NORTH CAROLINA DEPARTMENT OF
HEALTH AND HUMAN SERVICES
DIVISION OF HEALTH SERVICE REGULATION
RALEIGH, NORTH CAROLINA
IN RE: REQUEST FOR DECLARATORY )
RULING BY NEW HANOVER REGIONAL ) DECLARATORY
MEDICAL CENTER AND SOUTH ATLANTIC ) RULING
RADIATION ONCOLOGY, LLC )
FID# 050139 )
I, Mark Payne, Director, Division of Health Service Regulation, North Carolina
Department of Health and Human Services (the “Department” or “Agency”), do hereby issue this
Declaratory Ruling pursuant to North Carolina Gen. Stat. §150B-4 and 10A N.C.A.C. 14A.0103
under the authority granted me by the Secretary of the Department of Health and Human Services.
New Hanover Regional Medical Center (“NHRMC”) and South Atlantic Radiation
Oncology, LLC (“SARO”) (collectively the “Parties”) have requested that the North Carolina
Department of Health and Human Services, Division of Health Service Regulation (the
“Department”) issue a declaratory ruling as to the applicability of Chapter 131E, Article 9 of the
North Carolina General Statutes, and of the Department’s rules, to the facts described below.
Specifically, the Parties request a determination that the Redesignation (without relocation) of
SARO’s Cancer Center, including the linear accelerator and simulator located therein, to an
unlicensed, provider-based outpatient department of NHRMC: (1) is permitted by the Hospital
Licensure Act; and (2) does not require a Certificate of Need (“CON”). This ruling will be binding
upon the Department and the entities requesting it, as long as the material facts stated herein are
accurate. This ruling pertains only to the matters referenced herein. Except as provided by N.C.
Gen. Stat. § 150B-4, the Department expressly reserves the right to make a prospective change in
the interpretation of the statutes and regulations at issue in this Declaratory Ruling. Denise Gunter
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of Nelson Mullins Riley & Scarborough LLP has requested this ruling on behalf of the Parties, and
has provided the material facts upon which this ruling is based.
STATEMENT OF FACTS
NHRMC operates an integrated health care delivery system with its main hospital campus
located at 2131 S. 17
th
Street in Wilmington, New Hanover County, North Carolina. NHRMC
currently owns fifty percent of SARO. NHRMC also owned fifty percent of SARO when SARO
applied for and was issued a certificate of need effective August 30, 2005 to develop an oncology
treatment center in Brunswick County by acquiring a linear accelerator and a simulator.
SARO developed and currently operates the freestanding radiation oncology treatment
center in a single building located at 545 Ocean Highway West, Supply, North Carolina 28462.
SARO’s Cancer Center Space measures 9,847 square feet and houses a linear accelerator in a linear
accelerator vault and a CT area used by physicians, physicists and dosimetrists for generating
images for treatment planning and radiation dosage.
The Parties now propose to continue operation of the radiation oncology treatment center
in the same building at the same physical address, but wish to Redesignate the 9,847 square feet
currently operated as SARO’s Cancer Center from a freestanding radiation oncology treatment
center to a provider-based, unlicensed location of NHRMC.
The parties further represent the following:
a. The SARO Cancer Center Space is already designated as a Business Occupancy in
Brunswick County;
b. The SARO Cancer Center does not administer anesthesia;
c. The SARO Cancer Center does not provide emergency or urgent care;
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d. No more than three (3) patients will be simultaneously rendered incapable of self-
preservation under emergency conditions without the assistance of others;
e. The requested re-designation will not involve the offering or expansion of any new
facility, service or equipment;
f. No assets will physically move as a result of the re-designation;
f. The requested re-designation will not change the inventory of linear accelerators
and simulators in Brunswick County or in New Hanover County or the State.
The Cancer Center Space and the linear accelerator will remain in the precise same location
in the same building at 545 Ocean Highway West, Supply, North Carolina. NHRMC will enter
into a Resources and Services Agreement to operate the Cancer Center Space, including the linear
accelerator.
ANALYSIS
The Redesignation entails the Parties shifting the designation of the Cancer Center Space
from a provider-based licensed location of SARO to a provider-based, unlicensed location of
NHRMC. No assets are physically moving as a result of the Re-designation.
A. Licensure Discussion
Pursuant to the proposed Agreement, the Cancer Center Space, and the linear accelerator
therein, will be provider-based to NHRMC, and is permitted to be operated as an unlicensed
outpatient location under the North Carolina Hospital Licensure Act’s Business Occupancy
Exception, contained in N.C. Gen. Stat. § 131E-76(3). That statute defines “hospital” as follows
for licensure purposes:
“’Hospital’ means any facility which has an organized medical staff and
which is designed, used, and operated to provide health care, diagnostic and
therapeutic services, and continuous nursing care primarily to inpatients
where such care and services are rendered under the supervision and
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direction of physicians licensed under Chapter 90 of the General Statutes,
Article 1, to two or more persons over a period in excess of 24 hours. The
term includes facilities for the diagnosis and treatment of disorders within
the scope of specific health specialties. The term does not include private
mental facilities licensed under Article 2 of Chapter 122C of the General
Statutes, nursing homes licensed under G.S. 131E-102, adult care homes
licensed under Part 1 of Article 1 of Chapter 131D of the General Statutes,
and any outpatient department including a portion of a hospital
operated as an outpatient department, on or off of the hospital's main
campus, that is operated under the hospital's control or ownership and
is classified as Business Occupancy by the Life Safety Code of the
National Fire Protection Association as referenced under 42 C.F.R. §
482.41 . . . .”
See N.C. Gen. Stat. § 131E-76(3) (emphasis added).
Because outpatient Business Occupancy locations are not part of a licensed hospital under
the Business Occupancy Exception, they are not restricted by the “County Line Licensure Rule”
at 10A N.C.A.C. 13B.3101(f), and thus can be located in a county other than the county in which
the hospital is located. Therefore, the SARO Cancer Center Space (in Brunswick County) can
operate as a non-licensed, provider-based outpatient department of NHRMC ( main campus
located in New Hanover County) consistently with the Hospital Licensure Act.
The North Carolina Hospital Licensure Act’s “hospital” definition in N.C. Gen. Stat. §
131E-76(3) incorporates by reference the definitions in the 2000 Life Safety Code of the National
Fire Protection Association (the “Life Safety Code”). That Life Safety Code designates whether
hospital space is classified as:
1. Health Care Occupancy;
2. Ambulatory Care Occupancy; or
3. Business Occupancy (so as to meet the Business Occupancy Exception).
The Life Safety Code at NFPA 101 Section 3.3.134.1 defines what functionally constitutes
occupancy for Ambulatory Health Care. The Life Safety Code classifies “Ambulatory Health
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Care” as a “building or portion thereof used to provide services or treatment simultaneously to
four or more patients that (1) provides, on an outpatient basis, treatment for patients that renders
the patients incapable of taking action for self-preservation under emergency conditions without
the assistance of others; or (2) provides, on an outpatient basis, anesthesia that renders the patients
incapable of taking action for self-preservation under emergency conditions without the assistance
of others.” See NFPA 101 Section 3.3.134.1A.
Because Business Occupancy classification is a functional step below Ambulatory Health
Care (i.e., fewer requirements), the Department’s Construction Section looks at what falls below
the Ambulatory Health Care standard to determine what is classified as Business Occupancy under
the Life Safety Code. Thus, a Business Occupancy classification is appropriate when a building
or portion thereof is used to provide outpatient services where treatment renders three (3) or fewer
patients simultaneously incapable of self-preservation under emergency conditions without the
assistance of others. The SARO Cancer Center Space is already designated as Business
Occupancy. NHRMC and SARO represent that no more than three (3) patients will be
simultaneously rendered incapable of self-preservation under emergency conditions without the
assistance of others. In addition, SARO does not administer anesthesia to its patients.
Given the foregoing features, the Department confirms that the Redesignation (without
relocation) of SARO’s Cancer Center Space to unlicensed, provider-based space of its co-owner
hospital, NHRMC is permitted by the Business Occupancy Exception in N.C. Gen. Stat. § 131E-
76(3) of the Hospital Licensure Act.
B. CON Discussion
The Redesignation does not trigger any of the definitions of a “new institutional health
service,” which would implicate CON review. N.C. Gen. Stat. § 131E-178(a) provides that no
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person shall offer or develop a “new institutional health service” without first obtaining a CON.
The term “new institutional health service” is defined in numerous ways in N.C. Gen. Stat. § 131E-
176(16).
Among these definitions is N.C. Gen. Stat. § 131E-176(16)(b), which defines a “new
institutional health service” to include:
. . . [T]he obligation by any person of a capital expenditure exceeding two
million dollars ($2,000,000) to develop or expand a health service or a health
service facility, or which relates to the provision of a health service . . . .
See N.C. Gen. Stat. § 131E-176(16)(b).
The parties represent that there is no capital cost associated with the proposed
Redesignation. The inventory of linear accelerators and simulators will not change as a result of
the proposal. Neither will ownership of the equipment change as a result of the proposal.
Because no beds are involved, the Redesignation does not constitute a change in bed
capacity” under N.C. Gen. Stat. § 131E-176(16)(c). Because no operating rooms are involved, the
Redesignation does not implicate N.C. Gen. Stat. § 131E-176(16)(u). Nor does the Redesignation
constitute a “new institutional health service” under any other CON trigger in N.C. Gen. Stat. §
131E-176(16).
NHRMC owned fifty percent of SARO at the time SARO applied for and received the
CON to develop the SARO Cancer Center and continues to own fifty percent of SARO. NHRMC
will enter into a Resources and Services Agreement to operate the Cancer Center Space, including
the linear accelerator. Because of the parties’ relationship, the Redesignation does not trigger any
of the “acquisition-related” new institutional health service definitions in N.C. Gen. Stat. §131E-
176(16).
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The Redesignation does not involve the offering or expansion of any new facility, service
or equipment, and will not alter the inventory of linear accelerators in Brunswick County, New
Hanover County or the State.
It is a well-established principle of statutory construction that the intent of the Legislature
controls the interpretation of the statute. See State v. Fulcher, 294 N.C. 503, 520, 243 S.E.2d 338,
350 (1978). Prohibiting this simple intra-organizational Redesignation of existing services would
not advance the goal of avoiding costly duplication because the Radiation Therapy Equipment and
the Cancer Center Space already exist and are used to provide the same services they will provide
after the Redesignation. Construing the statute otherwise would lead to absurd results that the
General Assembly could not have intended. See King v. Baldwin, 276 N.C. 316, 325, 172 S.E.2d
12, 18 (1970) (“It is presumed that the legislature acted in accordance with reason and common
sense and that it did not intend an unjust or absurd result.”)
This proposal is similar to a UNC Health Care proposal that the Agency has found to be
non-reviewable. On March 24, 2016, the Agency determined that no CON review was necessary
for UNC Health Care to Redesignate (without relocation) Caldwell Memorial Hospital,
Incorporated’s (“CMHI”) Cancer Center Space (including one linear accelerator) on Caldwell
Memorial Hospital’s license and located on that hospital’s campus in Caldwell County to
unlicensed, provider-based outpatient department of its sister hospital, UNC Hospitals, which is
located in Orange County. UNC Hospitals and Caldwell Memorial Hospital are both owned by
The University of North Carolina Health Care System.
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CONCLUSION
For the foregoing reasons, assuming the statements of fact in the request to be true, I
conclude that that the Redesignation (without relocation) of SARO’s Cancer Center Space, and
Radiation Therapy Equipment located therein, to unlicensed, provider-based space of NRHMC:
(1) is permitted by the Hospital Licensure Act; and (2) does not require a Certificate of Need.
This the _____ day of December, 2016.
______________________________
Mark Payne, Director
Division of Health Service Regulation
N.C. Department of Health and Human Services
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CERTIFICATE OF SERVICE
I certify that a copy of the foregoing Declaratory Ruling has been served upon the
nonagency party by certified mail, return receipt requested, by depositing the copy in an official
depository of the United States Postal Service in first-class, postage pre-paid envelope addressed
as follows:
Denise Gunter
NELSON MULLINS RILEY & SCARBOROUGH LLP
380 Knollwood Street
Suite 530
Winston-Salem, NC 27103
This the _______ day of December, 2016.
__________________________________
Cheryl Ouimet
Chief Operating Officer