Emory University Hospital has big plans for its Smyrna campus: a planned $34 million renovation to the existing hospital and the addition of a new medical office building and a parking deck.
But its plans for the renovation have been tied up in courts since 2016, with WellStar Health System interceding in the process to prevent the renovations from happening.
The delay has prevented Emory from offering updated medical facilities to patients in the southeast Cobb area at a hospital that hasn't undergone significant renovations since first opening in the 1970s.
The dispute between the two health systems dates back to 2015, when Emory purchased the hospital outright from its former partner in the facility, Adventist Health System.
In March 2016, Emory filed a Certificate of Need application for $33.8 million worth of renovations into the hospital, located off South Cobb Drive near the Kings Springs Road intersection in Smyrna.
In Georgia, health care companies have to file a CON application before undertaking certain capital investments, such as building new facilities, buying equipment or beginning renovations. The state’s Department of Community Health reviews the applications.
“The purpose of the CON program is to ensure the availability of adequate health care services to meet the needs of all Georgians, while safeguarding against the unnecessary duplication of services that perpetuate the costs of health care services,” according to a fact sheet on the Georgia DCH’s website.
Emory wants to spend about $13.9 million on construction and about $17.8 million on new equipment for the 82,000-square-foot hospital, according to its CON application.
The dispute over the CON has moved its way through the Georgia judicial system over the years, and WellStar recently requested the Georgia Supreme Court weigh in on the matter.
Meanwhile, a separate court case is working through Cobb Superior Court between the two health systems. In court documents, WellStar alleges that Emory’s purchase of the hospital in 2015 was improper under Georgia law and seeks to have the purchase nullified.
Additionally, the Smyrna City Council recently approved a request from Smyrna to rezone the hospital’s campus to allow for a new 120,000-square-foot medical office building on the site, as well as a new parking deck. That project is unrelated to the 2016 CON application under dispute. An Emory spokesperson said a Certificate of Need is not needed for the planned addition, but did not elaborate as to why.
HISTORY OF THE CON DISPUTE
The Department of Community Health approved Emory’s CON application in August 2016, and WellStar appealed that decision to the CON Appeal Panel. The panel held a hearing in March 2017 and affirmed the CON application approval in July 2017.
WellStar then appealed to the Department of Community Health’s commissioner, who also affirmed the decision in August 2017.
That’s when the application moved to the courts. WellStar petitioned for judicial review of the commissioner’s decision, but Cobb Superior Court Judge Reuben Green denied the petition in an order filed Feb. 13, 2018.
Next, WellStar sought an appeal from the Court of Appeals of Georgia, which denied the petition for judicial review and affirmed Green’s ruling in March 2019.
Now, WellStar is asking the Georgia Supreme Court to take up the case, filing an official request called a petition for writ of certiorari on April 2.
In court documents, WellStar has made a variety of arguments for why Emory’s CON application should be denied, but the issue the courts have been asked to decide deals with the CON appeal panel’s decision from July 2017.
WellStar argues Emory’s new CON application can’t be approved because its old CON that allowed it to operate as a hospital lapsed.
This argument is tied to the history of the hospital. It was founded in 1974 by a group of physicians as Smyrna Hospital and was acquired by Adventist Health System in 1976.
In 1995, Adventist Health System entered into a joint venture with Emory Healthcare, and the hospital was renamed Emory-Adventist Hospital.
The hospital closed in October 2014, Emory University acquired the full title to the property in April 2015 and reopened the hospital as Emory University Hospital Smyrna in October 2015.
WellStar argues that Emory’s acquisition of the property in 2015 was not valid and that its original CON did not survive the acquisition, not to mention that the hospital’s CON authority lapsed because it did not provide any inpatient services for 12 months.
“As a result, (WellStar) asserted that (Emory) ‘must obtain new CON authority to operate a hospital,’ which applies more extensive and rigorous guidelines,” the Georgia Court of Appeals Decision reads.
However, both Judge Green and the Court of Appeals panel have ruled that the CON appeal panel does not have the authority to consider whether or not the existing CON is valid.
“(WellStar) contends that the DCH’s initial determination of (Emory University Hospital Smyrna’s) existing CON status was erroneous and should have been reviewed by the panel hearing officer,” the Court of Appeals decision states. “However, (WellStar’s) argument is not proper within the limited framework of the CON Appeal Panel. Accordingly, this provides no basis for reversal and (WellStar) must avail itself of other remedies.”
Leo Reichert, WellStar’s executive vice president and general counsel, said the health system disagrees with the courts’ rulings and that their argument is “the only reasonable reading” of the law.
“We disagree with that, and we’ve laid out why,” Reichert said. “It doesn’t make any sense to us that the hearing officer wouldn’t review that because the hearing officer has to make a decision (on) which set of rules apply to a project, and there are different rules that apply to a project for a new hospital versus those that apply to renovations. (It is) much more strict for the new hospital.”
Reichert said that WellStar’s objection is not just about Emory’s Smyrna location, but about preventing future abuse of the system.
“It is a roadmap for abuse. It would create a precedent for anybody else to try to play these same games and avoid the public review of all the terms of the transaction, which is required under the law and the policy of the state of Georgia to make certain that communities are treated fairly when nonprofit hospital assets change hands.”
Kem Mullins, WellStar’s executive vice president for its ambulatory division & business development, said the health system is aware of criticism that health systems use the CON process in an attempt to limit competition.
Mullins, a former president of WellStar Cobb Hospital, said a competitor coming in and providing similar services but only to commercial payers would make it not feasible for nonprofit health systems, which see all patients regardless of ability to pay, to continue.
“In order for us to be able to maintain those types of services, we have to protect our ability to treat all patients regardless of their payer source,” Mullins said.
In response to a list of questions emailed to a spokesperson, Emory sent the following statement on the ongoing dispute:
“Emory Healthcare continues to work through the Certificate of Need (CON) process for the Emory University Hospital Smyrna campus on South Cobb Drive. Emory Healthcare leaders have been working closely with Smyrna city officials on plans to renovate the hospital to better serve the community, following CON approval. The hospital is open and is currently providing limited services, without an emergency room.”
In April, WellStar filed a request for the Georgia Supreme Court to take up the case. The court has not made a determination on whether it will grant the petition.
Most of these requests are not granted, but all are heard and voted on by the entire court, according to Jane Hansen, spokesperson for the Georgia Supreme Court.
There is no deadline for the court to decide on a petition, Hansen said. If the court agrees to accept the case, it will go into the system with the rest of the court cases to be scheduled for arguments.
A COURT BATTLE OVER THE HOSPITAL’S PURCHASE
In a separate legal dispute, WellStar is seeking to have Emory’s 2015 purchase of the hospital property nullified. WellStar filed its complaint in Cobb Superior Court in February 2018.
WellStar argues that the purchase did not comply with Georgia’s Hospital Acquisition Act, which governs the process by which a nonprofit hospital is sold and requires a review process and public hearings.
In court documents, WellStar alleges that “Emory conducted a years-long scheme to acquire the Smyrna hospital cheaply through forcing a closure, blocking other potential buyers, and evading review under the Act.”
When Emory was considering purchasing the hospital outright, it sought guidance from the Georgia Attorney General’s office as to whether the Hospital Acquisition Act applied.
According to court documents, Emory claims the AG’s office determined that the law did not apply because the hospital wasn’t technically considered a “hospital” under the act. When the hospital closed in 2014, its license was returned to the Department of Community Health and placed on inactive status, Emory states in court documents.
Because the hospital was closed and did not have an active license, Emory states in court documents, the AG’s office ruled the Hospital Acquisition Act did not apply.
“After (Emory University Hospital Smyrna) was awarded a CON, WellStar asked the Attorney General’s Office at least nine … times to reconsider its determination that the HAA did not apply to Emory’s acquisition of the property,” Emory’s attorneys write in court briefs.
Each time, the AG’s office has declined to change its determination, Emory’s attorneys state.
Emory is seeking to have WellStar’s suit ruled in its favor, arguing that the court should defer to the AG’s interpretation and that WellStar’s case is invalid.
WellStar argues that Emory misrepresented its purchase of the property to the AG’s office, omitting certain facts that could have swayed the AG’s determination. Among the omitted facts WellStar alleges would have applied are that there was another potential buyer for the hospital, Northside Hospital, but Emory blocked the sale.
Both health systems are asking the judge to rule in their favor before the case goes to trial. A hearing before Judge Green on their motions has not been scheduled yet, according to Green’s staff attorney, Katy Duke. However, a hearing could come in late May or early June if both parties agree to a court date, Duke said.