Judge recommends approval for Riverwalk surgery, diagnostics center

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An administrative law judge who three months ago held hearings about whether the Hoover Health Care Authority should be granted state permission to build an ambulatory surgery and medical diagnostics center in Riverchase on Friday sided with the Health Care Authority.

Ryan deGraffenreid III, who heard three weeks’ worth of testimony in May and June, said in a 148-page order that he believes the state Certificate of Need Review Board should grant the Hoover Health Care Authority’s request over the objections of another entity seeking to build a similar facility on the western side of Hoover.

A company called the Forest Park Group contested the Health Care Authority’s application for a certificate of need, claiming the Health Care Authority was not an appropriate entity to seek such approval because it won’t be the one operating the proposed surgery center and diagnostics center in Riverchase, to be called the Riverwalk Health and Wellness Center.

The Health Care Authority, if granted a certificate of need, plans to seek proposals from interested health care systems or physician groups who in turn would operate the Riverwalk facility or portions of it.

The Forest Park Group argued that the Health Care Authority had failed to demonstrate a need for an ambulatory surgery center and diagnostics center in the Hoover part of Shelby County and that such a facility would be a duplication of services and likely would siphon off patients or doctors from existing surgery centers in the area.

DeGraffenreid said in his order that the Health Care Authority presented credible testimony and data-driven evidence, including market studies and research, demonstrating “a substantial unmet public need for outpatient surgical and diagnostic care services in the Riverchase community and broader Shelby County.”

DeGraffenreid said that the Forest Park Group failed to adequately account for the types of surgery specialties that Riverwalk plans to offer, which include but are not limited to urology, pediatrics, podiatry, dermatology, plastics, obstetrics/gynecology, ophthalmology, general surgery, and ear, nose and throat specialties.

Currently, there are four ambulatory surgery centers in Shelby County: the Medplex Outpatient Surgery Center in Southlake, the Ascension St. Vincent’s One Nineteen surgery center near Greystone, the Physician Endoscopy Center at 119 (also near Greystone) and the Shelby Baptist Ambulatory Surgery Center at Shelby Baptist Medical Center in Alabaster.

The Medplex Outpatient Surgery Center specializes in orthopedics and pain management, and Riverwalk does not currently anticipate providing those, deGraffenried said in his order. The Physician Endoscopy Center at 119 is limited to gastroenterology, another specialty that Riverwalk does not presently anticipate providing, deGraffenreid wrote.

One Nineteen does not offer urology services like Riverwalk plans to do, and none of the surgery centers offer dermatology services, he wrote.

And while there may be some overlap between the surgery specialties that Riverwalk plans to offer and those specialties offered by Ascension St. Vincent’s One Nineteen and Shelby Baptist, those facilities are inconveniently located for residents of Hoover in and around Riverchase, he wrote. And Shelby Baptist Medical Center has slowly been reducing its surgical service offerings, he wrote.

“Most importantly, none of the existing Shelby County ASCs have opposed the Applicant’s Project, indicating that the facilities do not believe they will be detrimentally impacted through the alleged loss of patients, providers and staff to the Project ASC [Riverwalk],” deGraffenreid wrote.

On the contrary, the Health Care Authority provided clear and convincing evidence that there is a a shortage of surgery centers in Shelby County, he said. Testimony indicated that the Medplex and Shelby Baptist facilities are well over 100% utilized, and the One Nineteen facility is more than 87% utilized (when excluding a non-general surgery room), deGraffenreid said.

Medplex recently gained approval to relocate 2 miles further east of Southlake and add two more operating rooms but anticipates being at 85% to 90% utilization after those two rooms are added, deGraffenreid noted.

Shelby County’s population is anticipated to increase from 236,721 in 2024 to 246,306 in 2026, at which point Shelby County is projected to be the fifth largest county in the state, based on data from Center for Business and Economic Research at the University of Alabama.

More than 100,000 people live within a 5-mile radius of the Riverwalk campus, and 18.3% of them are aged 65 or older (a population that frequently needs more surgeries), according to testimony shared.

The U.S. Department of Health and Human Services classifies Shelby County as a “medically underserved area” based on poverty levels, infant mortality, the population aged 65 or older, and the ratio of primary care physicians to residents in the community.

Based on population projections, Shelby County residents likely will need 38,000 outpatient surgeries by 2025, which would require 38 operating rooms, testimony indicated. There currently are only 16 operating rooms in Shelby County, and three of those are for endoscopy only and a fourth is not for general anesthesia surgeries, testimony indicated. By 2030, an additional 3,000 surgeries likely will be needed, demonstrating a demand for three more operating rooms, the data shows.

The Hoover Health Care Authority also demonstrated strong community support for the Riverwalk facility, with 198 people signing a petition in favor of it and 158 people writing letters of support, deGraffenreid said. There was no community opposition to Riverwalk, other than from the Forest Park Group, he said.

Numerous officials testified in support of Riverwalk, including state Sen. Jabo Waggoner, Sen. April Weaver, Sen. Dan Roberts, Rep. Leigh Hulsey, Rep. Susan DuBose, Rep. Arnold Mooney, Rep. David Faulkner, Hoover Mayor Frank Brocato, Pelham Mayor Gary Waters, Hoover Council President John Lyda and Hoover Councilwoman Khristi Driver.

Jimmy Holloway, president of Corporate Realty, a company partnering with the city of Hoover and Health Care Authority on Riverwalk, testified that he has had meetings with all the hospital systems in the Birmingham area and “every one of them said there is a lot of need in Shelby County. And … nobody from those systems is opposed to our CON because they see the need and they explain to us that there is a need, and that they are full in capacity, and they would welcome additional facilities for their physicians.”

Stephanie Akin, a financial consultant hired for the Riverwalk project, testified that Riverwalk is expected to generate 4,411 outpatient surgical visits and 19,845 outpatient diagnostic visits in its first year and 4,631 outpatient surgical visits and 20,837 outpatient diagnostic visits in its second year. Based on those projections, the facility should have combined net operating revenues of $11.4 million the first year and $12.5 million the second year, Akin’s company projected. Net income should be $400,874 the first year and almost $1.3 million the second year, according to those projections.

The Forest Park Group provided its own expert, who alleged the Riverwalk project was overestimating its expected usage and that the project is not financially feasible, but deGraffenreid said the expert for the Forest Park Group was unconvincing because his evidence appeared to be based on flawed assumptions.

And while the Forest Park Group claimed the Hoover Health Care Authority was an appropriate group to seek a certificate of need, DeGraffenreid also referenced testimony from multiple experts that it is not uncommon for health care authorities to obtain certificates of need and in turn lease out operations to other entities.

Furthermore, “all three members of the Hoover HCA Board are highly experienced and capable of selecting operator(s) for the Project who will provide premium professional capabilities,” deGraffenreid wrote.

DeGraffenreid also noted that the Forest Park Group, owned by Loree Skelton (the sister of former Hoover Mayor Brian Skelton), “does not currently, nor has it ever, provided health care services or otherwise conducted any business in the State of Alabama, and, for all relevant purposes, appears to be a shell entity.”

On March 15, the Forest Park Group filed a letter of intent to seek a certificate of need to develop a multi-specialty ambulatory surgery center in Jefferson County in the proposed second phase of Stadium Trace Village in the Trace Crossings area, and on June 15, filed the actual application to obtain the certificate of need.

Attorneys for the Forest Park Group argued that the Riverwalk project would threaten to harm the Forest Park Group’s effort, but deGraffenreid once again sided with the Hoover Health Care Authority that there was no convincing evidence to back up that claim.

Alan Paquette, chairman of the Hoover Health Care Authority, said Monday he was excited to see that the administrative law judge sided with the Health Care Authority and he feels confident the CON Board will do the same when it takes up the matter on Sept. 18.

However, he’s frustrated that the Forest Park Group’s efforts to contest this have delayed the Riverwalk project by at least three months. “That just kind of set us back,” he said. “We’ve wasted so much time and taxpayers’ money.”

Paquette said the Health Care Authority doesn’t oppose the surgery center Skelton is proposing to build in Stadium Trace Village. “I think the market can handle both of those, and the city of Hoover is better off with both of those,” he said.

Brocato said deGraffenreid was on point in identifying the Forest Park Group as a shell company.

“I could never quite figure out why she [Skelton] filed that opposition,” the mayor said. “She gave no good reasons at all, and it cost the city a lot of unnecessary legal fees, and it cost us a delay in putting our plan together.”

The city is ready to move forward and build a quality health care facility for residents and the thousands of other people who will use Riverwalk, Brocato said.

“It’s not something just for Riverchase, but for the city of Hoover and the entire metro area,” he said. “We’re hoping that we get a positive result for the people, and we look forward to putting this great deal together very soon.”

Peck Fox, an attorney for the Forest Park Group, said his client is very disappointed in the administrative law judge’s recommendation. “We think he disregarded a great deal of evidence that Hoover failed to comply with the certificate of need criteria,” Fox said.

The Health Care Authority never established who its provider would be or what doctors would be providing services, he said. The Forest Park Group plans to present its opposition to the CON Board as well, and if necessary, take the matter to an appellate court or the Alabama Supreme Court, he said.

“We intend to pursue all avenues,” Fox said. “We think we’re protecting not only our interests, but the interests of citizens and the integrity of the certificate of need process itself.”

Paquette said the Health Care Authority’s attorneys advised him to expect a continued fight from the Forest Park Group, but he believes the Health Care Authority will prevail. If they do, the authority will be ready to put out its request for proposals immediately in an effort to find an operator, he said. It will give operators somewhere between two weeks to 30 days to respond, he said.

He also thinks there will be rapid movement on the other parts of the Riverwalk development, which is on 91 acres in the Riverchase Office Park formerly owned by Regions Bank. In addition to an ambulatory surgery center and diagnostics center, the plan calls for other corporate and medical office space, a 135-room hotel, 102 single-family homes and almost 500 multi-family residential units. Read more about the entire Riverwalk plan here.