Link to original WordPerfect file
Link to PDF file
How to access the above link?
All opinions are subject to modification and technical correction prior to official publication in the North Carolina Reports and North Carolina Court of Appeals Reports. In the event of discrepancies between the electronic version of an opinion and the print version appearing in the North Carolina Reports and North Carolina Court of Appeals Reports, the latest print version is to be considered authoritative.
CAROLINAS MEDICAL CENTER, DUKE MEDICAL CENTER, FORSYTH MEMORIAL
HOSPITAL, HIGH POINT REGIONAL HOSPITAL, MISSION-ST JOSEPH'S
HEALTH SYSTEM, INC., MOSES H. CONE MEMORIAL HOSPITAL, THE NORTH
CAROLINA BAPTIST HOSPITALS, INC., UNIVERSITY HOSPITAL, WAKE
MEDICAL CENTER, and WESLEY LONG COMMUNITY HOSPITAL, Medical
Providers, Plaintiff-Appellants, v. EMPLOYERS AND CARRIERS LISTED
IN EXHIBIT A, Defendant-Appellees
Filed: 16 August 2005
Constitutional Law_administrative agency_no authority to declare statute unconstitutional
The North Carolina Industrial Commission is an administrative agency without authority
to declare statutes unconstitutional, and it erred by doing just that with a statutory revision of
N.C.G.S. § 97-26(b) concerning workers' compensation payments to hospitals. Other avenues
to challenge the constitutionality of the statute were not taken and there was no alternative basis
for supporting the Commission's ruling.
Judge WYNN concurring.
Appeal by defendants from opinion and award entered 16
February 2004 by a panel of the Full Commission of the North
Carolina Industrial Commission. Heard in the Court of Appeals 12
Ott Cone & Redpath, P.A., by Laurie S. Truesdell, Wendell H.
Ott, and Melanie M. Hamilton, for plaintiff-appellants.
Charles R. Hassell, Jr., Root and Root, P.L.L.C., by Allan P.
Root, Young Moore and Henderson P.A., by Dawn D. Raynor, for
The North Carolina Industrial Commission entered an order on
18 December 2003 declaring that the provisions of N.C. Gen. Stat.
§ 97-26(b) as they existed from 1 July 1995 to 1 April 1996 were
unconstitutional. We hold that the North Carolina Industrialcommission is without authority to declare statutes of the State
unconstitutional and vacate its order.
On 6 May 1994, the North Carolina Supreme Court filed its
decision in the Case of Charlotte-Mecklenburg Hosp. Auth. v. North
Carolina Indus. Comm'n, 336 N.C. 200, 443 S.E.2d 716 (1994),
declaring that the North Carolina Industrial Commission did not
have authority under N.C. Gen. Stat. § 97-26 to require hospitals
to accept payment for medical services on a per diem basis. In
response to the questions surrounding its authority to set hospital
rates leading up to the Charlotte-Mecklenburg decision, the
Industrial Commission sought additional authority from the North
Carolina General Assembly. The result of these efforts was an
amendment to N.C. Gen. Stat. § 97-26. Act of April 19, 1993, ch.
679, sec. 2.3, 1993 N.C. Sess. Laws 398. As amended N.C. Gen.
Stat. § 97-26(b), effective 1 October 1994, read as follows:
Hospital Fees. -- Payment for medical compensation rendered by a
hospital participating in the State Plan shall be equal to the
payment the hospital receives for the same treatment and services
under the State Plan.
At the time of this amendment to N.C. Gen. Stat. § 97-26(b),
the State Plan utilized a complex diagnostic related grouping-based
reimbursement system (DRG) to compute amounts due to hospitals for
treatment of patients under N.C. Gen. Stat. § 135-40.4. Hospitals
compute patient charges on a standard UB-92 form, which states the
amount that a patient is expected to pay for hospital services. However, under the DRG reimbursement system, the actual charges set
forth in the UB-92 form are modified, based upon how efficiently a
hospital provides services for patients. To the extent that a
patient is hospitalized for a shorter period of time, the DRG will
reward that hospital with a greater payment. Conversely, if the
patient is hospitalized for a greater period of time, that hospital
is penalized. The result of the DRG system is that for some
patients the hospital is reimbursed more than the UB-92 amount, and
in some cases, the hospital is reimbursed less than the UB-92
As the DRG system was implemented, the Administrator of the
Industrial Commission began to receive complaints from the worker's
compensation insurance carriers that the amount of payments
approved by the Industrial Commission was exceeding the amount
shown on the UB-92 forms. At some point, the Administrator
directed the Industrial Commission to stop approving payments to
hospitals in excess of the amounts shown on the UB-92 form. Prior
to this decision, a number of payments to hospitals were approved
by the Industrial Commission for an amount in excess of the amount
shown on form UB-92.
Plaintiffs are hospitals that provided services to workers
whose injuries were covered under the North Carolina Worker's
Compensation Act (Chapter 97 of the North Carolina General
Statutes). Defendants are the employers of the injured workers, or
their worker's compensation insurance carriers. The parties have
stipulated that all workers suffered injuries that were compensableunder Chapter 97, and received treatment from the hospitals for
those injuries. There was a further stipulation that in each case,
the Industrial Commission approved payment to the hospital in an
amount in excess of the amount shown on form UB-92. Finally,
defendants stipulated that they would not challenge that
the payment amount approved by the Industrial
commission is the amount the hospital would
have received under the DRG reimbursement
system as implemented by the administrators of
the State Health Plan for the services
described by the UB-92 claims form, if those
had been covered by the State Health Plan.
Defendants refused to pay the amounts approved by the
Industrial Commission in excess of the amounts shown on form UB-92.
Plaintiffs sought payment for the full amount approved by the
Industrial Commission. A large number of cases, involving hospital
treatment provided between 1 July 1995 and 1 April 1996, were
consolidated for hearing before the Industrial Commission.
In the conclusions of law of its opinion and award, the
Industrial Commission ultimately concluded that the changes to
N.C. Gen. Stat. § 97-26 enacted in 1994 did not reasonably or
rationally relate to the purpose of the statute and were patently
unfair to the employers and their carriers who were subject to the
Worker's Compensation Act, [and therefore] the statute violated the
due process clause of the Constitution. U.S. CONST. amend. XIV;
16B Am Jur 2d, Constitutional Law § 912. The Commission based
this ultimate conclusion on additional conclusions of law in which
they determined that under the provisions of N.C. Gen. Stat. § 97-
26(b) they were required to authorize payments according to theState Health Plan, and that these mandated payments were
fundamentally unfair in that they were not directly related to the
actual cost of the care provided. They further concluded that the
system as mandated by statute included no adequate remedy to
address the individual situations where employers or their
insurance carriers were required under the system to pay out sums
which were not otherwise due as payment for relevant hospital
treatment and services[,] and therefore N.C. Gen. Stat. § 97-
26(b), as it was then written, deprived employers and their
carriers of property without due process of law.
The Commission ordered that plaintiff hospitals are not
entitled to receive the additional amounts approved by the
Industrial Commission over and above the actual hospital charges.
Commissioner Pamela T. Young dissented, asserting that the
Industrial Commission had no authority to determine the
constitutionality of acts of the General Assembly.
From this opinion and award, plaintiffs appeal, asserting that
the Industrial Commission lacked authority to declare an act of the
General Assembly unconstitutional, and erred in doing so.
Defendants purported to cross-appeal asserting additional bases
that would support the Commission's decision in favor of
Discussion of Legal Issues Presented
In plaintiffs' first argument they contend that the Full
Commission erred in ruling that it had the authority to decide the
constitutionality of former N.C. Gen. Stat. § 97-26(b). We agree. The Industrial Commission is not a court of general
jurisdiction, it is an administrative agency of the State, created
by statute. Hogan v. Cone Mills Corp., 315 N.C. 127, 137, 337
S.E.2d 477, 483 (1985). It is a
well-settled rule that a
statute's constitutionality shall be determined by the judiciary,
not an administrative board.
Meads v. North Carolina Dep't of
Agric., Food & Drug Protection Div., Pesticide Sec. (In re
Pesticide Bd. File Nos. IR94-128, IR94-151, IR94-155), 349 N.C.
656, 670, 509 S.E.2d 165, 174 (1998); see also State ex rel.
Utilities Comm'n v. Carolina Util. Customers Ass'n, 336 N.C. 657,
673-674, 446 S.E.2d 332, 341-342 (1994);
Gulf Oil Corp. v. Clayton,
267 N.C. 15, 20, 147 S.E.2d 522, 526 (1966)
; Great Am. Ins. Co. v.
Gold, 254 N.C. 168, 173, 118 S.E.2d 792, 796 (1961). The
Industrial Commission had no authority to pass on the
constitutionality of N.C. Gen. Stat. § 97-26(b)(1994).
We note that there were at least two avenues available to
defendants to properly challenge the constitutionality of the
statute in a lower tribunal. They could have brought an action
Uniform Declaratory Judgment Act, N.C. Gen. Stat. § 1-253
et seq. (2004).
Woodard v. Carteret County, 270 N.C. 55, 60, 153
S.E.2d 809, 813 (1967) (
A petition for a declaratory judgment is
particularly appropriate to determine the constitutionality of a
statute when the parties desire and the public need requires a
speedy determination of important public interests involved
Alternatively, pursuant to N.C. Gen.
the Industrial Commission of its own motion couldhave certified the question of the constitutionality of the statute
to this Court before making its final decision.
The Industrial Commission acknowledged this option in its
decision in Carter v. Flowers Baking Co., 1996 N.C. Wrk. Comp.
LEXIS 5284, in which it held that the Commission does not have the
authority to find that enactments of the Legislature are
unconstitutional[,] and that:
If the Commissioners feel strongly that a
statute is unconstitutional and that it would
clearly offend their oath to apply it, or that
applying it would cause irreparable prejudice,
or that the question would not otherwise be
reviewed in the courts, etc., the Commission
may certify questions of law to the Court of
Appeals for decision and determination
[pursuant to N.C. Gen. Stat. § 97-86], which
would operate as a supersedeas except as
provided in G.S. 97-86.1.
Id. at 11-12. The record in this matter contains no such
certification. Rather, the Industrial Commission chose, contrary
to its own prior decision and the established case law of this
state, to declare a statute passed by the General Assembly to be
The parties in their oral arguments before this Court
suggested that we proceed to decide the constitutional question,
even though it is not properly before us. It is not the role of
the appellate courts to render advisory opinions in matters that
are not properly before them. Wiggins v. Pyramid Life Ins. Co., 3
N.C. App. 476, 478, 165 S.E.2d 54, 56 (1969).
There has been no petition for certiorari filed in this case.
N.C. R. App. P. Rule 21. There has been no motion filed by anyparty requesting that we suspend the Rules of Appellate Procedure
under Rule 2 and treat the appeals of appellants and appellees as
a certification by the Industrial Commission under N.C. Gen. Stat.
§ 97-86. The record in this matter is devoid of any indication
that the parties requested that the Industrial Commission certify
the constitutional question to this Court.
N.C. Gen. Stat. § 97-96 allows this Court to consider
questions of law certified to it by the Industrial Commission. It
does not presume to allow this Court to certify matters to itself
for review and consideration. The provisions of Rule 2 are
discretionary, and cannot be used to confer jurisdiction upon this
Court in the absence of jurisdiction. Bromhal v. Stott, 116 N.C.
App. 250, 253, 447 S.E.2d 481, 483 (1994).
We decline to attempt to utilize Rule 2 to confer jurisdiction
upon this Court in the absence of a certification from the
Industrial Commission under N.C. Gen. Stat. § 97-86.
The Industrial Commission was completely without authority to
declare a statute enacted by the General Assembly unconstitutional.
Defendants' Cross-Assignments of Error
Defendants argue in cross-assignments of error (incorrectly
designated a cross-appeal) that there were alternative bases
supporting the Industrial Commission's opinion and award. We
First, defendants argue that N.C. Gen. Stat. § 97-26(b)(1994)
was unconstitutional for uncertainty and vagueness and was an
unlawful delegation of legislative power to an administrativeagency. Having held that the Commission was without authority to
determine the constitutionality of N.C. Gen. Stat. § 97-
26(b)(1994), we must also hold that this cross-assignment of error
is without merit.
Second, defendants argue that the legislation creating the
State Teachers' and Employees' Health Plan expressly prohibits
charges in excess of what hospital patients not covered by the Plan
would be required to pay[,] and that this, in turn, prohibits
charges assessed under N.C. Gen. Stat. § 97-26(b)(1994) from
exceeding those authorized for patients not covered by the Plan.
N.C. Gen. Stat. § 97-26(b)(1994) states: Hospital Fees. --
Payment for medical compensation rendered by a hospital
participating in the State Plan shall be equal to the payment the
hospital receives for the same treatment and services under the
State Plan. Defendants rely on N.C. Gen. Stat. § 135-40.7 (1996),
which outlines general limitations and exclusions for the State
Plan, and states:
The following shall in no event be considered
covered expenses nor will benefits described
in G.S. 135-40.5 through G.S. 135-40.11 be
(8) Charges for any services with respect to
which there is no legal obligation to pay. For
the purposes of this item, any charge which
exceeds the charge that would have been made
if a person were not covered under this Plan
shall, to the extent of such excess, be
treated as a charge for which there is no
legal obligation to pay . . . .
Defendants argue that because they were required to pay
amounts for services greater than that which people not coveredunder the Plan would have been required to pay, under N.C. Gen.
Stat. §135-40.7(8) they were only obligated for payments up to the
UB-92 amounts. However, N.C. Gen. Stat. § 135-40.4 (1996)
(emphasis added) states in relevant part:
Notwithstanding the provisions of this
, the Executive Administrator and Board
of Trustees of the Teachers' and State
Employees' Comprehensive Major Medical Plan
may contract with providers of institutional
and professional medical care and services to
established preferred provider networks. ...
The Executive Administrator and Board of
Trustees shall implement a refined
diagnostic-related grouping or
reimbursement system for hospitals as soon as
practicable, but no later than January 1,
(b) As used in this section the term
preferred provider contracts or networks
includes, but is not limited to, a refined
diagnostic-related grouping or
diagnostic-related grouping-based system of
reimbursement for hospitals.
This statute required the Plan to set up a DRG based system
for preferred providers. Defendants' interpretation of N.C. Gen.
Stat. § 135-40.7(8) would render N.C. Gen. Stat. § 135-40.4
inoperable. As Garry Bowman, who was qualified as an expert in
hospital charges and billing procedures, testified, UB-92 charges
for services in the hospital billing context do not necessarily
directly correspond with the amounts the hospitals are reimbursed
for those services. For this reason, charge is not synonymous
with payment in Chapter 135. Defendants were charged the same
amounts that would have been charged to individuals not covered by
the Plan (and not covered by N.C. Gen. Stat. § 97-26(b)(1994)),however they were then required to reimburse plaintiffs pursuant to
the negotiated rates under the Plan's DRG system. Though this
result may be unfair, it is authorized by Chapters 97 and 135.
N.C. Gen. Stat. § 135-40.7(8) provides defendants no relief.
Third, defendants argue this Court should hold that the
decision of Thomas Bolch, then Administrator of the North Carolina
Industrial Commission, to withhold approval of DRG bills submitted
to defendant payors was necessary to preserve the integrity and
proper functioning of the workers' compensation system.
This argument is nothing more than a restatement of
defendants' argument that N.C. Gen. Stat. § 97-26 was
unconstitutional, because it violated due process. As previously
discussed, this argument is not properly before this Court. In
addition, to adopt this argument would require us to sanction
Administrator Bolch's decision to deliberately violate an act of
the General Assembly. This we refuse to do. Finally, this
argument is premised upon the fallacious assumption that the bills
in question were not approved by the Industrial Commission
following Administrator Bolch's decision to withhold approval of
bills in excess of the UB-92 amount. However, in each of the cases
before the Commission, the parties stipulated that the Commission
approved payment to the plaintiffs in the amount that they would
have received under the DRG reimbursement system.
Defendants' cross-assignments of error are without merit.
opinion and award of the Industrial Commission is vacated.
VACATED. Judge BRYANT concurs.
Judge WYNN concurring with separate opinion.
WYNN, Judge concurring with separate opinion.
While I agree with the majority that the Industrial Commission
had no authority to pass on the constitutionality of N.C. Gen.
Stat. § 97-26(b) (1994), I would treat the full Commission's
Opinion and Award as a certification to this Court and address the
issues on appeal.
N.C. Gen. Stat. § 97-86 (2004) provides that [t]he Industrial
Commission of its own motion may certify questions of law to the
Court of Appeals for decision and determination by said Court. I
would treat the Opinion and Award as a certification on the
constitutionality of N.C. Gen. Stat. § 97-26(b) (19944) to this
Court. A determination of the constitutionality of section 97-
26(b) in the instant appeal is in the interest of judicial economy.
Upon remand of this case to the Industrial Commission, the
Commission will most likely immediately certify the
constitutionality of this statute to this Court for determination.
N.C. Dep't of Env't & Natural Res. v. Carroll
, 358 N.C. 649, 665,
599 S.E.2d 888, 898 (2004) (in the interests of judicial economy
and fairness to the parties the Supreme Court addressed the
substantive issues on appeal). Furthermore, Rule 2 of the North
Carolina Rules of Appellate Procedure allows us to reach the issues
on appeal in the interest of judicial economy. N.C. R. App. P. 2
([T]o expedite decision in the public interest, either court ofthe appellate division may, . . . suspend or vary the requirements
or provisions of any of these rules in a case pending before it
upon application of a party or upon its own initiative
I would decide the issues on appeal, or at the very least,
remand this case to the Industrial Commission for a determination
of whether the constitutional issue should be certified to this
*** Converted from WordPerfect ***