Hope-A Women's Cancer Center, P.A. v. North Carolina Department of Health & Human Services

Citations: 691 S.E.2d 421; 203 N.C. App. 276; 2010 N.C. App. LEXIS 540Docket: COA08-1548

Court: Court of Appeals of North Carolina; April 6, 2010; North Carolina; State Appellate Court

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Hope-A Women's Cancer Center, P.A. (Hope) challenges a ruling from the North Carolina Department of Health and Human Services (DHHS) which determined that Hope's proposed Services Agreement with an out-of-state corporation to provide diagnostic and radiation oncology services would qualify as a 'new institutional health service' under N.C. Gen. Stat. 131E-176(16). Consequently, Hope must obtain a certificate of need (CON) for the project. Hope, located in Asheville, specializes in cancer diagnosis and treatment for women and sought a declaratory ruling to avoid the CON requirement. The proposed Services Agreement would involve the use of a linear accelerator, a dual-use PET scanner with CT capability, and an MRI scanner, along with necessary personnel, ancillary equipment, and maintenance. The Court of Appeals of North Carolina affirmed the DHHS ruling, obligating Hope to secure the CON.

The Services Agreement stipulates that the Provider assumes the risk of loss or damage to the Equipment and is responsible for insuring it, as well as for any associated property taxes. The Agreement does not mandate the provision of specific units of Equipment; rather, the Provider can select and substitute Equipment as needed, provided it meets the specified requirements. Hope is not permitted to acquire any ownership interest in the Equipment. In November 2007, Hope sought a declaratory ruling to confirm that its proposed project and entry into the Services Agreement did not qualify as a "new institutional health service" under N.C. Gen. Stat. 131E-176(16), thus not necessitating a Certificate of Need (CON). This request faced opposition from various healthcare organizations, while the North Carolina Medical Society supported Hope. On January 16, 2008, the Department of Health and Human Services (DHHS) denied Hope's request. Subsequently, in February 2008, Hope sought judicial review in Wake County Superior Court, invoking several statutory provisions. Multiple healthcare entities filed motions to intervene, which were granted, allowing them to participate fully in the case. In June 2008, the court upheld the DHHS ruling, leading Hope to appeal, arguing that its project should not be classified as a "new institutional health service" under the relevant statute, a position the court ultimately disagreed with.

The standard of review for administrative decisions involves assessing the superior court's order for legal errors, focusing on whether the appropriate scope of review was applied and if it was done correctly. The type of error claimed by the appellant influences the scope of review; if the claim is an error of law, a de novo review is conducted. The trial court, in this case, reviewed the Department of Health and Human Services' (DHHS) declaratory ruling de novo, indicating the correct standard was applied. 

The General Assembly mandates that no new institutional health service may be developed without obtaining a certificate of need (CON) from the Department, as stated in N.C. Gen. Stat. 131E-178. The definition of 'new institutional health services' is provided in N.C. Gen. Stat. 131E-176(16). Hope argues that four specific subsections of this statute apply to the project, but contends that none are applicable due to the characteristics of the Services Agreement. The relevant subsections discussed include those related to capital expenditures exceeding $2 million for health services, acquisition of major medical equipment, and the provision of mobile medical equipment not previously in use in North Carolina. The purpose of the CON law is to regulate the construction of healthcare facilities to meet public needs efficiently.

If Hope's proposed project qualifies as a 'new institutional health service' under any part of N.C. Gen. Stat. 131E-176(16), a Certificate of Need (CON) is necessary. The relevance of the project not fitting under other definitions is immaterial; any applicable definition mandates a CON. Hope's Services Agreement lacked sufficient detail for a declaratory ruling, leading to arguments that the Department of Health and Human Services (DHHS) could not make factual findings in this context. Nonetheless, DHHS concluded that the project, as described, would violate CON law. The definition most relevant to Hope's proposal is found in N.C. Gen. Stat. 131E-176(16)(f1), which includes the acquisition of certain medical equipment such as linear accelerators and MRI scanners. DHHS determined that the arrangement with the out-of-state provider constituted a comparable acquisition requiring a CON, despite Hope's claim that it would not own the equipment. Hope’s interpretation of the agreement's nature was rejected, with the ruling emphasizing that clear statutory language must be applied as is, without judicial construction unless ambiguity exists.

Statutory construction principles apply only when a statute's meaning is ambiguous. The interpretation of the statute by the relevant agency is given significant deference. In this context, the term 'acquisition' as defined in N.C. Gen. Stat. 131E-176(16)(f1) can occur through various means, including leasing or similar arrangements. According to BLACK'S LAW DICTIONARY, 'acquisition' involves gaining possession or control. Hope's Services Agreement meets this definition as it allows Hope to possess and use equipment to benefit its patients. Although Hope may not own the equipment outright, its control and use for service provision qualify as an 'acquisition.' This classification aligns with the Certificate of Need (CON) law's objective to regulate health service costs and distribution, ensuring that new institutional health services are necessary and efficient. The Department of Health and Human Services (DHHS) correctly interpreted the statute, concluding that using the equipment under the Services Agreement constitutes a comparable arrangement. The trial court's affirmation of DHHS's ruling that Hope's proposal is an 'acquisition' under the CON law is upheld, rendering further examination of Hope's arguments about the Services Agreement's classification under other statutory provisions unnecessary.

Hope is required to obtain a Certificate of Need (CON) for its project under N.C. Gen. Stat. 131E-176(16)(f1), regardless of the Services Agreement's classification. Hope argues that the trial court incorrectly upheld the Department of Health and Human Services (DHHS) ruling, claiming it relied on additional, unaddressed bases for denial, undermining Hope's right to meaningful appellate review. The DHHS ruling acknowledged comments from various parties, termed "Commentators," who opposed Hope's request and provided legal arguments for denial, which were considered by DHHS. The ruling clarified that any additional bases for denial were due to the merit of the Commentators' arguments rather than an oversight. DHHS followed proper procedures under N.C. Admin. Code tit. 10A, r. 14A.0103, which allows for the solicitation of comments from affected parties. Hope did not object to the participation or comments of the Commentators during the DHHS proceedings or in its judicial review petition, except to claim bias in DHHS's solicitation of opposing comments. As a result, the only preserved appellate issue is Hope's objection regarding the alleged selective solicitation of comments, as per N.C.R.App. P. Rule 10(a), which requires a ruling request from the trial court to preserve a question for appeal.

In Bio-Medical Applications of N.C. Inc. v. N.C. Dep't of Health, Human Servs., the court examined whether the North Carolina Department of Health and Human Services (DHHS) followed lawful procedures in denying Hope's request for a declaratory ruling. Rule 14A.0103(g) permits DHHS to notify potentially affected persons for comments, which Hope acknowledged was properly done. Hope did not successfully argue that DHHS's consideration of comments constituted unlawful procedure, nor did it show impropriety in DHHS's communications. 

Hope contested that the ruling improperly referenced "additional bases" for denial related to Intervenors' arguments without detailing them, claiming this incorporated 416 pages of opposition against Hope's request. The court disagreed, stating that DHHS's ruling correctly outlined the legal bases for denial and addressed Hope's arguments regarding definitions of "new institutional health services." The ruling indicated DHHS considered the comments but did not adopt any specific legal argument from the Commentators.

Lastly, Hope argued against the trial court's denial of attorney's fees, claiming DHHS acted without substantial justification. However, the court found no merit in this argument, asserting that under N.C. Gen. Stat. 6-19.1, an award of attorney's fees requires both a finding of lack of substantial justification by the agency and no special circumstances that would render such an award unjust. The court upheld the trial court’s decision.

G.S. 6-19.1 can only be invoked by a party to recover attorney's fees if that party is determined to be the prevailing party, as established in House v. Hillhaven, Inc. Since Hope was not the prevailing party in this case, its argument is rejected, resulting in the overruling of this assignment of error. Consequently, the court affirms the decision. Judges WYNN and STROUD concur in this affirmation. Additionally, the term 'project' is used informally in reference to Hope's petition for judicial review and does not align with the specific definition in N.C. Gen. Stat. 131E-176(20), which pertains to capital expenditures for new institutional health services. Hope's inquiry centered on whether its proposed undertaking qualified as a 'new institutional health service,' and the informal use of 'project' avoids presuming the answer. Furthermore, Hope cites Mission Hosps. Inc. v. N.C. Dept. of Health, Human Services, where the court found that ex parte communications during the preparation of a Final Agency Decision constituted a legal error, but such communications were clearly evident in that case's record.