Appeal by respondent-intervenor from final agency decision
entered on or about 12 June 2006 by North Carolina Department of
Health and Human Services, Division of Facility Services Director
Robert J. Fitzgerald. Heard in the Court of Appeals 11 April 2007.
Wyrick Robbins Yates & Ponton, LLP by K. Edward Greene for
Respondent-Intervenor Liberty Home Care, LLC.
Smith Moore, LLP by Maureen Demarest Murray and Susan M.
Fradenburg for Petitioner Hospice at Greensboro, Inc. d/b/a
Hospice and Palliative Care of Greensboro's and Hospice of the
Piedmont, Inc.
Attorney General Roy A. Cooper, III by Assistant Attorney
General June S. Ferrell for Respondent-Appellee N.C. Dept. Of
Health and Human Services.
Bode Call & Stroupe, L.L.P. by Matthew A. Fisher for Amicus
Community CarePartners, Inc.
Maupin Taylor, P.A. by Marcus C. Hewitt for Amicus Community
Home Care of Johnston County, Inc., Carrolton Home Care, Inc.,
and Community Home Care of Vance County, Inc.
Parker Poe Adams & Bernstein by Renee J. Montgomery, Susan L.
Dunathan, and Robert A. Leandro for Amicus Hospice &
Palliative Care Charlotte Region d/b/a Hospice at Charlotte.
Johnston, Allison & Hord, P.A. by Patrick E. Kelly for Amicus
The Carolinas Center for Hospice and End of Life Care.
STROUD, Judge.
Respondent-intervenor Liberty Home Care, L.L.C. appeals from
the final agency decision entered by the North Carolina Department
of Health and Human Services [DHHS], Division of Facility Services
[DFS] in a contested case. Petitioner Hospice at Greensboro, Inc.
[HGI] contested the DHHS, DFS Certificate of Need Section's [CON
Section] issuance of a “No Review” letter to Liberty, which
authorized Liberty to open a hospice office in Greensboro, North
Carolina without first obtaining a Certificate of Need [CON] from
the department. The final DHHS agency decision granted summary
judgment in favor of HGI based upon the agency's conclusions that
Liberty's Greensboro hospice office was a “new institutional health
service” for which Liberty was required to obtain a CON and that
HGI was “substantially prejudiced” by the CON Section's actions.
This Court must resolve three issues on appeal: (1) whether
N.C. Gen. Stat. § 131E-188 (2005) authorizes Liberty to appeal thefinal DHHS agency decision directly to this Court, (2) whether
Liberty established a “new institutional health service” in
Guilford County for which it was required to obtain a CON, and (3)
whether HGI has shown “substantial prejudice” resulting from the
CON Section's actions. We affirm.
I. Factual Background
On 21 February 2005, Liberty's Executive Director Anthony
Zizzamia, Jr. sent a letter of intent to CON Section Chief Lee
Hoffman, requesting permission to open “branch locations” to its
“existing licensed and certified hospices” without first obtaining
CONs. In the letter, Zizzamia expressed Liberty's “understanding
that the branch extension of existing hospice offices is exempt
from [CON] review”; thus, Zizzamia sought a “No Review” letter from
the CON section. Liberty proposed “branch office locations” in
four additional counties based on its “existing licensed and
certified” Fayetteville hospice and in nine additional counties
based on its “existing licensed and certified” Raeford hospice.
On 7 March 2005, the CON Section responded to Liberty's letter
of intent and informed Liberty that “[e]stablishment of each branch
office is a separate determination that requires a separate
request.” The CON section further explained that Liberty “must
demonstrate the need for each branch office based on the provision
of hospice services to patients who reside in that county from the
home office that will support the branch office.”
On 30 March 2005, Hoffman sent a letter to Zizzamia requesting
additional information and responding to his inquiries “as towhether a certificate of need is required prior to opening the
branch offices” that Liberty proposed. Hoffman stated that Liberty
must document that the proposed offices would be “located in”
Liberty's “'
current service area,'” explaining “documentation must
be submitted to show that the proposed branch offices will be
located in a county in which at least one patient is currently
served by one of your existing licensed hospice agencies.”
(Emphasis added.) According to Hoffman, Liberty's “current service
area” included any county in which Liberty served at least one
patient from its existing, licensed hospices. [hereinafter one
patient rule]. An attachment to Hoffman's letter set forth a
sample format for providing the requested information. The
attachment was titled “RE: Exempt from review/<Proposed County
Location> branch office of <name of existing licensed hospice>
Medicare Provider.”
Thereafter, Liberty made a separate request for each proposed
hospice office and submitted documentation to show the proposed
hospice offices complied with the one patient rule. In particular,
on 30 June 2005, Liberty informed the CON section that it had
“recently admitted a hospice patient in Guilford County, North
Carolina,” who was “being served by [Liberty's] Hospice providing
services from our Fayetteville location.” Liberty requested that
the CON section “provide [it] with a letter of '[N]o [R]eview' with
respect to this [Greensboro] branch office.” As documentation, Liberty attached a Home Health Certification
and Plan of Care
(See footnote 1)
identifying one patient, S.H., in Greensboro,
North Carolina. The form listed S.H.'s “start of care date” as 21
June 2005. It also listed authorized prescription medications for
S.H. and set forth a plan for S.H's care, which included the use of
oxygen, wound care, pain management, and “short term therapy
management of terminal illness.” Liberty received the Plan of Care
on 27 June 2005 and the form was signed by S.H.'s attending
physician on 28 June 2005; however, S.H. died on 24 June 2005.
Notwithstanding S.H.'s death, Liberty attached the Plan of Care to
its 30 June 2005 request for a “No Review” letter as documentation
of its “current service area.” The Plan of Care for S.H. is the
only documentation of current service area that Liberty provided to
the CON section.
On 7 July 2005, the CON Section responded to Liberty's 30 June
2005 request for “No Review.” The response provided, in part:
Based on the CON law in effect on the
date of this letter, the proposal described in
your correspondence is not governed by, and
therefore, does not currently require a
certificate of need. . . . Further, it should
be noted that this determination is binding
only for the facts represented by you.
Consequently, if changes are made in the
project or in the facts provided in the
correspondence referenced above, a new
determination as to whether a certificate of
need is required would need to be made by the
Certificate of Need Section.
[Hereinafter “No Review” letter.]
The CON Section relied entirely upon Liberty's 30 June 2005
representations and made no further inquiry before issuing this “No
Review” letter to Liberty.
On 15 July 2005, based upon the “No Review” letter, Liberty
applied for a license from DHHS DFS License and Certification
Section to operate a “branch office” in Guilford County, which the
Section granted. The license, which became effective 19 July 2005
and expired “[m]idnight, December 31, 2005,” authorized Liberty to
“operate a hospice known as Liberty Home Care and Hospice located
at 2307 West Cone Blvd., Suite 150, City of Greensboro, North
Carolina Guilford County.”
On 5 August 2005, HGI filed a petition for a contested case
hearing, requesting review of the CON Section's decision to approve
Liberty's request for a “No Review” letter and the decision of the
License and Certification Section, to issue a license to Liberty
for the Greensboro hospice office. Liberty intervened in the
contested case on 18 August 2005.
On 2 December 2005, HGI filed motions for summary judgment,
entry of a stay of the CON Section's 7 July 2005 “No Review” letter
to Liberty, and entry of a stay of the hospice license issued to
Liberty on 19 July 2005 for the Greensboro hospice office. HGI
argued that Liberty's Greensboro hospice office is a “new
institutional health service” for which Liberty was required to
obtain a CON. On 9 December 2005, Liberty filed a motion for
summary judgment arguing that HGI was not an “aggrieved party”because the issuance of a “No Review” letter to Liberty did not
“substantially prejudice[]” HGI's rights.
Depositions and affidavits submitted for the purpose of
summary judgment established that Liberty first hired employees for
its Greensboro hospice office in April or May of 2005. Thereafter,
Liberty provided hospice services to one patient named S.H. for
four days, from 21 to 24 June 2005. Before coming into Liberty's
care, S.H. was a resident in Oakhurst nursing facility. A
representative of Oakhurst contacted Liberty to inform Liberty that
Oakhurst had a patient who needed hospice services. At that time,
Liberty was “actively looking for hospice patients to serve” so
that it could “establish [its] hospice unit” in Greensboro. As of
26 September 2005, Liberty had not provided hospice services to any
patient in Greensboro other than S.H. Liberty did not obtain a CON
for its Greensboro hospice office, but received a license for this
office based upon the CON Section's issuance of a “No Review”
letter.
The “No Review” process is not set forth in statute or rule,
but is a practice DHHS developed over time based on its
understanding of this Court's decision in
In re Total Care. In
In
re Total Care, this Court held that “the opening of branch offices
by an established home health agency within its current service
area is not the construction, development, or other establishment
of a new health service facility” for which a CON was required.
In
re Total Care, 99 N.C. App. 517, 522, 393 S.E.2d 338, 342 (1990).
When determining whether a proposed branch office is within ahealth service provider's current service area the CON section
considered only whether the applicant hospice had recently
“provided hospice services in the county in which they want to open
a branch.” Here, the CON Section relied entirely upon Liberty's
representations to make this determination.
Administrative Law Judge Agustus B. Elkins, II entered a
recommended decision granting HGI's motion for summary judgment on
25 January 2006. DFS Director Robert J. Fitzgerald reviewed the
recommended decision, considered written exceptions, and heard oral
argument on 21 April 2006. Fitzgerald entered a final agency
decision on 12 June 2006, adopting most of Judge Elkin's findings
and granting HGI's motion for summary judgment. Liberty appealed
the final agency decision to this Court.
II. Jurisdiction
[1] HGI
asks this Court to dismiss Liberty's appeal, arguing that appeal
from a final DHHS agency decision concerning a “No Review” letter
must be filed in Superior Court, Wake County pursuant to section
150B-45 of the North Carolina Administrative Procedure Act. N.C.
Gen. Stat. § 150B-45 (2005). Liberty agrees with HGI that section
150B-45 controls but asks this Court to grant certiorari review
pursuant to Rule 21 of the North Carolina Rules of Appellate
Procedure. N.C. R. App. P. 21 (2005). In their briefs, both
parties acknowledge that N.C. Gen. Stat. § 131E-188(a) (2005)
permits “any affected person” to contest the CON Section's decision
to “issue, deny, or withdraw a certificate of need or exemption”and that N.C. Gen. Stat. § 131E-188(b) (2005) provides a direct
appeal to this Court from “all or any portion” of any final DHHS
agency decision resolving a contested case filed under this
section. However, the parties conclude that section 131E-188 does
not authorize immediate appeal to this Court from the final DHHS
agency decision resolving petitioner's challenge to the CON
section's issuance of a “No Review” letter because a “No Review”
letter is not an “exemption.”
We disagree with both parties and hold that the CON section's
issuance of a “No Review” letter is the issuance of an “exemption”
for purposes of section 131E-188(a). Accordingly, we conclude that
section 131E-188(b) confers jurisdiction on this Court to hear
Liberty's appeal.
(See footnote 2)
“Any person affected,”
(See footnote 3)
by the CON Section's “decision to
issue . . . a certificate of need or exemption” is “entitled to a
contested case hearing under Article 3 of Chapter 150B of the
General Statutes.” N.C. Gen. Stat. § 131E-188 (2005). Chapter
150B of the North Carolina General Statutes is commonly known asthe Administrative Procedure Act and Article 3 of that Chapter sets
forth the procedures governing administrative hearings in contested
cases. A “contested case” is “an administrative proceeding . . .
to resolve a dispute between an agency and another person that
involves the person's rights, duties, or privileges.” N.C. Gen.
Stat. § 150B-2(2) (2005). Generally, “to obtain judicial review of
a final decision” entered pursuant to Article 3 of Chapter 150B,
“the person seeking review must file a petition in the Superior
Court of Wake County or in the superior court of the county where
the person resides.” N.C. Gen. Stat. § 150B-45 (2005). However,
when the final agency decision resolves a contested case filed
pursuant to section 131E-188, appeal may be taken to this Court as
of right. N.C. Gen. Stat. § 131E-188(b); N.C. Gen. Stat. § 7A-
29(a) (2005).
HGI contests the CON Section's issuance of a “No Review”
letter to Liberty. If the “No Review” letter represents an
“exemption,” then section 131E-188(b) confers jurisdiction on this
Court to consider Liberty's appeal from the final DHHS decision
resolving the contested case. If not, then appellate jurisdiction
lies in Superior Court, Wake County or in the superior court of the
county where Liberty resides.
The term “exemption” is not defined by N.C. Gen. Stat. § 131E-
176 (2005), which provides definitions for many terms of art used
throughout Chapter 131E. Although N.C. Gen. Stat. § 131E-184
(2005) lists circumstances in which DHHS “shall exempt . . . a new
institutional health service” from certificate of need review, thatsection does not define the term “exemption.” Finding no express
definition of the term “exemption” in Chapter 131E, we “presume[]
the General Assembly intended the word[] it used to have the
meaning [it has] in ordinary speech.”
Nelson v. Battle Forest
Friends Meeting, 335 N.C. 133, 136, 436 S.E.2d 122, 124 (1993);
see
also Correll v. Division of Social Services, 332 N.C. 141, 144, 418
S.E.2d 232, 235 (1992) (stating that “[s]tatutory interpretation
properly begins with an examination of the plain words of the
statute.”).
To be “exempt” ordinarily means to be “free from an obligation
or liability to which others are subject” or to be “released from
or not subject to, an obligation, liability, etc.”
Random House
Webster's College Dictionary, 467 (1st ed. 1991);
Black's Law
Dictionary 612 (8th ed. 2004) (defining “exempt” as “free or
released from a duty or liability to which others are held”);
Ballentine's Law Dictionary, 435 (3rd ed. 1969) (defining “exempt”
as “free of an obligation which is binding on others”).
With respect to health service providers, N.C. Gen. Stat. §
131E-178(a) (2005) states, “No person shall offer or develop a new
institutional health service without first obtaining a certificate
of need” from DHHS. The plain language of section 131E-178(a)
places an affirmative duty on any person seeking to “offer or
develop a new institutional health service” to apply for and
receive a CON first. Here, the CON Section released Liberty from
the obligation to obtain a CON for its Greensboro hospice office by
issuing the “No Review” letter. Thus, the CON section's issuanceof a “No Review” letter is an “exemption” which HGI was entitled to
contest pursuant to section 131E-188(a).
(See footnote 4)
See also In re
Wilkesboro,
Ltd., 55 N.C. App. 313, 317, 285 S.E.2d 626, 628 (1982)
(similarly concluding under prior law that the CON Section's
issuance of a “letter relieving Wilkesboro, Limited of the
requirement to apply for a certificate of need” was “[an] approval,
an approval with conditions, or [a] denial of an application for a
certificate of need” which the petitioner was entitled to contest).
For the reasons stated above, we hold that the CON Section's
issuance of a “No Review” letter is the issuance of an “exemption”
for purposes of section 131E-188(a). Accordingly, we conclude that
section 131E-188(b) confers jurisdiction on this Court to hear the
incident direct appeal.
III. Summary Judgment
[2] Liberty argues that DHHS erred by granting petitioner's
motion for summary judgment. In particular, Liberty assigns error
to the agency's conclusions that (1) “Liberty's proposal to open a
new hospice office in Guilford County constitutes the establishment
of a new hospice agency which required a Certificate of Need” and(2) “[HGI is] substantially prejudiced as a matter of law by [the
CON Section's] actions.” Citing
In re Total Care, 99 N.C. App.
517, 393 S.E.2d 338 (1990), Liberty concludes that it was not
required to obtain a CON before opening the Greensboro office
because the office (1) is located within the “service area” of its
existing Fayetteville hospice and (2) is a “branch office” of the
Fayetteville hospice. Citing N.C. Gen. Stat. § 150B-23 (2005) and
Bio-Medical Applications of N.C., Inc. v. N.C. Dep't of Health and
Human Servs., No. COA04-1644, slip op. (N.C. App. Oct. 4, 2005)
(unpublished), Liberty concludes HGI failed to show that the CON
Section's issuance of the “No Review” letter substantially
prejudiced its rights because HGI's claims of prejudice are
speculative and because HGI does not have a right to be free from
competition. These are questions of law which this Court reviews
de novo.
Craven Reg'l Medical Authority v. N.C. Dep't of Health
and Human Servs., 176 N.C. App. 46, 51, 625 S.E.2d 837, 840 (2006).
We disagree with Liberty and affirm the final DHHS agency decision.
A. New Institutional Health Service
N.C. Gen. Stat. § 131E-178 provides that “No person shall
offer or develop a
new institutional health service without first
obtaining a certificate of need” from DHHS. (Emphasis added.)
“'New institutional health service' means,” in part, “[t]he
construction, development, or other establishment of a hospice.”
N.C. Gen. Stat. § 131E-176(16)(n) (2005). Therefore, any person
seeking to construct, develop, or otherwise establish a hospice
must first obtain a CON from DHHS. In 1990, this Court considered whether an existing home health
agency must obtain a CON before opening a branch office within its
service area.
See In re Total Care, 99 N.C. App. 517, 393 S.E.2d
338. At that time, section 131E-176 defined “new institutional
health service” to mean, in part, “[t]he construction, development,
or other establishment of a new health service facility.” N.C.
Gen. Stat. § 131E-176(16) (1989). New “health service facility”
was defined, in part, as a “home health agency.”
Id. Considering
these statutory definitions, together with the statutory definition
of home health agency,
(See footnote 5)
this Court held that “the opening of branch
offices by an established home health agency within its current
service area is not the construction, development, or other
establishment of a new health service facility” for which a CON was
required.
In re Total Care, 99 N.C. App. at 522, 393 S.E.2d at
342. In so doing, the Court reasoned that a home health agency's
opening of a second office inside its current service area did not
“transform” it into two separate agencies.
Id. at 520, 393 S.E.2d
at 340. The Court noted that “if the legislature had intended to
require a CON for each office used by the home health agency in
providing home health services it could have specified this in thestatute,” and specifically in the statutory definition of “new
health service facility.”
(See footnote 6)
We conclude that the reasoning and rule of
In re Total Care
govern the case
sub judice. An existing hospice's opening of a
second office within its current service area does not transform it
into two separate hospices. Correspondingly, if the legislature
had intended to require a CON for each office used by a hospice
then it could have specified this in the statutory definition of
“new institutional health service.”
(See footnote 7)
Therefore, the opening of
branch offices by an established hospice within its current service
area is not the construction, development, or other establishment
of a new institutional health service for which a CON is required.
(See footnote 8)
Our conclusion applies only to the statutory definition of “new
institutional health service” in effect in July 2005, at the time
the CON Section issued the “No Review” letter for Liberty's
proposed Greensboro hospice office.
Having concluded that the rule of
In re Total Care is
applicable to hospice branch offices opened within an existing
hospice's service area, this Court must consider whether Greensboro
is within the “service area” of Liberty's Fayetteville hospice. In
so doing, we emphasize that this Court's decision in
In re Total
Care was “premised on [the] undisputed fact” that the plaintiff
“inten[ded] to open additional offices only in its existing
geographical service area.”
In re Total Care, 99 N.C. App. at 522,
393 S.E.2d at 342. Thus, whether the home health care office
proposed by the plaintiff home health care agency in
In re Total
Care was actually located within the plaintiff's “service area” was
not an issue on appeal and was not addressed in the Court's
opinion.
1. Service Area
A “service area” is “the area of the State, as defined in the
State Medical Facilities Plan or in the rules adopted by [DHHS]
which receives services from a health services facility.” N.C.
Gen. Stat. § 131E-176(24a) (2005). The 2005 State Medical
Facilities Plan [SMFP] defines a “hospice's service area” as “the
hospice planning area in which the hospice is located.” N.C. Dep't
of Health and Human Servs., 2005 State Medical Facilities Plan 252
(2005). “Each of the 100 counties in the State is a separatehospice planning area.”
Id. Thus, the North Carolina General
Statutes define a hospice's “service area” as the county in which
it is located.
As explained above, this Court did not consider whether the
home health care office proposed by the plaintiff home health care
agency in
In re Total Care was actually located within the
plaintiff's service area. In fact, the plaintiff in
In re Total
Care established its home health agency in 1978, which is before
the effective date of the CON act. Because the plaintiff “was
granted a license under the grandfather provisions of the CON law
when the law was enacted,” it operated without a CON in
approximately fourteen counties, including four in which it had
offices. For purposes of that appeal, the Court treated the
fourteen counties in which the plaintiff operated as “equivalent to
a geographic service area under a CON,” citing the SMFP in effect
at that time.
(See footnote 9)
Thus, when stating its holding, this Court used the
term “service area” as the term was defined in the SMFP. The Court
did not create a new definition for this term or consider whether
the plaintiff's “service area” actually complied with the SMFP
definition. The definition of “service area” was not at issue in
that case.
Applying
In Re Total Care to the case
sub judice, we hold that
the opening of branch offices by an established hospice within itscurrent service area is not the construction, development, or other
establishment of a new institutional health service for which a CON
is required. Service area means “the hospice planning area in
which the hospice is located.” Liberty holds a CON for its hospice
located in Fayetteville, North Carolina. The planning area and,
therefore, the service area for this hospice is Cumberland County.
Because Liberty seeks to open a hospice office in Greensboro, North
Carolina, which is located in a county outside the service area of
its existing hospice, Liberty has not met the requirements set
forth in
In re Total Care.
Liberty urges this Court to ignore the statutory definition of
“service area,” arguing that the home health care office proposed
by the plaintiff home health care agency in
In re Total Care did
not meet the statutory definition of “service area”; the CON
Section has interpreted
In re Total Care to create a new definition
of service area, such that a health service provider's service area
is any area in which it has recently served at least one patient;
and the statutory definition of “service area” is used only to
determine whether there is a need for a “new institutional health
service.” We are not persuaded.
First, this Court's opinion in
In re Total Care was “premised
on [the] undisputed fact” that the plaintiff “inten[ded] to open
additional offices only in its existing geographical service area.”
In re Total Care, 99 N.C. App. at 522, 393 S.E.2d at 342. Again,
whether the proposed home health care offices were actually locatedwithin the plaintiff home health care agency's existing service
area was “undisputed” and not at issue on appeal.
Second, we agree with Liberty that an agency's interpretation
of a statutory term is entitled to deference when the term is
ambiguous and the agency's interpretation is based on a
“permissible construction of the statute.”
County of Durham v.
N.C. Dep't of Env't and Natural Res., 131 N.C. App. 395, 396-97,
507 S.E.2d 310, 311 (1998). However, we conclude that the
statutory term “service area” is not ambiguous and that the CON
Section's interpretation of this term is not based on “construction
of the statute”; rather, it is based on an erroneous reading of
this Court's decision in
In re Total Care.
CON Section Chief Lee Hoffman testified at a deposition taken
in preparation for the hearing in this contested case. When asked
how the CON Section defined the term “current service area,”
Hoffman explained that the Section considered a “current service
area” to be any county where “there was a patient being served at
about that time” or “there had been a pattern and practice of
services provided to that county, even if there wasn't a patient
currently being served in the most recent past.” Hoffman also
repeatedly testified that the CON Section gleaned this definition
from this Court's decision in
In re Total Care and nowhere else.
DHHS is not entitled to judicial deference to its
misinterpretation of
In re Total Care. In fact, by implementing a
one patient rule, DHHS has encouraged a practice that this Court
disavowed in that case: “[the] offering . . . and opening [of]offices in leapfrog fashion across the State without obtaining a
CON for such services and offices.”
In re Total Care, 99 N.C. App.
at 522, 393 S.E.2d at 342. This Court expressly “premised” its
ruling “on [the] undisputed fact” that the plaintiff home health
agency intended “to open additional offices only in its existing
geographical service area” and explained that its decision in
In re
Total Care was “limited to the facts of [that] particular appeal”
to prevent such an interpretation.
Id.
Moreover, DHHS is not entitled to deference for a policy that
is contrary to the plain language of section 131E-176(24a), which
defines a hospice's service area as the county in which the hospice
is located by statutorily adopting the definition of service area
set forth in the SMFP. The one patient rule further frustrates the
General Assembly's express purpose to prevent “[t]he proliferation
of unnecessary health service facilities” by permitting hospice
providers to open facilities in “leapfrog fashion” without a
determination that such facilities are needed. N.C. Gen. Stat. §
131E-175(4) (2005). The General Assembly has determined that
“unnecessary health service facilities result[] in costly
duplication and underuse of facilities,” as well as “unnecessary
use of expensive resources” and “an enormous economic burden on the
public who pay for the construction and operation of these
facilities as patients, health insurance subscribers, health plan
contributors, and taxpayers,” which the CON process is designed to
prevent. N.C. Gen. Stat. § 131E-175(4), (6) (2005). Third, Liberty argues that the statutory definition of
“service area” is used only to determine the need for a “new
institutional health service,” and should not be used to determine
whether its proposed Greensboro hospice office meets the definition
of “new institutional health service.” In essence, Liberty asks
this Court to determine that its proposed Greensboro office is not
subject to the requirements of the CON law because the proposed
office is inside Liberty's service area and that the proposed
office is inside Liberty's service area because the CON law
(specifically the statutory definition of service area) does not
apply. We reject this circular argument.
2. Extension of
In re Total Care
This Court limited its holding in
In re Total Care as follows:
[T]his opinion is limited to the facts of this
particular appeal and
does not determine the
question whether extension of home health
services to patients in counties outside an
agency's current service area, or
the
expansion of branch offices of an established
home health agency outside the agency's
current service area would trigger the CON
requirement under N.C. Gen. Stat. § 131E-176.
In re Total Care, 99 N.C. App. at 522-23, 393 S.E.2d at 342
(emphasis added). Having concluded that Liberty's Greensboro
hospice office is located outside the service area of its
Fayetteville hospice, we must answer the question left unresolved
by
In re Total Care: whether an existing hospice care provider
must obtain a CON before opening an office outside its service
area. We conclude that it must. Because a branch hospice office is necessarily supported by an
existing certified “parent” hospice, it is also necessarily subject
to the limitations imposed on the “parent” hospice by the CON law.
See In re Total Care, 99 N.C. App. at 520, 393 S.E.2d at 340.
(reasoning that a branch home health office and parent home health
agency comprise a single agency). Every CON is issued for a finite
“service area.”
See N.C. Gen. Stat. § 131E-181(a) (entitled
“Nature of a Certificate of Need”) (stating “[a] certificate of
need shall be valid only for the defined scope, physical location,
and person named in the application). It is well established that
an existing institutional health service must obtain a new CON to
relocate outside this service area. N.C. Gen. Stat. § 131E-
176(16)(q). This is because “the relocation of a health service
facility from one service area to another” establishes a “new
institutional health service.”
Id.;
But see Christenbury Surgery
Center v. N.C. Dep't of Health, 138 N.C. App. 309, 531 S.E.2d 219
(2000). Similarly, we hold that an existing institutional health
service must obtain a new CON to open a “branch office” outside its
service area.
(See footnote 10)
Such an office, regardless of the label affixed by
its developer, is a “new institutional health service” for which a
CON is required.
3. Conclusion
For the reasons stated above, we hold that the opening of a
branch office by an established hospice within its current service
area is not the construction, development, or other establishment
of a new institutional health service for which a CON is required.
This holding is applicable only to Chapter 131E as it existed in
July 2005. We further hold that the Greensboro hospice office
proposed by Liberty is not located within its current service area;
therefore, the proposed office is a “new institutional health
service” for which Liberty was required to obtain a CON.
Accordingly, this assignment of error is overruled.
B. Substantial Prejudice
[3] Liberty assigns error to DHHS's denial of its motion for
summary judgment. In support of its argument, Liberty contends
that HGI failed to allege in its petition for a contested case
hearing that the CON Section “substantially prejudiced” its rights
and failed to forecast evidence of “substantial prejudice” as
required by N.C. Gen. Stat. § 150B-23(a) (2005). We disagree and
hold that the issuance of a “No Review” letter, which results in
the establishment of “a new institutional health service” without
a prior determination of need, substantially prejudices a licensed,
pre-existing competing health service provider as a matter of law.
N.C. Gen. Stat. § 150B-23(a) provides, in part, that a
petition for a contested case hearing “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 orcivil penalty, or has otherwise substantially prejudiced the
petitioner's rights.” Here, HGI alleges only that the CON
Section's issuance of a “No Review” letter to Liberty has
“substantially prejudiced” its rights. In support of this
allegation, HGI forecast evidence regarding the potential for loss
of patients, patient confusion, and impairment of fund-raising for
non-profit hospices. Because we resolve this issue as a matter of
law, we do not consider the sufficiency of the evidence forecast by
HGI.
HGI is a hospice care provider that has been operating
licensed hospices in Guilford County since 1978 and has a
significant interest in ensuring that unnecessary and duplicative
hospice services are not opened in its service area. Because an
applicant for a CON must “demonstrate that the proposed project
will not result in unnecessary duplication of existing or approved
health service capabilities or facilities,” this interest (which
the General Assembly has also determined to be a public interest)
is vetted during the CON application process. Competing hospice
providers, like HGI, may participate in the CON application process
by filing “written comments and exhibits concerning a proposal [for
a new institutional health service] under review with the
Department.” N.C. Gen. Stat. § 131E-185(a1) (2005). Such comments
may include
a. Facts relating to the service area proposed
in the application;
b. Facts relating to the representations made
by the applicant in its application, and itsability to perform or fulfill the
representations made;
c. Discussion and argument regarding whether,
in light of the material contained in the
application and other relevant factual
material, the application complies with
relevant review criteria, plans, and
standards.
Id.
Here, HGI was denied any opportunity to comment on the CON
application, because there was no CON process. In fact, the CON
Section's issuance of a “No Review” letter to Liberty effectively
prevented any existing health service provider or other prospective
applicant from challenging Liberty's proposal at the agency level,
except by filing a petition for a contested case. We hold that the
issuance of a “No Review” letter, which resulted in the
establishment of a “new institutional health service” in HGI's
service area without a prior determination of need was prejudicial
as a matter of law.
Cf. In re Wilkesboro, Ltd., 55 N.C. App. 313,
285 S.E.2d 626 (decided under prior law, holding that the
petitioner was entitled to a contested case hearing, and concluding
that the petitioner, who was a competitor of the respondent, had “a
substantial stake in the outcome of the controversy, such that the
Court could, “in fact, think of no better person to assure complete
review of this issue”).
IV. Conclusion
For the reasons stated above, we hold that the CON Section's
issuance of a “No Review” letter is the issuance of an “exemption”
for purposes of section 131E-188(a). Accordingly, we conclude thatsection 131E-188(b) confers jurisdiction on this Court to hear the
incident appeal.
Additionally, we hold that the opening of a branch office by
an established hospice within its current service area is not the
construction, development, or other establishment of a new
institutional health service for which a CON is required. As
explained above, this holding is applicable only to Chapter 131E as
it existed in July 2005. We further hold that the Greensboro
hospice office proposed by Liberty is not located within the
current service area of its Fayetteville hospice; therefore, the
proposed office is a “new institutional health service” for which
Liberty must obtain a CON.
Finally, we hold that the issuance of a “No Review” letter,
which results in the establishment of “a new institutional health
service” without a prior determination of need, substantially
prejudices a licensed, pre-existing competing health service
provider as a matter of law.
Accordingly we affirm the final agency decision entered on or
about 12 June 2006 by DHHS, DFS Director Robert J. Fitzgerald
awarding summary judgment to HGI.
AFFIRMED.
Judges MCCULLOUGH and CALABRIA concur.
Footnote: 1