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Friday, November 04, 2005

Ind. Decisions - Decision in one federal trial over whether communities have right to restrict new medical centers

"Hospital expansion OK: Court ruling allows St. Francis to resume its plans to build in Mooresville" is the headline to a story today by Josh Duke in the Business Section of the Indianapolis Star. Some quotes:

A federal judge is allowing St. Francis Hospital to resume its expansion plans in Mooresville and delivered a statewide message that counties don't have the authority to prohibit the construction of hospitals. U.S. District Judge David F. Hamilton ruled that state law grants the Indiana State Department of Health -- not local government -- the power to regulate and license hospitals in the state.

The ruling, handed down Wednesday, could affect the 37 counties that run county-supported hospitals. Those hospitals, which often serve as the safety net in accepting all patients regardless of their ability to pay, have complained in recent years about being at a competitive disadvantage with for-profit, specialty-service hospitals that take away better-insured patients.

St. Francis went to court after leaders from Morgan County, southwest of Indianapolis, imposed a temporary moratorium on the construction of medical facilities within its borders as a way of ensuring the financial health of its county-run hospital, Morgan Hospital & Medical Center in Martinsville. * * *

At least four other Indiana counties have considered or adopted similar restrictions. Those counties have chosen to either prevent construction through their moratoriums or have forced health-care businesses to obtain local approval through a "certificate of need" process before they begin construction.

Another hearing Wednesday by a different federal judge involved a similar lawsuit against Clark and Floyd counties. A decision in that case could come in a few weeks, which gives those counties some hope despite Hamilton's decision. In the hearing, Judge Sarah Evans Barker, while acknowledging she was aware of Hamilton's ruling, chose to study it further before making her decision.

Inside Indiana Business has the St. Francis Hospital-Mooresville press release.

Meanwhile, the Louisville Courier Journal has coverage of the case involving Clark and Floyd counties pending before Judge Barker. Some quotes from the story by Alex Davis:

INDIANAPOLIS -- Hospital officials in Clark and Floyd counties formed a conspiracy to thwart private competition, an attorney argued yesterday in federal court. At the urging of the hospitals, both counties passed moratoriums earlier this year banning the construction of private medical facilities.

Attorney Daniel Warncke contended that those moratoriums are illegal because they violate antitrust laws and overstep the zoning authority of the two counties.

Warncke represents two groups of Kentucky-based investors who want to build hospitals in Southern Indiana. The two groups sued the counties June 13 in U.S. District Court in New Albany, challenging the moratoriums.

During a two-hour hearing yesterday before U.S. District Judge Sarah Evans Barker, Warncke said there was "evidence of communication" between the two hospitals that amounted to a conspiracy. He did not elaborate.

Attorneys for the counties argued, however, that anything the hospitals did regarding the moratoriums had no direct bearing on the counties' decisions to enact them. * * *

Barker said she would rule shortly after Thanksgiving on whether the moratoriums can remain in place.

The outcome of the suit could bring significant changes to the medical-care landscape in Southern Indiana. If the investors prevail, the number of hospitals in Clark and Floyd could grow from three to five in the next couple of years, and possibly even more in the future.

Clark Memorial and Floyd Memorial, both publicly owned, now operate along with the private Medical Center of Southern Indiana in Charlestown as the only three hospitals in Clark and Floyd counties. * * *

Attorneys for the counties argued yesterday that the moratoriums were simply a way to assess local medical needs and thus prepare for the future. Task forces in both counties have been appointed to consider those issues, they said, and the bans could be lifted at any time, depending on the outcome of those studies.

There already may be at least one strike against the counties. It came Wednesday when a similar case in Morgan County, near Indianapolis, was decided in favor of Sisters of St. Francis Health Services Inc. Sisters of St. Francis had sued to overturn a similar moratorium enacted by the Morgan County commissioners. Warncke predicted that Wednesday's ruling, by U.S. District Judge David Hamilton, would have a "positive impact" on Barker's decision in a few weeks.

But the lawyers for Clark and Floyd counties said that there are many differences between the two cases and that the Morgan County decision could still be appealed. * * *

Floyd's moratorium was approved in March and lasts one year. Clark's started in February and lasts two years. Some municipal officials also have grumbled about the moratoriums, suggesting they infringe on the zoning rights of cities and towns.

Here are earlier ILB entries on the issue from 10/6/05 and 10/10/05, plus a 10/22/05 entry on a proposed Chicago-area hospital merger.

Judge Hamilton's opinion in Sisters of St. Francis v. Morgan County (SD Ind., 11/2/05) begins:

In the past, the State of Indiana required state government approval, in the form of what was often called a certificate of need, before a new hospital could be built or an existing hospital could be substantially expanded. The state repealed that requirement in 1987 and allowed market forces of supply and demand to replace the certificate of need regulatory process. Pub. L. No. 194-1987, § 9, 1987 Ind. Acts 2270 (repealing Ind. Code §§ 16-1-3.7-1 to -12).

The central issue in this case is whether a county government in Indiana may now impose on its own a new requirement for county approval of hospital construction or expansion. Under a federal statute protecting religious freedom, a more specific question is whether such a county requirement may be applied to a hospital operated by a religious order in furtherance of its mission to heal the sick. The case was tried to the court on October 4 and 5, 2005 on an expedited schedule with the agreement of the parties. The court now states its findings of fact and conclusions of law pursuant to Rule 52 of the Federal Rules of Civil Procedure. Substance rather than the court’s label shall govern whether a matter is treated as a finding of fact or a conclusion of law. As explained below, the court finds that the new Morgan County ordinance imposing first a limited moratorium and then a county approval requirement on hospital construction in the county is preempted by Indiana’s Home Rule Act. The court also finds that the ordinance is not preempted by the federal Sherman Act, does not at least on its face violate plaintiff’s rights under the federal Religious Land Use and Institutionalized Persons Act known as RLUIPA, and does not violate Indiana zoning laws.

I have uploaded a copy of the 53-page decision; access it here.

Posted by Marcia Oddi on November 4, 2005 07:46 AM
Posted to Ind Fed D.Ct. Decisions