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Bridges v. Banner Health

Supreme Court of Alaska

December 19, 2008

Robert L. BRIDGES, M.D., and Alaska Open Imaging, LLC, Appellants,
BANNER HEALTH d/b/a Fairbanks Memorial Hospital, and Karleen Jackson, in her official capacity as Commissioner, State of Alaska, Department of Health and Social Services, Appellees.

As Amended on Rehearing March 5, 2009.

Page 485

[Copyrighted Material Omitted]

Page 486

Robert J. Gunther, Law Office of Robert J. Gunther, Anchorage, and Mark S. Bledsoe, Law Offices of Mark S. Bledsoe, Anchorage, for Appellants.

Peter J. Maassen, Ingaldson, Maassen & Fitzgerald, Anchorage, and Peter Gruenstein, Gruenstein & Hickey, Anchorage, for Appellee, Fairbanks Memorial Hospital.

Stacie L. Kraly, Assistant Attorney General, and Talis J. Colberg, Attorney General, Juneau, for Appellees, State of Alaska and Karleen Jackson.

Before : FABE, Chief Justice, MATTHEWS, EASTAUGH, and CARPENETI, Justices.

Page 487


EASTAUGH, Justice.


The superior court enjoined Alaska Open Imaging Center (AOIC) from operating its Fairbanks magnetic resonance imaging (MRI) facility without first obtaining a certificate of need (CON). Six weeks after the superior court issued the injunction enjoining AOIC, AOIC's medical director, Dr. Robert Bridges, unsuccessfully moved to intervene in the superior court proceeding. Dr. Bridges appeals the denial of his intervention motion and AOIC appeals the injunction. Because the superior court did not err in determining that Dr. Bridges's intervention motion was untimely, we affirm its denial. As to AOIC's appeal, we also affirm in part. The CON statute does not violate the Alaska Constitution's equal protection clause or prohibition against special legislation. But because there appears to be an unresolved genuine issue of material fact about whether AOIC's facility satisfies AS 18.07.111(8)(B)'s exclusion for " offices of private physicians," we vacate the injunction and remand.


Alaska's certificate of need (CON) statute, AS 18.07.031, requires that a health care provider seeking to construct a " health care facility" at a cost equaling or exceeding the statute's monetary threshold obtain a CON from the Alaska Department of Health and Social Services (DHSS).[1] In 2004 the Alaska Legislature enacted House Bill (H.B.) 511, amending the CON statute.[2] Among other changes, H.B. 511 added the term " independent diagnostic testing facility" to the definition of " health care facility" in AS 18.07.111(8).[3]

Banner Health owns and operates Fairbanks Memorial Hospital.[4] In October 2005 Mike Powers, the hospital's chief executive officer, informed DHSS Commissioner Karleen Jackson that Alaska Open Imaging Center (AOIC) had applied for a building permit to open an MRI facility in Fairbanks without first obtaining a CON; Powers asked DHSS to determine whether AS 18.07.031 required AOIC to obtain a CON.

In November 2005 Commissioner Jackson asked Jeff Kinion, one of AOIC's managers at the time, whether AOIC's plans were subject to the CON requirements. Kinion responded that AOIC's facility is not a " health care facility" under AS 18.07.111(8) because, per AS 18.07.111(8)(B), a " health care facility" does not include " the offices of private physicians ... whether in individual or group practice." Kinion asserted that the CON requirement does not apply to AOIC because AOIC's facility is a private physician's office, not an independent diagnostic testing facility.

In response Commissioner Jackson informed Kinion that DHSS had reviewed the documents Kinion had provided and concluded that the " facility will be constituted as an office of private physicians in group practice and therefore in accordance with AS 18.07.111(8) is not considered a ‘ health care facility’ for the purposes of the [CON] program."

In February 2006 Banner Health asked Commissioner Jackson to reconsider her decision that AOIC's facility did not require a CON. She denied the request, determining that 7 Alaska Administrative Code (AAC) 07.012 " controls this question." This regulation states that, for purposes of AS 18.07.111, " ‘ independent diagnostic testing facility’

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means a fixed-location facility or mobile facility that (1) performs diagnostic testing using major diagnostic testing equipment ... and (2) is, or would be, required to enroll as an independent diagnostic testing facility for purposes of Medicare or Medicaid reimbursement under 42 C.F.R. 410.33." [5] Commissioner Jackson concluded that AOIC is not an independent diagnostic testing facility because the Center for Medicare and Medicaid Services does not characterize AOIC as an independent diagnostic testing facility for billing purposes.

In March 2006 Banner Health filed a superior court complaint for injunctive and declaratory relief, naming Commissioner Jackson and AOIC as defendants. Banner Health sought an injunction to enjoin DHSS from relying on 7 AAC 07.012 and a " judicial declaration that 7 AAC 07.012 is void and unenforceable because it unlawfully conflicts with both legislative intent and the plain language of AS 18.07.111(8)." Banner Health asserted that if the regulation exempts entities such as AOIC from the CON laws, the regulation would be inconsistent with the statute because the regulation requires a facility both to be an independent diagnostic testing facility and to enroll as an independent diagnostic testing facility for Medicare and Medicaid reimbursement purposes. Banner Health also requested a preliminary injunction to enjoin AOIC from constructing or operating its Fairbanks facility without a CON.

Commissioner Jackson and AOIC each opposed Banner Health's motion. Commissioner Jackson argued that the statute directed DHSS to include independent diagnostic testing facilities in the CON process, but left DHSS free to define an independent diagnostic testing facility. She asserted that the regulation is valid because DHSS's adoption of the Center for Medicare and Medicaid Services definition is consistent with the statute. AOIC likewise argued that the DHSS regulation is consistent with the statute. It also argued that a balancing of equities did not support Banner Health's request for an injunction and that granting injunctive relief to Banner Health would violate the equal protection clause of the Alaska Constitution.[6] AOIC cross-moved to dismiss the complaint, arguing that if H.B. 511 applied to AOIC it would be an unconstitutional " special act." [7]

The superior court denied AOIC's motion to dismiss in July 2006. In August 2006 the court held a hearing on Banner Health's motion. After concluding that 7 AAC 07.012 is inconsistent with AS 18.07.111, the court, by order of September 7, 2006, declared the regulation " void to the extent it negates the legislature's intent to include AOIC and other like independent diagnostic testing facilities within the definition of ‘ health care facility,’ and thus subject to the requirements of the [CON] program." The court also found that Banner Health would face irreparable harm if the court did not grant injunctive relief; it therefore enjoined AOIC from operating its facility. Concerned whether AOIC could be adequately protected, the superior court made the injunction conditional, giving AOIC 180 days-until February 5, 2007-to obtain a CON Before the injunction would take effect. Commissioner Jackson provided AOIC an expedited schedule that, if followed, would allow AOIC to obtain a CON decision Before the injunction became effective. AOIC did not apply for a CON.

In October 2006, six weeks after the court granted the injunction against AOIC, Dr. Robert Bridges, AOIC's medical director, moved to intervene in Banner Health's suit. He argued that he is an equity owner of AOIC and the primary guarantor of approximately $10,000,000 of AOIC's debt and that ...

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