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CaroMont loses appeal; five Gaston County doctors to open endoscopy center

After a three-year dispute, the North Carolina Court of Appeals has rejected an attempt by CaroMont Health to prevent the opening of a competing endoscopy center in Gaston County.

CaroMont had appealed the state’s 2011 decision to allow Greater Gaston Center and its five Gaston County gastroenterologists to open the outpatient center that would compete with existing endoscopy services at Gaston Memorial Hospital, which is owned by CaroMont.

In a unanimous decision, the court upheld an administrative judge’s earlier decision that CaroMont did not support its claim that the new center would result in significant financial harm to CaroMont and Gaston Memorial.

The case stems back to 2010, when the five Gaston County doctors – Samuel Drake, Khaled Elraie, Nelson Forbes, Austin Osemeka and William Watkins – asked the state for certificate-of-need approval to open an outpatient surgery center with two endoscopy rooms. The state gave conditional approval in March 2011.

The doctors called their group Greater Gaston Center and are operating in partnership with Physicians Endoscopy, a national endoscopy center development and management company, which owns and operates about 30 centers nationwide.

Barry Tanner, CEO of Physicians Endoscopy, said Tuesday he was pleased to get the unanimous decision from the appellate court. “It’s been a long time in coming.”

Pending final approval from the state, Tanner said construction could begin early next year, with opening projected for next summer.

CaroMont officials said they would have no comment Tuesday about the decision or whether they would appeal. When the state appeals court issues a split decision, the losing side has the right to an appeal before the state Supreme Court. But with a unanimous decision, the Supreme Court has discretion over whether to hear an appeal.

In 2011, CaroMont appealed the state’s approval for Greater Gaston Center, claiming that CaroMont would be “significantly financially harmed” because four of the five GGC doctors are on the medical staff of Gaston Memorial and would refer some of their patients to GGC instead of Gaston Memorial.

At that time, Gaston Memorial had eight endoscopy rooms and was the only provider of that service in the county. In 2008, the hospital had received approval to move two of the eight rooms to a freestanding clinic, to be called CaroMont Endoscopy Center. It didn’t open until earlier this year in Belmont.

Endoscopies, including colonoscopy, have become increasingly common for diagnosing and preventing colorectal cancer. Of cancers that affect both men and women, colon cancer is the third most common cancer and the second leading cause of cancer-related deaths in the United States.

After hearing CaroMont’s appeal, administrative law judge Joe Webster found in favor of the Greater Gaston Center. His decision was upheld by the director of the state’s Division of Health Regulation in the Department of Health and Human Services. The agency concluded that CaroMont’s allegations of harm “were no more than the normal effects of competition when physicians or patients may choose one facility over another.”

The agency – and the court of appeals – also rejected testimony from David Legarth, a CaroMont consultant, who projected the hospital system “would lose between $463,000 and $925,000 in net income per year” if Greater Gaston Center was allowed to offer endoscopy procedures in the county.

But the agency “found that the data relied upon by Mr. Legarth was flawed and his analysis omitted critical factors that could diminish the projected losses,” the court of appeals said.

The appeals court agreed with the state agency’s finding that “CaroMont’s volume and revenue (from endoscopy procedures) were already declining…before approval of the GGC application…because Gaston County patients were seeing treatment outside of Gaston County.”

The state agency also concluded that Gaston County “could support all ten GI endoscopy procedure rooms – both the eight operated by CaroMont and the two proposed by GGC.”

Garloch: 704-358-5078
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