- The Mississippi State Department of Health approved a lease between Oceans Healthcare and St. Dominic’s that could re-open 83 psychiatric and 35 chemical dependency beds shuttered in June of 2023. Merit sued to prevent the planned re-opening.
In June of last year, St. Dominic Hospital announced it would be closing its in-patient behavioral health services in Jackson and taking 83 licensed psychiatric beds and 35 chemical dependency beds offline.
The decision left Central Mississippi with just one “single point-of-entry” mental health care hospital — Merit Health Central Inpatient Adult Behavioral Health.
Now Merit Health is suing to prevent the St. Dominic’s facility from re-opening. Named in the lawsuit are Oceans Behavioral Hospital of Jackson, LLC, St. Dominic-Jackson Memorial Hospital, and the Mississippi State Department of Health (MSDH).
The closure of St. Dominic’s behavioral health center resulted in widespread concern over the ability to serve patient demand in the Jackson area. In the immediate aftermath, both UMMC and Merit reported being at capacity for behavioral health services and needing to divert in-patient admissions.
St. Dominic’s spokesperson Meredith Bailess indicated at the time that the hospital remained committed to helping patients access care and was actively fielding partnership inquiries to re-open the facility.
On September 15, 2023, St. Dominic’s entered into a lease agreement with Oceans Healthcare. Under the terms of the contract, Oceans would assume control of the shuttered facility, with the right to re-open the licensed 83 psychiatric beds and 35 chemical dependency beds, and provide the same services previously offered by St. Dominic’s at the location. In the immediate term, Oceans’ plans include re-opening 77 of the licensed beds.
Oceans Healthcare operates 36 behavioral health facilities across the U.S., including a behavorial health hospital in Biloxi and another in Tupelo.
Mississippi “Certificate of Need” or “CON” law required Oceans Healthcare to obtain regulatory approval from the Department of Health prior to re-opening the hospital facility.
READ MORE: Mississippi ‘Certificate of Need’ law stifling healthcare system?
The law extends to MSDH broad lattitude to create “standards to determine when a person, facility or organization must apply for a certificate of need,” and “standards to determine when a change of ownership has occurred or will occur.”
In March of this year, MSDH determined that the lease between St. Dominic’s and Oceans Healthcare did not require the issuance of a new certificate of need, but rather, was a “change in ownership.”
This determination was based on the fact that Oceans would be offering the same services, using the same facility and licensed beds previously operated by St. Dominic’s. MSDH’s decision meant that Oceans was cleared to move forward without having to satisfy the considerable requirements associated with a CON.
According to Matthew Mitchell, a scholar at The Knee Center for the Study of Occupational Regulation, the “process can take months and can cost tens of thousands of dollars in fees and much more in compliance cost. Existing providers are allowed to oppose the applications of their would-be competitors and the regulator may deny an application if he or she thinks that the new service will duplicate an existing one.”
Mitchell argues that what the law “calls ‘duplication’ customers would call ‘competition.’”
In a recently conducted interview with Magnolia Tribune for a separate story on CON reform proposals, State Health Officer Dr. Daniel Edney said that objections by competitors can lead to an 18-month to two-year delay in the approval process.
When asked how many CON applications are disputed, Dr. Edney said, “I would say virtually all of them.”
Merit Health argues in its lawsuit that because MSDH ruled that Oceans Healthcare did not need to obtain a new CON to re-open the St. Dominic’s behavioral hospital, Merit was denied its ability as a competitor to object to the planned re-opening.
Merit’s lawsuit seeks what is known as “declaratory judgment,” which in this case would mean a ruling that MSDH lacked the legal authority to treat the re-opening as a change in ownership and that Oceans Healthcare should be subjected to the full CON approval process.
Substantively, Merit’s suit contend that had Oceans Healthcare been required to obtain a new CON, its current business plan would have not serviced enough indigent patients, putting Merit at a competitive disadvantage.
Both Oceans Healthcare and MSDH have filed motions to dismiss, arguing MSDH had clear statutory authority to determine whether the re-opening of the facility constituted a change in ownership or a new facility that required a new CON.
Below is Merit Health’s complaint for declaratory judgment, along with the memorandums filed by Oceans Healthcare and MSDH seeking dismissal.
Russ Latino
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