By Dan E. Way

dway@heraldsun.com; 918-1035

CHAPEL HILL -- A challenge to the state's approval for UNC Hospitals to build a Hillsborough medical campus threatens to delay the project, but officials say they will push forward with planning and design of the 68-bed facility despite Alamance Regional Medical Center's opposition.

"Yes we did file an appeal last Friday" to the state's issuance of a required certificate of need (CON), Tracey Grayzer, Alamance Regional Medical Center spokeswoman, confirmed late last week.

She deferred specifics of the appeal to Alamance Regional CEO John Kern, who was out of town, as were other high-ranking administrators in a position to discuss the challenge.

"I think that they are concerned that they will be adversely affected by the building of UNC Hospitals' Hillsborough campus," said Karen McCall, vice president of public affairs and marketing for UNC Health Care.

"They think that we are going to be trying to increase our market share, and we haven't added any capacity in this CON. We are just trying to decompress our [cramped Chapel Hill] campus. In the CON, we haven't said that we are increasing our numbers."

How great a delay might be expected on the project "all depends on how quickly we can resolve the issue," McCall said. "We would like to be able to build this hospital as soon as possible. We need the capacity right now. We have long delays on people being able to get into beds" at the Chapel Hill campus.

"We will be working with the certificate of need agency to try to determine the issues that need to be discussed and resolved," McCall said. "I think the state will be trying to resolve the process as quickly as possible also since they gave us conditional approval to proceed."

A delay caused by a regulatory wrangle could lead to higher costs on the project, she conceded.

"I think that's a rule of thumb, but I don't, at this point, have any specifics on that," McCall said.

"Basically, we remain committed to developing the Hillsborough campus because we believe it's a solid investment in our area's growth in health care, and we're working to address Alamance Regional Medical Center's concerns in anticipation that the CON division will move forward with its decision to allow us to increase access to care for the people of Orange and Alamance counties and surrounding areas," McCall said.

Hillsborough Town Commission members and other town officials are monitoring developments in the regulatory appeal.

"The information has been shared with the board, but there hasn't been any open discussion on it," said Town Manager Eric Peterson.

"In the immediate future, this is not having an impact on the process from our standpoint," Peterson said. "I don't think they [UNC Hospitals] were anticipating submitting their special use permit by January. It's going to be sometime later in the year."

Indications to the town from Raymond R. Lafrenaye, vice president for facilities planning and development for UNC Hospitals, are that this is more of a speed bump than a wall to scale.

"If he's not pressing the panic button, and he's indicating they're still going to proceed with the design ... we're ready to respond" with working on necessary permits and site plan approvals, Peterson said.

In an e-mail to the town last Wednesday, Lafrenaye said: "We will still proceed with design as far as our current approval takes us and wait to see if our Pre Development CON gets approval (which we expect). Alamance could also appeal that approval which also complicates matters for us. We will see how the contested case hearings progress. We still believe that we will be ultimately authorized to proceed and that Alamance does not have a valid appeal."

But in an earlier e-mail from Dee Jay Zerman, associate director of planning for UNC Health Care System, spelled out some complications of the appeal.

"Contested Case Hearings are conducted through the Office of Administrative Hearings. This type of litigation can last up to 270 days, which could tie up our final approval until July 2010," Zerman wrote. "Part of the process, as you may recall from the most recent MRI Scanner litigation, requires us to participate in mediation discussions, which generally begin a few months after the contested case hearing begins.

"As you also know, we have submitted a separate CON application for 'Pre-Development Activities for the Hillsborough Campus.' This CON decision is expected to be made sometime between 11/19/2009 and 1/29/2010. This would allow us to proceed with planning and design activities beyond the CON threshold of $2M[illion], up to contracting the construction for the Hillsborough Campus."

Zerman said Alamance Regional has not publicly opposed UNC's pre-development activity certificate of need application, "but when our CON application is approved ARMC can also decide to appeal that approval. In that event, planning and design activities would definitely be compromised."

As currently envisioned, the Hillsborough campus would contain diagnostics and treatment space, a surgical suite, outpatient pharmacy, laboratory services, physical and occupational therapy services, emergency services including a helicopter pad, and support space for the Chapel Hill hospitals.

It would be built in phases, going from a 241,000-square-foot hospital in 2013 with a projected quarter-billion-dollar annual economic impact to a complex of 810,000 square feet with an annual economic impact of nearly $1 billion by 2028.