services at Chesapeake General Hospital, adjudication of?cer?s recommended decision at 8, 10. See Lewis-Gale IFFC Ex. 39. ?9 DCOPN Staff Report at 12. 3" Lewis-Gale IFFC Ex. 43. Adjudication Of?cer?s Recommendation Page 6 of 13 Several county boards of supervisors and town councils have passed resolutions in support of the project, and ?ve mayors and other local governmental of?cials and administrators lend their support. Directors and administrators of five nursing training programs in the region support the project. Twenty upper-level business leaders have expressed their support. The Greater Blue Ridge Division of the March of Dimes supports the Lewis?Gale project. The Edward Via College of Osteopathic Medicine supports the project. Nine ?neonatal special care families? have also written expressing support, several relaying details of their experiences with having a neonate transferred abruptly. Two petitions of support for the project have a total of over 2,300 signatories. Senator Edwards appeared as a witness at the IFF C. Noting that he serves on the Senate Education and Health Committee, Senator Edwards asked that ?a human face? be put on this project, adding that are talking about families, we are talking about babies who have great needs, we are talking about the need for bringing the mothers and the babies together at a time when sometimes they are separated because of the need to go to a [hospital with] specialty level care.? He continued by sharing his belief that all hospitals in the greater Richmond area, i. (2., PD 15, have at least specialty level neonatal services, and asked ?why should the citizens of western Virginia be treated differently and not have more than one option??21 Several witnesses at the IFF testi?ed in detail regarding the stresses and challenges of being forced to switch physicians and care teams mid?pregnancy, due to anticipated complications and the need for an intended delivery site to have neonatal specialty level services, and of the and physical effects experienced when unexpected complications arise during delivery and neonates are separated from their mothers due to the need to transfer them to a hospital offering specialty level services. An obstetrician/gynecologist practicing at LGMC observed that [p]atients come to see physicians I think because they are comfortable over time. . . . The continuity is there; their physicians know their case histories, their stories, what they have gone through during the pregnancy. [Such physicians] are more familiar with their pregnancy history. Certainly when you are talking about having to transfer a patient in high risk situations, the anxiety of that transfer, going to see another facility, physicians who are very new, usually in training as well, managing and helping manage your care is very stressful as well to the patients. . . . kangaroo care is very important. We have actually moved to more of a skin to skin [approach] right at the time of delivery for most babies. Obviously the separation of mother and baby in the high risk situation, [or] the preterm delivery[, is a detractor from that, [and, if they need. .ventilator support, it?s still vgry helpful to have mother and father be able to be at the bedside and be with their baby.22 Ninety- -four persons attended the public hearing noticed and held the proposed project; no one who attended spoke 1n opposition, or otherwise indicated opposition, to the project. 3Despite the breadth and depth of community support for the project, the decision whether to approve it remains the Commissioner?s to make, based on the totality of evidence in the record viewed through the COPN law. 2' IFFC Tr. at 63-67. 22 IFFC Tr. at 104. 23 DCOPN Staff Report at 6. Adjudication Of?cer?s Recommendation Page 7 of 13 A professor at the Virginia Tech Carilion School of Medicine and Research Institute who also serves as the chief pediatric. officer of Carilion Clinic wrote expressing, on behalf of Carilion Clinic, her opposition to the Lewis-Gale project, stating that ?[tjhere are a signi?cant number of reasons to question the impact an additional NIC may have on neonatal care in the region.?24 The professor states that HPR currently has 6.48 NICU bassinets per 1,000 live births in 2008, ?which far exceeds both the national average for similar regions and the level of NIC services currently recommended by the and goes on to point out that approval of the Lewis-Gale project ?has the potential to erode the existing high level of neonatal care . . . 3?25 The professor observes that recent data show a two percent decrease in births in HPR 111, and a decrease in prematurity. She further states that [n]umerous academic journals . . . have published articles showing a high, positive correlation between the larger size/volumes of NICUS and infants having a higher level of overall health and a significantly lower level of mortality. . . . The consensus among NICU researchers is that small, low-volume NICUs are generally not in the best health interests of the community.?26 (ii) The availability of reasonable alternatives to the proposed service or facility that would meet the needs of the population in a less costly, more ef?cient, or more effective manner; The project would foster continuity and quality of care for sensitive and emotionallyodistraught patients and families and prevent unnecessary disruption in the continuity of care caused by the transfer of infants and, at times, obstetric patients to a hospital outside the system of hospitals operated by Lewis-Gale. But the alternative of maintaining the status quo would tend to preserve the utilization levels at existing services, upon which pro?ciency in performing various clinical techniques and general quality and safety depend. Additionally, introducing intermediate care nursery services could be a viable alternative, but Lewis-Gale discounts such an alternative.? Any recommendation or report of the regional health planning agency regarding an application for a certi?cate that is required to be submitted to the Commissioner pursuant to subsection of? 32.1?102.6; Not applicable. (iv) Any costs and bene?ts of the project; The bene?ts of the project would include greater maternal and neonatal continuity of care within an established health care center anchored by a regional, tertiary care hospital, due mainly to reduction in the number of pre-delivery and post-delivery transfers of neonates. An increase in institutional competition would also result from approval of the project. DCOPN considers the costs of the project, estimated to total $3.4 million, to fall within a generally reasonable range.28 These costs would be funded using the internal reserves of HCA. But a full evaluation of the costs would also 24 September 8, 2010, Letter from A. Ackerman to R. Crowder, Administrative Record Ex. 2 at I. 25 September 8, 2010, Letter from A. Ackerman to R. Crowder, Administrative Record Ex. 21 at l. 26 September 8, 2010, Letter from A. Ackerman to R. Crowder, Administrative Record Ex. 21 at 1-2. 27 IFFC Tr. at 59. 3? DCOPN Staff Report at 3. Adjudication Of?cer?s Recommendation Page 8 of 13 include the project?s tendency to cause the erosion of the high level of neonatal care currently provided at Carilion Roanoke Memorial Hospital. The ?nancial accessibility of the project to the residents of the area to be served, including indigent residents; and While LGMC has established policies and procedures for promoting charity care, it provides a level of charity care that is well below the average among hospitals in HPR 111.29 Lewis-Gale has agreed to provide a level of charity care in the special care nursery it seeks that would equal the 2008 average among hospitals in HPR (vi) At the discretion of the Commissioner, any other factors as may be relevant to the determination of public need for a project. No additional factors relating to the review of this project are clearly remarkable or appear to call for the exercise of the Commissioner?s discretion in identifying or evaluating them in relation to this item of the second statutory consideration. 3. The extent to which the application is consistent with the State Medical Facilities Plan. The COPN law requires that ?[a]ny decision to issue . . . a certi?cate shall be consistent with the most recent applicable provisions of the State Medical Facilities Plan . . . 3?30 The SMFP, adopted as a regulation and amended by the Board of Health effective February 15, 2009, and contained in the Virginia Administrative Code at 12 VAC 5-230-10 et seq., includes several provisions applicable to a project proposing the introduction of special care nursery services.3 Special and subspecial care nursery services are already generally available within 90 minutes driving time of hospitals providing less intensive levels of nursery services, thereby causing existing circumstances to comply with a normative provision of the SMFP.32 A provision of the SMFP states that existing special level nursery services in an HPR should achieve 85 percent occupancy before new services can be added.33 HPR has 13 special level nursery bassinets, all of which are located at Centra Virginia Baptist Hospital. In 2008, these bassinets operated at an occupancy level of 71.3 percent. Lewis-Gale contends that these bassinets operated at 86.8 percent in 2009.34 Reliance on this provision to determinative effect, as discussed in past recommended decisions, is problematicl Regardless, reasonable availability and access to special 3" DCOPN Staff Report at IO. 3" Va. Code ?32.1-102.3. 3' For the sake of brevity, the SMFP provisions revealing the most salient features of the project are discussed in this document. The DCOPN staff report should be consulted for a discussion of additional details in relation to specific applicable provisions ofthe SMFP, all of which can be operative in a culminating determination ofa project?s degree of compliance with the SMFP. 33 12 VAC 5230940 (B). 33 12 VAC 5-230-970 (A). 3? Lewis-Gale IFFC Ex. 20. "5 See DCOPN Staff Report at 13. Adjudication Of?cer?s Recommendation Page 9 of 13 care nursery services exists in HPR 111, especially within the service areas of both LGMC and Carilion Roanoke Memorial Hospital.36 A provision of the SMFP counsels that a specialty level newborn nursery should contain ?a minimum of 18 bassinets.?37 Lewis-Gale contends that ?no specialty~level NICUs in Virginia . . . meet this standard.?38 Further, one such nursery was ap roved in 2006 to have ?ve bassinets and a second one was approved in 2010 to have eight bassinets. 9 Regardless, the creation of yet another small special level NICU, in close proximity to a subspecial level NICU, would tend to out against the quality-based bene?ts of a larger, well-utilized service. Another discretionary provision of the SMFP provides that an HPR should have ?no more than four bassinets for specialty level newborn services . . . per 1,000 live births. . . .40 This provision suggests a maximum, without With 12,487 live births performed in 20084 and 13 bassinets already in existence in HPR as many as 37 additional special level bassinets would be permissible under this discretionary provision. But in light of the possibility that a subspecial level bassinet may be used for an infant needing special level care, a total of 43 bassinets are available in HPR for the care of infants needing special level care. This total reduces the number of additional bassinets, as calculated by a single discretionary provision of the SMFP that must be deployed in conjunction with others, to seven. Finally, a provision of the SMFP counsels that neonatal special care services should be provided under the direction of at least one quali?ed physician.42 Lewis-Gale states that, should the project be approved, it will recruit for a neonatologist or perinatologist.? DCOPN states that the occupancy of the subspecial care nursery at Carilion Roanoke Memorial Hospital declined from 86.6 percent to 61.5 percent between 2006 and 2010. The introduction of eight special-level bassinets at LGMC, which anticipated performing only 690 deliveries in 2010, poses a risk of further reducing utilization of existing specialty and subspecialty level newborn services. Approval of the Lewis?Gale project would redirect specialty level infants that originate from within the Lewis-Gale system from Carilion Roanoke Memorial Hospital to LGMC. This would reduce utilization and create a duplicative service that is likely to have low utilization to the detriment of quality in a geographical area that has suf?cient access to special care nursery services. Summary ofrhe Project ?3 Overall Consistency with the SMFP. After reviewing the administrative record, including the transcript of the IFFC, the DCOPN staff report and the applicant?s IFFC-related submissions, I conclude that suf?cient data and information substantiate the recommendation made below. Speci?cally, and in relation to this statutory consideration, I believe that the introduction of special care nursery services at LGMC is generally inconsistent with the 3? See DCOPN Staff Report at 13. 3? 12 VAC 5-230-970 (B). 33 Lewis-Gale Proposed Findings and Conclusions at 24. 39 Case Decision dated September 20, 2006 (approving five bassinets at Bon Secours St. Francis Medical Center), and Case Decision dated November 15, 2010 (approving the relocation of eight bassinets to Sentara Princess Anne Hospital). 4" 12 VAC 5-230-970 (C). 4' Lewis-Gale Proposed Findings and Conclusions at 25. 42 12 VAC 5-230-1000. *3 See DCOPN Staff Report at 15. Adjudication Of?cer?s Recommendation Page 10 of 13 SMFP, as well as the public interests and purposes to which that plan is devoted. Reference to the record in general and reliance on administrative precedent is asserted. 4. The extent to which the proposed service or facility fosters institutional competition that bene?ts the area to be served while improving access to essential health care services for all persons in the area to be served. Approval of the Lewis-Gale project would foster institutional competition. DCOPN observes that "[p]atients and obstetricians who may have been reluctant to choose LGMC for obstetrical care, due to its lack of either specialty or intermediate level special care nursery services, will be more inclined to use LGMC if the project is approved.?44 But such a shift in care would come at the expense of volume-sensitive quality in caring for frail and vulnerable infants. 5. The relationship of the project to the existing health care system of the area to be served, including the utilization and ef?ciency of existing services or facilities. Intermediate level and subspecialty level neonatal care services exist at Carilion Roanoke Memorial Hospital. These resources consist of 30 intermediate level bassinets and 30 subspecialty level bassinets. From 2006 to 2009, inclusive, these bassinets operated at occupancy levels just over 80 percent, and DCOPN projects that 2010 utilization of these bassinets decreased.45 Thirteen specialty level bassinets are in approximately 60 miles to the east of Salem. LGMC is a tertiary care hospital with a loyal patient base in HPR 111. It is licensed to operate 23 obstetric beds. In 2008, according to DCOPN, it staffed only six of these beds. Some suppression of obstetric utilization may be due, in part, to the ?well?known? fact, as Lewis-Gale characterizes it,46 that LGMC does not have a neonatal care nursery more capable than general level newborn services (which do not require certification through the COPN program). While approval of the Lewis-Gale project would not change the need for infants born in one of the Lewis-Gale hospitals located in PBS 4 and 5 (other than LGMC) to be transported for specialty level services, approval of the project would obviate the need to transfer infants from LGMC to - Carilion Roanoke Memorial Hospital. While approval of the Lewis-Gale project would lessen the disruption to continuity of care for delicate patients and anxious families caused by the emotionally charged switching from one to another health care system, it would duplicate services already in existence without the promise of achieving sustainable utilization levels.47 4? DCOPN Staff Report at 16. ?5 DCOPN Staff Report at 2. 4? Lewis-Gale Proposed Findings and Conclusions at 26?27. ?7 DCOPN disclosed data demonstrating that during the 42-month period ending June 2010, infants needing special care nursery services were transferred from a hospital within the Lewis-Gale system, with 108 of these going to Carilion Roanoke Memorial Hospital. See DCOPN Staff Report at 14, Table 6. This results in 2.64 infants having been so transferred per month. Without signi?cant growth in obstetrics at LGMC, its proposed eight-bassinet special care nursery program would Adjudication Officer?s Recommendation Page 11 of 13 6. The feasibility of the project, including the ?nancial bene?ts of the project to the applicant, the cost of construction, the availability of ?nancial and human resources, and the cost of capital. Lewis-Gale?s pro forma statement anticipates a loss in the ?rst year of operation that would decrease in the second year. DCOPN believes that these losses are ?signi?cantly understated.?48 Lewis-Gale states that it expects LGMC to perform over 1,000 deliveries by 2013, with additional utilization accruing from approval of the project.49 Yet, even though the proposed special care nursery services would have only eight bassinets, Lewis-Gale predicts that they will be occupied at only 19 percent in 2013 and 2014.50 Ultimately, the project may bene?t the applicant ?nancially by rounding out the services of LGMC in the community?s eye, and resources should be available at the time of implementation, although a neonatologist or perinatologist willing to operate a low-utilization special care nursery would have to be recruited before the services became operational and thereafter retained. The care of critically ill infants depends on the existence of a team of professionals, including physicians, specially-trained nurses, respiratory therapists, pharmacists and other clinical care providers. Forming and sustaining the coordinated and effectual workings and necessary level of expertise of such a team, in the face of slim or marginal utilization, cannot be assured, based on the facts of this case. Further, DCOPN believes that forming such a team may involve recruiting the necessary care providers from Carilion Roanoke Memorial Hospital. With the costs of the project being defrayed with accumulated reserves from HCA, the cost of capital does not appear to be an issue relevant to the project. 7. The extent to which the project provides improvements or innovations in the ?nancing and delivery of health services, as demonstrated by: the introduction of new technology that promotes quality, cost effectiveness, or both in the delivery of health care services; (ii) the potential for provision of services on an outpatient basis; any cooperative efforts to meet regional health care needs; and (iv) at the discretion of the Commissioner, any other factors as may be appropriate. In essence, the project is intended to improve the ability of a four-hospital system, anchored by a tertiary hospital in Salem LGMC, to care for critically ill infants within that system and in greater conformance with apparent community expectations. But, ultimately, the delivery of health care services would not be improved due to the duplication of existing services, the establishment of another of low-utilization, and the erosion of quality within these volume-sensitive services. No additional factors relating to the review of this project are clearly remarkable or appear to call for the exercise of the Commissioner?s discretion in identifying or evaluating them in relation to this item under the seventh statutory consideration. 8. In the case of a project proposed by or affecting a teaching hospital associated with a public institution of higher education or a medical school in the area to be serve the unique research, training, and clinical mission of the teaching hospital or medical school, 4? DCOPN Staff Report at 16. ?9 Lewis-Gale Proposed Findings and Conclusions at 27. 5" Lewis-Gale IFFC Ex. 36. Adjudication Officer?s Recommendation Page 12 of 13 and (ii) any contribution the teaching hospital or medical school may provide in the delivery, innovation, and improvement of health care for citizens of the Commonwealth, including indigent or underserved populations. Lewis-Gale states that it has an ?extensive relationship? with the Edward Via College of Osteopathic Medicine and that LGMC is a teaching hospital. Lewis-Gale states that the project would ?bene?t students as they prepare for their practices, particularly those in rural communities in southwestern Virginia, where they are likely to encounter high-risk pregnant patients.?51 Other institutions of learning in the region that have nurse training programs support the project as an educational opportunity.52 Yet, utilization of the subspecialty care nursery services at Carilion Roanoke Memorial Hospital stands to be directly affected by approval of the Lewis-Gale project, to the detriment of educational and training programs relating to the Virginia Tech Carilion School of Medicine and Research Institute. B. The Proposed Proiect in Relation to the Statutory Considerations and the COPN Law Generally. In connection with all eight statutory considerations, appearing in bold type above, and upon review of the administrative record compiled in relation to the proposed project (including the application, the transcript of the IFFC, the DCOPN staff report and the IFFC-related submittals of the applicant), I believe that suf?cient data and information exist to substantiate the recommendation made below, and that the record presents, overall, a suf?cient basis for denial of the proposed project. All issues pertinent to a public need determination identi?ed in relation to this project have been explored and given evaluative attention in the process of adjudicatory review. Reference to the record is made and reliance on administrative precedent is asserted. IV. Recommendation The recommendation made herein follows a full review of the application seeking approval of the introduction of special care nursery services. I have heard from counsel to the applicant and have heard a presentation of the DCOPN staff report by an analyst who reviewed the project. Based on my assessment, I have concluded that the Lewis-Gale project does not merit approval. Lewis-Gale should not receive a Certi?cate authorizing the project, as proposed. Such a project is not necessary to meet a public need. In addition to conclusions drawn throughout this document, speci?c reasons for my recommendation include: The proposed project would unnecessarily duplicate existing services, including those at Carilion Roanoke Memorial Hospital, the regional perinatal center for Perinatal Region II, exerting an adverse impact on the utilization and quality of existing services; 5 Lewis-Gale Proposed Findings and Conclusions at 27-28. 53 See DCOPN Staff Report at 18. Adjudication Officer?s Recommendation Page 13 of 13 (ii) The proposed project is inconsistent with applicable provisions of the SMF P, as well as the public interests and purposes to which that plan is devoted; The project would result in at least a two-year ?nancial loss and its economic viability is readily questionable; (iv) The project would reduce the frequency and duration of medical transportation for only some infants in the Lewis-Gale system of hospitals in HPR infants delivered at and Despite many expressions of community support for the project, a dispassionate review of the facts in relation to the law indicates that the project would be duplicative of accessible services in existence, stands to harm the quality of exacting clinical care provided to frail infants, and is not needed. Respectfully submitted, R. Harris, JD. Adjudication Of?cer August 31, 2011