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Chamber president pleads for O.R. beds in Garner at state Certificate of Need hearing

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January 29, 2019

Intense fight for new O.R. beds

By Seth Thomas Gulledge  – Staff Writer, Triangle Business Journal
Jan 25, 2019

On a sunny Friday morning in October, a dialysis patient, a chamber of commerce president and dozens of lawyers walked into a sparsely fitted conference room on the Dorothea Dix campus.
The Triangle’s largest health care providers – UNC Health Care, Duke University Health, and WakeMed Health and Hospitals – were represented by the dark suits ready to ask for permission from state regulators to expand in Wake County.
It was one of hundreds of steps in a health care organization’s path to do what would otherwise come naturally to it: expand. Hours of presentations followed, each blending into the other as presenters made eerily similar pitches, referring to thousands of pages of documents containing hundreds of graphics, figures, arguments and spreadsheets. The process is called Certificate of Need.

Neal Padgett, president of the Garner Chamber of Commerce, said at the hearing that UNC Rex’s Garner project “will help us as we recruit more businesses to Garner that will, in turn, improve our local economy and quality of life for our residents.”
“I urge you support the Garner community and approve the Garner project with Rex Health Care,” he said.
UNC Health Care is proposing to develop a center in Garner with two operating rooms, totaling $16.2 million.

For the entire story, see below or click here.
Interspersed in the tangle of legalese and growth projections were pleas from people such as Chatty Harris, a dialysis patient seeking quicker access to care.
“In six years I’ve gathered two infections,” she told the room. “As a dialysis patient, I don’t think we should have to wait that long. This is about our lives. Whatever it takes of us to help us get on with our lives, and save money, that’s what we want to do.”
Harris’ plea has not yet been answered. That comes Jan. 29 when just two signatures from N.C. Department of Health and Human Services officials will conclude a historic fight between the Triangle’s major health care providers by announcing the approved distribution of six operating rooms.
The coming decisions have the power to transform a swath of land, bring health care closer to thousands of residents – and let the winning organization rake in millions of dollars.
It is also a step that could lessen wait times in overloaded hospitals, decrease health costs for outpatient procedures and bring medical locations to budding cities and neighborhoods in the Triangle.
It also has the power to prevent an organization from doing anything.
In past years, hospitals have often looked to add patients, and market share, with major additions within their established footprints. For example, UNC Rex opened the 8-story North Carolina Heart and Vascular Hospital in 2017 and Duke announced a $100 million expansion plan for Duke Regional last year.
But many of these new pitches are seeking new beds in the parts of the Triangle growing at lightning speed – and often a long way from the established medical centers. It’s no surprise four of the proposals seek beds in Cary, a health care market that is underserved – and with a highly affluent population promising years of revenue streams.
For the larger health care providers in the Triangle, the CON applications is as close to a “gloves-come-off” process one could imagine because millions of dollars are at stake. For the first time in years, all of the Triangle’s major players are taking off their gloves in the same ring.
Why are they fighting?
North Carolina, like a majority of states in the country, adheres to a CON process, which puts the power of when and where providers can expand services in the hands of NC DHHS.

Those regulations bring hordes of lawyers employed to prove with meticulous attention to detail and state regulation – manifesting in endless pages of applications – that their provider is more worthy than the other providers of expanding their service.
Traditionally, these hordes have spent most of their time fighting bureaucratic red tape – not each other.
Recent state decisions on these applications have been routine. Last year, in Wake, Orange or Durham counties, only one denial was issued – when UNC Rex and Duke Raleigh fought to acquire a PET/CT Scanner and Duke won.
Of the nearly 1,500 decisions across the state the department has issued since 2012 that Triangle Business Journal reviewed, only 152 were denials. Of those, few were in Triangle counties, and even fewer were the result of competition between major providers.
That’s not the case now.
Between the bidding providers, nine projects, including the construction of seven ambulatory surgical centers, are proposed – totaling nearly $100 million. Most of them will not be approved.
The unprecedented competition spawned from the 2018 State Medical Facilities Plan. That plan estimated Wake County will need six more operating rooms by 2020 – meaning one provider or a combination of providers will be allowed to construct six more.
The deficit – calculated by the number of necessary rooms to meet projected volume – is a result of both the burgeoning Wake County population and the increased surgical demand from other counties. State officials project that by 2020, Duke Raleigh Hospital is projected to have a 6.7 operating room deficit and WakeMed Raleigh will have a 3.4 O.R. deficit.
But the state separately notes the deficits by the organizations’ total bed space in the county, meaning WakeMed as a whole, is projected to have a 2.7 O.R. surplus in 2020. The same is true of UNC Rex Hospital, which reports a 3.9 O.R. deficit even though UNC Health Care reports a 2 O.R. surplus.
To address these growing demands, the providers focus on ambulatory surgical centers (referred to as ASCs in the industry). The surgical centers provide same-day outpatient surgeries for patients for less serious medical needs, ideally saving patients and providers money while also clearing the surgery rooms at the hospitals for more serious inpatient cases.
For example, Duke’s request states, “Because ASCs are highly specialized and function on a much smaller scale, they are able to provide services at a lower price than a full-service hospital.”
Steve Lawler, president of the North Carolina Healthcare Association, says the need for outpatient centers is growing. 
“More than half of hospital services are now delivered on an outpatient basis, driven by advances in care, by payers, and by consumers,” he says. “Hospitals and health systems are challenged to expand outpatient services and make them convenient and accessible, while continuing to provide essential health services for their communities.”
Lawler also mentions health providers generally support the arduous CON process, calling it “an important framework” that is supported by the association’s members.
The CON proposals include:

  • Duke University Health: Duke is proposing to build a $34.3 million surgical center as part of a larger medical campus in western Cary. The center would contain four operating rooms – marking it as both the most expensive of the competing requests and the only one that asked for more than two rooms. Duke is also proposing to build two additional operating rooms at Duke Raleigh Hospital. The surgical center is to be complete by July 2012. The two O.R.s at Duke Raleigh would be set for December of this year.

  • UNC Health Care: UNC is proposing to develop a center in Cary with two operating rooms, totaling $16.6 million, as well as a similar center in Garner totaling $16.2 million. UNC Rex is also applying for two additional operating rooms on-site. The proposed projects would be complete by July 2021.

  • WakeMed Health and Hospitals: WakeMed is proposing to build a center in north Raleigh with two operating rooms, totaling $11.3 million. It also proposes building a similar center in Cary, totaling $8.6 million. Both projects would be complete by October 2020.

  • RAC Surgery: Its proposal is for a Raleigh center with a single operating room focused on vascular access procedures for patients with end-stage renal disease. The project is projected to cost $2 million and be complete by January 2020.

  • OrthoNC: The group of orthopedic clinics is proposing a single operating room in Raleigh focused on orthopedic and pain-management procedures. The project is expected to cost $3.9 million and would be complete in October 2020.

All together, the applications represent requests for 16 separate operating rooms – far more than the six rooms regulators are expected to approve.
Millions of dollars at stake
The providers that receive approval for their projects get exclusive permission to build operating rooms.
According to their applications, providers estimate that within the third year following their projects’ completion, between 1,600 and 4,000 cases could be revolving through the proposed centers annually. That number fluctuates depending on the project, but the dollars are big.
Duke’s project – the most ambitious of the six surgical center projects –estimates by the third year it will see 4,770 cases annually, charging $9,430 on average per case, for a total $15.9 million in gross revenue, according to their CON application.
In-hospital operating rooms however, show a much higher cost to patients, averaging at $35,521 per case for the proposed projects, as opposed to $8,302 for the proposed ambulatory centers.
While the scope of the decisions on who wins the centers is significant, the decisions are made by a small group of state employees who follow criteria outlined in state law. The law requires applicants demonstrate the need for the project – and it has particular requirements such as the demonstration of the effect on access for low-income people, minorities, handicapped and the elderly.
The applications and comments are considered by a project analyst employed by the state and assigned to certain counties. After considering those applications, the analyst and a manager working alongside as co-signer issue the decision. Mike McKillip is overseeing the Wake County decision and Fatimah Wilson is the team leader assigned to McKillip’s area.
Details about them and their processes are guarded. NC DHHS officials have refused to arrange interviews with the analysts or managers involved, although McKillip and other DHHS staffers have answered basic questions about the process via email.
A public records request to the DHHS general counsel office requesting more details about these analysts was denied, though their start dates with the department were provided.
When the decisions are issued, applicants have 30 days to appeal before the CON is issued – and then applicants can present their arguments to an administrative law judge.
The majority of decisions are not contested, with few applications even competitive. That’s not expected to happen this time.
Competition has an impact on lives
The competition rages beyond Wake County. Duke and UNC Rex are competing for six O.R. spaces in Orange County, while Duke Health and Southpoint Surgery Center are competing for four O.R. spaces in Durham County.
And the 2019 State Medical Facilities Plan projects a deficit of another three operating rooms in Orange County and a two O.R. deficit in Wake County.
Applications for those spots are due in April and August. The winners get more health care – and jobs.
Neal Padgett, president of the Garner Chamber of Commerce, said at the hearing that UNC Rex’s Garner project “will help us as we recruit more businesses to Garner that will, in turn, improve our local economy and quality of life for our residents.”
“I urge you support the Garner community and approve the Garner project with Rex Health Care,” he said.
Harris, who has been on dialysis for 13 years, is a patient of Raleigh Dialysis and president of its patient support group. She spoke in support for RAC Surgery Center at the hearing, saying it would increase access to dialysis patients who often need outpatient surgeries to prevent infections. Harris said she and other patients would often have to wait weeks, even months for their procedures.
“It would be great to have something like this to be able to go to, maybe the next day, maybe that Friday, maybe even the next Monday,” she said.
“For a patient, it’s about our lives, it’s about our health.”