LAFFERTY ENTERPRISES, INC. D/B/A TRANS-STAR AMBULANCE SERVICE APPELLANT
COMMONWEALTH OF KENTUCKY, CABINET FOR HEALTH AND FAMILY SERVICES, OFFICE OF HEALTH POLICY; SECRETARY VICKIE YATES BROWN GLISSON, CABINET FOR HEALTH AND FAMILY SERVICES, IN HER OFFICIAL CAPACITY; AND JAN-CARE AMBULANCE SERVICE, TRI-STATE DIVISION INCORPORATED APPELLEES
FROM FRANKLIN CIRCUIT COURT HONORABLE PHILLIP J. SHEPHERD,
JUDGE ACTION NO. 17-CI-00168
FOR APPELLANT: Mark W. Leach Louisville, Kentucky
FOR APPELLEE JAN-CARE AMBULANCE SERVICE, TRI-STATE DIVISION
INCORPORATED: Jay E. Ingle Chacey R. Ford Lexington, Kentucky
BEFORE: DIXON, KRAMER AND LAMBERT, JUDGES.
Enterprises, Inc. d/b/a Trans-Star Ambulance Service
("Trans-Star") appeals from the Franklin Circuit
Court's opinion and order entered October 5, 2017,
reversing the final order of the Cabinet for Health and
Family Services ("Cabinet"). In this order the
court found that Jan-Care Ambulance Service, Tri-State
Division Incorporated ("Jan-Care") violated
Kentucky's Certificate of Need ("CON") laws and
licensure requirements because it was not exempt from
compliance under federal preemption through its contracts
with the Veterans Administration ("VA"). Trans-Star
further appeals from the circuit court's order denying
reconsideration of its October 5, 2017, opinion and order.
After careful review of the briefs and the law, we affirm.
is a West Virginia corporation providing ambulance services.
In 2005, following the VA's Request for Proposals
("RFP") and Jan-Care's bid to provide services,
Jan-Care was awarded a contract with the VA to service
patients of the Huntington VA Hospital in parts of West
Virginia, Kentucky,  and Ohio. After being awarded this
contract, Jan-Care provided ambulance services in Kentucky
without obtaining either a Kentucky CON or Kentucky license.
Jan-Care also subcontracted with other ambulance services,
including Trans-Star, to provide services in Kentucky
pursuant to its VA contract.
relevance to the issues before us, page 16, paragraph 9(c),
of the contract provided:
[t]he VA will place calls directly with the contractor, if
the contractor does not have an ambulance available or is not
licensed to provide services to a particular area, the
contractor is responsible to coordinate the trip with another
licensed ambulance provider.
page 20, section 52.252-2 CLAUSES INCORPORATED BY REFERENCE,
of the contract included 852.237-70 CONTRACTOR
RESPONSIBILITIES, referring to 48 C.F.R. 852.237-70 of the
Federal Acquisition Regulations ("FAR") - which is
mirrored by the VA Acquisition Regulation ("VAAR")
- providing in pertinent part:
[t]he contractor shall obtain all necessary licenses and/or
permits required to perform this work.
contract was extended until the VA issued another RFP for
which Jan-Care submitted its bid resulting in their 2012
contract which contained substantive revisions. Notably, the
language of the previous contract's paragraph 9(c),
quoted above, was not included in the 2012
contract. Instead, the 2012 contract included a
state-specific requirement for licensure in West Virginia. By
contrast, it contains no requirement for Kentucky licensure.
In 2013, Jan-Care ceased using subcontractors to fulfill its
1, 2014, as a result of a complaint by Trans-Star, the
Kentucky Board of Emergency Medical Services
("KBEMS") sent a cease and desist letter to
Jan-Care concerning its Kentucky operations without Kentucky
licensure. Jan-Care responded asserting its VA contract
preempted Kentucky licensure requirements. On July 25, 2014,
KBEMS replied advising it did not intend to take further
action against Jan-Care, pending the Cabinet's issuance
of an advisory opinion - which was subsequently never
requested or issued.
2015, Trans-Star sued Jan-Care in federal court alleging
Jan-Care was filing false or fraudulent claims with the VA in
violation of the False Claims Act ("FCA"), citing
31 U.S.C. 3729-3733. The federal court dismissed
this action with prejudice in 2016 for failure to state a
claim upon which relief could be granted.
2016, during the pendency of the federal action, Trans-Star
filed a complaint as an affected party, by being a
competitor, with the Cabinet alleging Jan-Care was
transporting patients in Kentucky in violation of Kentucky
law. Trans-Star requested the Cabinet commence show cause
proceedings against Jan-Care based on its amended complaint
in the federal action. Jan-Care moved to dismiss the show
cause proceedings to which Trans-Star responded. In lieu of a
hearing, the hearing officer entered a recommended order in
favor of granting Jan-Care's motion to dismiss based on
federal preemption. Specifically, the hearing officer found
the VA runs under the contract were not subject to Kentucky
CON laws. Trans-Star filed exceptions to the recommended
order to which Jan-Care responded. The Cabinet remanded the
matter for further proceedings to conduct a hearing and take
evidence to more fully develop the record to allow it to
determine whether preemption applied.
show cause hearing took place on September 29 and 30, 2016,
with both parties presenting witnesses and documents.
Thereafter, the hearing officer entered his second
recommended order finding that the language of the 2005
contemplates that the VA contractor will be licensed to
provide ambulance services in the areas covered by the
contract. Therefore rendering any argument that the VA
Contract preempts Kentucky CON and licensing laws moot. Even
if the VA Contract were to preempt Kentucky CON and licensing
laws, the VA contract itself requires licensing in the
covered areas; a license which Jan-Care does not possess. As
a result Jan-Care has failed to meet their burden of proof
that they are not ...