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Surgical Care Affiliates, LLC v. North Carolina Industrial Commission

Court of Appeals of North Carolina

November 21, 2017

SURGICAL CARE AFFILIATES, LLC, Petitioner,
v.
NORTH CAROLINA INDUSTRIAL COMMISSION, Respondent.

          Heard in the Court of Appeals 22 August 2017.

         Appeal by respondent from decision entered 9 August 2016 by Judge Paul C. Ridgeway in Wake County No. 16-CVS-600 Superior Court.

          Parker Poe Adams & Bernstein LLP, by Renee J. Montgomery and Matthew W. Wolfe, for petitioner-appellee.

          Attorney General Joshua H. Stein, by Special Deputy Attorney General Amar Majmundar and Assistant Attorney General Bethany A. Burgon, for respondent-appellant.

          Wyrick Robbins Yates & Ponton LLP, by Frank Kirschbaum, Charles George, and Tobias Hampson, for Greensboro Orthopaedics, P.A., OrthoCarolina, P.A., Raleigh Orthopaedic Clinic, P.A., Surgical Center of Greensboro, LLC, Southeastern Orthopaedic Specialists, P.A., Orthopaedic & Hand Specialists, P.A. (Hand Center of Greensboro), Cary Orthopaedic and Sports Medicine Specialists, P.A., and Stephen D. Lucey, M.D., as amici curiae in support of petitioner-appellee.

          Troutman Sanders LLP, by Christopher G. Browning, Jr. and Gavin B. Parsons, for North Carolina Retail Merchants Association, North Carolina Home Builders Association, North Carolina Chamber, North Carolina Farm Bureau, North Carolina Association of Self-Insurers, American Insurance Association, Property Casualty Insurers Association of America, Employers Coalition of North Carolina, North Carolina Forestry Association, North Carolina Automobile Dealers Association, North Carolina Association of County Commissioners, Builders Mutual Insurance Company, Dealers Choice Mutual Insurance Company, First Benefits Insurance Mutual, Inc., Forestry Mutual Insurance Company and the North Carolina Interlocal Risk Management Agency, and P. Andrew Ellen for North Carolina Retail Merchants Association, J. Michael Carpenter for North Carolina Home Builders Association, Amy Y. Bason for the North Carolina Association of County Commissioners, Kimberly S. Hibbard and Gregg F. Schwitzgebel, III, for North Carolina Interlocal Risk Management Agency, T. John Policastro for North Carolina Auto Dealers Association, and H. Julian Philpott, Jr., for North Carolina Farm Bureau, as amici curiae in support of respondent-appellant.

          BRYANT, JUDGE.

         Because we hold the Superior Court erred in defining the term "hospital, " as used in the context of 2013 N.C. Sess. Laws ch. 410, § 33. (a) and concluding that "hospitals are separate and legally distinct entities from ambulatory surgical centers, " we reverse the court's decision that our General Assembly did not authorize the Industrial Commission to adopt new maximum fees for ambulatory surgical centers pursuant to 2013 N.C. Sess. Laws ch. 410, § 33. (a) and remand the matter for entry of an order affirming the Commission's declaratory ruling.

         On 1 October 2015, petitioner Surgical Care Affiliates, LLC, ("petitioner") filed a request for a declaratory ruling with respondent, the North Carolina Industrial Commission ("the Commission").

[Petitioner] has requested a declaratory ruling regarding the validity of certain of the Commission's rules affecting the fee schedule for services performed at ambulatory surgery centers. Specifically, [petitioner] has requested that the Commission declare invalid its adoption of a new fee schedule for ambulatory surgery center services set forth in 04 NCAC 10J .0103(g) and (h) (also referenced in 04 NCAC 10J .0103(i)), and its amendment of 04 NCAC 10J .0101(d)(3) and (5) to remove the former fee schedule.

         On 25 July 2013, our General Assembly ratified 2013 N.C. Sess. Laws ch. 410, § 33. (a), which set out mandates for the Commission regarding its medical fee schedule. The Commission noted in its 14 December 2015 Declaratory Ruling that "[w]ith respect to the schedule of maximum fees for physician and hospital compensation adopted by [the Commission] pursuant to G.S. 97-26, those fee schedules shall be based on the applicable Medicare payment methodologies." (Emphasis added). Furthermore, the Commission noted that in developing the new fee schedules, 2013 N.C. Sess. Laws ch. 410, § 33. (a) provided that "[the Commission was] exempt from the certification requirement of G.S. 150B-19.1(h) and the fiscal note requirement of G.S. 150B-21.4."

         Addressing the new mandate, the Commission adopted rules 04 NCAC 10J .0102 and .0103 and amended rules 04 NCAC 10J .0101 and .0102. Under Rule 04 NCAC 10J .0101, the Commission set out its "Hospital Fee Schedule, " which included reimbursement for services provided by ambulatory surgery centers. Further, the Commission reasoned that by following the procedures for rulemaking, as set out in General Statutes, Chapter 150B, a rebuttable presumption was created that the rules were adopted in accordance with the Administrative Procedure Act.

         Petitioner challenged the Commission's determination that the mandates set out in 2013 N.C. Sess. Laws ch. 410, § 33. (a), "[w]ith respect to the schedule . . . for physician and hospital compensation" (emphasis added), directed the Commission to change the fee schedule for medical treatment provided at ambulatory surgery centers.[1] Furthermore, petitioner challenged the assertion that the session law's exemption from the fiscal note requirement of N.C. Gen. Stat. § 150B-21.4 was applicable to the Commission. Thus, petitioner argued that the adopted new rules (04 NCAC 10J .0102 and .0103) and the amended existing rules (04 NCAC 10J .0101 and .0102) were also invalid due to the Commission's failure to meet the fiscal note requirements of section 150B-21.4. Petitioner asserts that "as a result of substantially reduced maximum reimbursement rates for surgical procedures provided pursuant to Chapter 97, and the Commission's failure to promulgate a fee schedule that includes all surgical procedures performed at ambulatory surgery centers, [petitioner] will lose a significant amount of revenue."

         However, as reflected in its declaratory ruling, the Commission reasoned that petitioner failed to rebut the presumption of validity regarding the Commission's adopted and amended rules and denied petitioner's requested relief.

         On 13 January 2016, petitioner filed a petition for judicial review of the Commission's declaratory ruling in Wake County Superior Court. Prior to the hearing, the following parties, Greensboro Orthopedics, P.A.; OrthoCarolina, P.A.; Raleigh Orthopaedic Clinic, P.A.; Surgical Center of Greensboro, LLC; Southeastern Orthopaedic Specialists, P.A.; Orthopaedic & Hand Specialists, P.A.; Cary Orthopaedic and Sports Medicine Specialists, P.A.; and Stephen D. Lucey, filed a motion to ...


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