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1. Administrative Law--certificate of need--standard of review by trial court
The trial court applied the correct standards of review when considering a petitioner's
contention that a declaratory agency ruling was affected by an error of law and was arbitrary and
capricious in that the court applied a de novo standard to the contention that the ruling was
affected by an error of law, and considered the agency record in determining that there was no
rational basis for the ruling.
2. Hospitals and Other Medical Facilities--ambulatory surgical facility--certificate of
need--second site
The trial court correctly reversed the Department of Health & Human Services ruling
requiring petitioner to obtain a new certificate of need before developing ambulatory surgical
facilities at a second site within its service area. The relocation and expansion of a portion of
petitioner's ambulatory surgical program to a second location within the service area for which
petitioner already holds a certificate of need does not fall within the definition of a “new
institutional health service” as contained in N.C.G.S. § 131E-176(16) and does not require a
second certificate of need. The statutes governing licensure of ambulatory surgical facilities and
those governing certificates of need for new institutional health services are independent
provisions and petitioner is not required to obtain a separate certificate of need because it must
obtain a separate license.
Parker, Poe, Adams & Bernstein, L.L.P., by Renee J. Montgomery
and Russell B. Killen, for petitioner-appellee.
Attorney General Michael F. Easley, by Assistant Attorney
General Melissa L. Trippe, for respondent-appellant.
MARTIN, Judge.
Petitioner, Christenbury Surgical Center (the “Center”), is a
licensed multi-specialty ambulatory surgical facility located at
449 North Wendover Road, Charlotte, North Carolina, and received a
Certificate of Need to develop and operate a multi-specialty
ambulatory surgical facility in 1992. On 6 October 1998, theCenter filed a Request For Declaratory Ruling from the Division of
Facility Services of the Department of Health and Human Services
(the “Department”) requesting a ruling that the Center “can operate
in more than one location under one license and that the location
of some of its operating rooms and ancillary space at a second site
within its service area does not require a Certificate of Need.”
As applicable to this appeal, the Request for Declaratory Ruling
required that the Department apply the provisions of G.S. Chapter
131E, Article 9 (Certificate of Need) to the following facts:
Christenbury Surgery Center proposes to
develop additional operating rooms, a recovery
room, and necessary ancillary space by leasing
space at a location in Charlotte different
from the location of its main facility on
North Wendover Drive in Charlotte. The use of
this additional space at a different location
is necessary because there is insufficient
space on North Wendover Drive for the
facility's needed expansion and relocation of
the entire facility would be too expensive. .
. .
The additional space that The Center
proposes to lease for use of its facility will
be located in Charlotte and will be operated
as part of Christenbury Surgery Center. The
cost of expanding into this additional space
will be less than $2 million and will not
involve the acquisition of major medical
equipment.
The two locations will be operated as one
ambulatory surgical center, with the same
ownership and administration, policies and
procedures, accounting system, and billing
system. The administrator of the Center will
be responsible for both locations, and
employees at both locations will be employeesof the Center. The roster of medical
personnel having surgical and anesthesia
privileges at the Center will be the same at
both locations. The nursing department will
be under the supervision of one director of
nursing and at least one registered nurse will
be at each location during the hours it is in
operation. Each location will meet all
requirements of 10 N.C.A.C. 3Q.1400, et seq.
Regarding physical plant requirements. Both
locations will provide the necessary equipment
and trained personnel to handle emergencies.
The quality assurance committee for the
facility will be the same at both locations.
The Department issued its Declaratory Ruling requiring the
Center to obtain (1) a separate license for each location at whichit offered an ambulatory surgical program, and (2) a certificate of
need before it developed additional operating room, recovery room,
and ancillary space at a second site within its service area. The
Center petitioned for judicial review of the Department's
Declaratory Ruling, contending the Department's ruling was contrary
to law, in excess of its statutory authority, and arbitrary and
capricious.
Upon review, the superior court affirmed the Department's
ruling that the Center must obtain a separate license for each
location at which it operates an ambulatory surgical program, but
ruled that the Department had exceeded its statutory authority, had
erred as a matter of law, and had acted arbitrarily and
capriciously in ruling that the Center must obtain a certificate of
need before it develops additional facilities at a second site
within its service area. The superior court reversed the
Department's Declaratory Ruling requiring the Center to obtain a
new certificate of need before developing the second site. The
Department appeals.
[1]An appellate court's review of a superior court order regarding an administrative decision consists of examining the superior court order for errors of law; i.e. determining first whether the superior court utilized the appropriate scope of review and, second, whether it did so correctly. In re Declaratory Ruling by North Carolina Com'r of Ins., 134 N.C. App. 22, 517 S.E.2d 134, disc. review denied, 351 N.C. 105, ___ S.E.2d ___ (1999) (citing Act-Up Triangle v. Com'n for Health Service, 345 N.C. 699, 483 S.E.2d 388 (1997)). The nature of the error asserted by the party seeking review of the agency decision dictates the proper scope of review. If the party asserts the agency's decision was affected by a legal error, de novo review is required; if the party seeking review contends the agency decision was not supported by the evidence, or was arbitrary or capricious, the whole record test is applied. Id. Where the issue raised is one of statutory interpretation, the reviewing court is not bound by the agency's interpretation of the statute, although some deference is traditionally afforded the agency interpretation. Brooks v. McWhirter Grading Co., Inc., 303 N.C. 573, 281 S.E.2d 24 (1981).
In this case, the Center alleged both that the Department's decision was affected by error of law, G.S. § 150B-51(b)(2)&(4), and that it was arbitrary and capricious, G.S. § 150B-51(b)(6). The superior court's decision indicated that the court applied a de novo standard of review in considering the Center's contention that the declaratory ruling was affected by error of law and was in excess of the Department's statutory authority, and that it considered the agency record in determining that there was no rational basis for the Department's ruling so that it was arbitrary and capricious. Thus, we conclude the superior court utilized the correct standards of review.
[2]Initially, we review the superior court's determination that the Department exceeded its statutory authority and erred as a matter of law when it declared that the Center would be required to obtain a new certificate of need to utilize additional space for an ambulatory surgical center at a second location within its service area. G.S. § 131E-178(a) provides, in pertinent part: “[n]o person shall offer or develop a new institutional health service without first obtaining a certificate of need from the Department . . . ” (emphasis added). As relevant to this case, the term “new institutional health service” is defined by G.S. § 131E-176(16) to include “[t]he construction, development, or other establishment of a new health service facility,” N.C. Gen. Stat. § 131-176(16)(a); “[t]he obligation by any person of a capital expenditure exceeding two million dollars ($2,000,000) to develop or expand a health service or a health service facility, or which relates to the provision of a health service,” N.C. Gen. Stat. § 131E-176(16)(b); and “[t]he acquisition by purchase, donation, lease, transfer, or comparable arrangement by any person of majormedical equipment,” N.C. Gen. Stat. § 131E-176(16)(p).
The relocation and expansion of a portion of its ambulatory surgical program to a second location within the service area for which the Center already holds a certificate of need does not fall within the definition of a “new institutional health service” as contained in G.S. § 131E-176(16). The Center already operates an ambulatory surgical program at its principal location on North Wendover Road in Charlotte; the second site will continue to be operated as a part of the Center with the same ownership, administrative organization, and utilizing the same professional policies and personnel. As proposed by the Center in its Request for Declaratory Ruling, the development of the additional space would cost less than two million dollars and would not involve the acquisition of major medical equipment as defined by G.S. § 131E- 176(14)(f). Thus, the Center's proposal is not a “new institutional health service” requiring a certificate of need, rather it is an expansion of an existing health service facility within the limitations permitted by the statutes which does not require a second certificate of need.
The Department contends, however, that the Ambulatory Surgical Facility Licensure Act, G.S. § 131E-145 et seq., and the certificate of need statute, G.S. § 131E-175 et seq., must be construed together. Thus, it contends, because the Center must obtain a separate license, pursuant to G.S. § 131E-147(d), to operate an ambulatory surgical facility at the second site, it must also obtain a separate certificate of need. We disagree. Thestatutes governing licensure of ambulatory surgical facilities and those governing certificates of need for new institutional health services are independent provisions; we find no provision in the certificate of need law which would indicate a legislative intent to make the requirement for a certificate of need dependent upon the requirement for a license. Indeed, the certificate of need law, as applicable to this case, requires a certificate of need for “new health services” or “health service facilities” as defined by G.S. § 131E-176(16), while the licensure statute requires licensure for “premises and persons.” N.C. Gen. Stat. § 131E-147(d)&(e).
Therefore, we agree with the superior court that the Department exceeded its statutory authority and erred as a matter of law in ruling that the Center is required to obtain a separate certificate of need to develop additional operating rooms, a recovery room, and necessary ancillary space at a second site within the service area for which it already holds a certificate of need.
The superior court also determined that the Department's declaratory ruling “indicated a lack of fair and careful consideration” and was, therefore, arbitrary and capricious because it was directly contrary to an earlier declaratory ruling by the Department in which it determined that a proposal by Forsyth Memorial Hospital to relocate a portion of its ambulatory surgical facility in Winston-Salem to a second site in Kernersville did not require an additional certificate of need. In view of our decision that the Department's declaratory ruling in this case was affectedby error of law and in excess of its statutory authority, we need not determine whether such declaratory ruling was also arbitrary and capricious.
The decision of the superior court reversing the Department's declaratory ruling requiring the Center to obtain an additional certificate of need for the proposed expansion of its ambulatory surgical facility is affirmed.
Affirmed.
Judges LEWIS and WALKER concur.
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