Physician’s satellite offices primarily for diagnostic testing not included in KRS 216B.010 certificate of need: GILBERT, M.D. V. COM. CAB. FOR HEALTH AND FAMILY SVCS. (COA 2/22/2008)

GILBERT, M.D.  V. COM. CAB. FOR HEALTH AND FAMILY SVCS.
MEDICAL FACILITY LICENSURE: APPLICABILITY OF EXEMPTION TO CERTIFICATE OF NEED REQUIREMENT

2007-CA-000042

PUBLISHED: AFFIRMING
PANEL: ACREE PRESIDING; KELLER, MOORE CONCUR
COUNTY: FRANKLIN
DATE RENDERED: 2/22/2008

John Gilbert, a well-known neurologist based in Lexington, his medical company and his satellite offices (collectively "Gilbert") appeal the TC’s Order affirming the decision of the Cabinet for Health & Family Services finding Dr. Gilbert in violation of KRS 216B.010, et seq., by operating health facilities with MRI services in London, Hazard and Florence without first obtaining a certificate of need ("CON"). Gilbert’s main contention on appeal was that his facilities are exempt from licensure per KRS 216B.020(2)(a), which exempts "private offices and clinics of physicians, dentists and other practioners of the healing arts." The Cabinet deemed this statute inapplicable since Gilbert did not actively practice at the 3 satellite offices and thus could not be considered a physician’s "private office." Gilbert conversely argued that the statute includes no element of personal active participation at the offices, only ownership.
    
The COA began its analysis by ruling that since both party’s interpretation of the subject statute was reasonable, the statute was ambiguous not on its face but as applied, and therefore constituted a latent ambiguity. The COA then turned to the legislative intent, and first noted its agreement with Gilbert that the Legislature did not intend to prohibit or discourage any physician from establishing satellite offices in medically underserved communities such as Hazard and London in this instance by permitting the exemption only if the physician owner personally and actively participated in the practice at each office. To remove any doubt, the COA affirmatively held that no such personal, active participation is required. On the other hand, the COA felt that the real focus of the Cabinet’s inquiry should have instead been on the kind of activity that usually takes place at the office for which an exemption is sought. To this end, Gilbert had the burden of demonstrating to the Cabinet that the exemption was, in fact, available and applicable to each of the 3 offices.
         
The COA’s review of the official record found that each of the 3 offices were primarily used as diagnostic facilities for patients referred by other physicians and were not used primarily to obtain scans for diagnosis of Gilbert’s own patients as he claimed. The evidence showed that no licensed physician was even actively present at the two eastern Kentucky offices while the physician who did work at the Florence office only read the films from the MRI scans performed at that office on patients referred by other physicians. Thus, the COA concluded that all three offices had all the hallmarks of a diagnostic testing facility. As such, the exemption under KRS 216B.020(2)(a) did not apply and a CON was needed for all three facilities on an individual basis, which Gilbert had failed to obtain. The TC’s Order sustaining the ultimate decision of the Cabinet was affirmed by the COA.

By Chad Kessinger, Schiller Osbourn Barnes & Maloney

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