On March 2, 2012, the Alabama Supreme Court announced a decision that will provide essential guidance as to when the Physician Office Exemption (“POE”) applies under Alabama’s Certificate of Need (“CON”) rules and regulations. In Ex parte Sacred Heart Health System, Inc. (in re: “Infirmary Health System and South Baldwin Regional Medical Center v. Sacred Heart Health System, Inc.”), the court crafted a new five-part test, referred to as “the POE Application Test,” which, according to the court, provides “an objective standard that can be used to determine whether the POE applies to any medical practice, whether the practice is solo or group, large or small, specialized or general.”

The case arose when Infirmary Health System and South Baldwin Regional Medical Center filed an action seeking a declaratory ruling that Sacred Heart Health System was required to obtain a certificate of need in order to develop a medical building that would accommodate physician offices, an outpatient surgery center, a diagnostic center, a laboratory, and a rehabilitation center. (The surgery center and rehabilitation center were later dropped from the project.)

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