Harnett Dispatch

BENJAMIN N. THOMPSON, ESQ. bthompson@wyrick.com

February 12, 2013

Harnett Forward Together Committee, Inc.

c/o Johnson Tilghman, Chairman

Post Office Box 1270
Lillington, NC 27546

Re:   Transforming Healthcare in Harnett County

Dear Mr. Tilghman:

Our client, Harnett Health System, Inc., has asked me to send the attached letter in response to a recent Resolution sent to you by the Harnett County Board of Commissioners.

Please feel free to have a member of your staff contact me should you need additional information.

Best regards.

Sincerely,

WYRICK ROBBINS YATES & PONTON LLP

Benjamin N. Thompson

BNT/bg

Enclosure

Wyrick Robbins Yates & Ponton LLP

robbins

BEWAMIN N. THOMPSON, Eso,

bthompsonPwyrick.com

February 11, 2013

VIA EMAIL

Dwight W. Snow, Esq. 302 W. Edgerton Street Dunn, NC 28334

Re:     Transforming Healthcare in Harnett County

Dear Dwight:

Our client, Harnett Health System, Inc. (“Harnett Health”), has asked us to send this letter to provide the Harnett County Board of Commissioners (the “Board”) with certain information regarding healthcare in Harnett County and to ensure that the Board has full and accurate historical information.

At the outset, Harnett Health would like to commend the Board for its efforts to improve the quality of health care and medical services in Harnett County. The Board has shown a commitment to the health of Harnett County’s citizens, and that commitment should be recognized.

Harnett Health believes that it, too, has shown a commitment not only to the improved quality of health care in Harnett County, but also to Good Hope’s new mental health inpatient facility. In fact, Harnett Health has fully and publicly supported Good Hope’s mental health initiatives since 2008. For example, Harnett Health assisted Good Hope in the development of its feasibility study for mental health beds, which ultimately allowed Good Hope to obtain financing for the new mental health facility. In addition, Harnett Health has provided management advice and will be providing food and laboratory services for the facility. Harnett Health’s Board of Trustees has even unanimously adopted a resolution supportive of the facility.

With this in mind, Harnett Health believes the Board does not have all the information regarding Good Hope’s efforts to build an outpatient surgical center. Specifically, Good Hope’s certificate of need (“CON”) authorizes the development of a replacement hospital, not an

outpatient surgery center. Although Good Hope previously sought a determination from the Department of Health and Human Services (“DHHS”) permitting Good Hope to use its CON to build an outpatient surgical center, DHHS denied that request. Good Hope appealed that denial to Wake County Superior Court, where on July 31, 2012, Judge Donald Stephens upheld DHHS’s denial. Specifically, Judge Stephens’ Order states: “[T]he establishment of an [outpatient] surgical facility pursuant to Good Hope’s CON is not within the identified scope of the certificate issued in December of 2001.” I have attached a copy of Judge Stephens’ Order for your information.

Judge Stephens’ Order is a final judicial determination and, notably, one that Good Hope did not appeal. When a party does not appeal an Order, the Order becomes binding on all parties to the suit. In this regard, a final judgment issued by a court “is conclusive of rights, questions and facts in issue, as to the parties and privies, in all other actions involving the same matter.” Catawba IMem’IFe’tckaman Res., 112 N.C. App. 557, 563-64, 436 S.E.2d 3980, 393-94 (1993). “Such a final judgment will bar a subsequent action involving the same issues between the same parties.” Id. at 564, 436 S.E.2d at 394. Here, Good Hope’s development of an outpatient surgical center would not be the development of “an already approved medical service.” Asking any organization to support such an outpatient surgical center is tantamount to asking the organization to support something that a judge has already determined is contrary to law.

Based on the above, Harnett Health believes the Board has not been provided with full and accurate information. This is made further apparent from statements that were made both in a recent Board Resolution and at the January 7, 2013 meeting (as reflected in the recording made and posted on the Board’s website). For example, the Board was not informed that the State Medical Facilities Plan has not identified a need for any additional surgical suites in Harnett County.

Another example is the suggestion made at the meeting that Good Hope’s development of an outpatient surgical center would necessarily result in Good Hope being able to increase the number of the psychiatric beds in its new 16-bed facility. While Harnett Health does and will continue to support Good Hope in efforts to improve inpatient mental health in Harnett County and, if permitted, to make additional mental health beds available, there are several reasons why Good Hope may not be able to increase its number of psychiatric beds. First, in a 2009 settlement agreement with DHHS, Good Hope agreed that once its “16-bed inpatient psychiatric facility…is operational, Good Hope will not develop or offer additional inpatient psychiatric beds pursuant to the terms of its existing 2001 CON[.]” Thus, Good Hope is currently contractually barred from developing additional inpatient psychiatric beds unless it receives an entirely new CON from DHHS. I have attached a copy of Good Hope’s 2009 Settlement Agreement with DHHS for your information. To that end, however, if Good Hope were to request additional mental health beds through the certificate of need process, Harnett Health would support Good Hope in that initiative.

Second, current federal law prohibits an inpatient psychiatric facility with more than 16 beds from being eligible for Medicaid reimbursement. Without Medicaid reimbursement, it is highly unlikely that an inpatient psychiatric facility would be financially viable.

Another example of a matter regarding which the Board has not been provided full and accurate information pertains to the competitive nature of the certificate of need process in North Carolina. The public record is clear that Good Hope and Harnett Health have both actively participated in that process. For example, when DHHS approved Harnett Health’s application for a CON to build Central Harnett Hospital, Good Hope filed a lawsuit challenging that approval and sought to prevent Harnett Health from obtaining the CON. That lawsuit was ultimately decided in Harnett Health’s favor.

The opportunity to challenge CON decisions is not an anti-competitive activity but is rather an activity specifically authorized by North Carolina law. This activity is actually designed to foster competition by allowing organizations of any size the right to apply to provide services to the citizens of North Carolina and to challenge state decisions that organizations believe they are better suited to provide.

The fact that Good Hope is expressing an interest in building a surgical center, which is a CON-regulated and competitive activity, indicates interest in continuing to provide additional healthcare services and competing effectively in the healthcare market. Should not other organizations have the same rights as Good Hope to compete? However, the Board asking any organization to stop competing against Good Hope, thereby letting Good Hope have free reign to compete against that organization may, if not better informed, unintentionally result in the Board attempting to control competition. I am hopeful the Board has no intention of doing this.

I am informed that since the last election, Harnett Health has invited and now continues to invite the Board to tour the new hospital together with leaders from Harnett Health and to engage in a discussion about Harnett Health’s new expanded scope of services. Harnett Health also has additional plans that can be shared with the Board.

Harnett Health’s Board of Trustees wishes to work cooperatively together with the Board, Campbell University, First Choice, Good Hope and the Department of Public Health to build access to physicians and access to care, as demonstrated by Harnett Health’s recent accomplishments. Harnett Health is certainly committed to transforming healthcare in Harnett County and has made great strides in achieving this goal. It should be noted that working together, like Good Hope and Harnett Health have done over mental health and like First Choice and Harnett Health have done over providing access to primary care, does not preclude each of these organizations from competing from time to time in the market place. Sometimes they work together and sometimes they compete.

Harnett Health hopes that the foregoing, which we believe paints a fuller picture of historical events and the current status of healthcare in Harnett County, is helpful to the Board. Again, Harnett Health wishes to commend the Board’s cooperative partnerships with Harnett Health, Campbell University and its School of Osteopathic Medicine, FirstHealth of the Carolinas, Inc., East Carolina University’s Dental School, and Good Hope’s new mental health facility.

Should you or the Board have any questions, please feel free to contact me. Best regards.

Sincerely,

WYRICK ROBBINS YATES & PONTON LLP

Benjamin N. Thompsd

cc:        Governor Pat McCrory

North Carolina Speaker of the House Thom Tillis

North Carolina House Representative John Torbett

Fred Steen, Governor’s Legislative Liaison

North Carolina House Representative Mike Stone

North Carolina House Representative David Lewis

North Carolina Senator Ronald Rabin

Drexdal Pratt, Director of the Division of Health Service Regulation, North Carolina Department of Health and Human Services

Board of Directors, Harnett Forward Together Committee, Inc.

STATE OF NORTH CAROLINA                                                               IN THE OFFICE OF

ADMINISTRATIVE HEARINGS

COUNTY OF HARNETT                                                                                     06 DHR° 1432

GOOD HOPE HOSPITAL, INC.,                                  )

)

Petitioner,                        )

v.                                                                        )

)         SETTLEMENT AGREEMENT

N.C. DEPARTMENT OF HEALTH AND                 )

HUMAN SERVICES, DIVISION OF                         )

HEALTH SERVICE REGULATION, ACUTE )
AND HOME CARE LICENSURE AND                     )

CERIOCATION SECTION,                                            )

)

Respondent.                   )

NOW COMES Good Hope Hospital, Inc. (“Good Hope”), the North Carolina Department of Health and Human Services, Division of Health. Service Regulation, Acute and Home Care Licensure and Certification Section (the “Agency” or “Respondent”) (collectively referred to hereinafter as “the parties”) and enter into the following settlement agreement in order to settle and compromise all claims arising out of the above-captioned contested case and 03- CVS-1878.

RECITALS

WHEREAS, Good Hope Hospital is a 72 bed hospital located in Erwin, Harnett County, North Carolina. It was the first hospital to be established in Harnett County, and has provided . services to Harnett County and the surrounding area since 1913;

WHEREAS, Good Hope Hospital is the only facility that has offered inpatient psychiatric services in the Lee-Harnett mental health area;

WHEREAS, effective January 1, 2006, the Acute and Home Care Licensure and Certification Section renewed the license issued to Good Hope Hospital, Inc. to operate an acute

care hospital under N.C. Gen. Stat. § 13 lE-75 et seq. for 43 acute care inpatient beds, 29 inpatient psychiatric beds and 2 operating rooms;

WHEREAS, Good Hope holds a certificate of need to develop a partial replacement facility with 34 acute care inpatient beds, 12 inpatient psychiatric beds and 3 operating rooms (the “2001 CON”);

WHEREAS, Good Hope requested a change in the scope and location of the 2001 CON project through a declaratory ruling request and the appeal of the denial of that declaratory ruling request is currently pending in Wake County Superior Court, 03 CVS 1878 (“declaratory ruling matter”);

WHEREAS, on February 13, 2006, Good Hope’s CEO, Glenn Davis, wrote to the Acute

and Home Care Licensure and Certification Section, informing the Agency that because of the

ongoing litigation and corresponding delay related to the development of a new facility pUrsuant to a CON;Good Hope Hospital was forced to implement temporary cost control measures. One such measure was the temporary suspension of all hospital services, which would take place in the near future. Mr. Davis wrote that the temporary suspension of services “should not have any impact on Good Hope Hospital’s license or certification at this time because the suspension of services is temporary and it is pursuing a plan regarding re-establishing services in the future.”;

WHEREAS, Denise Smith, CFO of Good Hope Hospital, informed the Acute and Home Care Licensure and Certification Section in a letter dated March 7,. 2006, that Good Hope Hospital would suspend all services, effective April 11,2006;

WHEREAS, a letter dated April 24, 2006, from the Acute and Home Care Licensure and Certification Section addressed to Good Hope Hospital stated that “This letter is official notice that the above hospital, Good Hope Hospital, Inc., is closed effective April 11, 2006.”;

WHEREAS, the. Acute and Home Care Licensure and Certification Section has taken action_ to seek the surrender of Good Hopes license used on the information contained in its letter addressed to Good Hope Hospital dated April 24, 2006;

WHEREAS, Good Hope alleges that it never received the April 24, 2006, letter;

WHEREAS, Good Hope initiated this action to challenge the Acute and Home Care Licensure and Certification Section’s decision to close the Hospital and to require the surrender of Good Hope Hospital’s license for 43 acute care beds, 29 psychiatric beds and 2 operating rooms;

WHEREAS, this case has previously been stayed while awaiting a decision regarding Good Hope’s appeal of its 2003 application;

WHEREAS, a final decision disapproving Good Hope’s 2003 application has been rendered;

WHEREAS, no other parties have attempted to intervene in this action;

WHEREAS, Good Hope disputes that its license should be surrendered;

WHEREAS, the Agency contends that its decision to require the surrender of Good Hospital’s license was valid;

WHEREAS, the execution of this settlement agreement does not constitute an admission of error by either party;

WHEREAS, pursuant to N.C. Gen. Stat. § 150B-22, it is the policy of the State to settle disputes between State agencies and other persons whenever possible;

WHEREAS, pursuant to this policy, the parties have disdussed settlement of this contested case;

NOW THEREFORE, pursuant to N.C. Gen. Stat § 150/3-22 and -31(b), and subject to the approval of Jeff Horton, Acting Director of the Division of Health Service Regulation, the parties have decided to resolve this contested case in the manner set forth below.

AGREEMENT

I . Issuance of License. After the submission by Good Hope of a complete license application and applicable fees for a freestanding inpatient psychiatric facility and within 5 business days of notification to Petitioner that Petitioner tuts complied with all applicable state and regulatory provisions, the DHSR. Acute and Home Care Licensure and Certification Section shall issue a license for no more than a 16-bed inpatient psychiatric facility, pursuant to G.S. § 1220, Article 2, to Good Hope.

2. Stay ofPending Case. The parties agree to stay the pending case for forty-eight

(48) months from the Effective Date of this agreement. At the end of forty-eight months Good Hope shall file a notice of voluntary dismissal, with, prejudice, in the above-referenced contested case in the Office of Administrative Hearings.

1. Petition for Judicial Review. Within twelve months of the Effective Date of this agreement Good Hope will elect to pursue its petition for judicial review in the case denominated as 03-CVS-1878 in the Superior .Court of Wake County. If Good Hope does not pursue its petition for judicial review within twelve months from the Effective Date of the signing of the agreement it will withdraw with prejudice its petition for judicial review.
2. Development of 16 Inpatient Psychiatric Beds. Goad Hope Will open a 16-bed inpatient psychiatric facility under a new license ‘pursuant to the requirements of G. S. § I 22C at the current Good Hope Hospital location in Erwin, NC (the “Mental Health Facility”). No patients will be admitted to the Inpatient psychiatric facility until the portion of the building

housing the 16 inpatient psychiatric beds and support services has plans and specifications reviewed and approved by the Division’s Construction Section and the North Carolina Department of Insurance Engineering Division. The building codes to be applied to the facility are to be as determined by the North Carolina Department of Insurance Engineering Division (DOD. Building requirements shall include but not be limited to items noted in a memorandum (See Exhibit .”A”) from Frances Pedrigi, DHSR. Facility Architectural Supervisor, to Bill Larrison dated June 4, 2008 in which specifics of construction and renovation requirements were discussed and documented with representatives of Good Hope, D01, and the Division. The Licensure rules to be applied to the physical plant requirements of the facility are contained as codified under G.S. I 22C for inpatient psychiatric treatment. The Life Safety Code to be applied to the facility for purposes of Center for Medioare/Medicaid Services (CMS) certification is the 2000 Edition of National Fire Protection Code 101, Life Safety Code for new construction which includes but is not limited to a complete automatic sprinkler system that covers the inpatient facility and support areas in the building for the inpatient services. Good Hope must separately apply for and receive approval for CMS certification and is not in any way guaranteed certification by this settlement agreement. Where any governmental unit that has jurisdiction over the renovations of the facility has additional or different requirements related to physical plant and life safety codes,. those requirements would supersede the physical plant requirements noted by the Division. A certificate of need will be required for the, renovation and operation of the 16-bed inpatient psychiatric facility only if the total capital expenditure for the project exceeds the amount contained in G.S. 131E-176(16)b. . •

1. Completion Date — lviental Health Facility. The Mental Health Facility described paragraph 4 will be licensed, certified and operational within forty-eight (48) months of the Effective Date of this agreement.
2. 2001 Certificate of Need. Gorid Hope will have forty-eight (48) months from the Effective Date of this agreement to develop a facility pursuant to the terms set forth in the 2001 CON, or, if permitted pursuant to appeal, the terms set forth. in the declaratory ruling matter pending judicial review (the “2001 Replacement Facility). The 2001 Replacement Facility must be lieensed, certified and operational at the end of the forty-eight month time period. If the 2001 Replacement Facility is not licensed, certified and operational within forty-eight (48) months, as defined by paragraph 9, from the Effective Date of this agreement, Good Hope agrees to relinquish its 2001 CON to the North Carolina Department of Health and Human Services, Division of Health Service Regulation, Certificate of Need Section.
3. Additional Psychiatric $Ods. Once the 16-bed inpatient psychiatric facility, referenced in paragraph 4 is operational, Good Hope will not develop or offer additional inpatient psychiatric beds pursuant to the terms of its existing 2001 CON or declaratory ruling matter.

S.                   No Material_ Change. The development of the 16-bed inpatient psychiatric

facility, rather than a 12-bed psychiatric unit as part of the 2001 CON Application, will not be considered a material change to the 2001 CON Application.

9.                   Litigation Stay. If any third party brings any administrative, legal or equitable

action or Proceeding that seeks to delay, obstruct, enjoin, or otherwise frustrate the development
or operation of the Mental Health Facility or the 2001 Replacement Facility, including an action
challenging the terms of this Agreement, the 48 month time period for development of the

Mental Health Facility and 2001 Replacement Facility shall be stayed for the duration of the action or proceeding (but not to exceed three years from the date the action or proceeding is initiated). The 48 month time period will re-commence beginning on the earlier of: (i) the date the action or proceeding has been finally adjudicated, or (ii) three years from the date the action was filed.

1. Good Faith. The Division of Health Service Regulation will act in good faith and without unnecessary delays in approving plans and licensure of the Mental Health Facility and the 2001 Replacement Facility and will cooperate with Good Hope in its efforts to submit any necessary revisions to construction plans so that the construction may be approved promptly by the appropriate Divisions and Departments of the Respondent N.C. Department of Health and Human Services, Petitioner Good Hope Hospital will also act in good faith .in pursing the development of the Mental Health. Facility and 2001 Replacement Facility in a timely manner. For purposes of this agreement with regards to the Division of Health Service Regulation, “good faith” means the agency will give Good Hope the same consideration, treatment and speed of review and approval accorded all other hospitals licensed to operate in North Carolina.
2. Release. Good Hope hereby releases Respondent,. its, officials, employees, and representatives, from any and all liability that has arisen or might arise out of Respondent’s actions to date regarding Good Hope Hospital’s license.
3. Expenses. The parties agree that each shall bear its own expenses, including attorney’s fees, and that no claim for such costs or expenses shall be made by one party against the other.
4. Effect of Approval. If approved by Mr. Horton, this agreement shall resolve all issues involved in, or arising out of the above-referenced contested case.
5. Effect of Disc royal. If this agreement is not approved by Mr. Horton, the parties agree that this agreement shall be null and void and that Good Hope shall be entitled to proceed with their contested case. In that event, Mr. Horton’s review of this agreement as provided herein shall not prejudice his authority to render the final agency decision following the hearing in this matter in accordance with Article 3 of Chapter 1508 of the North Carolina General Statutes. In addition, if this agreement is not approved by Mr. Horton, the parties agree that it shall be inadmissible at the contested case hearing for any purpose.
6. Waiver of Right to Appeal Agreement. The parties irrevocably waive any right to initiate an appeal from this agreement, assuming that any such right exists.
7. Merger. The parties further agree and acknowledge that this written agreement sets forth all of the terms and conditions between them concerning the subject matter of this agreement, superseding all prior oral and written statements and representations, and that there are no terms or conditions between the parties except as specifically set forth in this agreement.
8. Modification or Waiver. No modification or waiver of any provision of this agreement shall be effective unless it is in writing. Any modification or waiver must be signed by authorized representatives of the parties and must be adopted and approved by the Director of the Division of Health Service Regulation.

1 8.                                                                  No Strict Interpretation against Draftsman. Each of the parties has participated in

the drafting of this agreement and bac had the opportunity to consult with counsel concerning its terms. This agreement shall not be interpreted strictly against any one party on the ground that it drafted the agreement.

19.     Recitals and Headings. All parts and provisions of this agreement, including the

recitals and paragraph headings, are intended to be material parts of the agreement.

1. Authority to Settle. The undersigned represent and warrant that they are authorized to enter into this agreement on behalf of the parties to this agreement.
2. 21.            .ex part Presentation. Good Hope authorizes counsel for the Agency to present this agreement to Mr. Horton ex parte.
3. Effective Date. This agreement shall be effective as of the day and year on which it is adapted and approved by the Director of the Division of Health Service Regulation.
4. Binding Effect. This agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legal representatives, successors, and assigns.

IN WITNESS WHEREOF, the parties have executed two original copies of this settlement agreement, with one original copy being retained by each party.

Good Hope Hospital, Inc.

Date:  g             o7

N. Earl. Jones. Jr.,

Chairman Board of Good Hope Hospital

By:

Maureen Demarest Murray Susan M. Fradenburg

Smith Moore Leatherwood LLP P.O. Box 21927

Greensboro, NC 27420

COUNSEL FOR PETITIONER

ACUTE AND HOME CARE LICENSURE AND CERTIFICATION SECTION

By:                                  eriü Date:___________________

Azzie Y. nley ‘ef

Acute and Home Care Licensure and Certification Section

2704 Mail Service Center

Raleigh, NC 27699-2704

ROY COOPER Attorney General

By; It_c._4140^. June S (Fir

Assis .1 ILI/limey General

NC Department of Justice P.O. Box 629

Raleigh, NC 27602-0629 NC State Bar No, 12945