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Cumberland County Hosp. Sys., Inc. v. NC Department of Health and Human Services

Court of Appeals of North Carolina

November 4, 2014

CUMBERLAND COUNTY HOSPITAL SYSTEM, INC. d/b/a CAPE FEAR VALLEY HEALTH SYSTEM, Petitioner,
v.
NC DEPARTMENT OF HEALTH AND HUMAN SERVICES, DIVISION OF HEALTH SERVICE REGULATION, CERTIFICATE OF NEED SECTION, Respondent, and FIRSTHEALTH OF THE CAROLINAS, INC., Respondent-Intervenor

Heard in the Court of Appeals August 14, 2014

K& L Gates LLP, bye Gary S. Qualls, Susan K. Hackney and Steven G. Pine for petitioner-appellant.

Nelson Mullins Riley & Scarborough LLP, by Noah H. Huffstetler, III, Denise M. Gunter, and Candace S. Friel, for respondent/intervenor-appellee FirstHealth.

Attorney General Roy Cooper, by Special Deputy Attorney General June S. Ferrell and Assistant Attorney General Scott T. Stroud for respondent-appellee DHHS.

STEELMAN, Judge. Judges GEER and STROUD concur.

Page 492

Appeal by petitioner from Final Decision entered 17 September 2013 by Administrative Law Judge Beecher R. Gray, NC Department of Health and Human Services 12 DHR 12094.

OPINION

STEELMAN, Judge.

N.C. Gen. Stat. § 131E-188(a) does not prevent an administrative law judge from entering summary judgment in a contested case challenging a CON decision. Summary judgment was properly entered for respondents because petitioner failed to demonstrate that approval of the CON substantially prejudiced its rights.

I. Factual and Procedural Background

Respondent-intervenor FirstHealth of the Carolinas, Inc. d/b/a FirstHealth Moore Regional

Page 493

Hospital (FirstHealth) operates FirstHealth Moore Regional Hospital (FirstHealth Moore) in Moore County. In 2010 FirstHealth filed an application for a Certificate of Need (CON) to develop FirstHealth Hoke Community Hospital (FirstHealth Hoke) in Raeford, Hoke County, with eight acute care beds and one operating room (OR). At that time Hoke County was included in two service areas in the State Medical Facilities Plan (SMFP): the Moore/Hoke service area and the Cumberland/Hoke service area. Although there are several multi-county service areas, this was the only instance of a county being included in two service areas. In December 2012 Hoke County became a separate service area and the joint Moore/Hoke and Cumberland/Hoke service areas were eliminated. In April 2012, respondent North Carolina Department of Health and Services, Division of Health Service Regulation, Certificate of Need Section (DHHS), granted FirstHealth's application for a CON to develop FirstHealth Hoke.

On 15 June 2012, FirstHealth and petitioner Cumberland County Hospital System, Inc. d/b/a/ Cape Fear Valley Medical Center (Cape Fear) each filed CON applications to provide 28 acute care beds in the Cumberland/Hoke service area in accordance with the 2012 SMFP. Cape Fear's 28-Bed application proposed to add 28 acute care beds to its existing hospital in Fayetteville, and FirstHealth's 28-Bed application proposed to add 28 acute care beds to FirstHealth Hoke. These were competitive applications under 10A N.C.A.C. 14C.0202(f) (" Applications are competitive if . . . the approval of one or more of the applications may result in the denial of another application reviewed in the same review period." ), because, under N.C. Gen. Stat. § 131E-183(a)(1) and the need determination in the 2012 SMFP, both 28-Beds applications could not be approved.

Also on 15 June 2012, FirstHealth submitted a CON application asking to relocate one of its ORs from FirstHealth Moore to FirstHealth Hoke, facilities that were both in the Moore/Hoke service area. The OR was pre-existing, and approval of FirstHealth's OR application would not cause the disapproval of any other CON applications. DHHS determined that it was a noncompetitive application under 10A N.C.A.C. 14C.0202(f).

On 27 November 2012 DHHS approved FirstHealth's 28-Bed application and its OR application, and denied Cape Fear's 28-Bed application. On 21 December 2012 Cape Fear filed petitions for contested case hearings to challenge DHHS's approval of FirstHealth's OR CON application and its decision to approve FirstHealth's 28-Bed application while denying Cape Fear's 28-Bed application.

On 25 February 2013 the Administrative Law Judge (ALJ) consolidated Cape Fear's petitions for contested case hearings in the 28-Bed and OR cases. Cape Fear's appeal from the decision of the ALJ in the 28-Bed case is currently pending before this Court, and the present appeal involves only FirstHealth's OR application.

On 17 May 2013 Cape Fear filed a motion for partial summary judgment in both cases, and FirstHealth and DHHS filed a joint motion for summary judgment in the OR case. FirstHealth and DHHS asserted that there were no genuine issues of material fact and that they were entitled to summary judgment on the grounds that Cape Fear could not demonstrate that its rights were substantially prejudiced by DHHS's decision to approve the OR application. ALJ Gray conducted a hearing on the parties' summary judgment motions on 31 May 2013. On 17 September 2013 ALJ Gray filed a Final Agency Decision granting summary judgment in favor of FirstHealth and DHHS with respect to Cape Fear's petition for a contested case hearing in the OR case. The ALJ ruled that FirstHealth and DHHS were entitled to summary judgment because Cape Fear had not shown that approval of FirstHealth's OR CON had substantially prejudiced its rights.

Cape Fear appeals.

II. Unconditional Right to Contested Case Hearing

In its first argument, Cape Fear contends that the ALJ erred by granting summary judgment in favor of FirstHealth, on the grounds that it " is entitled to a full contested

Page 494

case hearing, pursuant to N.C. Gen. Stat. § 131E-188, to prove that it was substantially prejudiced." Cape Fear contends that N.C. Gen. Stat. § 131E-188 " guarantees" it a " full contested case hearing." We disagree.

A. Standard of Review

N.C. Gen. Stat. § 150B-51 governs our review of the ALJ's decision and provides in pertinent part that:

. . .
(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 ...

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