Colon Health Centers of America, LLC v. Hazel

733 F.3d 535, 2013 WL 5737706
CourtCourt of Appeals for the Fourth Circuit
DecidedOctober 23, 2013
Docket19-1790
StatusPublished
Cited by45 cases

This text of 733 F.3d 535 (Colon Health Centers of America, LLC v. Hazel) is published on Counsel Stack Legal Research, covering Court of Appeals for the Fourth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Colon Health Centers of America, LLC v. Hazel, 733 F.3d 535, 2013 WL 5737706 (4th Cir. 2013).

Opinions

Affirmed in part, reversed in part, and remanded by published opinion. Judge WILKINSON wrote the opinion, in which [540]*540Judge KING and Judge WILSON joined. Judge WILSON wrote a concurring opinion.

WILKINSON, Circuit Judge:

Appellants are out-of-state medical providers who seek to open facilities in Virginia similar to those they operate in other states. They are hindered by Virginia’s certificate-of-need requirement, which they challenged in the court below under a variety of constitutional theories. That court dismissed the suit for failure to state a claim upon which relief could be granted. We reverse the dismissal of appellants’ Commerce Clause claims, affirm the dismissal of their Fourteenth Amendment claims, and remand for further proceedings in accordance with this decision.

I.

A.

In order to launch a medical enterprise in the state of Virginia, a firm is required to obtain a “certificate of public need.” Va.Code Ann. §§ 32.1-102.1 et seq.; 12 Va. Admin. Code §§ 5-220-10 et seq. Virginia’s certificate-of-need program governs most medical capital expenditures undertaken in the state, including the construction of new facilities and the addition of new equipment or services to an existing facility. It does not, however, apply to the replacement of existing equipment. At its core, the program mandates that an applicant demonstrate, within the relevant region, a public need for the service that it seeks to offer. Va.Code Ann. § 32.1-102.3(A). The primary purposes of the requirement are to preclude the development of excess capacity, to ensure proper geographical distribution of medical facilities, to protect the economic viability of existing providers, and to promote the provision of cost-effective medical services. Appellees’ Br. at 2-3.

In determining whether a particular applicant has demonstrated a sufficient public need for its proposed services, the State Health Commissioner is required to consider a variety of factors. Va.Code Ann. § 32.1-102.3(B)(l)-(8). No single factor is dispositive. The Commissioner must consider, for instance, “[t]he extent to which the proposed service or facility fosters institutional competition that benefits the area to be served,” in addition to “[t]he relationship of the project to the existing health care system of the area to be served, including the utilization and efficiency of existing services or facilities.” Id. § 32.1-102.3(B)(4)-(5).

Firms that desire to obtain a certificate of need are required to navigate a potentially lengthy, costly, and unpredictable application process. The cost of applying is pegged at one percent of the proposed expenditure, with a cap of $20,000. In the review scheme, different types of submissions are grouped into subcategories for simultaneous review in a process referred to as “batching.” The statute facially requires the review process to be completed within 190 days of the start of the relevant batching cycle.

Following the submission of an application, the appropriate regional health planning agency must complete its initial investigation within 60 days. This stage of review includes a public hearing in proximity to the site of the proposed expenditure. Affected persons are permitted to submit data to assist the agency in its task. Subsequent to this preliminary examination, the agency must provide the Department of Health with its recommendation regarding the disposition of the application.

The Department is then required to determine whether an informal fact-finding conference is warranted. Such a conference will be held if the Department inde[541]*541pendently determines that it is necessary or if an intervening party demonstrates that good cause exists to hold such a hearing. Good cause exists if “(i) there is significant relevant information not previously presented at and not available at the time of the public hearing, (ii) there have been significant changes in factors or circumstances relating to the application subsequent to the public hearing, or (iii) there is a substantial material mistake of fact or law in the Department staffs report on the application or in the report submitted by the health planning agency.” Id. § 32.1-102.6(G); see also 12 Va. Admin. Code § 5-220-230CA).

The date on which the record closes varies depending on whether an informal fact-finding conference is conducted. An application is deemed approved if the Commissioner fails to issue a decision within 70 days of the closing of the record. Appellants allege that “[w]ithout an informal fact-finding conference, the entire application process and review can take six to seven months to complete. If an informal fact-finding conference is requested by any person, the certificate-of-need process can take significantly longer.” Compl. ¶ 136. In their brief before this court, appellants elaborate on this claim by asserting that the process “can take literally years.” Appellants’ Br. at 11.

B.

Appellants, Colon Health Centers and Progressive Radiology, are medical providers who seek to avoid the purportedly onerous burdens imposed by the certificate application process. Each desires to offer potentially valuable services in the Virginia market. Colon Health “combines the advantages of the two prevailing colon-cancer screening methods in a ‘one-stop shop’ that screens, diagnoses, and treats colon cancer.” Compl. ¶ 47. Traditional colon-cancer screening involves an invasive procedure referred to as optical colonoscopy. The alternative, virtual colonoscopy, relies on noninvasive computed tomography (CT) scans but, unlike optical colonoscopy, does not permit the treating physician to immediately remove any detected polyps. Instead, a second visit is typically required.

Colon Health circumvents this problem by exporting the images captured via virtual colonoscopy to a team of radiologists, who immediately scan the images for polyps. They report their conclusions within an hour to an on-site gastroenterologist, who is able to perform the necessary surgery without recalling the patient for a second visit. This streamlined approach reduces the cost and inconvenience of colonoscopy, thus encouraging a higher percentage of at-risk individuals to undergo screening.

Colon Health currently provides joint virtual colonoscopy and treatment services at offices in Delaware and New Jersey. Its attempts to enter the Virginia market, however, were stymied after potential competitors intervened to oppose its certificate-of-need application. Id. ¶ 140. It alleges that, in the absence of the certificate requirement (which covers CT scanners), it would open Virginia facilities offering its unique package of services.

Progressive Radiology specializes in using magnetic resonance imaging (MRI) to diagnose neurological and orthopedic injuries. Id. ¶¶ 75-76. Progressive currently maintains radiology facilities in Maryland and the District of Columbia. It formerly operated a radiology business in Virginia, but ceased to do so when the facility which had contracted for its services was purchased and the contract subsequently terminated. Like Colon Health, Progressive alleges that the certificate requirement, which covers MRI machines, deters it from providing its specialized services in [542]*542the Commonwealth. Progressive estimates that it would serve approximately 400 patients per month if it were permitted to reenter the market.

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Bluebook (online)
733 F.3d 535, 2013 WL 5737706, Counsel Stack Legal Research, https://law.counselstack.com/opinion/colon-health-centers-of-america-llc-v-hazel-ca4-2013.