August 4, 1977

Ms. Judith Call 
Secretary 
State Department of Health 
Foss Building 
Pierre, South Dakota 57501

Official Opinion No. 77-66

Expiration of certificate of need

Dear Ms. Call:

You have requested an official opinion from this office based upon the following factual situation:

FACTS: 

Reference is made to the Certificate of Need Law, 34-7A, with special attention to 34-7A-18.  This section reads as follows: “Expiration of certificate of need-A certificate of need shall expire if the construction or modification is not commenced within one year following the issuance of the certificate.”  While this particular section addresses only the commencement of the project, it does not address any requirements in regard to completion time.

Reference is made to one specific project, Valley Springs Manor.  A Certificate of Need was issued for this project on September 21, 1973.  The applicant indicated that construction had commenced on September 13, 1974, with some grading and earth work being done. From surveys and other information it has been determined that no further construction has been done since that time.

Based on the above facts, you ask the following questions:

QUESTIONS: 

1.  Is the Certificate of Need which was issued for the Valley Springs project still valid since no further work has been done since the initial grading in September, 1974? 
    
2.  If the answer to the above question is yes, would the Certificate of Need still be valid although issued to a licensed nursing home on which the license has been terminated as of November 15, 1975?

IN RE QUESTIONS NO. 1 AND 2:

As pointed out in your statement of facts, SDCL 34-7A-18 provides for the Certificate of Need expiring if the construction or modification is not “commenced” within one year following the issuance of the certificate.  This statutory provision has not been construed by a court of record in South Dakota and upon researching the similar statutory language found in the State of Minnesota, I also find no judicial construction or interpretation there which is available for our consideration.

I believe it is obvious that the Legislature did not intend a Certificate of Need to be in effect over long periods of time wherein the facility is taking no affirmative action to complete the construction or modification authorized by the Certificate of Need. With this intent and purpose in mind, I do not believe it is reasonable to interpret SDCL 34-7A-18 as being inapplicable so long as a facility once turned at least one shovel of ground to begin the construction or modification authorized by the Certificate of Need. If such a narrow interpretation were taken, the statute would have little if any real meaning.

It is my opinion that the Certificate of Need which was granted for the Valley Springs project in 1974 should not be seen as still being a valid Certificate of Need.  I believe the fact that the project has had no further work done on it since the initial grading in September of 1974 is sufficient reason for the department to consider the Certificate of Need expired.  I believe the requirements of SDCL 34-7A-18 are applicable to this situation and provide justification for the department's considering the Certificate of Need expired.  This position is only further necessitated and justified, in my opinion, by the fact that, as you state, the original Certificate of Need was issued to a licensed nursing home facility which is no longer in existence since the license was terminated in November of 1975.

Respectfully submitted,

William J. Janklow
Attorney General

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