CHARLESTON, S.C. - In opposing not one, not two, but three competing surgery centers, CareAlliance Health Services made the same argument to state government officials: There was plenty of capacity for outpatient surgeries at its two hospitals, Roper and Bon-Secours-St. Francis Xavier. So convincing were those arguments that the certificates of need (CON) for all three surgery centers continue to be tied up in the appeals process and the facilities still stuck to the drawing board.

But when CareAlliance later submitted its application for an expansion at Roper Hospital that included four outpatient ORs, suddenly things had changed. The outpatient ORs at its two hospitals were reaching capacity. South Carolina's Department of Health and Environmental Control (DHEC) asked for clarification on that point but never received it. Despite acknowledging that the expansion is necessary, DHEC turned down Roper's $71 million proposal.

"I didn't feel comfortable about approving the application," says Joel Grice, DHEC's director of health facilities.

Falling on its sword
In addition to the four outpatient ORs, at stake for Roper is a new tower that would consolidate cardiac services and a 42-bed surgical nursing unit (no new beds would be added to the 453-bed hospital).

"We have no objections to the hospital expanding," says Michael Sagatelian, MD, part of one gastroenterology group whose planned endoscopy center has been blocked by Roper. "The point of contention is the conflict of statements when Roper said they have adequate outpatient OR capacity, and now they are saying they need more."

Five appeals have been filed, an unusually high number. In fact, Roper Hospital itself has appealed the CON that was granted. But the hospital point outs that "we appealed the conditions, not the CON," says Patsy Alston, a spokesperson for CareAlliance Health Services. "We feel the conditions are out of the scope of what DHEC's regulations call for. This is very unusual."

"Stipulations like these that may upset the hospital's future planning and growth," adds Laura Evans, the director of legal services for CareAlliance.

The three proposed ASCs - the Charleston Endoscopy Center, Health First LLC and the Palmetto Digestive Disease and Endoscopy Center - have appealed the Roper CON. So has East Cooper Regional Medical Center in Mount Pleasant, S.C., which objected to Ropers' building a free-standing emergency room and whose radiation therapy unit was disputed by Roper.

Particularly in the case of the proposed surgery centers, the appeals might be designed to persuade Roper to give up its opposition to their CONs. The three proposed surgery centers received CONs from the DHEC in 2002, but Roper appealed each of them. The CONs continue to be tied up in the appeals process. "We appealed on the advice of our attorney, who also is the attorney for Health First, and I know she's consulted with the attorney for Charleston Endoscopy Center. The thinking may be, 'If you drop yours, we'll drop ours,'" says Dr. Sagatelian.

Playing hardball
The physician groups may simply be playing hardball with a competitor they describe as deceptive. Dr. Sagatelian and William Brenner, MD, of the Charleston Endoscopy Center, say early meetings with Roper or CareAlliance administrators gave them the impression their projects would be unopposed.

"Before we applied for a CON, we informed CareAlliance of our plans. We asked them flat-out if they would oppose us, and they assured us they would not. We asked them if they wanted to do the center jointly with us, and they turned us down. We felt we had a green light," says Dr. Sagatelian, who adds he was "shocked" when CareAlliance phoned his group after the CON was granted, and said Roper would fight the center "to the bitter end."

Dr. Brenner says his group also approached CareAlliance with their plans: "We worked at the hospital and we still do. We did not want to have a conflict. At the time, Roper gave us no reason to think they would fight us. ... On the last day possible, Roper appealed."

In both these cases, Roper won the appeal, and the surgery centers' CONs have been denied. The physician groups may appeal back to the DHEC, then to a state appeals court and then to the Supreme Court.

But all of this takes money, and lots of it. Dr. Brenner estimates his group has spent $200,000 on legal and consultants' fees, and Dr. Sagatelian says his group has spent about $140,000.

"If we had known about the legal battle, we probably wouldn't have applied for the CON," said Dr. Sagatelian.

Still, Dr. Brenner vows his group will fight on: "It's the classic battle between the hospital and the doctors, and the patients get caught in middle. But if you are right, and the project will benefit patients, pursue it. Don't be cowed by a deep-pockets opponent."