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Surgical Care Affiliates, LLC v. N.C. Department of Health & Human Sevices

Court of Appeals of North Carolina

August 19, 2014

SURGICAL CARE AFFILIATES, LLC and BLUE RIDGE DAY SURGERY CENTER, L.P., Petitioners,
v.
N.C. DEPARTMENT OF HEALTH AND HUMAN SERVICES, DIVISION OF HEALTH SERVICE REGULATION, CERTIFICATE OF NEED SECTION, Respondent, and WAKEMED, Respondent-Intervenor

 Heard in the Court of Appeals April 23, 2014

Editorial Note:

This Decision is not final until expiration of the twenty-one day rehearing period. [North Carolina Rules of Appellate Procedure 32(b)]

Office of Administrative Hearings. No. 12 DHR 09678.

Nexsen Pruet, PLLC, by Frank S. KirschbaumMr., Robert A. HamillMr., and Rachael Lewis AnnaMr., for Petitioners.

Attorney General Roy Cooper, by Special Deputy Attorney General June S. FerrellMr., for Respondent.

Smith Moore Leatherwood LLP, by Maureen Demarest MurrayMr., Terrill Johnson HarrisMr., and Carrie A. HangerMr. for Respondent-Intervenor.

STEPHENS, Judge. Judges ROBERT N. HUNTER, JR., and ERVIN concur.

OPINION

Appeal by Petitioners from Final Decision entered 23 July 2013 by Judge Eugene J. Cella in the Office of Administrative Hearings. Heard in the Court of Appeals 23 April 2014.

STEPHENS, Judge.

Background

This case involves the proposed relocation of two specialty ambulatory operating rooms from Southern Eye Ophthalmic Surgery Center (" Southern Eye" )[1] to the WakeMed health care system's Raleigh Campus, where the operating rooms would be used as " shared operating rooms" for inpatients and outpatients. WakeMed is a nonprofit corporation that owns and operates multiple health care facilities in the Triangle region of North Carolina. WakeMed purchased Southern Eye on 10 May 2012 with the intention of relocating its operating rooms to WakeMed Raleigh. Petitioners Surgical Care Affiliates, LLC (" SCA" ) and Blue Ridge Day Surgery Center, L.P. (" Blue Ridge" )[2] operate a multispecialty ambulatory surgical facility in Raleigh,[3] are direct competitors with WakeMed, and contest the proposed relocation of these rooms.

WakeMed filed a certificate of need (" CON" ) application with the North Carolina Department of Health and Human Services (" the Agency" ) on 16 April 2012, officially proposing to move the two operating rooms to its Raleigh Campus. The Agency conditionally granted that application on 27 September 2012. Following the Agency's decision, SCA and Blue Ridge petitioned for a contested case hearing to challenge the decision. [4] An administrative law judge with the Office of Administrative Hearings (" the ALJ" ) heard the matter beginning 15 April 2013 and affirmed the Agency's decision on 23 July 2013 by final decision. Petitioners appeal from the ALJ's final decision.

Discussion

On appeal, Petitioners argue that the ALJ erred in affirming the Agency's decision because (1) the Agency failed to apply certain agency-created regulations, referred to by Petitioners as " the conversion rules," to WakeMed's CON application and (2) this failure " substantially prejudice[d] [Petitioners'] rights." We affirm the decision of the ALJ on the issue of substantial prejudice and, therefore, do not reach the issue of the application of the conversion rules.

I. Standard of Review

" In cases appealed from administrative tribunals, we review questions of law de novo and questions of fact under the whole record test." Diaz v. Div. of Soc. Servs., 360 N.C. 384, 386, 628 S.E.2d 1, 2 (2006) (citation omitted). Pursuant to section 150B-51 of the North Carolina General Statutes:

(b) The court reviewing a final decision may affirm the decision or remand the case for further proceedings. It may also reverse or modify the decision if the substantial rights of the petitioners may have been prejudiced because the findings, inferences, conclusions, or decisions are:
(1) In violation of constitutional provisions;
(2) In excess of the statutory authority or jurisdiction of the agency or administrative law judge;
(3) Made upon unlawful procedure;
(4) Affected by other error of law;
(5) Unsupported by substantial evidence admissible under [sections] 150B-29(a), 150B-30, or 150B-31 in view of the entire record as submitted; or
(6) Arbitrary, capricious, or an abuse of discretion.
(c) In reviewing a final decision in a contested case, the court shall determine whether the petitioner is entitled to the relief sought in the petition based upon its review of the final decision and the official record. With regard to asserted errors pursuant to subdivisions (1) through (4) of subsection (b) . . ., the court shall conduct its review of the final decision using the de novo standard of review. With regard to asserted errors pursuant to subdivisions (5) and (6) of ...

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