An administrative law judge has ruled that medical imaging facilities jointly owned by six radiologists and Providence Alaska Medical Center will require a Certificate of Need to continue operating.
“The regulation under which Imaging Associates of Providence was previously determined to be exempt has been declared invalid and the department has accepted the ruling,” said Chief Administrative Law Judge Terry Thurbon. “IAP, therefore, must apply for certificates of need for the Abbott Road (Anchorage) and Mat-Su Valley facilities, within 60 days after the effective date of this decision,” Thurbon said in a decision released Oct. 29.
A Certificate of Need is a permit issued by the state to operate health care facilities. It is required for facilities that make capital investments of $1 million or more.
Anchorage attorney Peter Gruenstein, who represents IAP, said Nov. 14 that his client strongly disagrees with the state's decision and would fight it all the way to the Alaska Supreme Court.
Gruenstein said that before construction of the two facilities began, the state Department of Health and Social Services twice issued an opinion stating that Certificates of Need were not required.
If Health and Social Services Commissioner Karleen Jackson adopts Thurbon's recommendations, IAP would have the right to appeal that decision all the way to the state Supreme Court, he said.
Thurbon's decision noted that when IAP constructed its facilities, a statute made physicians' offices exempt from the Certificate of Need requirements. An additional regulation made imaging facilities exempt as well. Both the statute and the regulation appeared to apply to the IAP facilities, Thurbon said.
A subsequent Superior Court ruling in another case purported to invalidate the regulation. IAP argued that the department cannot apply the Superior Court ruling to the facility. Alternatively, IAP argued that the department should be stopped from requiring it to obtain certificates of need for the facilities because it relied on the regulation and the department's determination that IAP's facilities were physicians' offices and not independent diagnostic testing facilities.
“The department is not required to perpetuate errors,” Thurbon said. “Unless and until the Superior Court's ruling is reversed, the department is free to respect the court's ruling invalidating the regulation. The department's previous determinations that the IAP facilities are not independent diagnostic testing facilities did not have the effect of giving IAP permission to operate those facilities free from regulation by the department in the event a change in the law, or its interpretation, subjected the facilities to regulation,” Thurbon said.
Jackson specified in a Sept. 22, 2006 letter to IAP that the group's Anchorage facility was substantially similar to the imaging facility formerly operated by Alaska Open Imaging center in Fairbanks.
Open Imaging closed its doors in Fairbanks in February in compliance with a state Superior Court order. The order followed a decision in a suit brought by Banner Health Systems, operator of Fairbanks memorial Hospital.
Banner, which operates radiography services at Fairbanks Memorial, had complained to the state that Alaska Open Imaging needed a Certificate of Need to operate its radiographic imaging center in competition with the hospital. Alaska Open Imaging had argued it did not need the certificate under terms of state legislation passed in 2004, and the state Department of Health and Social Services concurred.
Last August, Judge Niesje Steinkruger told the company to get certified within six months or close. Jeff Kinion, chief executive officer for Alaska Open Imaging, said the action by Banner Health Systems was a move to erase competition.
Alaska Open Imaging's prices for services were in some cases substantially lower than Fairbanks Memorial, Kinion said. And Elizabeth Ripley, spokeswoman for Mat-Su Regional Medical Center, said hospitals are required in many cases to treat patients regardless of their ability to pay, while Imaging Associates of Providence and other like business ventures can choose to serve only those who can pay.
