D.B. and her husband are the adoptive parents of A.L. At an
early age A.L. was removed from the home of her biological parents
by the Buncombe County Department of Social Services because she
had been severely neglected and abused. A.L. was placed in the
foster care of D.B. and her husband and then later, in 1999,
adopted as a special needs child. Because A.L. is a special needs
child, she is eligible for Medicaid coverage until she is at least
21. Since the time A.L. was adopted by D.B. and her husband,
A.L.'s care has been coordinated, paid for, and provided by Blue
Ridge Center (BRC).
Due to the abuse suffered by A.L. in her early childhood, she
has been diagnosed with numerous medical conditions including rage
disorder, borderline personality disorder, bipolar disorder and
post-traumatic stress disorder. At times A.L. experienced violent
rages and attempted to injure herself and others, including her
family. A.L.'s physicians determined that she needs crisis
intervention and stabilization services in order to help with her
dangerous rages.
Before 2000, under the supervision of Dr. Kim Masters, crisis
intervention and stabilization services were provided by Charter
Psychiatric Hospital in Asheville, North Carolina. When this
treatment was being provided to A.L., her condition graduallyimproved and there was a time period in which A.L. was not required
to be placed outside of the home for treatment. However, Charter
closed in February 2000. Mission-St. Joseph's, the hospital
located closest to A.L.'s home, does not offer services any less
restrictive than full psychiatric commitment.
On several occasions after the closing of Charter, A.L. again
began to have rage outbursts that escalated out of control. On two
occasions, A.L. experienced severe episodes of rage, and D.B.
contacted BRC's triage line to request services to stabilize A.L.
On both occasions, D.B. was informed that the only crisis service
available was to find a magistrate, obtain a commitment order, then
call the police who would take A.L. to the local emergency room for
possible involuntary commitment. D.B. did not think this course of
action was appropriate and believed that it was harmful to A.L.'s
overall health.
Due to repeated denials of crisis intervention and
stabilization services requested by D.B. for A.L., D.B. filed a
grievance with the North Carolina Department of Health and Human
Services, Division of Mental Health, Developmental Disabilities and
Substance Abuse Services (DMH). In her grievance, D.B. requested
in-home emergency after-hours crisis service and therapeutic foster
bed service. BRC denied D.B.'s request on 9 October 2000 stating,
Blue Ridge Center's after hours emergency
service is provided via telephone and on-site
at Mission-St. Joseph's Emergency Room. Blue
Ridge Center presently has no crisis
therapeutic foster bed providers. We
continually seek such providers includingproviders in our own therapeutic foster care
program.
After receiving this denial, D.B. filed a petition for a
contested case hearing in the Office of Administrative Hearings
(OAH) on 6 December 2000. A hearing was held before Administrative
Law Judge (ALJ) James L. Connor, II, where evidence was heard as to
the denial of requested relief, medical diagnosis of A.L.,
prescribed treatment and framework for the provision of Medicaid
services to children. The ALJ issued a recommended decision on 19
May 2003.
At the hearing before the ALJ, D.B. offered statements from a
Dr. Masters, one of A.L.'s treating physicians, to show that in her
opinion A.L. needed 24 hours a day and 7 days a week crisis and
community based wrap-around services. Another treating physician,
Dr. Patrick Lilliard, also testified as to the need for crisis
intervention and stabilization services. When asked directly
whether, in his clinical opinion, the provision of effective crisis
intervention and stabilization services were medically necessary
for A.L., Dr. Lilliard answered that the absence of such services
put A.L. at risk and that they were essential to her psychiatric
care. He declined to state that the requested services were
medically necessary. Dr. Munger, a non-treating physician,
testified that “crisis stabilization” was a medical necessity for
A.L. but that he did not believe that it was medically necessary
that the initial intervention occur in A.L.'s home. The ALJ
concluded that the requested crisis intervention and stabilizationservices had been proven by a preponderance of the evidence to be
medically necessary. In the ALJ's recommended decision, he
recommended that the denial for the requested services be reversed
and that BRC and DMH
provide to A.L. 24 hour per day, 7 day per
week crisis intervention and stabilization
services in a form consistent with the
direction of her treating physicians. This
need not include having a therapeutic foster
bed always empty and available for A.L., but
should include a sufficient number of such
beds, given the population who need them, so
as to make such beds usually available when
needed. To the extent A.L. is living at home
with D.[B.], these services should also
include the 24/7 availability of a properly
trained person to come to A.L.'s home during
severe crises for therapeutically appropriate
interventions.
DMH and BRC filed exceptions and objections to the ALJ's
recommended decision on 15 August 2003. In its final agency
decision, the agency declined to adopt the entire recommended
decision of the ALJ. The final agency decision stated,
[i]t is recommended that a comprehensive
person centered plan be developed that
includes a 24/7 crisis plan among other
identified treatment and supports. This plan
should identify the desired outcomes for
A.L.['s] health, safety and well being in
order to meet the mental needs identified by a
comprehensive assessment. These services
should be covered by EPDST.
However, the agency's final decision failed to state its reasons
for refusing to accept the recommended decision of the ALJ.
D.B. then filed a petition for judicial review on 14 November
2003 in Buncombe County Superior Court. The superior court vacated
the final agency decision, concluded as a matter of law that therequested Medicaid relief was not medically necessary, and
reinstated the original denial of relief by BRC. From the superior
court's order, D.B. now appeals.
On appeal D.B. contends,
inter alia, that the superior court
exceeded its authority under the pre-2001 version of the
Administrative Procedure Act, which is applicable in the instant
case. We agree.
We note that, although the Administrative Procedure Act (APA)
has been amended to make new
procedures and standards applicable,
the amendments only apply to cases commenced on or after January
2001. N.C. Gen. Stat. § 150B-151 (2003). Because the present case
was commenced with a December 2000 filing in the OAH, the
procedures and standards afforded in the pre-2001 statute apply.
When under the applicable version of the APA a petition for
review of an agency decision is filed in superior court, the
superior court acts as an appellate court; both this court and the
superior court must utilize the same standard of review.
See
Teague v. Western Carolina University, 108 N.C. App. 689, 691, 424
S.E.2d 684, 686,
disc. review denied, 333 N.C. 466, 427 S.E.2d 627
(1993). “If it is alleged that an agency's decision was based on
an error of law then a
de novo review is required. A review of
whether the agency decision is supported by the evidence, or is
arbitrary or capricious, requires the court to employ the wholerecord test.”
Walker v. N.C. Dept. of Human Resources, 100 N.C.
App. 498, 502, 397 S.E.2d 350, 354 (1990),
disc. review denied, 328
N.C. 98, 402 S.E.2d 430 (1991). The whole record test generally
requires examination of the entire record, including the evidence
which detracts from the agency's decision.
Id. at 503, 402 S.E.2d
at 354. “'The “whole record” test does not permit the reviewing
court to substitute its judgment for the agency's as between two
reasonably conflicting views; however, it does require the court to
take into account both the evidence justifying the agency's
decision and the contradictory evidence from which a different
result could be reached.'”
Watson v. N.C. Real Estate Comm., 87
N.C. App. 637, 639, 362 S.E.2d 294, 296 (1987) (citations omitted),
disc. review denied, 321 N.C. 746, 365 S.E.2d 296 (1988).
“Ultimately, the reviewing court must determine whether the
administrative decision had a rational basis in the evidence.”
Henderson v. N.C. Dept. of Human Resources, 91 N.C. App. 527, 531,
372 S.E.2d 887, 890 (1988).
In the instant case, the requisite substantive and procedural
review to be conducted by the judiciary is established by the
following statutory provision:
(a) In reviewing a final decision in a
contested case . . .
[f]irst, the court shall
determine whether the agency heard new
evidence after receiving the recommended
decision. If the court determines that the
agency heard new evidence, the court shall
reverse the decision or remand the case to the
agency to enter a decision in accordance with
the evidence in the official record.
Second,
if the agency did not adopt the recommended
decision, the court shall determine whetherthe agency's decision states the specific
reasons why the agency did not adopt the
recommended decision. If the court determines
the agency did not state specific reasons why
it did not adopt a recommended decision, the
court shall reverse the decision or remand the
case to the agency to enter specific reasons.
N.C. Gen. Stat. § 150B-51(a) (1999) (emphasis added). The plain
language of this statute requires the trial court to make these two
threshold determinations
before determining whether there is
substantial evidence to support an agency decision: “After making
the determinations, if any, required by subsection (a), the court
reviewing a final decision may affirm the decision of the agency or
remand the case for further proceedings.”
Id.
(See footnote 1)
The superior
court's failure to apply the appropriate standard of review does
not necessarily require remanding the case to the superior court if
this Court is able to “reasonably determine from the record whether
the petitioner's asserted grounds for challenging the agency's
final decision warrant reversal or modification of that decision
under the applicable provisions of N.C.G.S. § 150B-51(b).”
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 instant case, the superior court did not make the
procedural inquiry required by N.C. Gen. Stat. § 150B-51(a) before
undertaking a substantive review of the agency's decision.
Further, upon making its substantive review of the final agency
decision, the superior court improperly entered an order containing
new findings of fact.
See N.C. Dep't of Env't & Natural Res., 358
N.C. at 662, 599 S.E.2d at 896 (“In a contested case under the APA
. . . 'there is but one fact-finding hearing of record when witness
demeanor may be directly observed.' Thus, the ALJ who conducts a
contested case hearing possesses those 'institutional advantages,'
that make it appropriate for a reviewing court to defer to his or
her findings of fact.”) (citations omitted). Moreover, the
superior court's order fails to indicate that it employed the
“whole record” test in reviewing the final agency decision. The
trial court's actions may be unproblematic under the amended APA;
however, the superior court was bound by the pre-2001 APA in the
present case. N.C. Gen. Stat. § 150B-51 (2003) (In the event that
the agency does not adopt the recommended decision of the ALJ, the
court must review the official record
de novo and shall make
findings of fact and conclusions of law, giving no deference to
prior decisions made in the case and unbound by the findings of
fact and conclusions of law made in the final agency decision.).
In the instant case, there were conflicting views between the
physicians who testified whether A.L.'s requested crisisintervention and stabilization services were medically necessary.
Some of the testifying physicians opined that the requested
services were medically necessary, while others thought of these
services as merely medically desirable. On these facts, the ALJ
found by a preponderance of the evidence that the Medicaid services
requested for A.L. were medically necessary and therefore made a
recommended decision that A.L. be provided with crisis intervention
and stabilization services in accordance with the recommendations
of her treating physicians. In making its final decision, the
agency decided not to adopt the recommended decision of the ALJ,
but it failed to state the specific reasons for this course of
action.
We note that, given the breadth of medical opinions offered
which constitutes substantial evidence, the final agency decision
would be affirmed under the whole record test if the agency had
stated appropriate reasons for rejecting the ALJ's decision.
See
In re Community Association, 300 N.C. 267, 282-83, 266 S.E.2d 645,
656 (1980) (
holding that, where the case is one of conflicting
views, the court is not permitted to replace the agency's view with
views of its own where the reasons for adopting this view, in light
of the whole record, appear to be implicit in the order
). However,
N.C. Gen. Stat. § 150B-51 (1999) dictates the precise procedural
steps that must be followed by appellate courts. The superior
court, acting as an appellate court, did not follow these
standards. N.C. Gen. Stat. § 150B-51 requires,
inter alia, that a
threshold determination be made by the superior court to determine
whether an agency rejected an ALJ decision without stating the
specific reasons for doing so; if the agency had not provided
specific reasons, the court is not permitted to conduct substantive
review and instead must reverse or remand on the procedural issue.
In the absence of such stated reasons, the courts cannot
“reasonably determine from the record whether the petitioner's
asserted grounds for challenging the [substance of the] agency's
final decision warrant reversal or modification of that decision
under the applicable provisions of N.C.G.S. § 150B-51(b).”
N.C.
Dep't of Env't & Natural Res., 358 N.C. at 665, 599 S.E.2d at 898.
Accordingly, given that the agency failed to provide a
rationale for rejecting the ALJ's recommendation in the case
sub
judice, the superior court could not make a reasonable
determination as to whether the agency's conclusions were supported
by substantial evidence. The failure of the superior court to
remand on this ground constituted reversible error.
Accordingly, we remand to the superior court with instructions
to remand to the agency for specific findings why the agency did
not adopt the recommended decision of the ALJ. In light of our
disposition it is unnecessary to address the remaining issues
briefed on appeal.
Vacated and remanded.
Judges TYSON and BRYANT concur.
Footnote: 1