ATTACHMENT - REQUIRED STATE AGENCY FINDINGS

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ATTACHMENT - REQUIRED STATE AGENCY FINDINGSFINDINGSC ConformingCA ConditionalNC NonconformingNA Not ApplicableDecision Date:Findings Date:November 4, 2019November 4, 2019Project Analyst:Assistant Chief:Tanya M. SaporitoLisa PittmanProject ID #:Facility:FID #:County:Applicant:J-11756-19Raleigh Radiology Cameron Village190395WakeRaleigh Radiology Imaging Network, LLCRaleigh Radiology, LLCDevelop a new diagnostic center with CT scanner, mammography, bone density, xray and ultrasound imaging services in Cameron VillageProject:REVIEW CRITERIA FOR NEW INSTITUTIONAL HEALTH SERVICESN.C. Gen. Stat. §131E-183(a) The Agency shall review all applications utilizing the criteria outlinedin this subsection and shall determine that an application is either consistent with or not in conflictwith these criteria before a certificate of need for the proposed project shall be issued.(1)The proposed project shall be consistent with applicable policies and need determinations inthe State Medical Facilities Plan, the need determination of which constitutes a determinativelimitation on the provision of any health service, health service facility, health service facilitybeds, dialysis stations, operating rooms, or home health offices that may be approved.CRaleigh Radiology Imaging Network, LLC and Raleigh Radiology, LLC propose to develop anew diagnostic center, Raleigh Radiology Cameron Village, in a medical office buildinglocated at 505 Oberlin Road in Raleigh. Raleigh Radiology Imaging Network, LLC will leaseand operate the diagnostic center, and Raleigh Radiology, LLC will provide staffing andmanagement for the operation of the facility. Both applicants will hereinafter be referred tocollectively as “the applicant” or “Raleigh Radiology”.The applicant proposes to acquire and operate computed tomography (CT), mammography with3-D Tomosynthesis, X-ray and bone densitometry and ultrasound equipment, the total cost ofwhich will exceed the statutory threshold of 500,000; therefore, the equipment qualifies the

Raleigh Radiology Cameron VillageProject I.D. # J-11756-19Page 2facility as a diagnostic center, which is a new institutional health service and requires a Certificateof Need (CON).N.C. Gen. Stat. 131E-176(7a) states:“"Diagnostic center" means a freestanding facility, program, or provider, includingbut not limited to, physicians' offices, clinical laboratories, radiology centers, andmobile diagnostic programs, in which the total cost of all the medical diagnosticequipment utilized by the facility which cost ten thousand dollars ( 10,000) or moreexceeds five hundred thousand dollars ( 500,000). In determining whether the medicaldiagnostic equipment in a diagnostic center costs more than five hundred thousanddollars ( 500,000), the costs of the equipment, studies, surveys, designs, plans, workingdrawings, specifications, construction, installation, and other activities essential toacquiring and making operational the equipment shall be included. The capitalexpenditure for the equipment shall be deemed to be the fair market value of theequipment or the cost of the equipment, whichever is greater.”Need DeterminationThe proposed project does not involve the addition of any new health service facility beds,services, or equipment for which there is a need determination in the 2019 State MedicalFacilities Plan (SMFP). Therefore, there are no need determinations applicable to this review.PoliciesThe proposed capital cost is greater than 2 million, but less than 5 million; therefore, PolicyGEN-4: Energy Efficiency and Sustainability for Health Service Facilities on page 31 of the2019 SMFP is applicable to this review. Policy GEN-4 states:“Any person proposing a capital expenditure greater than 2 million to develop,replace, renovate or add to a health service facility pursuant to G.S. 131E-178 shallinclude in its certificate of need application a written statement describing theproject’s plan to assure improved energy efficiency and water conservation.In approving a certificate of need proposing an expenditure greater than 5 millionto develop, replace, renovate or add to a health service facility pursuant to G.S.131E-178, Certificate of Need shall impose a condition requiring the applicant todevelop and implement an Energy Efficiency and Sustainability Plan for the projectthat conforms to or exceeds energy efficiency and water conservation standardsincorporated in the latest editions of the North Carolina State Building Codes. Theplan must be consistent with the applicant’s representation in the written statementas described in paragraph one of Policy GEN-4.Any person awarded a certificate of need for a project or an exemption from reviewpursuant to G.S. 131E-184 is required to submit a plan for energy efficiency andwater conservation that conforms to the rules, codes and standards implemented

Raleigh Radiology Cameron VillageProject I.D. # J-11756-19Page 3by the Construction Section of the Division of Health Service Regulation. The planmust be consistent with the applicant’s representation in the written statement asdescribed in paragraph one of Policy GEN-4. The plan shall not adversely affectpatient or resident health, safety or infection control.”In Section B.11, pages 25 - 26, the applicant provides a written statement describing its planto work with a design team and facility management group to assure improved energyefficiency and water conservation. The applicant adequately demonstrates that the applicationincludes a written statement describing the project’s plan to assure improved energy efficiencyand water conservation.ConclusionThe Agency reviewed the: ApplicationExhibits to the applicationBased on that review, the Agency concludes that the application is conforming to this criterionfor the following reasons: the applicant does not propose to develop any new beds or services, or acquire anyequipment for which there is a need determination in the 2019 SMFP, andthe applicant adequately demonstrates that the proposal is consistent with PolicyGEN-4 for the following reasons:o the capital cost of the proposed project is greater than 2 million and less than 5 million, ando the applicant provides a written statement in the application describing theproject’s plan to assure improved energy efficiency and water conservation.(2)Repealed effective July 1, 1987.(3)The applicant shall identify the population to be served by the proposed project, and shalldemonstrate the need that this population has for the services proposed, and the extent to whichall residents of the area, and, in particular, low income persons, racial and ethnic minorities,women, handicapped persons, the elderly, and other underserved groups are likely to haveaccess to the services proposed.CThe applicant proposes to develop a new diagnostic center, Raleigh Radiology CameronVillage, in a medical office building in the Cameron Village area of Raleigh.Designation as a Diagnostic Center

Raleigh Radiology Cameron VillageProject I.D. # J-11756-19Page 4In Section C.1, pages 27 - 30, the applicant states the proposed diagnostic center will includefive diagnostic modalities, including CT, mammography, X-ray, bone densitometry andultrasound. In Section F.1, page 72, the applicant provides a table showing the new medicaldiagnostic equipment costing 10,000 or more, which is summarized below:EQUIPMENTCOSTSALES TAX1SHIPPINGTOTALEquipment 543,926CTOptions 61,752Total 605,678 43,912Included 649,590Equipment 416,522MammographyOptions-Total 416,952 30,198Included 446,720Equipment 80,040Bone DensitometryOptions-Total 80,040 5,803Included 85,843Equipment 149,900X-rayOptions2 12,0003Total 161,900 11,783 3,000 176,638Equipment 135,270UltrasoundOptions-Total 135,270 9,807Included 145,077Grand Total Equipment 1,503,868(1) The applicant states sales tax is 7.25% of equipment cost.(2) The option is for an overhead strut, based on applicant’s experience operating similar equipment.(3) Shipping cost based on applicant’s experience operating similar equipment.As shown in the table above, the combined cost of the equipment is more than 500,000 andtherefore a certificate of need is required to develop a diagnostic center.Patient OriginN.C.G.S. §131E-176(24a) states: “Service area means the area of the State, as defined in theState Medical Facilities Plan or rules adopted by the Department, which receives servicesfrom a health service facility.” The 2019 SMFP does not define a service area for diagnosticcenters, nor are there any applicable rules adopted by the Department that define the servicearea for diagnostic centers. Thus, the service area in this review is as defined by the applicant.Facilities may also serve residents of counties not included in their service area.The following table, from Section C.3 illustrates projected patient origin during the first threefull fiscal years (CY 2021 - CY 2023) following project completion.

Raleigh Radiology Cameron VillageProject I.D. # J-11756-19Page 5COUNTY1ST FULL FY (CY 2021)2ND FULL FY (CH 2022)3RD FULL FY (CY 2023)# PTS.% OF TOTAL# PTS.% OF TOTAL# PTS.% OF TOTALWake9,690*95.0%13,21995.0%16,90095.0%Out of 0.0%17,789100.0%*The application has the number 6960 in this cell; however, the Project Analyst determined that the digitswere transposed, since 9,690 is 95% of 10,201 and 9,690 510 10,201.Numbers may not sum due to roundingThe applicant states, “Out of area includes patients from other North Carolina counties, and from otherstates, primarily Virginia, South Carolina.”In Section C, pages 35 - 36, the applicant provides the assumptions and methodology used toproject its patient origin. The applicant’s assumptions are reasonable and adequately supported.Analysis of NeedIn Section C.4, pages 37 - 47, the applicant explains why it believes the population projectedto utilize the proposed services needs the proposed services, as summarized below: The applicant states population growth projections and aging of Wake County residentsshow need for diagnostic imaging services; particularly in the Cameron Village area(pages 39 - 41). The increasing traffic congestion in Wake County; particularly in the Cameron Villagearea, which was designed as a retail hub, is increasing travel times to Raleigh,necessitating the development of services more locally (page 42). The health, social and educational status of the proposed service area support the needfor additional diagnostic services (pages 43 - 44). The applicant cites the US Preventive Services Task Force cancer and diagnosticscreening recommendations (page 45). Current access issues for the medically underserved in the Cameron Village area,combined with the applicant’s experience in diagnostic imaging, necessitate thelocation of diagnostic imaging services as proposed in this application in the proposedservice area (pages 46 – 47).The information is reasonable and adequately supported for the following reasons: The applicant provides reasonable and adequately supported information to support itsassertion that the income, health, social and educational status of the proposed servicearea support the need for additional diagnostic services. Reliable data sources are used to support assertions about population growth and agingin the proposed service area.

Raleigh Radiology Cameron VillageProject I.D. # J-11756-19Page 6 Citations from the US Preventive Task Force recommendations and current access todiagnostic services in the Cameron Village area support a need for additional diagnosticservices in that area.Projected UtilizationIn Section Q, Form C, the applicant provides projected utilization, as summarized in thefollowing table.Raleigh Radiology Cameron Village, Projected UtilizationCOMPONENTCT ScannerX-rayMammographyProcedures2-D Procedures3-D ProceduresUltrasoundBone Densitometry1ST FYCY 20212ND FYCY 20223RD FYCY 470In Section C.7, pages 48 - 50, the applicant provides the annual maximum capacity per unit foreach type of medical diagnostic equipment proposed in this application, as well as theassumptions and methodology used to project the annual maximum capacities. The annualmaximum capacity for each type of medical diagnostic equipment proposed in this applicationis shown in the table below.RALEIGH RADIOLOGY Cameron VillagePROJECTED ANNUAL CAPACITY BY MODALITY*(PROCEDURES BY TYPE)COMPONENTYEAR 1YEAR 2YEAR 3Mammography2,8222,8223,669Tomosynthesis 8Bone Density605605605X-ray7,6617,66111,290CT Scanner2,4193,0244,032*The applicant’s projections are based on projected operating hours, time required perprocedure, and projected staffing in each of the first three operating years. See applicationpages 48 - 50.In Section Q, pages 120 – 147, the applicant provides the assumptions and methodology usedto project utilization in a series of 19 steps, based on the following basic assumptions frompage 120:

Raleigh Radiology Cameron VillageProject I.D. # J-11756-19Page 7(1) A separate methodology is used to project utilization of each unit of diagnosticequipment.(2) Each methodology is population-based from information from Claritas and the NorthCarolina State Office of Budget and Management, and uses state and national hospitaland physician utilization rates.(3) The methodology adjusts the state-reported use rates for CT and X-ray to determineoutpatient (OP) use; and uses national data regarding physician office use rates for theother three proposed modalities.(4) The three project years are CYs 2021, 2022 and 2023.The 19 steps in the assumptions and methodology are summarized below:Step 1: Identify the Service Area and Population to be Served by CT, X-ray and Ultrasound The applicant states it identified the proposed service area using demographic and mappingsoftware from Claritas for all of Wake County and then specifically for the Cameron Villagearea. See pages 121 - 122 of the application.Step 2: Project CT Scanner Need for Wake County - The applicant states it projected the needfor outpatient CT scanner services based on the projected Wake County population and a stateCT scanner use rate. The applicant then adjusted the use rate to reflect OP CT use at 123.63OP CT scans per 1,000 population. See page 123 of the application.Step 3: Project CT Scanner Market Share and Volumes for Cameron Village - The applicantstates it projected its CT scanner volumes based on the assumption that it would achieve 1.4%market share of Wake County projected use in the first project year, 1.8% in the second projectyear, and 2.3% in the third project year, based on Cameron Village and surroundingneighborhood population and future estimates. See pages 124 - 125 of the application.Step 4: Project CT Scanner Volumes with In-Migration - Based on the applicant’s experienceoperating diagnostic centers at other Wake County locations, it projected an additional 5% inmigration from patients outside of Wake County. The applicant states Raleigh Radiologyhistorical data shows 13% of Raleigh Radiology patients are from outside of Wake County.See page 126 of the application.Step 5: Project X-ray Need for Wake County - The applicant states it projected the need for Xray services based on the state projected population and a state X-ray use rate based on FY2018 data from acute care hospitals in the state. The applicant then adjusted the use rate downto reflect OP X-ray use at 225.743 OP X-rays per 1,000 population. The applicant used onlydata that reflected hospital OP X-ray use rates. See page 127 of the application.Step 6: Project X-ray Market Share and Volumes for Cameron Village - The applicant statesit projected its X-ray volumes based on the assumption that it would achieve 1.4% market shareof Wake County projected use in the first project year, 1.8% in the second project year, and

Raleigh Radiology Cameron VillageProject I.D. # J-11756-19Page 82.3% in the third project year, based on Cameron Village and surrounding neighborhoodpopulation and future estimates. See page 128 of the application.Step 7: Project X-ray Volumes with In-Migration – As in Step 4, the applicant relies on itsexperience in providing diagnostic imaging services at other locations and projects that anadditional 5% of X-ray patients would originate from outside Wake County. See page 129 ofthe application.Step 8: Project Ultrasound Need for the Identified Service Area Population - The applicantstates it projected the need for ultrasound services based on the projected Wake Countypopulation and the national ultrasound use rate, which it calculated based on data from the2016 National Ambulatory Medical Care Survey (NAMCS) and 2016 U.S. Census data.Relying on that data, the applicant adjusted the ultrasound use rate by 20% to determine an OPultrasound use rate of 127.14 scans per 1,000 population. See page 130 of the application.Step 9: Project Ultrasound Market Share and Volumes – To project market share for theproposed Cameron Village facility, the applicant projected its ultrasound volumes based on theassumption that it would achieve 1.4% market share in the first full year, 1.8% in the secondfull year, and 2.3% in the third full year. See page 131 of the application.Step 10: Project Ultrasound Volumes with In-Migration - Based on the applicant’s experienceoperating diagnostic centers at other locations, it projected an additional 5% of ultrasoundpatients would originate from outside Wake County. See page 132 of the application.Step 11: Identify the Population to be Served by Bone Density Equipment – Relying on dataobtained from demographic and mapping software from Claritas, the applicant states itidentified the service area population for the proposed bone density equipment specifically forfemale patients over the age of 65 years in Wake County. See page 133 of the application.Step 12: Project Bone Density Scans Needed for the Identified Service Area Population - Theapplicant states it projected the need for bone density services based on the projected servicearea population of women age 65 and older and the national bone density scan use rate (211.68bone density scans per 1,000 population) which it calculated based on data from the 2016National Ambulatory Medical Care Survey and 2016 U.S. Census data. The applicant appliedthe 211.68 national bone density scan use rate to its projected population from Step 11. Seepage 134 of the application.Step 13: Project Bone Density Market Share and Volumes - The applicant projected its bonedensity volumes based on the assumption that it would achieve 1.4% market share in the firstfull year, 1.8% in the second full year, and 2.3% in the third full year. See page 135 of theapplication.Step 14: Project Bone Density Volumes with In-Migration - Based on the applicant’sexperience operating diagnostic centers at other locations, it projected an additional 5% of bonedensity patients would originate from outside Wake County. See page 136 of the application.

Raleigh Radiology Cameron VillageProject I.D. # J-11756-19Page 9Step 15: Identify the Population to be Served by Mammography Equipment - The applicantidentified the service area population for the proposed mammography equipment specificallyfor female patients over the age of 40 years based on demographic and mapping software byClaritas. Based on that analysis, the applicant identified the projected population of women40 years old and older in Wake County. See page 137 of the application.Step 16: Project Mammography Needed for the Identified Service Area Population - Theapplicant projected the need for mammography services based on the projected service areapopulation of women age 40 and older and the national mammography use rate (653.3mammograms per 1,000 population) which it calculated based on data from the 2017 HealthUnited States (Table 70) and U.S.

new diagnostic center, Raleigh Radiology Cameron Village, in a medical office building located at 505 Oberlin Road in Raleigh. Raleigh Radiology Imaging Network, LLC will lease and operate the diagnostic center, and Raleigh Radiology, LLC will provide staffing and management for the operation of the facility.

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