State of Tennessee

Department of State
Administrative Procedures Division
312 Rosa L. Parks Avenue
8th Floor, William R. Snodgrass Tower
Nashville, Tennessee 37243-1102
Phone: (615) 741-7008/Fax: (615) 741-4472

June 8, 2023

Abby Nix, Esq. Jim Christoffersen, Esq.

Baker, Donelson, Bearman, Caldwell & Tennessee Health Facilities Commission
Berkowitz, PC 502 Deaderick Street
P.O. Box 331884 Andrew Jackson Bldg. 9th Fl
1600 West End Avenue, Ste. 2000 Nashville, TN37243
Nashville, TN 37203 Sent via email also to:
Sent via email also to: [email protected]
[email protected]

Betsy J. Beck, Esq.

Kramer Rayson LLP
P.O. Box 629
Knoxville, TN 37901
Sent via email also to: bbeck@kramer-
rayson.com

Bryce E. Fitzgerald, Esq.

Kramer Rayson LLP
P.O. Box 629
Knoxville, TN 37901
Sent via email also to: bfitzgerald@kramer-
rayson.com

Diamond Stewart, Esq.

Gullett Sanford Robinson & Martin, PLLC
150 Third Avenue South, Suite 1700
Nashville, TN 37201
Sent via email also to: [email protected]

Hilary C. Dennen, Esq.

Gullett Sanford Robinson & Martin, PLLC
150 Third Avenue South, Suite 1700
Nashville, TN 37201
Sent via email also to: [email protected]
John E. Winters, Esq.
Kramer Rayson LLP
P.O. Box 629
Knoxville, TN 37901
Sent via email also to: jwinters@kramer-
rayson.com

Lindsay E. Ray, Esq.

Baker, Donelson, Bearman, Caldwell &
Berkowitz, PC
P.O. Box 331884
1600 West End Avenue, Ste. 2000
Nashville, TN 37203
Sent via email also to:
[email protected]

M. Clark Spoden, Esq.

Gullett Sanford Robinson & Martin, PLLC
150 Third Avenue So., Suite 1700
Nashville, TN 37201
Sent via email also to: [email protected]

Warren Gooch, Esq.

Kramer Rayson LLP
P.O. Box 629
Knoxville, TN 37901
Sent via email also to: wgooch@kramer-
rayson.com

William H. West, Esq.

Baker, Donelson, Bearman, Caldwell &
Berkowitz, PC
P.O. Box 331884
1600 West End Avenue, Ste. 2000
Nashville, TN 37203
Sent via email also to:
[email protected]

William Scales, Esq.

Gullett Sanford Robinson & Martin, PLLC
150 Third Avenue So., Suite 1700
Nashville, TN 37201
Sent via email also to: [email protected]
Dan H. Elrod, Esq.
Butler Snow, LLP
150 3rd Ave. South, Suite 1600
The Pinnacle at Symphony Place
Nashville, TN 37201
Sent via email also to:
[email protected]

Travis Swearingen, Esq.

Butler Snow, LLP
150 3rd Ave. South, Suite 1600
The Pinnacle at Symphony Place
Nashville, TN 37201
Sent via email also to:
[email protected]

C.E. Hunter Brush, Esq.

Butler Snow, LLP
150 3rd Ave. South, Suite 1600
The Pinnacle at Symphony Place
Nashville, TN 37201
Sent via email also to:
[email protected]

G. Brian Jackson, Esq.

Butler Snow, LLP
150 3rd Ave. South, Suite 1600
The Pinnacle at Symphony Place
Nashville, TN 37201
Sent via email also to:
[email protected]

RE: TRISTAR STONECREST MEDICAL CENTER, SAINT THOMAS RUTHERFORD

HOSPITAL, AND WILLIAMSON MEDICAL CENTER V. TENNESSEE HEALTH
FACILITIES COMMISSION AND VANDERBILT UNIVERSITY MEDICAL
CENTER D/B/A VANDERBILT RUTHERFORD HOSPITAL, APD Case No.
25.00-220022J

Enclosed is an Initial Order, including a Notice of Appeal Procedures, rendered in this case.

Administrative Procedures Division

Tennessee Department of State

Enclosure(s)
 BEFORE THE TENNESSEE HEALTH FACILITIES COMMISSION

IN THE MATTER OF:

SAINT THOMAS RUTHERFORD

HOSPITAL,
TRISTAR STONECREST MEDICAL
CENTER, APD Case No. 25.00-220022J
WILLIAMSON MEDICAL CENTER, CON No. CN2109-026
Petitioner,

v.

TENNESSEE HEALTH FACILITIES

COMMISSION,
Respondent,

and

VANDERBILT UNIVERSITY MEDICAL

CENTER d/b/a/ VANDERBILT
RUTHERFORD HOSPITAL,
Intervenor.

INITIAL ORDER

This contested case was heard de novo in Nashville, Tennessee, on December 5-9, 12, 15-

16, and 19-20, 2022, before Administrative Judge Claudia Padfield, assigned by the Tennessee

Secretary of State, Administrative Procedures Division (APD), to sit on behalf of the Tennessee

Health Facilities Commission. The hearing addressed the allegations contained in the NOTICE OF

HEARING filed on January 13, 2022, pertaining to the application for a certificate of need (“CON”)

filed by Vanderbilt University Medical Center d/b/a Vanderbilt Rutherford Hospital (“VRH”) on

October 1, 2021, which was approved by the Health Facilities Commission1 (“HFC”) on December

15, 2021. Petitioner, Saint Thomas Rutherford Hospital (“STRH”), was represented by attorneys

1Pursuant to Public Chapter 1119, the Tennessee Health Services and Development Agency was renamed as of July
1, 2022, to the Tennessee Health Facilities Commission. For consistency, the agency shall be referred to as the current
name regardless of when the agency’s action occurred.
Warren L. Gooch, John E. Winters, Betsy Beck, and Bryce E. Fitzgerald. Petitioner, TriStar

StoneCrest Medical Center (“StoneCrest”), was represented by attorneys M. Clark Spoden,

William Scales, Hilary Dennen, and Diamond Stewart. Petitioner, Williamson Medical Center

(“WMC”), was represented by attorneys William West, Lindsay Ray, and Abby Nix. General

Counsel James B. Christoffersen represented Respondent, HFC. Intervenor, VRH, was

represented by attorneys Dan H. Elrod, G. Brian Jackson, Travis Swearingen, and C.E. Hunter

Brush.

At the close of the hearing, multiple post-hearing deadlines were set for the filing of the

following: the hearing transcript, counter designations of depositions, objections to the counter

designations, redacted and condensed deposition transcripts, proposed findings of fact and

conclusions of law, and post-hearing briefs. As such, the RECORD closed on April 11, 2023.

Pursuant to TENN. CODE ANN. § 68-11-1610(d), the INITIAL ORDER must be entered by June 12,

2023.

Based on the review of the testimony, exhibits, and the entire record, it is determined that

Petitioner have met their burden of proof to show that the application for the certificate of need

does not mee the relevant statutory and regulatory requirements. According, VRH’s application

for the certificate of need is DENIED.

SUMMARY OF THE EVIDENCE

At the hearing, 25 witnesses provided live testimony. A video deposition of one witness

was submitted in lieu of live testimony by agreement of the parties. One hundred ninety-six

exhibits were entered into evidence. Six documents were marked for identification purposes only

as part of an offer of proof. Sixty-eight condensed and redacted deposition transcripts and four

documents were entered as late-filed exhibits.

Page 2 of 31
 FINDINGS OF FACT

1. In 2020, VRH applied with HFC for a CON application (No. CN2004-012) to

establish a 48-bed full-service hospital in Murfreesboro, Rutherford County, Tennessee. The CON

application also included six neonatal intensive care unit (NICU) bassinets.

2. HFC considered VRH’s application at a Commission meeting held on August 26,

2020. Also considered by HFC, on that same date, was the CON application submitted by STRH

to open a community hospital, Saint Thomas Rutherford Westlawn Hospital. HFC considered

both CON applications simultaneously due to the nearly identical locations, overlapping services,

overlapping service areas, and similar type of facilities.

3. At the August 26, 2020, meeting, by a 4-2 vote, VRH’s CON application was

denied by HFC. At the same meeting, HFC approved the Saint Thomas Westlawn Hospital’s CON

application.

4. VRH timely appealed HFC’s denial of the application, which contested case was

assigned a case number of 25.00-203133J by the Administrative Procedures Division. Per the

ORDER GRANTING PETITIONS TO INTERVENE issued by Administrative Judge Rachel Waterhouse

on November 4, 2020, WMC, StoneCrest, and STRH, along with two other Saint Thomas

hospitals, were allowed to intervene.

5. VRH filed a notice of voluntary dismissal of APD Case. No. 25.00-203133J on

October 7, 2021. An ORDER OF NONSUIT AND DISMISSAL was issued by Administrative Judge

Waterhouse on October 8, 2021.

6. Administrative Judge Waterhouse issued both an ORDER GRANTING INTERVENOR’S

MOTION FOR COSTS and an ORDER DENYING INTERVENORS’ MOTION TO MODIFY AND EXTEND

PROTECTIVE ORDER AND GRANTING PETITIONER’S MOTION TO ENFORCE AGREED PROTECTIVE

ORDER on December 3, 2021.

Page 3 of 31
 7. HFC filed a NOTICE OF PETITIONS FOR JUDICIAL REVIEW with APD on June 9, 2022.

A certified technical record was provided by APD on June 15, 2022. To date, no further filings

have been received by APD regarding that appeal.

8. The Tennessee Health Services and Planning Act of 2021 became effective after

VRH’s first CON was denied. Among other changes, the CON requirement for a hospital to add

acute care beds to an existing facility was eliminated. Therefore, an existing hospital may add

such beds without having to show a need for the same beds. The policy provision of the statute

now requires that the establishment of healthcare facilities must promote access to necessary, high-

quality, and cost-effective services. TENN. CODE ANN. § 68-11-1603.

9. While the first appeal was pending, VRH submitted a second application for a CON

application (No. CN2109-026) on October 1, 2021. The second application was for a 42-bed

hospital in Murfreesboro, Rutherford County, Tennessee, including diagnostic and therapeutic

cardiac catheterization services.

10. HFC considered the second application at the Commission meeting held on

December 15, 2021. At that same meeting, by a vote of 5-1, HFC approved VRH’s CON No.

CN2109-026.

11. VRH is owned by Vanderbilt University Medical Center (VUMC), in Nashville,

Davidson County, Tennessee. VUMC’s main campus consists of Vanderbilt University Hospital,

Monroe Carell Jr. Children’s Hospital Vanderbilt (MCJCHV), Vanderbilt Psychiatric Hospital,

and Vanderbilt Stallworth Rehabilitation Hospital. VUMC’s main campus is a tertiary2 and

quaternary3 medical center with 1,175 licensed beds for the relevant period. VUMC also owns

2 Tertiary care is highly specialized medical care. Tertiary care is typically provided over an extended period of time.
It involves advanced and complex diagnostics, procedures, and treatments that are performed by medical personnel in
facilities with highly specialized equipment.
3 Quaternary care is an extension of tertiary care but is even more specialized.

Page 4 of 31
Vanderbilt Wilson County Hospital, Vanderbilt Bedford Hospital, and Vanderbilt Tullahoma-

Harton Hospital.

12. The proposed location for VUMC’s VRH CON No. CN2109-026 is at the southeast

intersection of Veterans Parkway and I-840, off I-24, on 80 acres of land. The site is approximately

six miles from the Williamson County/Rutherford County border on the west side of Rutherford

County. The proposed facility would be an acute care, community hospital and would include:

o 26 adult medical/surgical beds

o four intensive care unit beds
o six pediatric beds
o six obstetrical beds
o eight observation beds
o an emergency department
o a surgical suite with two major operating rooms
o four general purpose operating rooms
o two endoscopy procedure rooms
o a cardiac catheterization laboratory
o a physical and respiratory therapy room
o a reception and waiting area
o imaging services including magnetic resonance imaging, computerized
tomography, ultrasound, and mammography
o laboratory and pharmacy services
o space for ancillary services and
o a helipad that can be accessed by VUMC LifeFlight aeromedical transport service.

13. STRH is an acute care hospital in Murfreesboro, Rutherford County, Tennessee. It

sits on eight acres. STRH is approximately six miles from VRH’s proposed location. At the time

of the hearing, STRH had 376 licensed beds. Due to the change in Tennessee’s CON law, STRH

does not need approval to add additional beds; at the time of the hearing, STRH was in the process

of adding an additional 58 beds which were expected to open in Spring 2023.

14. STRH also has a community hospital in Murfreesboro, Rutherford County,

Tennessee, Saint Thomas Rutherford Westlawn. Westlawn is across the street and less than one

mile across Veterans Parkway from VRH’s proposed location. Both sites are at the same

intersection of I-840 and Veterans Parkway. Westlawn is a community hospital which has eight

Page 5 of 31
inpatient beds, eight emergency beds, outpatient services, imaging services, physician practices,

and telemedicine services.4

15. StoneCrest is an acute care hospital in Smyrna, Rutherford County, Tennessee.

StoneCrest is located approximately 12 miles northwest of VRH’s proposed location off I-24. At

the time of the hearing, StoneCrest had 119 licensed beds, 115 of which were staffed.

Approximately 71% of StoneCrest’s patients come from Rutherford County. StoneCrest last

added beds in February 2020 when it added six intensive care unit beds. StoneCrest completed a

major emergency department expansion in November 2019.

16. WMC is an acute care hospital in Franklin, Williamson County, Tennessee. It is

located approximately 20 miles from the proposed site of VRH. WMC is approximately two miles

from the Rutherford County/Williamson County border. WMC has 203 licensed beds, all of which

were staffed during the relevant period.

17. VUMC has greatly expanded its geographic reach by purchasing three preexisting

Middle Tennessee hospitals and also by establishing outpatient and walk-in clinics. VUMC

operates more than 800 outpatient clinics across Middle Tennessee in 180 locations. In Rutherford

County, VUMC operates retail health clinics in La Vergne, Smyrna, and Murfreesboro;

comprehensive cardiology care; behavioral health; maternal medicine; ambulatory surgery;

imaging; outpatient surgery; and other outpatient services.

18. For pediatric services in Rutherford County, VUMC’s MCJCHV offers imaging,

urgent care facilities, subspecialty clinics, and a pediatric outpatient surgery center. The

subspecialty clinics include services for cardiology, diabetes, endocrinology, gastroenterology,

4Westlawn opened on March 16, 2023. As stated above in the facts, this hospital’s CON application was approved
prior to the filing of the current appeal but is relevant to the current appeal to provide a complete and accurate overview
of hospital medical services in Rutherford County that had been approved at the time VRH filed the CON application
under consideration.
Page 6 of 31
nephrology, neurology, orthopedics and sports medicine, otolaryngology and audiology, plastic

surgery, pulmonology, rheumatology, and urology. The magnetic resonance imaging service area

at the Rutherford County location has an 18-county service area.

19. VUMC’s Vanderbilt Wilson County Hospital has 245 licensed beds, 158 of which

are staffed. VUMC’s Vanderbilt Bedford Hospital has 49 licensed beds, 24 of which are staffed.

VUMC’s Vanderbilt Tullahoma-Harton Hospital has 135 licensed beds, 86 of which are staffed.

VUMC’s Vanderbilt Tullahoma-Harton Hospital is seeking a trauma designation which includes

a service area of Rutherford and Williamson Counties.

20. The occupancy rates of VUMC’s three existing community hospitals are between

13% and 37%.

21. VUMC, StoneCrest, STRH, and WMC all provide health care that meet appropriate

quality standards.

22. The proposed service area of VRH is Rutherford County. Approximately 75% of

VRH’s patients are expected to originate in Rutherford County.

23. Rutherford County has had and continues to have rapid population growth.

Rutherford County currently has a population of approximately 350,000. Rutherford County is

projected to become the fourth most populated Tennessee county by 2026.

24. Despite the growth in population, Rutherford County residents have not had a

significant increase in the level of utilization of inpatient services. This is consistent with the

steady decline in length of hospitalization stays across the country and in Tennessee for general,

non-tertiary care.

25. The COVID-19 pandemic caused hospitals across Rutherford County and

throughout Tennessee to have occupancy rates that were skewed from typical years. The pandemic

also caused various spikes in hospital utilization. The data from 2020-2022 is challenging to

Page 7 of 31
analyze when looking at daily average census and hospital utilization rates. As such, the data from

2020-2022 is not reliable and has been disregarded by healthcare planners.

26. The VRH CON application showed a surplus of 145 licensed beds in Rutherford

County. Since the filing of the application, a new community has opened, STRH has added and

is in the process of adding beds. Per the most recent data from the Tennessee Department of

Health, the current surplus in Rutherford County is 67 licensed beds.

27. STRH has treated emergency department patients in hallway beds. While not ideal,

treating patients in hallways at emergency departments is not unique to STRH. There is no

evidence that any patient treated in a hallway bed at any of the facilities involved led to a lower

quality care for those patients.

28. STRH has spent a significant amount of time on direct-admit-med-surg diversion

and intensive care unit diversion which means that STRH is not able to admit patients into the

hospital because there are no beds available. STRH has been unable to transfer adult patients to

VUMC’s main campus because VUMC was likewise on diversion. As such, area physicians have

sometimes had difficulty admitting their patients to STRH.

29. STRH has an average inpatient occupancy rate of 80%. STRH has not enacted

emergency medical services division.

30. At times, but especially during COVID-19 surges, all area hospitals have had to

board patients in the emergency departments due to lack of available bed capacity in other hospital

rooms. The wait time to transfer to an available inpatient bed in a hospital has varied greatly. The

longer holds (24 or more hours) are typically due to psychiatric patients who are waiting to be

transferred to an appropriate facility.

31. STRH offers a variety of services including orthopedic surgery, oncology,

obstetrics, neuroscience, and cardiology. STRH has a NICU and is expanding that unit from 16 to

Page 8 of 31
22 beds. STRH has increased the provided services to become a more of a tertiary referral center

rather than a local community hospital.

32. StoneCrest offers inpatient services for women’s health, obstetrics/gynecology,

NICU, cardiology, orthopedics, pulmonology, critical care, diabetes, and oncology. StoneCrest

also offers outpatient services such as imaging, physical therapy, emergency department services,

and advanced wound care. StoneCrest has a dedicated pediatric emergency room.

33. StoneCrest has an average inpatient occupancy rate of less than 60%. While on

occasion a patient has been placed in a hallway bed at StoneCrest, it is rare.

34. WMC has a partnership with MCJCHV whereby the eight-bed pediatric emergency

department, eight-bed NICU, and 16-bed pediatric inpatient unit at WMC are staffed by Vanderbilt

physicians. WMC provides the nurses for the pediatric units. Due to lack of need, WMC has plans

to reduce the 16-bed pediatric inpatient unit to ten beds.

35. WMC’s MCJCHV-run pediatric unit has an inpatient daily average census of two

patients. The various pediatric units at WMC are underutilized and have capacity to admit all

lower acuity pediatric patients from Rutherford County and adjacent counties.

36. VRH proposes to have six dedicated pediatric beds. This is a duplicative service to

what MCJCHV pediatricians already offer at WMC.5 VRH does not plan to offer a NICU, any

pediatric inpatient surgery, or a pediatric emergency room.

37. STRH provides pediatric inpatient services. STRH does not have a separate

pediatric unit. It has six pediatric beds with nurses who have pediatric advanced life support

training certifications. STRH has had pediatric trained respiratory therapists.6 STRH has an

5 Dr. Brent Rosser, a pediatrician at Murfreesboro Medical Clinic, reluctantly testified that the VRH facility would
not offer any pediatric services that are not available at WMC.
6 It was unclear from the testimony at the hearing whether STRH currently had pediatric trained respiratory therapists

on staff.
Page 9 of 31
average daily census of pediatric patients of one. STRH has not had enough inpatient pediatric

patients to sustain having full-time, designated pediatric nurses on staff.

38. The volume of non-critical care population at VUMC’s MCJCHV has decreased

10-15% over the last five years. Most pediatric care is provided on an outpatient basis. Half of

MCHCHV’s subspecialties are offered in Rutherford County at the various locations as outlined

above. The length of stay for non-critical care pediatric patients has declined both locally and

nationally.

39. VRH projected a daily average census for its pediatric unit of two patients for the

first year and 2.7 patients for the second year.

40. In the CON application, VRH represented to HFC that the average length of stay

for a pediatric patient would be 4.6 days.

41. Per Dr. Margaret Rush, President of MCJCHV, the actual anticipated average

length of stay for a pediatric patient at VRH would be 2 to 2.5 days.

42. WMC is adding 15 emergency department beds due, in part, to an increase in the

need for mental health services and the inability to transfer those patients from the emergency

room to a mental health facility.

43. WMC has an average occupancy of 55%.

44. VRH proposes to offer the following services: general medical and surgical, cardiac

catheterization, laboratory, and imaging. All of these services are offered at STRH, WMC, and

StoneCrest. No tertiary level services are proposed.

45. The federal government requires not-for-profit hospitals to publish a Community

Health Needs Assessment every three years to help justify their not-for-profit tax status. STRH

and VUMC published a joint Rutherford County Health Needs Assessment in 2019. The report is

based on data, interviews, and surveys. The top three needs in Rutherford County in 2019 were

Page 10 of 31
addressing affordable housing and homelessness; social factors including education levels,

unemployment, crime, etc.; and health promotion and wellness. The need for an additional

hospital was not mentioned anywhere in the report.

46. The cardiac catheterization CON criteria utilize a weighted formula to measure the

existing capacity of cardiac catheterization labs in the proposed service area. Per the weighted

formula as established in the guidelines, need is presumed to exist for additional cardiac

catheterization lab capacity if the average current utilization of all existing providers is greater

than 70%.

47. As one of its outpatient practices and clinics in Rutherford County, VUMC operates

Vanderbilt Heart Murfreesboro. This consists of four cardiologists and two advanced practice

nurse practitioners. Additionally, a heart failure physician, a heart failure nurse practitioner, an

electrophysiologist, and a lipid nurse practitioner rotate through the Vanderbilt Heart

Murfreesboro Clinic. VRH’s CON application includes a cardiac catheterization laboratory that

would allow these practitioners to provide services at their own facility rather than having to

coordinate the services at a current area hospital such as StoneCrest or STRH.

48. VRH would be staffed and maintained by at least one cardiologist who has

performed 75 cases annually over the previous five years.

49. Dr. Fayaz Malik, the Chair of the Department of Cardiology at STRH, provided

credible testimony that the practice of cardiology is changing due to emerging technology

involving cardiac computed tomography (CT). While some patients are now able to avoid the

more invasive procedure of a cardiac catheterization by having a cardiac CT performed, there are

some patients who will need to have a cardiac catheterization based on the results of the cardiac

CT.

Page 11 of 31
 50. Using the most recent reliable data (obtained prior to the pandemic), STRH’s

cardiac catheterization capacity was over 90%. StoneCrest’s capacity was slightly less than 60%.

51. The cardiac catheterization capacity, per the weighted formula as established in the

State Health Plan, at STRH and StoneCrest is over the required capacity threshold of 70%.

52. VUMC’s cardiologists who practice in Rutherford County satisfy the minimum

physician requirements to initiate these services per the guidelines.

53. Prices for services rendered at VRH would be based on the same community

hospital charge structure as the three county-adjacent community hospitals: Vanderbilt Bedford

Hospital, Vanderbilt Wilson County Hospital, and Vanderbilt Tullahoma-Harton Hospital.

54. VRH would accept Medicare and TennCare/Medicaid patients. VRH projected in

the CON application that 61% of its patients would be Medicare and Medicaid patients. This is

comparable to other area hospitals.

55. At least two of VUMC’s community hospitals have not generated revenues in

excess of their expenses. In 2021, Vanderbilt Bedford Hospital had a loss of $4,792,817;

Vanderbilt Wilson County Hospital had a loss of $7,330,835.7

56. VRH has a projected charity care rate of 5%. This is a slightly lower rate than other

area hospitals.

57. BlueCross/BlueShield of Tennessee (BCBST) is the largest commercial insurer in

Tennessee. BCBST opposes the CON application due to unnecessary duplication of services that

would inflate the cost of healthcare services.

58. VRH submitted a projected payor mix (the percentage of a facilities’ revenue from

private insurance versus self-paying patients versus public insurance programs such as Medicare

7 The record does not reflect the revenue compared to expenses of Vanderbilt Tullahoma-Harton Hospital.
Page 12 of 31
and Medicaid) in the CON application. The payor mix listed Humana and Wellcare as part of its

Medicare Advantage Payors list.

59. On December 1, 2022, before the hearing began, VUMC notified WellCare of

Tennessee that it would stop accepting Medicare Advantage Plans as of April 1, 2023. On

December 13, 2022, VUMC provided the same notice to Humana. The reason stated in the letters

for the termination of both agreements was that VUMC was no longer willing to accept the level

of losses associated with the plans. VUMC had demanded a 20% increase in payments for all

treatments which was rejected by the payors. In a press release to the public, VUMC asserted that

a higher reimbursement rate was necessary to pay for inflationary costs of personnel, supplies,

equipment, and medications. VUMC announced on March 14, 2023, that an agreement to continue

providing in-network care was reached with Humana. The increase in payments from Humana to

VUMC was not announced. No agreement with WellCare was announced or provided.

60. There is a nursing shortage both in Tennessee and across the country. The shortage

began before the outbreak of the COVID-19 pandemic and continues presently.

61. Due to staffing issues, hospitals have delayed services. Due to staffing issues,

hospitals have temporarily closed certain services. This has created accessibility issues. Some of

those delayed or closed services were due to staffing problems associated with the pandemic and

are not ongoing issues.

62. None of the involved healthcare hospitals caused the nursing shortage. The

involved healthcare hospitals have taken action to address the nursing shortage, such as offering

residency programs for nursing graduates, programs to allow existing staff to take a more advanced

clinical role, sponsorships of clinical workers to receive further education and more advanced

training, and affiliation with nursing schools.

Page 13 of 31
 63. Hospitals, including all of the parties in this case, have resorted to hiring traveling

or contract nurses in order to be adequately staffed. Traveling or contract nurses are paid at much

higher rates than on-staff nurses.

64. VUMC represented to HFC, during the December 15, 2021, meeting, that staffing

has not been an overwhelming challenge.

65. At the time of the hearing, VUMC had approximately 1,000 to 1,100 open nursing

positions across its healthcare system.

66. VRH will require 114 nurses and 171 ancillary clinical personnel.

67. VUMC has paid hiring bonuses, student loan forgiveness, and moving expenses to

help recruit nurses.

68. VUMC plans to staff VRH by having nurses transfer from other VUMC facilities

to VRH as well as hiring new nurses.

69. The additional costs of labor to hospitals cannot be immediately passed directly to

consumers due to the hospitals’ contracts with the insurance companies or government. As

indicative of the demands for a higher contract rate from VUMC to Humana and Wellcare, the

additional costs can be a basis for requesting a higher reimbursement rate from insurance

companies or the government as a continuation of accepting patients as in-network patients.

APPLICABLE LAW

1. The Tennessee Health Facilities Commission is granted the authority to approve or

deny certificate of need applications by TENN. CODE ANN. § 68-11-1609(a).

2. STRH, StoneCrest, and WMC are healthcare institutions that are located within a

thirty-five-mile radius of the location of the action proposed. As such, the three entities had

authorization to file written objections to appeal the approval of VRH’s CON application. TENN.

CODE ANN. § 68-11-1609(g).

Page 14 of 31
 3. Without opposition from Petitioners or Respondent, VRH moved to intervene in

this case, which request was granted pursuant to TENN. CODE ANN. § 4-5-310 and TENN. COMP. R.

& REGS. 0720-13-.01(4).

4. This contested case was presided over by the undersigned administrative law judge

sitting alone pursuant to TENN. CODE ANN. § 68-11-1610(c). As a proceeding convened by HFC,

this contested case was a de novo hearing. Big Fork Mining Company v. Tennessee Water Quality

Control Board, 602 S.W.2d. 515, 521 (TENN. CT. APP. 1981).

5. In a contested case hearing before HFC, Petitioners have the burden of proving, by

a preponderance of the evidence, that a CON application should be denied. TENN. COMP. R. &

REGS. 0720-13-.01(3).

6. Pursuant to TENN. CODE ANN. § 68-11-1609(b), “A certificate of need shall not be

granted unless the action proposed in the application is necessary to provide needed health care in

the area served, will provide health care that meets appropriate quality standards, and the effects

attributed to competition or duplication would be positive for consumers. In making these

determinations, the commission shall use as guidelines the goals, objectives, criteria, and standards

adopted to guide the commission in issuing certificates of need. Until the commission adopts its

own criteria and standards by rule, those in the state health plan apply. Additional criteria for

review of applications must also be prescribed by the rules of the commission.”

7. The State Health Plan Certificate of Need Standards and Criteria sets forth the

consideration given for applicants seeking to establish acute care beds for a new facility. The

determination of need is established through a four step process “[u]sing utilization and patient

origin data from the Joint Annual Report of Hospitals and the most current populations projection

series from the Department of Health, both by county, … .” State Health Plan, 2017-2018 Edition,

p. 54. The need for hospital beds should be projected four years into the future. “New hospital

Page 15 of 31
beds can be approved in excess of the ‘need standard for a county’ if … [a]ll existing hospitals in

the proposed service area have an occupancy level greater than or equal to 80 percent for the most

recent Joint Annual Report.” Id. at p. 56.

8. To determine whether there is a need for acute care beds in a new facility, the State

Health Plan considers similar services in the service area, trends in occupancy and utilization, and

the likely impact of the proposed increase in acute care beds on existing providers. Consideration

is to be given to whether the increase in beds will result in unnecessary, costly duplication of

services. Id. at p. 60.

9. Other facts to consider when looking to add acute care beds are quality

considerations, establishment of service area, services and relationship to high-need and

underserved populations, access to serve equally all of the service area, adequate staffing,

assurance of resources, data requirements, quality control and monitoring, licensure and quality

considerations, and community linkage plan if applicable. Id. at pp. 61-62.

10. The State Health Plan provides criteria relating to cardiac catheterization services.

State Health Plan, 2009 Edition, Appendix B. TENN. COMP. R. & REGS. 0720-11-.01(2)(h) (July

2022) provides the guidelines for evaluating quality standards for cardiac catheterization projects.

11. TENN. COMP. R. & REGS. 0720-11-.01 (July 2022) provides the general criteria that

HFC will consider when determining if an application for a certificate of need should be granted.

Specifically applicable to the current appeal are the criteria for need and competition/duplication

effects which are:

(1) Need. The health care needed in the area to be served may be evaluated upon the
following factors:
(a) The relationship of the proposal to any existing applicable plans;
(b) The population served by the proposal;
(c) The existing or certified services or institutions in the area;
(d) The reasonableness of the service area;

Page 16 of 31
 (e) The special needs of the service area population, including the accessibility to
consumers, particularly women, racial and ethnic minorities, TennCare
participants, and low-income groups;
(f) Comparison of utilization/occupancy trends and services offered by other area
providers;
(g) The extent to which Medicare, Medicaid, TennCare, medically indigent, charity
care patients and low-income patients will be served by the project. In determining
whether this criteria is met, the Commission shall consider how the applicant has
assessed that providers of services which will operate in conjunction with the
project will also meet these needs.
…
(3) The effects attributed to competition or duplication would be positive for the
consumers. Whether the effects attributed to competition would be positive for the
consumers may be evaluated upon the following factors:
(a) Access to high quality, cost-effective healthcare services;
(b) The impact upon patient charges;
(c) Participation in TennCare, Medicare and other federal and state reimbursement
programs; participation in other insurance plans; and charity care;
(d) Whether the applicant commits to maintaining an actual payor mix that is
comparable to the pay mix projected in its CON application, particularly as it relates
to Medicare, TennCare/Medicaid, Charity Care, and the Medically Indigent; and
(e) The availability and accessibility of human resources required by the proposal,
including those required by existing providers.

12. The commission has the authority to revoke a certificate of need if “[t]he decision

to issue a certificate of need was based, in whole or in part, on information or data in the application

which was false, incorrect, or misleading, whether intentional or not.” TENN. CODE. ANN. § 68-

11-1617(3).

ANALYSIS AND CONCLUSIONS OF LAW

The CON process plays an important role in ensuring access, sustainability, and safety in

Tennessee’s healthcare system. This includes ensuring appropriate and necessary services and

facilities are available in communities across the state, and that patients are able to access those

services in a safe and affordable manner. The CON process recognizes the unique needs and

challenges of health care compared to other industries.

Page 17 of 31
 The written transcript of oral testimony provided at a hearing does not fully convey the

evidence given or always provide a complete picture of the proof in a case.8 Ginna Felts is the

Vice President of Business Development at VUMC and prepared both of VRH’s CON

applications. Ms. Felts was unable to answer questions at the hearing that someone in her position

should be expected to know, often stating that she did not recall when asked questions about the

CON application or the process. In contrast, Ms. Felts provided one-word answers, such as “yes”,

“no”, or “sure”, when she was answering leading questions asked by VRH’s counsel. Ms. Felts

avoided answering questions directly if the answer would have been harmful to VRH. Ms. Felts’

demeanor while providing live testimony was incredulity at the need to answer questions that

would cast doubt on the CON application or VUMC. The veracity of Ms. Felts’ testimony is

questionable and is given little weight.

Appropriate Quality Standards

A CON applicant must prove that the facility will provide health care that meets

appropriate quality standards. All four healthcare hospitals in this case offer health care at

appropriate quality standards. There was no testimony or evidence that VRH would not be

expected to offer the same quality of care at the proposed facility that is offered at other hospitals

owned by Intervenor. Petitioners have failed to prove by a preponderance of the evidence that the

CON application does not meet this portion of TENN. CODE ANN. § 68-11-1609(b).

Need for Health Care in Area Served

8 “A stenographic transcript correct in every detail fails to reproduce tones of voice and hesitations of speech that often
make a sentence mean the reverse of what the words signify.” Broadcast Music v. Havana Madrid Restaurant Corp.,
175 F.2d 77, 80 (2d. Cir. 1949). “It is true that the carriage, behavior, bearing, manner and appearance of a witness –
in short, his ‘demeanor’ – is a part of the evidence.” Dyer v. MacDougall, 201 F. 2d, 265, 268-268 (2d. Cir. 1952).
“When credibility and weight to be given testimony are involved, considerable deference must be afforded to the trial
court when the trial judge had the opportunity to observe the witnesses’ demeanor and to hear in-court testimony.”
Hughes v. Metropolitan Government of Nashville and Davidson County, 340 S.W.3d 352, 360 (Tenn. 2011) (internal
citations omitted).
Page 18 of 31
 VRH and Petitioner hired expert witnesses to support their respective cases. All experts

offered credible, well-reasoned testimony. The opinions reached, not surprisingly, by each expert

was to the advantage of the expert’s client. The experts used data and methodology to reach

conclusions that benefitted their respective clients and discounted data that would have led to a

different conclusion. While the testimony and opinions offered are not nullified in what was,

essentially, a battle of the experts, VRH’s experts relied upon information in forming their opinions

that was misleading or is no longer applicable to the case. For example, VRH’s experts relied

upon statistics from the COVID-19 pandemic period even though it has been established that those

figures do not accurately reflect general occupancy or utilization of healthcare services. VRH’s

expert witnesses did not consider the impact of the largest expansion in VUMC’s history - an

approximately $755 million expansion expected at the main, tertiary campus. A significant portion

of the justification for the need requirement in the CON application was the lack of available space

at the Davidson County facilities. As the expansion renders this argument moot, VRH’s experts’

testimony and opinions must be discounted.

In the CON application, VRH represented to HFC that the average length of stay for a

pediatric patient would be 4.6 days. This contrasts with the testimony of Dr. Margaret Rush,

President of MCJCHV, who provided credible testimony that the average length of stay at VRH

is expected to be 2 to 2.5 days. Dr. Rush was not consulted or involved in planning any portion of

the CON application. To the extent that VRH’s expert witnesses relied upon the inaccurate higher

utilization projections, the testimony and opinions formed based on the inaccurate projections are

discounted.

The majority of VRH’s anticipated patients will originate in Rutherford County. While

VRH would have to draw patients from other counties to be viable and sustainable, the projected

service area is reasonable under TENN. COMP. R. & REGS. 0720-11-.01(1)(d).

Page 19 of 31
 Some Rutherford County residents choose to travel to VUMC’s tertiary campus to seek

inpatient treatment that could be received at a hospital in Rutherford County. Due to a variety of

factors such as convenience to tertiary services, if needed, or proximity to work, some Rutherford

County residents would continue to go to VUMC even if VRH were built. This has proven to be

true with the three community hospitals purchased by VUMC. For those Rutherford County

residents who choose to have Vanderbilt physicians as their healthcare providers, they may desire

to have a Vanderbilt-owned hospital six miles from STRH or 10 miles from StoneCrest. But VRH

has conflated desire and need. Vanderbilt has hospitals or units within another hospital in five of

the seven counties adjacent to Rutherford County – the various hospitals in downtown Nashville,

the pediatric units within WMC, Vanderbilt Tullahoma-Harton Hospital, Vanderbilt Wilson

County Hospital, and Vanderbilt Bedford Hospital. Excluding the Davidson County facilities, the

other VUMC hospitals or VUMC-managed hospital units all have ample capacity and do not

require travel into the tertiary facilities. While residents of Rutherford County may select VUMC

as their healthcare provider, the CON application process is focused on providing patients with

geographic access to care. Rutherford County residents have access to care and have a choice in

hospitals in their county. All Rutherford County residents have “reasonable access to health care”

as required in the State Health Plan. Having a third provider choice is not a criterion for approval

of a CON application.

The State Health plan gives special consideration to underserved geographic regions. VRH

does not seek to provide services to a region or underserved population group but rather to expand

the market wherein it can provide inpatient hospital care. VRH has argued that providing a special,

six-bed pediatric unit should be given consideration as providing access to an underserved

population. WMC, through its partnership with MCJCHV, offers all of VRH’s proposed pediatric

services, and even higher level of services, approximately two miles from the

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Williamson/Rutherford County line. Rutherford County pediatric patients have reasonable access

to services within the geographic area. Petitioners have proven by a preponderance of the evidence

that the approval of the CON application does not satisfy TENN. COMP. R. & REGS. 0720-11-

.01(1)(e). Additionally, WMC’s pediatric units are underutilized. A duplication of these services

in the geographic area is not positive for consumers. Petitioners have proven by a preponderance

of the evidence that, as to the pediatric services, that the CON application also fails to satisfy TENN.

COMP. R. & REGS. 0720-11-.01(3).

VRH hired a private firm to coordinate signatures to support the VRH CON application.

As part of these efforts, VRH coordinated to have individuals submit affidavits in support of the

project. VRH offered these affidavits in its CON application, and testimony at the HFC

commission hearing, in support of its application. However, it does not appear that the public was

provided accurate information from VRH as to what the proposed hospital would entail. In support

of VRH, affidavits from community members spoke to being able to access non-routine or

specialty care at the proposed hospital. This sentiment is mistakenly repeated throughout the

affidavits by individuals who believe that the new hospital would relieve them of having to go to

a tertiary hospital to receive specialty care. As delineated above, VRH proposes to be a community

hospital and does not propose any level of tertiary care.

Other affidavits supported VRH as a means of spreading medical services throughout

Rutherford County. To the contrary, the services would not be spread throughout Rutherford

County as VRH would be across the street from an existing hospital and emergency department at

Westlawn. All proposed medical services at VRH are also available at StoneCrest and STRH

which are not in the same location within Rutherford County.

It appears that the healthcare community was provided inaccurate or misleading

information as to what VRH would offer. VRH coordinated with Murfreesboro Medical Clinic

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(MMC), a large physician group in Murfreesboro that rents office space to VUMC, to have MMC’s

physicians submit affidavits in support of the CON application. MMC physicians wrote in

affidavits of the addition to the community that could be offered through Vanderbilt’s “incredible

array of specialties.” While VUMC has many specialty clinics in the Rutherford County area,

VRH does not propose any specialties that are not available at the local area hospitals. Indeed, all

specialty hospitalizations would continue to be admitted at VUMC’s main tertiary campus – not

at VRH.

Many of the healthcare providers in Rutherford County who submitted affidavits in support

of VRH had a shocking lack of knowledge about what services are available to their patients

without having to refer patients to a hospital in downtown Nashville. Many physicians referenced

the need for having a second hospital in Rutherford County or that there was only one hospital that

served Rutherford County. However, there was already a second hospital, StoneCrest, in

Rutherford County when all of these physicians signed their affidavits. StoneCrest is a mere 10

miles down the interstate from the proposed location of VRH. Some of the physicians also

referenced the mistaken belief that there would be subspecialists and researchers at VRH. MMC

pediatricians incorrectly stated that all pediatric patients from Rutherford County and surrounding

counties must go to Nashville for any advanced pediatric care. Just twenty miles from the proposed

VRH location, all Rutherford County pediatric patients have access to Vanderbilt pediatricians and

inpatient care at WMC without having to travel to a tertiary hospital. If the level of pediatric

services cannot be provided at a community in-patient setting such as at WMC, VRH will not

relieve the need for pediatric patients to travel to MCJCHV.

The granting or denial of a CON application is not a popularity contest based on a number

of signatures or affidavits. While there is no evidence that VRH purposely provided false

information to individuals or physicians to elicit their support, VRH included affidavits in the CON

Page 22 of 31
application that were clearly based on false or misleading information. The evidence shows that

MMC wants to use its support of VRH not necessarily for the good of the public but, at least in

part, for its own gain. The evidence shows that MMC has offered support to VRH so that they can

“make demands. Get what we want from the beginning” as well as using support of the project to

“make St. Thomas nervous.” LATE-FILED EXHIBIT 59, at exhibit 18. MMC, a large, for-profit

healthcare provider, has offered its support in the current CON application as an ongoing effort to

pit one hospital provider against another to advance its own goals. The way the affidavits were

obtained, the inaccuracies contained therein, and the motive for submitting the affidavits renders

them unpersuasive in their attempt to support any of the criteria to approve a CON application.

Thus, they have been given no weight.

A better indication of what is needed and desired in Rutherford County is the 2019

Community Health Needs Assessment. This report was not a result of a marketing tool by VRH

to solicit opinions to support its goals but rather an objective assessment across all aspects and

populations of Rutherford County as to what was needed. The need for an additional hospital was

not mentioned in the report.

The current CON law requires a new hospital to prove a need for additional hospital beds

using the acute care bed standards and criteria in the State Health Plan. Any existing hospital can

add acute care beds as budgets and space permit. It has been argued by VRH and HFC that the

acute care bed need formula is outdated and should not be followed. However, under the current

law and guidelines, it is required that VRH prove the beds are needed.

The Tennessee Legislature and HFC have decided to treat existing hospitals and entities

differently than those that wish to open a hospital. If HFC does not believe the acute care need

bed formula is accurate or applicable, HFC has the authority to change the State Health Plan. The

last change to the acute care bed need formula was in 2017-2018. The State Health Plan has been

Page 23 of 31
updated three times since the acute care bed need formula was put into place. This formula also

could have been changed when the CON law changed in 2021, but HFC chose not to do so. The

governing statute states the commission “shall use as guidelines the goals, objectives, criteria, and

standards adopted … . Until the commission adopts its own criteria and standards by rule, those

in the state health plan apply.” TENN. CODE ANN. § 68-11-1609(b) (emphasis added). While the

State Health Plan is a guideline and not law, it provides the only objective measurements by which

a CON application can be evaluated. The absence of the only applicable guideline would leave

the approval process completely subjective as to which measurements should be used to prove that

the new facility is needed.

Despite the acute care bed need formula showing a surplus of hospital beds in Rutherford

County, STRH has continued to add hospital beds and anticipates opening even more in 2023.

STRH has made efforts to become a tertiary center rather than a community hospital and is making

the adjustments toward this goal. VUMC has begun construction on an approximately $755

million project that would add roughly 248 beds at its tertiary hospitals, none of which need to be

approved through the CON application process. This construction project – and the addition of a

large number of beds – were not mentioned in the CON application or at the HFC hearing even

though the project had been internally approved. While the plan has changed and will likely

continue to evolve, VRH did not mention the largest expansion in VUMC’s history to HFC. The

argument that a hospital is needed in Rutherford County to accommodate additional hospital space

in Davidson County is moot given VUMC’s expansion plan.

Moreover, the suggestion that HFC was made aware of the expansion under the guise that

VRH informed HFC that it is always looking to expand or maximize its space is not flawed. VRH

presented to HFC that one aspect of satisfying the need requirement was to progressively transfer

non-tertiary Rutherford County patients away from the Davidson County campus in order to create

Page 24 of 31
more availability at the Nashville hospitals. Intervenor now argues that the expansion project is

not pertinent to the CON application, but it used the lack of available beds at its Nashville campus

as a justification for the CON application. To the extent that this information was relied upon

when the CON application was approved, the information was misleading or incorrect.

Petitioners have proven that all existing hospitals in the proposed service area do not have

an occupancy level greater than 80% to satisfy the exception to the need standard for Rutherford

County. Petitioners have proven by a preponderance of the evidence that the CON application

fails to satisfy the criterion for need under TENN. COMP. R. & REGS. 0720-11-.01(1)(f).

Adequate Staffing

A CON applicant must show, under the acute care need criteria, a plan for adequate

staffing. There are a finite number of trained nurses. At the time of the hearing, VUMC had over

1,000 open nursing positions across its numerous clinics and hospitals. When HFC considered the

CON application, VUMC had at least 500 budgeted unfilled nursing positions at its main campus,

yet VUMC falsely presented that staffing had not been a problem. Having a nurse transfer from

working at one of the downtown Nashville facilities to work at VRH does not “fill” the VRH

position as it then opens a position elsewhere. If approved, VUMC would need to fully staff VRH

in addition to the 248 hospital beds it is in the process of adding in Davidson County.

Marilyn Dubree, VUMC’s Executive Chief Nursing Officer, provided credible testimony9

as to the nursing shortages and challenges faced at VUMC over the course of her extensive career.

At the time of the hearing, Ms. Dubree estimated that VUMC had between 1,000 to 1,100 open

nursing positions. VUMC has offered signing bonuses as high as $25,000 to fill specialized

nursing positions. Ms. Dubree was not aware of any other hospital system that offered hiring

9Due to unavailability at the close of the hearing, the parties agreed to submit Ms. Dubree’s video deposition into the
RECORD.
Page 25 of 31
bonuses at that level. Based on Ms. Dubree’s credible testimony, the statements made by VUMC

personnel at the HFC hearing that VUMC’s main campus is fully staffed, and that staffing has not

been an overwhelming challenge, were false and/or misleading in order to gain approval of the

CON application.

The parties’ efforts to address the nursing shortage by helping to improve the availability

of nursing and clinical staff are commendable. While providing hiring bonuses, moving expenses,

and student loan forgiveness adds to the cost of a facility, these are costs that all healthcare

providers are having to pay. The addition of a fourth acute care community hospital in Rutherford

County does not alleviate these costs, it only exacerbates the need for additional nursing staff.

Historically, no CON application has been denied on the basis of staffing. If it is presumed that

every project can be fully staffed at the completion of the project without considering a full analysis

of the staffing situation, one must question why the criterion as to staffing is even a factor. While

one cannot predict the future of nursing, the current nursing crisis and large number of open

positions across all healthcare facilities, including VRH’s many facilities, demonstrate sufficient

evidence to prove that the lack of availability and accessibility of human resources required by the

proposed construction project, including those required by existing providers, will not be positive

for consumers. Petitioners have proven by a preponderance of the evidence that the CON

application fails to satisfy the staffing criterion under TENN. COMP. R. & REGS. 0720-11-.01(3)(e).

Other Guidelines

Several of the guidelines were uncontested: demonstration of an ability and willingness to

serve all patients in the proposed service area; documentation that it will provide the resources

necessary to properly support the applicable level of services; agreement to provide the

Department of Health and/or HFC with all reasonably requested information and statistical data,

identification for data reporting, quality improvement, and outcome and process monitoring

Page 26 of 31
system; and compliance with appropriate rules of the Department of Health as well as accreditation

with the Joint Commission. As these factors were not contested, Petitioners have failed to prove

that VRH’s CON application does not satisfy these guidelines.

Cardiac Catheterization Services

The State Health Plan established extensive guidelines in 2009 for a CON application to

establish cardiac catheterization services. Since the current guidelines were established more than

13 years ago, new cardiac technology has been created that may reduce the demand for diagnostic

cardiac catheterizations. Much like the requirements established for the acute card bed need

formula, those guidelines could have been updated in the 10 more recent State Health Plans if the

appropriate bodies had chosen to do so, but they did not. It should be noted that VRH relies upon

these guidelines to prove the need for cardiac catheterization services, while simultaneously

arguing that the acute bed need formula in the guidelines should not be utilized. The applicable

data support the weighted formula in the guidelines. Petitioners have failed to prove by a

preponderance of the evidence that the CON application for cardiac catheterization criteria has not

been met pursuant to TENN. COMP. R. & REGS. 0720-11-.01(2)(h).

Effects for Consumers

VRH’s current CON application was filed after the CON application for the Westlawn

hospital was approved. VRH is proposed to be in virtually the identical location as Westlawn.

VRH’s proposal is for the same type of facility, though larger, than Westlawn. VRH would cover

the same service area as Westlawn thought it would extend into a larger area. Lastly, VRH would

provide overlapping services to Westlawn in that both would have an emergency department and

inpatient hospital services. The need for these identical services at the identical location in the

identical service area has not been established and have not been shown to be positive for

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consumers. Petitioners have proven by a preponderance of the evidence the criteria under TENN.

COMP. R. & REGS. 0720-11-.01(3)(a).

The effects of competition or duplication are required to be positive for consumers.

Consumer advantage does not just mean convenience. Hospitals are unique among other industries

as well as other aspects of the healthcare system. If an individual wants a car, hamburger, haircut,

or house built, that individual may go to any business to attempt to purchase that item or service,

and the business may demand a price for that service or item. If an agreed-upon price cannot be

reached, the individual may attempt to find that item or service elsewhere. Within the healthcare

system, this also applies to certain specialties such as plastic surgery, dermatological, or pediatrics.

A pediatrician may refuse to see a patient who cannot provide payment for the services rendered

or who is simply too difficult, in the pediatrician’s opinion, to work with. This is not the case with

a hospital. A hospital cannot turn away a patient who does not have the means to pay for the

service the patient needs or if the patient becomes difficult. Hospital services are not governed by

traditional supply/demand economic principles. As testified to by Armand Balsano, VRH’s expert

witness and healthcare management consultant, duplicative competition is not good for consumers.

Mr. Balsano agreed that a planning tenet for healthcare services has been not to duplicate services

unnecessarily. This has been a fundamental principle of the CON laws for the last 30 years. VRH,

however, presented an affidavit with its CON application from an individual who supports VRH

under the guise of the concept that “[t]he free market should be allowed to work.”10 Allowing

more hospitals into a given healthcare market simply for the sake of competition shows a lack of

understanding of how the healthcare system and hospitals in particular work.

VRH has positioned itself as a low-cost provider of health care. After submitting the CON

application and before the hearing began for one payor and during the hearing for the other payor,

10 EXHIBIT 1, at p. 244.
Page 28 of 31
Intervenor chose to terminate contracts with Medicare Advantage Plans providers Humana and

WellCare. VRH did not announce an adjustment to the projected payor mix or make HFC or the

tribunal aware of the decision to stop accepting these Medicare Advantage plans despite VUMC

asserting that the decision was made only after undertaking a careful analysis. While information

has been provided to show that the contract with Humana was resolved, no such information was

provided for WellCare. It is inevitable that healthcare providers and payors of care will have

contractual discussions. There is also no guarantee that any healthcare provider will continue to

accept every Medicare Advantage plan or any other payor. However, the validity of the data that

VRH used to support its argument that it can provide cost-effective health care is questionable.

The timing of the decision and the failure of VUMC to be forthcoming with its decision is

tantamount to providing false, incorrect, or misleading information in the CON application.

VRH has asserted it will be a participant in TennCare, Medicare, and other federal and

state reimbursement programs, similar to Intervenor’s other facilities. VRH has presented that its

payment model will be the same as VUMC’s three existing community hospitals. Those hospitals

have all lost money. According to Dr. Wright Pinson, the Deputy CEO and Chief Health System

Office for VUMC, a healthcare system cannot undertake to complete a project unless it is

financially feasible. It is not reasonable to believe that a new hospital will generate profits when

using the same payment structure as the three existing hospitals that have lost revenue. Presuming

a higher cost in order to be sustaining, VRH would likely be a more expensive healthcare option

than the current providers. A provider is not required to be the lowest cost provider in a market,

only that it be a cost-effective provider of services. Petitioner has proven by a preponderance of

the evidence that the effects attributed to competition or duplication of services would not be

positive for consumers under TENN. COMP. R. & REGS. 0720-11-.01(3)(b), (c), and (d).

Page 29 of 31
 With the change of the CON law that allows the addition of more beds once the originally

approved facility is completed, if approved, VRH could continue to expand on the 80-acre property

without any further requirement to prove need or advantage to the consumer. It is possible for

additional entries into the market of additional providers to result in services that outweigh the

demand. Healthcare providers must have a basic level of utilization of services to justify the

addition or maintenance of such services or facilities. Intervenor has explored opening a

Children’s Hospital in Rutherford County, which STRH has stated it would support, but the

extremely low level of utilization does not currently justify the facility such that Intervenor did not

pursue the project. A new hospital has opened in Rutherford County that was approved and known

about prior to submission of the instant CON application. The impact of that hospital on creating

existing availability to in-patient care or access to services is not yet known. The impact of every

preexisting hospital being able to add hospital beds without regard for the need for those beds,

available staffing, or benefit to patients is also not yet known.

For the foregoing reasons, Petitioners have established by a preponderance of the evidence

that the application for a certificate of need, when taken as a whole, for a 42-bed community

hospital facility including the initiation of diagnostic and therapeutic cardiac catheterization

services does not meet the statutory definition of being necessary to provide needed health care in

the area to be served and that the effects attributed to competition or duplication would not be

positive for consumers. Additionally, HFC’s “decision to issue the certificate of need was based,

in whole or in part, on information or data in the application which was false, incorrect, or

misleading, whether intentional or not,” in violation of TENN. CODE ANN. § 68-11-1617(3).

Accordingly, it is ORDERED that Vanderbilt Rutherford Hospital CON’s application

number CN2109-026 is DENIED.

Page 30 of 31
 This INITIAL ORDER denying the application for a certificate of need is entered to protect

the public in the State of Tennessee, consistent with the purposes fairly intended by the policy and

provisions of the law.

It is so ORDERED.

This INITIAL ORDER entered and effective this the 8th day of June, 2023.

Filed in the Administrative Procedures Division, Office of the Secretary of State, this the

8th day of June, 2023.

Page 31 of 31
 IN THE MATTER OF: APD CASE No. 25.00-220022J
TRISTAR STONECREST MEDICAL CENTER,
SAINT THOMAS RUTHERFORD HOSPITAL,
AND WILLIAMSON MEDICAL CENTER V.
TENNESSEE HEALTH FACILITIES
COMMISSION AND VANDERBILT
UNIVERSITY MEDICAL CENTER D/B/A
VANDERBILT RUTHERFORD HOSPITAL
NOTICE OF APPEAL PROCEDURES

REVIEW OF INITIAL ORDER

Attached is the Administrative Judge’s decision in your case before the BEFORE THE TENNESSEE HEALTH
FACILITIES COMMISSION (COMMISSION), called an Initial Order, with an entry date of June 8, 2023. The
Initial Order is not a Final Order but shall become a Final Order unless:

1. A Party Files a Petition for Reconsideration of the Initial Order: You may ask the Administrative Judge to
reconsider the decision by filing a Petition for Reconsideration with the Administrative Procedures Division (APD).
A Petition for Reconsideration should include your name and the above APD case number and should state the specific
reasons why you think the decision is incorrect. APD must receive your written Petition no later than 15 days after
entry of the Initial Order, which is no later than June 23, 2023. A new 15 day period for the filing of an appeal to the
COMMISSION (as set forth in paragraph (2), below) starts to run from the entry date of an order disposing of a
Petition for Reconsideration, or from the twentieth day after filing of the Petition if no order is issued. Filing
instructions are included at the end of this document.

The Administrative Judge has 20 days from receipt of your Petition to grant, deny, or take no action on your Petition
for Reconsideration. If the Petition is granted, you will be notified about further proceedings, and the timeline for
appealing (as discussed in paragraph (2), below) will be adjusted. If no action is taken within 20 days, the Petition is
deemed denied. As discussed below, if the Petition is denied, you may file an appeal. Such an Appeal must be
received by the APD no later than 15 days after the date of denial of the Petition. See TENN. CODE ANN. §§ 4-5-317
and 4-5-322.

2. A Party Files an Appeal of the Initial Order: You may appeal the decision to the COMMISSION by filing an
Appeal of the Initial Order with APD. An Appeal of the Initial Order should include your name and the above APD
case number, and state that you want to appeal the decision to the COMMISSION, along with the specific reasons for
your appeal. APD must receive your written Appeal no later than 15 days after the entry of the Initial Order, which
is no later than June 23, 2023. The filing of a Petition for Reconsideration is not required before appealing. See
TENN. CODE ANN. § 4-5-317.

3. The COMMISSION decides to Review the Initial Order: In addition, the COMMISSION may give written notice
of its intent to review the Initial Order, within 15 days after entry of the Initial Order.

If either of the actions set forth in paragraphs (2) or (3) above occurs prior to the Initial Order becoming a Final Order,
there is no Final Order until the COMMISSION renders a Final Order.

If none of the actions in paragraphs (1), (2), or (3) above are taken, then the Initial Order will become a Final Order.
In that event, YOU WILL NOT RECEIVE FURTHER NOTICE OF THE INITIAL ORDER BECOMING A
FINAL ORDER.

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IN THE MATTER OF: APD CASE No. 25.00-220022J
TRISTAR STONECREST MEDICAL CENTER,
SAINT THOMAS RUTHERFORD HOSPITAL,
AND WILLIAMSON MEDICAL CENTER V.
TENNESSEE HEALTH FACILITIES
COMMISSION AND VANDERBILT
UNIVERSITY MEDICAL CENTER D/B/A
VANDERBILT RUTHERFORD HOSPITAL

NOTICE OF APPEAL PROCEDURES

STAY

In addition, you may file a Petition, with APD, asking the Administrative Judge for a stay that will delay
the effectiveness of the Initial Order. A Petition For Stay must be received by APD within 7 days of the date of
entry of the Initial Order, which is no later than June 15, 2023. See TENN. CODE ANN. § 4-5-316. A reviewing
court also may order a stay of the Order upon appropriate terms. See TENN. CODE ANN. §§ 4-5-322 and 4-5-317.

REVIEW OF A FINAL ORDER

When an Initial Order becomes a Final Order, a person who is aggrieved by a Final Order in a contested case may
seek judicial review of the Final Order by filing a Petition for Review “in the Chancery Court nearest to the place of
residence of the person contesting the agency action or alternatively, at the person’s discretion, in the chancery court
nearest to the place where the cause of action arose, or in the Chancery Court of Davidson County,” within 60 days
of the date the Initial Order becomes a Final Order. See TENN. CODE ANN. § 4-5-322. The filing of a Petition for
Reconsideration is not required before appealing. See TENN. CODE ANN. § 4-5-317.

FILING
Documents should be filed with the Administrative Procedures Division by email or fax:

Email: [email protected]

Fax: 615-741-4472

In the event you do not have access to email or fax, you may mail or deliver documents to:

Secretary of State
Administrative Procedures Division
William R. Snodgrass Tower
312 Rosa L. Parks Avenue, 8th Floor
Nashville, TN 37243-1102

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