Just over a year ago, in October 2024, the Alabama Certificate of Need Review Board approved a certificate of need for a proposed health care facility, Riverwalk Health and Wellness, located in the empty, former corporate office tower of Regions Bank in the Riverchase area of Hoover.
If that sounds boring and overly complicated, you should know a couple of things. First, it is overly complicated, and I’ll do my best to explain it. But second, and most importantly, you should know that the decision to grant that CON—and almost every decision that followed—was so controversial that it has drawn attention from all corners of the state’s healthcare industry, was a major factor in the Hoover mayor getting booted out by voters and has reopened a debate about the necessity of the state’s CON process.
To understand exactly why all that is so, it will take us some time. But at the core of this whole ordeal is one pretty simple fact and one very, very curious decision.
The simple fact is this: The CON process in Alabama is primarily in place to ensure that healthcare projects are necessary and viable and serve the public’s best interest, and the most important factor in that decision is whether or not the entity operating any proposed healthcare facility has the history, resources and viable plan to give the project the best chance at success.
The curious decision was this: The state board tasked with judging those operators approved the Hoover project despite the fact the project had not yet identified an operator.
“What has happened here is simply wrong,” said Jack Mooresmith, an attorney who drafted Alabama’s CON regulations in the late-1970s and who worked extensively on healthcare litigation and CON hearings over the last four decades. “I’ve never seen—in my 40-plus years of doing this—another project that remotely comes close to this one in the way the rules have been disregarded at a basic level. It is the most bizarre CON process that I’ve ever seen.”
Even the State Health Planning and Development Agency (SHPDA)—the entity that is in charge of the CON process—admits that Riverwalk’s CON approval was the first time in the 40-year history of the board that a project without an operator has been approved. SHPDA executive director Emily Marsal downplayed the uniqueness, though, saying that the board has, at other times, placed conditions on an applicant when granting a certificate of need. However, even she—along with numerous attorneys and healthcare executives I have spoken with over the past few months—said that a project gaining CON approval, even on a conditional basis, without an operator was a first.
But before we get ahead of ourselves here, let’s explain a few things, starting with what the Riverwalk Village project is and how the CON process works and why it exists.
The Project
On its face, the Riverwalk Village project is not particularly noteworthy, at least outside of the Hoover area. It’s a fairly standard revitalization project that utilizes health care to transform a once-vibrant, recently-downtrodden area of town. The project, undertaken by Corporate Realty (which was Healthcare Solutions in the original filing but underwent a name change), was to be part of a larger overhaul of some 90-plus acres that make up the Riverchase office park. There are plans for various types of housing and green spaces to go along with the health care center.
Riverwalk Village Health and Wellness is set to reside in one section of the old, abandoned Regions Bank corporate office tower. I have previously written about the very odd lease between the City of Hoover and Corporate Realty– a story that in many ways led to this piece thanks to an outpouring of information and opinions from a variety of people (including some very knowledgeable folks) who either took an interest in the project after reading about the lease or who had been following the project due to other media outlets’ stories.
Much of that information became public knowledge thanks to the CON process—a particularly useful public benefit—and it quickly became a hot topic among the healthcare community.
If you are unfamiliar with the certificate of need (CON) process in Alabama, the first thing you should do is thank your maker, because it is a world all to itself, with its own set of rules and regulations and unique processes. It is a necessary world—don’t misunderstand me on that point—but if you are unfamiliar with it, figuring it out can take some time.
The certificate of need (CON) process has become a bit controversial of late, particularly among those who believe the “free market” can handle any and all problems no matter how many times this theory has been proven untrue.
In Alabama, the CON process is designed to ensure that new healthcare facilities are in the public’s best interest, and that they serve a need in a manner that provides quality service at a reasonable price. The process is a particular godsend in the world of elder care, where too often large providers who rely on private insurers, Medicare and private pay, price local facilities—and local patients—out of the market. Likewise, the process prevents market saturation in all specialties, which often lead to failing systems and steep prices.
For a project like Riverwalk Village, though, such a process should be a relatively easy—if cumbersome—hurdle, since the project was going to serve Hoover—a growing, prosperous area that its leadership has repeatedly said is lacking in healthcare options. And city officials were quite literally running the recruitment and planning of the project.
In order to gain a certificate of need, an applicant must demonstrate a history of health care management and explain, in detail, how the project will address the area’s needs and serve the community in the long term. Specific detail must be provided with the application, including the operator’s history, other facilities owned/operated, all specialty services offered and a detailed description of manpower, compliance with regulations and other details. (There are specific steps and detailed requirements that are also part of the process, but I’m choosing to simplify it for the sake of brevity and your sanity.)
All of that information is first reviewed by SHPDA staff to ensure it complies with the rules. It is then considered by the CON Review Board, which is responsible for granting or denying a CON. And then, oh yeah, the application can be contested by anyone that can demonstrate a viable interest in the project (i.e. a nearby health care facility whose business will be impacted if the applicant is successful).
Riverwalk’s project was contested, leading to a lengthy hearing process before an administrative law judge. That contested case was built around one thing: It didn’t have an operator.
The Contested Case
When the CON application for Riverwalk Health and Wellness Center (the proper name of the project) was filed in Sept. 2024, it was not filed by the entity that planned to operate the healthcare facility at the center of the entire project. Instead, it was filed by the Hoover Health Care Authority—a board established by the City of Hoover in 2021 and given broad powers to expand the city’s health care offerings.
Riverwalk Village was to be its largest and most ambitious project, and so far is its only project. It was also oddly arranged, because HHCA started by partnering with a developer first. It then entered into a very odd lease for the old Regions office tower. Then, it filed an application for a certificate of need. When it went before SHPDA, there was no entity selected to operate the healthcare facility at the center of this massive project.
What makes that so odd is that much of the CON process is designed to gauge the qualifications of the operator, and to make viability determinations based upon the past history of that operator and the sorts of specialties that it typically offers. It’s quite hard, for example, to determine if a healthcare company applying for a CON has a solid track record operating an ambulatory surgery center (what Riverwalk plans to open) when you don’t have a healthcare company to evaluate.
That was the crux of Forest Park Group’s challenge. Led by attorney Loree Skelton, who is the CEO of South Haven Corporation, and also a health care attorney specializing in CON laws, regulations and healthcare development. Forest Park contended that HHCA lacked proper standing to request a CON because it didn’t plan to operate the Riverwalk facility. In fact, HHCA, according to the lease it entered into with Corporate Realty, gave up complete control of the facility, turning it all over to the developer, who then planned to contract with the operator, contrary to what HHCA represented to the ALJ and the CON Review Board. But the operator had not yet been identified, and at the time, they weren’t close to finding one.
Skelton and Forest Park had their own project in the works—a multi-specialty ambulatory surgical center on the other side of town, part of the second phase of the Stadium Trace Village development. And things behind the scenes were about to turn very ugly, as the two sides threw punches and counter-punches at each other. (I’ll get into the details of that fight, and the allegations made by both sides, in a later piece. For now, just know that it was intense.)
At the end of a two-week hearing that featured more than a dozen witnesses, administrative law judge Ryan deGraffenreid III sided with Hoover and recommended that SHPDA grant the CON to the Riverwalk Village development, despite the fact that no operator was attached to the project. His ruling stretched on for more than 100 pages, but it essentially boiled down to this: There was no rule in place that specifically forbade granting a CON without an operator identified.
“It doesn’t make practical sense to grant a CON when you can’t make the majority of the determinations that are required in the CON process (because there’s no operator),” said a veteran healthcare attorney who has followed the case. “But at the same time, there’s nothing on the books that says you can’t do it and there’s a sort of contingency process in place that has been used to give applicants time to cure certain deficiencies in their application. So, he probably figured he’d let it go through and the CON board could always kill it later if the operator didn’t stack up.”
On November 3, 2024, HHCA got its CON, but it came with strict conditions. It was also accompanied by an agreement with SHPDA stating that the granting of that conditional CON by the Review Board would not constitute precedent. Then, shortly thereafter, the Board passed a new rule giving SHPDA more authority to demand information about an operator on the front end.
To put all of that in layman’s terms: The CON Review Board made it clear that what happened with Riverwalk Village would be a one-time deal.
When I mentioned to Emily Marsal, the executive director at SHPDA, that it seems like Riverwalk Village was given preferential treatment, she disagreed. Marsal, who never shied away from questions and was always responsive, said that while Riverwalk did technically receive different treatment, it wasn’t necessarily preferential treatment.
“The basic requirements were met, or it would not have gone to the board,” Marsal said of Riverwalk Village’s CON application. “They received a CON with the understanding that they would have to file a project modification to expressly give the name of the operator of (the project) within a year of receiving the CON. A project modification can be done with a project which has not ‘vested’ meaning, for example, that services have begun or that a certificate of completion has been granted by ADPH.”
In other words, while the certificate of need had technically been granted, it wasn’t a “vested” CON, meaning that the applicant couldn’t claim the CON as an asset that could be transferred to another party. In order to achieve that status, as in all cases, the project would have to demonstrate what’s known as a “firm commitment” within a year—and that’s an absolute, no exceptions deadline.
A “firm commitment” is one of several actions, such as making a large purchase specific to the project, entering into a construction contract or signing a significant lease, that demonstrates a meaningful commitment to the project.
But before the Riverwalk Project and HHCA could demonstrate such a commitment, it would have to, within a year, present to SHPDA an operator that met standards, adhered to all the promises of services offered and possessed the sound healthcare history that HHCA promised during its contested hearing and before the CON Review Board hearing.
More Oddities
This is where two issues unique to the Riverwalk Village project gum up the works and turn it all very odd. The first, of course, is that Riverwalk doesn’t have a named operator. The second is that very odd lease that HHCA entered into which essentially said it had no say in any decisions being made and relinquished all of that power to Corporate Realty, the developer.
Under the rules governing the CON process, the operator of a project is supposed to be the entity that files a firm commitment notification. That means a project’s operator would have to be identified prior to the filing of that firm commitment, because otherwise no one else would have standing to file it.
Riverwalk’s search for an operator stretched on for months. Finally, in mid-October, HHCA filed the proper paperwork for a project modification that named Solara Surgical Partners LLC as the operator of Riverwalk Village. The project modification touted Solara’s qualifications and asked that the company be approved by the board.
But on Oct. 22, a week after the project modification was filed, Marsal sent HHCA a letter stating that it was deeming the project modification as “incomplete,” because SHPDA still had numerous questions about the services Solara planned to offer and any doctors that had agreed to partner with the company.
Then, on Oct. 31, just four days prior to its one-year deadline, HHCA filed paperwork for its firm commitment, offering up an invoice for just over $100,000 worth of random equipment that had been purchased by Solara for the project.
Do you see the problem?
Solara has not yet been approved as the operator, and there’s no indication from the SHPDA board that it will be approved. As such, it should not have standing under Alabama law to file for a firm commitment. And because the November 4 deadline for that filing had passed, it would seem to indicate that the Riverwalk Village project was in serious jeopardy.
Missing that deadline would mean HHCA and Corporate Realty would have to restart the CON process from the beginning. That would ordinarily take months, at least. But the problem is actually worse, because SHPDA has now placed in effect, a moratorium on the processing of CON applications for multi-specialty ambulatory surgical centers. Missing the deadline would likely mean the project could be delayed by years.
Not to worry. On November 6, Marsal sent a letter to HHCA’s attorney informing him that the invoice for equipment purchased by Solara would be approved as a firm commitment.
When I asked Marsal about that decision, and noted that Solara has no standing at this point to file for a firm commitment, she said, essentially, that there was yet another hole in the rules.
“What I can tell you is that the letter was processed in the ordinary course and found to meet the requirements for a firm commitment,” she wrote. “I’m not aware of any prior agency action or Board ruling that has prohibited a firm commitment or obligation to be memorialized by an agent of the CON holder on the holder’s behalf, so long as the underlying commitment or obligation is indeed ‘firm’ and demonstrated to apply to the approved project. Here we had not only documentation of the order, but of the payment itself.
“That said, should it later develop that there was no ‘bona fide’ obligation … then SHPDA could assert the right to revisit its prior acknowledgement.”
Mooresmith was skeptical of Marsal’s interpretation of the rules, noting that Solara cannot qualify as an agent for HHCA because Solara “has not been approved as the operator and the board apparently still has questions about it.”
So, yet again, the board is going to potentially clean up a problem on the back end because the CON regulations were not properly followed on the front end.
And it doesn’t stop there.
In response to Marsal’s letter informing HHCA that its project modification was deemed incomplete, HHCA’s attorney Colin Luke responded a few days later, saying that the information was mostly contained in the original application and that it did not feel comfortable disclosing the requested information concerning physicians who would be participating in the project.
Somehow, despite failing to answer either inquiry, and SHPDA never accepting the explanation, the project modification is scheduled to be heard by the CON Review Board on December 17. For a project that, by virtue of the approval of the firm commitment, has already been vested, despite the operator not being accepted.
“This is all politics,” said Mooresmith, who testified during the contested case hearing and raised many of the same issues. “There’s no justification for any of this. It’s just so wrong that there can’t be any justification for it, other than it’s a political decision that’s appeasing certain people.”
And that creates an even bigger issue. For the last several months, the certificate of need process has been under attack by large healthcare companies who want free reign to take over the Alabama market and squeeze out smaller, local companies. That is especially true in the world of elder care. The opponents of the CON process fall back on familiar arguments about “free markets” and letting the strong survive. The problem is that rarely works in the end for patients, who end up facing higher costs or few options.
I asked Marsal if she was concerned that the actions taken in the Riverwalk CON process could be used as an argument against the process—as evidence presented by the opponents that not all parties are treated equally. She again said that Riverwalk didn’t receive special treatment, and that the administrative law judge’s decision supported that fact. She also said the CON process is vital for many reasons, perhaps most importantly for creating a public record.
Mooresmith had another view—one much more simple.
“They’re already ignoring the CON regulations, so they’re the ones doing away with it,” he said. “It has served a great purpose. But it is meaningless if the rules are not applied the same for everyone.”
What will happen from here is truly anyone’s guess. Riverwalk’s project modification is scheduled to be discussed at the CON Review Board’s next meeting in December. There has been some indication that the project’s representatives could face tough questions at that hearing, and that approval is not guaranteed. Should that be the case, it’s unclear what the next steps would be.
As it stands, though, a $400 million project seems to be teetering in the balance, held together by loopholes and workarounds. And the entire healthcare establishment in Alabama is watching.
