Appeal by petitioner from the final decision entered 20 August
2004 by Robert J. Fitzgerald, Director of the Facilities Services
Division of the North Carolina Department of Health and Human
Services. Heard in the Court of Appeals 17 August 2005.
Kennedy Covington Lobdell & Hickman, LLP, by Gary S. Qualls
and Colleen M. Crowley, for petitioner-appellant.
Attorney General Roy Cooper, by Assistant Attorney General
Thomas M. Woodward, for respondent-appellee.
Poyner & Spruill, LLP, by William R. Shenton and Thomas R.
West, for respondent-intervenor-appellee.
ELMORE, Judge.
This appeal arises from the determination of the North
Carolina Department of Health and Human Services (NCDHHS) that
Total Renal Care (TRC) be awarded a certificate of need that would
allow it to transfer ten existing dialysis stations from its Hoke
County facility to a new facility in Robeson County planned for
Saint Pauls. For the reasons stated herein, we affirm the final
Agency decision.
After the January 2003 Semi-Dialysis Report (SDR) issued by
NCDHHS indicated 1) that a large number of Robeson County patients
were leaving their home county to get dialysis and 2) that there
was a need for 19 additional dialysis stations in Robeson County,
TRC submitted an application to the Certificate of Need Section
(CON Section) of NCDHHS. TRC proposed to meet the needs indicated
in the SDR by transferring 10 dialysis stations from adjacent Hoke
County pursuant to “Policy ESRD-2”: a policy of the NCDHHS that
allows a provider to relocate stations to a contiguous county
currently served by the provider if the relocation will not result
in a deficit of stations in the county from which they will be
transferred, or a surplus of stations in the county to which they
will be moved. See N.C. Admin. Code tit. 10A, r. 14B.0341 (June
2004). These applications are non-competitive.
After the CON Section approved TRC's application, Bio-Medical
Applications (BMA) filed a petition for a contested case hearing,
arguing that the CON Section erred in determining that TRC's
application was conforming to the criteria necessary for a CON
award. See, e.g., N.C. Gen. Stat. § 131E-183 (2003). BMA alsoargued that its rights would be substantially prejudiced by the
Agency's decision to allow TRC to place ten dialysis stations in
Saint Pauls because one of its facilities, Red Springs, was
underutilized and would likely lose additional patients and
revenue.
Following the contested case hearing, Administrative Law Judge
(ALJ) Samuel Chess issued a recommended decision in which he
determined that the CON Section had erred in approving TRC's
application because it was non-conforming to several review
criteria. TRC gave notice of its exceptions to the recommended
decision, and the matter was heard before Robert Fitzgerald,
Director of the Division of Facility Services, who issued the final
Agency decision. The Agency's decision rejected the ALJ's
recommended decision, including a majority of his findings, and
concluded that TRC's application was conforming or conditionally
conforming to the criteria. The Agency also determined that BMA
had failed to prove its rights would be substantially prejudiced by
the approval of TRC's application. BMA appealed the Agency's
decision to this Court.
Section 131E-188 of our General Statutes authorizes BMA, as an
“affected person,” to petition for a contested case hearing. See
N.C. Gen. Stat. § 131E-188(a) (2003). There is no dispute that BMA
qualifies as an affected person under section 131E-188(c).
However, section 131E-188 merely provides the statutory grounds for
and prerequisites to filing a petition for a contested case hearing
regarding certificates of need; it does not provide the frameworkfor deciding the petition or the contested case.
(See footnote 1)
See N.C. Gen.
Stat. § 131E-188 (2003). That is governed by Article 3 of Chapter
150B of the General Statutes. N.C. Gen. Stat. §§ 131E-188 and 150B
et seq. (2003). Section 150B-23(a) states:
A contested case shall be commenced by filing
a petition with the Office of Administrative
Hearings . . . . A petition shall . . . state
facts tending to establish that the agency
named as the respondent has deprived the
petitioner of property, has ordered the
petitioner to pay a fine or civil penalty, or
has otherwise substantially prejudiced the
petitioner's rights and that the agency:
N.C. Gen. Stat. § 150B-23(a) (2003).
In this case, BMA argues that it showed substantial prejudice
to its rights and that the Agency decision was error. We disagree.
It is the petitioner's burden to prove the facts required by
section 150B-23(a) by a preponderance of the evidence. N.C. Gen.
Stat. § 150B-29(a) (2003);
Britthaven, Inc. v. N.C. Dept. of Human
Resources, 118 N.C. App. 379, 382, 455 S.E.2d 455, 459,
disc.
review denied, 341 N.C. 418, 461 S.E.2d 754 (1995). In its
petition for a contested case, BMA stated that due to the CONSection's decision its “rights and property have been substantially
and adversely affected, and have been unfairly prejudiced by the
approval of TRC's CON application.” At the contested case hearing,
BMA offered the testimony of Janice Lindsay (Lindsay), a regional
vice president with BMA's parent company. She testified that
although she thought BMA would retain its current patients due to
BMA's superior care, BMA's Red Springs facility could potentially
lose patients nonetheless. She testified that BMA's Red Springs
facility was currently operating at about a 65% utilization rate
when it should be operating at at least 80%. If Red Springs lost
ten patients to TRC's facility in Saint Pauls, then the Red Springs
facility could lose up to $72,000.00 a year. The ALJ reflected
Lindsay's testimony in his findings, noting that her testimony
proved BMA's rights would be substantially prejudiced by the
approval of TRC's application.
The Agency rejected the ALJ's findings on this point, stating
that the ALJ's findings were an inaccurate and incomplete
description of TRC's impact on BMA. Instead, the Agency found in
part that:
144. In analyzing the underutilization of the
Red Springs facility as part of her review of
the TRC Application, the Agency project
analyst correctly determined that BMA only
needed 10 additional patients to bring that
facility up to a 80% utilization rate. . . .
Therefore, even after the development and
operation of TRC's St. Pauls facility, there
would be a large number of Robeson County
patients remaining that BMA's Red Springs
facility could serve to reach the target
utilization rate of 80 percent.
145. BMA offered no evidence that it is likely
to lose any patients from Red Springs to any
of its other Robeson County facilities as a
result of the development and operation of
TRC's St. Pauls facility. While it may be
possible to calculate how much revenue BMA
would lose for every patient it
might lose to
TRC's St. Pauls facility, BMA, itself, does
not believe its existing patients
will choose
to transfer to TRC's St. Pauls facility if it
is built. Ms. Lindsay repeatedly testified
that it was not likely that BMA's existing
patients would want to transfer to TRC's St.
Pauls facility.
146. Ms. Lindsay's calculation of potential
revenue loss resulting from any patients lost
to TRC's St. Pauls facility does not prove
harm or substantial prejudice without some
credible additional evidence that BMA is
likely to lose patients to the St. Pauls
facility. BMA's unsupported speculation
regarding its potential loss of patients to
TRC's St. Pauls facility is not sufficient to
demonstrate that the Agency's award of a
certificate of need to TRC to develop this new
facility has or will substantially prejudice
BMA in any way.
151. The fact that BMA's Red Springs facility
has been underutilized for more than two years
and might continue to be underutilized does
not in any way demonstrate that the CON
Section's approval of the TRC Application
would substantially prejudice BMA.
As a result of these findings, the Agency concluded that:
4. No property right of Petitioner BMA is at
issue in this contested case.
5. The CON Law does not protect existing
health care providers from economic
competition where there is a demonstrated need
for additional services in the geographic
area.
6. The Agency has not ordered Petitioner BMA
to pay a fine or civil penalty.
7. There is no credible evidence of prejudice
to BMA's rights, including evidence of harm to
its Red Springs facility.
8. BMA has failed to prove, by a preponderance
of the evidence, that it will be substantially
prejudiced by the development and operation of
TRC's St. Pauls facility.
BMA assigns error to all the Agency findings and conclusions
concerning a substantial prejudice determination. As recently
applied in
Total Renal Care of N.C., LLC v. N.C. Dep't. Of Health
and Human Servs., ___ N.C. App. ___, 615 S.E.2d 81 (2005), and
Mooresville Hosp. Mgmt. Assocs. v. N.C. Dep't. Of Health and Human
Servs., ___ N.C. App. ___, 611 S.E.2d 431,
writ of certiorari
allowed, ___ N.C. ___, ___ S.E.2d ___ (30 June 2005) (No. 404A03-
2), our standard of review of an Agency decision regarding a
certificate of need does not incorporate the 2001 amendments to the
APA. In accordance with those cases, and the fact that no party
argues new evidence was reviewed by the Agency on the determination
of prejudice or alleges that the Agency failed to state
specifically why it was rejecting the ALJ's findings, we move
forward to an assessment of the substantive nature of the
assignments of error.
See id.;
see also N.C. Dep't of Env't &
Natural Res. v. Carroll, 358 N.C. 649, 658, 599 S.E.2d 888, 894
(2004) (“On judicial review of an administrative agency's final
decision, the substantive nature of each assignment of error
dictates the standard of review.”). BMA's assignments of error
regarding prejudice are all very similar, alleging that each fact
or conclusion is a violation of all the grounds in section 150B-
51(b). Essentially, the Agency determined that BMA had not shown,by a preponderance of the evidence, that its rights were
substantially prejudiced by the approval of TRC's application.
Assigning error to this determination presents both factual and
legal issues. Thus, we will apply the whole record test to
determine whether the Agency's decision was supported by
substantial evidence and not arbitrary or capricious;
to the extent
that BMA asserts that the Agency's decision is based on an error of
law, we will apply
de novo review.
See Dialysis Care of N.C., LLC
v. N.C. Dep't of Health & Human Servs., 137 N.C. App. 638, 646, 529
S.E.2d 257, 261,
aff'd per curiam, 353 N.C. 258, 538 S.E.2d 566
(2000).
In its brief, BMA does not argue that there was additional
evidence in the record that the Agency ignored in determining it
had not shown the appropriate degree of prejudice under section
150B-23. Rather, it argues that Lindsay's testimony was
sufficient, and to require more would place BMA in the awkward
position of proving TRC's application conforming. In other words,
if BMA had to specifically show which or how many patients it would
lose to TRC, it is in effect proving portions of TRC's utilization
rate for them. We find these arguments unpersuasive.
Whatever position BMA might be placed into, as the petitioner
in a contested case, it bears the burden of proving substantial
prejudice to its rights in order to recover.
See N.C. Gen. Stat.
§ 150B-29 (2003). BMA chose to prove that its rights were
substantially prejudiced on the basis that it would lose patients.
We can discern no reason why proving the loss of patients would bethe sole way for BMA to conform to section 150B-23;
(See footnote 2)
nonetheless,
BMA set out to prove that it would lose patients and profit due to
the approval of TRC's Saint Pauls facility. BMA relied entirely on
the testimony of Janice Lindsay to meet its burden of proof. A
review of the whole record supports the Agency's findings that
Lindsay's testimony was speculative at best. While her
mathematical calculations of lost revenue per patient may be
accurate, she was unable to say that BMA would lose any certain
number of patients. In fact, she testified BMA would likely lose
none of its current patients. Her own testimony, coupled with the
SDR that showed a need of at least 19 new stations, provides
substantial evidence that BMA would not be harmed by TRC's Saint
Pauls facility. We further find no error of law in the Agency's
determination that Lindsay's speculative testimony did not outweigh
the evidence of the CON Section's analysis and the SDR, both of
which showed BMA's utilization rate at the Red Springs facility
would not suffer any additional loss when Saint Pauls came online.
Accordingly, we affirm the Agency's decision in approving
TRC's CON application to transfer stations to Robeson County. TheAgency rejected the ALJ's determination that BMA had proven one of
its required elements under section 150B-23, that being the manner
in which the Agency substantially prejudiced BMA's rights.
See
Britthaven, 118 N.C. App. at 382, 455 S.E.2d at 459. The failure
to prove this aspect of section 150B-23 by a preponderance of the
evidence is fatal to the petitioner's contested case. Thus, it is
unnecessary to reach the question whether the Agency erred in
determining TRC's application was conforming, nor is it necessary
to address TRC's cross-assignments of error.
Affirmed.
Judges CALABRIA and GEER concur.
Report per Rule 30(e).
Footnote: 1