State Regulatory Healthcare and Appeals Litigation

An Overview

In the majority of jurisdictions, state legislatures have sought to impose stricter regulatory requirements on healthcare providers though the passage of state laws that provide for increased licensing requirements, increased Medicare/Medicaid certification requirements, and complex licensing and/or registration processes such filing for a “Determination of Need” (“DoN”) (sometimes also called a “Certificate of Need”) prior to constructing or expanding healthcare facilities. This type of comprehensive state regulatory control has had two primary effects on healthcare providers. First, it has generated additional obstacles for individuals and facilities seeking to offer new healthcare services or expand the capacity of those they already offer. Healthcare facilities, in particular, have long faced these types of legal and regulatory hurdles when completing regulatory applications and certifications. But as states have exerted more and more control over the creation and expansion of healthcare facilities, those challenges have multiplied and now demand an even greater commitment of a healthcare facility’s already-scarce resources. Second, stricter state regulations have provided a host of new opportunities for third parties to inject themselves into licensing and certification processes in order to block a competitor’s expansion by objecting to regulatory applications or regulatory certifications.

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Representative Matter: DBS attorneys assisted a major rehabilitation hospital in Boston successfully obtain Department of Public Health approvals for the design, construction, opening, and licensing of a new state-of-the-art hospital on the Boston waterfront.

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This phenomenon, which has opened up new avenues of healthcare litigation, is no more prevalent than during a DoN process in which the state requires any new or expanding healthcare facility to establish that its proposed project is “necessary” to serve the relevant community’s needs. By regulation, most DoN processes are public, meaning that, with limited exceptions, any individual or facility that is “affected” by the proposed project—including, and especially, competitors—will be given the opportunity to object to the state issuing the DoN approval. Competitors frequently avail themselves of these opportunities and use them to attack whether a proposed facility or expansion is truly “necessary” or financially feasible. These types of objections draw-out the administrative process that more heavily scrutinizes the application, and they also increase the chances of an administrative appeal either by the applicant facility (if the state agency denies it a DoN due to an objection) or by the objector (if the state agency grants the DoN over the objection).

As a result, it is more important than ever that healthcare providers—whether submitting an application for approval or certification themselves, or objecting to competitor’s application—strictly comply with every regulatory requirement in a particular application or request for certification, and that they also document every piece of evidence that supports or refutes each item required by the state. In this sense, healthcare providers should treat these certification processes as if they, themselves, are healthcare litigation. By doing so, providers can improve their chances of not only successfully obtaining or objecting to a certification, but also preserving that outcome on appeal. Furthermore, with so much money at stake these state regulatory processes often persist beyond the administrative setting and into court in the form of civil lawsuits brought under the state Administrative Procedures Act. When this happens, strict compliance with the rules and strong, well-documented evidence supporting your position becomes even more important.

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Representative Matter: DBS attorneys managed and obtained the required state regulatory approvals to permit a major nursing home provider in Worcester to expand and develop a state-of-the-art medical and elder care complex.

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Given the technical nature of many of the requirements in these state regulatory processes, and the possibility that every filing a provider makes at the administrative level will eventually become a crucial piece of evidence in not only an administrative appeal but a judicial appeal as well, it is crucial for healthcare facilities to retain counsel who possesses experience complying with the state regulatory processes that are necessary to successfully obtain the desired outcome, and who also has sufficient litigation experience to guide the process at the administrative level such that the hard-won outcome will ultimately be upheld on appeal.