Request By:
William L. Shadoan, Esq.
Fourth Street and Ballard County Courthouse
Wickliffe, Kentucky 42087
Opinion
Opinion By: Robert F. Stephens, Esq., Attorney General; Mark F. Armstrong, Esq., Assistant Attorney General
We are in receipt of your letter in which you ask our opinion of the proper interpretation of the Kentucky Health Facilities and Health Services Certificate of Need and Licensure Act, KRS 216.405 et seq. (hereinafter cited as the "Act"). The Act creates a Board, see KRS 216.405(2), whose authorization in the form of a Certificate of Need is required before a health service may be initiated, expanded, or modified, or a health facility may be constructed, expanded, or modified, see KRS 216.405(3). The words, "construction and modification, " are given a specific definition by KRS 216.405(4):
"'Construction or modification' means the erection, building, alteration, reconstructions, modernization, improvement, extension or establishment of a health facility or service, or the purchase or acquisition of diagnostic or therapeutic equipment, the inspection and supervision thereof and the studies, surveys, designs, plans, working drawings, specifications, procedures, and other actions necessary thereto, which:
(a) requires the total capital expenditure in excess of one hundred thousand dollars ($100,000); or
(b) will either
(1) initiate or expand the scope or type of services
(2) increase or decrease the bed complement of a health facility or health service. "
An exemption in the Act is created by KRS 216.455(1) which, in part, provides:
"Nothing in KRS 216.405 or 216.485 or the rules and regulations adopted under the provisions of KRS 216.405 to 216.485 shall be construed to authorize the licensure, supervision, regulation or control in any manner of:
(1) Private offices and clinics of physicians, dentists and other practitioners of the healing arts."
With the foregoing in mind, we may now refer to the facts underlying your question. Physicians in private practice have purchased medical equipment the cost of which is in excess of $100,000. This type of equipment is normally purchased by hospitals and similarly extensive health care facilities. It has been suggested that this equipment is purchased by the physician to avoid the necessity of obtaining a Certificate of Need under the authority of the exemption in KRS 216.455(1). From our telephone conversation, we learn that the equipment is located either in the physician's office or clinic or in a hospital or like health care facility.
Based upon the foregoing statements of law and of facts, your specific question is whether the purchase of equipment by a physician, the cost of which exceeds $100,000, is exempt from the Act by virtue of KRS 216.445(1).
The exemption statute, KRS 216.445(1), clearly removes "private offices and clinics" of health care providers from the Board's jurisdiction. This clear expression of the legislative intent is determinative,
Gateway Const. Co. v. Wallbaum, Ky., 356 S.W.2d 247 (1962), and compels the conclusion that a physician, dentist, or other practitioner of the healing arts may purchase any equipment regardless of price for the use in his "private office or clinic" without obtaining a Certificate of Need. We are, therefore, of the opinion that a physician may purchase the type of medical equipment mentioned in your letter for use in his "private office or clinic" without obtaining a Certificate of Need.
The foregoing opinion is, however, not a determinative answer to your question. The exemption statute expresses the clear legislative intent to exclude "private offices and clinics" from the Board's jurisdiction. This statute is unclear, however, in the meaning of the phrase, "private offices and clinics. " As far as we are aware, "private offices and clinics, " as used in KRS 216.445(1), has no technical meaning. Accordingly, we give them a popular meaning,
Commonwealth v. Wombles, Ky., 346 S.W.2d 299 (1961). Of course, we may also look to the policy and purpose of the act, the evil to be remedied and the object to be achieved,
Kentucky Region Eight v. Commonwealth, Ky., 507 S.W.2d 489 (1974);
George v. Alcoholic Beverage Control Bd., Ky., 421 S.W.2d 569 (1967). The intent of the Act is expressed in KRS 216.415;
"It is the intent of KRS 216.405 to 216.485 to provide for the orderly development of all health facilities and health services in accordance with the needs of the various regions of the Commonwealth through a certificate of need program. Further, it is the intent of KRS 216.405 to 216.485 to combine and coordinate the licensure and regulation of health facilities and health services in order to insure the availability and delivery of quality health care to the citizens of the Commonwealth."
Thus, the phrase, "private offices and clinics. " cannot be interpreted so broadly that one of the exemptions in KRS 216.445(1) would defeat the express intent of the Act. For example, a physician may not construct a hospital, as defined in 902 KAR 20:010, and claim it is exempt under KRS 216.445(1) as a "private office or clinic. " In other words, it is the actual use of the health facility and not the name attached thereto which determines whether it qualifies for the exemption as a "private office or clinic. "
In this regard, in its popular meaning,
Commonwealth v. Wombles, supra, a "private office or clinic" necessarily refers only to the office or offices and adjunct facilities, such as an examining room, used by a physician or group of associated physicians to diagnose and treat their own patients. This description of "private office or clinic" is not offered as a comprehensive definition. Rather, it is used here only as a working definition to emphasize that to qualify under the exemption, the "private office or clinic" must be devoted primarily for the diagnosis, care, and treatment of the physician's own patients.
Accordingly, whether a particular health facility is exempt as a "private office or clinic" is determined by such factors as (1) the number of patients who are referred to it by other physicians, (2) whether the facility is associated or connected with another health care facility, (3) whether the patient is charged by the referring physician or other health care facility, and (4) whether the facility is largely devoted to the use of equipment which is normally found only in larger health care facilities.
The enumeration of these four factors is not inclusive and such other factors as may be present in the use of a particular health care facility claiming to be a "private office or clinic" may be considered. The circumstances in which a health care facility is operated will vary from case to case. Whether the health care facility will qualify as a "private office or clinic" depends solely upon whether the circumstances in which it is used is consonant with the use of a "private office or clinic" as defined above.
We stress that to give the phrase, "private office or clinic, " as used in KRS 216.445(1), an expanded meaning will result in the exception swallowing the entire Act. Our conclusion is compelled to avoid the absurd result, cf.
Wesley v. Bd. of Educ. of Nicholas County, Ky., 403 S.W.2d 28 (1966) and to reconcile and harmonize all parts of the Act, cf.
Bischoff v. Hennessy, Ky., 251 S.W.2d 582 (1952).
One final point needs to be mentioned. According to our telephone conversation, some of the equipment described in your letter has been purchased by physicians and located in a non-exempt health care facility. We do not pass on the right of the physicians to make the purchase. We are, however, of the opinion that the non-exempt health care facility must obtain a Certificate of Need from the Board before the equipment is utilized, see KRS 216.405(4)(b)(1).
Summary: We are of the opinion that a health care facility may be exempt from KRS 216.405 et seq. as a "private office or clinic" under KRS 216.455(1). Whether a particular health care facility is entitled to the exemption is a matter to be determined by the Board created by KRS 216.405(2). The Board's determination of whether to grant a particular health care facility rests upon whether the use of the facility is consonant with the function of a "private office or clinic" as defined above. In making its determination, the Board should consider the factors set forth above and any other circumstances surrounding the use and function of the facility which the Board deems appropriate in a particular case. Our opinion extends no further and is limited to the expression of it in this Summary.