The New Hampshire Supreme Court ruled that the states certificate-of-need board was correct to forgo review of a medical office building, which the projects parent declared a condominium, sold to a developer and leased back, yielding a project cost well under the review threshold. The boards decision provoked a challenge from three competing providers.
Elliot Health System, the corporate parent of 264-bed Elliot Hospital in Manchester, N.H., began construction in 2005 on the Elliot Medical Center at Londonderry and in July 2007 submitted an application for CON exemption for a completed $11.7 million building that would house senior care, primary care, behavioral health services and, later, urgent care. Elliot Health sold the building to an unaffiliated developer for $11.8 million and struck a lease agreement to use the space.
The exemption was challenged by 224-bed Catholic Medical Center in Manchester, 82-bed Parkland Medical Center in Derry and Derry Medical Center, an independent medical practice. In an opinion written by Associate Justice James Duggan and issued Nov. 7, the court rejected arguments that the lease payments should be tallied as a capital expenditure and that the change of ownership should trigger review. The building was not an existing health facility at the time of the transaction, the court concluded.
In a concurring opinion, however, Associate Justice Linda Dalianis called Elliot Healths approach a clever way to circumvent CON review and noted the state Legislature may want to revisit the relevant portion of the CON law in light of the case. -- by Gregg Blesch