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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.
NORTH CAROLINA COURT OF APPEALS
Filed: 6 November 2007
HOSPICE & PALLIATIVE CARE
N.C. Department of Health and
N.C. DEPARTMENT OF HEALTH AND Division of Facility Services
HUMAN SERVICES, DIVISION OF No. 06 DHR 0018
FACILITY SERVICES, CERTIFICATE
OF NEED SECTION and N.C.
DEPARTMENT OF HEALTH AND HUMAN
SERVICES, DIVISION OF FACILITY
SERVICES, LICENSURE AND
LIBERTY HOME CARE II, LLC,
Appeal by respondent-intervenor from final agency decision
entered 8 December 2006 by Director Robert J. Fitzgerald for the
North Carolina Department of Health and Human Services, Division of
Facility Services. Heard in the Court of Appeals 18 October 2007.
Nelson Mullins Riley & Scarborough LLP, by Wallace C.
Hollowell, III, and Noah H. Huffstetler, III, for petitioner-
Attorney General Roy Cooper, by Assistant Attorney General
June S. Ferrell, for respondents-appellees.
Wyrick Robbins Yates & Ponton, LLP, by K. Edward Greene, Lee
M. Whitman, and Sarah M. Johnson, for respondent-intervenor-
Bode, Call & Stroupe, L.L.P., by S. Todd Hemphill, Diana Evans
Ricketts, and Matthew A. Fisher, for amicus curiae Community
Johnston, Allison & Hord, P.A., by Patrick E. Kelly and
Jennifer McKay Patterson, for amicus curiae The Carolinas
Center for Hospice and End of Life Care.
Liberty Home Care II, LLC (Liberty) appeals from the final
agency decision entered granting summary judgment in favor of
Hospice & Palliative Care Charlotte Region (Charlotte Hospice).
Liberty is a hospice agency with its principal office located
in Hoke County, North Carolina. Liberty was issued a Certificate
of Need (CON) in 2002 to develop its Hoke County Hospice Program.
On 20 May 2005, Liberty requested a No Review determination from
the North Carolina Department of Health and Human Services
(DHHS), Certificate of Need Section (CON Section) for a
proposed hospice branch office in Mecklenburg County. Liberty
stated that a Mecklenburg County resident was being served by its
Hoke County Hospice and it desired to open a hospice branch office
in Mecklenburg County.
On 26 May 2005, the CON Section issued a No Review
determination, stating no CON approval was required for Liberty's
proposal. On or about 2 June 2005, Liberty applied for a license
for the Mecklenburg Hospice Branch Office. The DHHS Acute and Home
Care Licensure and Certification Section (Licensure Section)
issued a license to Liberty to open the Mecklenburg County branch
office effective 6 June 2005. On 19 July 2005, Charlotte Hospice filed a petition for a
contested case hearing. Liberty was permitted to intervene.
Liberty continued to develop its Mecklenburg County hospice by
recruiting and hiring new staff while Charlotte Hospice's petition
for hearing was pending. On 2 December 2005, Liberty requested
another No Review determination for a hospice branch office to be
located in Mecklenburg County, based upon new facts and a new
admission of a hospice patient.
On 6 December 2005, the CON Section issued a No Review
letter, stating that Liberty's proposal did not require a CON based
upon current law. Liberty applied for a license for the
Mecklenburg hospice branch office, requesting that upon issuance of
the license, the Licensure Section cancel its 6 June 2005 license.
The Licensure Section issued a license to Liberty, effective 7
December 2005, for the Mecklenburg branch office and terminated the
previously issued license. Charlotte Hospice's pending petition
for a contested case hearing was dismissed as moot.
On 5 January 2006, Charlotte Hospice filed another petition
for a contested case hearing and Liberty was again permitted to
intervene. On 28 September 2006, an Administrative Law Judge
(ALJ) granted Charlotte Hospice's summary judgment motion, and
denied Liberty's cross-motion for summary judgment, motion to
dismiss, and motion for judgment on pleadings.
On 8 December 2006, a Final Agency Decision was issued which:
(1) upheld summary judgment in favor of Charlotte Hospice; (2)
denied Liberty's cross-motion for summary judgment; (3) deniedLiberty's motion to dismiss and motion for judgment on pleadings;
(4) directed Liberty to apply for and obtain a CON before
developing or opening a hospice office in Mecklenburg County; (5)
directed that after Liberty obtains any CON, Liberty must submit a
complete licensure application to the Licensure Section before it
may operate a hospice in Mecklenburg County; (6) directed the CON
Section to withdraw the 6 December 2005, No Review determination;
(7) directed the Licensure Section to declare the 7 December 2005
license issued to Liberty invalid; and (8) directed the CON Section
to inform Liberty to cease and desist from operating a hospice in
Mecklenburg County until it obtains a CON and License. Liberty
Liberty argues DHHS erred by: (1) finding that N.C. Gen.
Stat. § 131E-188 governs this case; (2) denying its motion to
dismiss and for judgment on the pleadings; and (3) denying its
motion for summary judgment.
Charlotte Hospice cross-assigns error to DHHS's failure to
adopt the ALJ's definition of service area, as a single county
pursuant to the 2005 State Medical Facilities Plan.
III. Standard of Review
The appropriate standard of review in this
case depends upon the issue being reviewed.
This Court has stated:
The proper standard of review by the trial
court depends upon the particular issues
presented by the appeal. If appellant argues
the agency's decision was based on an error of
law, then de novo review is required. If
appellant questions whether the agency'sdecision was supported by the evidence or
whether it was arbitrary or capricious, then
the reviewing court must apply the whole
The reviewing court must determine whether the
evidence is substantial to justify the
agency's decision. A reviewing court may not
substitute its judgment for the agency's, even
if a different conclusion may result under a
whole record review.
As to appellate review of a superior court
order regarding an agency decision, the
appellate court examines the trial court's
order for error of law. The process has been
described as a twofold task: (1) determining
whether the trial court exercised the
appropriate scope of review and, if
appropriate, (2) deciding whether the court
did so properly. As distinguished from the
any competent evidence test and a de novo
review, the whole record test gives a
reviewing court the capability to determine
whether an administrative decision has a
rational basis in the evidence.
Carillon Assisted Living, LLC v. N.C. Dep't of Health & Human
Servs., 175 N.C. App. 265, 269-70, 623 S.E.2d 629, 633 (2006)
(internal citations and quotations omitted).
IV. N.C. Gen. Stat. § 131E-188
Liberty argues DHHS erred when it concluded this case is
governed by N.C. Gen. Stat. § 131E-188 because the C[ON] Section's
December 6, 2005 ['N]o [R]eview['] determination is an 'exemption'
as that term is used in the C[ON] Law. We disagree.
This Court has recently held that the CON [S]ection's
issuance of a 'No Review' letter is the issuance of an 'exemption'
for purposes of section 131E-188(a). Hospice at Greensboro, Inc.
v. N.C. Dept. of Health and Human Ser., ___ N.C. App. ___, ___, 647
S.E.2d 651, 655 (2007). Where a panel of the Court of Appeals hasdecided the same issue, albeit in a different case, a subsequent
panel of the same court is bound by that precedent, unless it has
been overturned by a higher court. In the Matter of Appeal from
Civil Penalty, 324 N.C. 373, 384, 379 S.E.2d 30, 37 (1989).
N.C. Gen. Stat. § 131E-188(b) confers jurisdiction on this
Court to hear Liberty's appeal pursuant to this Court's prior
holding in Hospice at Greensboro, Inc. ___ N.C. App. at ___, 647
S.E.2d at 655-56. This assignment of error is overruled.
V. Motion to Dismiss and for Judgment on the Pleadings
Liberty argues that: (1) [t]he issues in this case were
previously decided in the first contested case and are therefore
barred by the doctrine of collateral estoppel; and (2) [DHHS]
erred by not granting [its] Motion to Dismiss pursuant to Rule
12(b)(6) and for Judgment on the Pleadings under Rule 12(c). We
Under collateral estoppel as traditionally applied, a final
judgment on the merits prevents relitigation of issues actually
litigated and necessary to the outcome of the prior action in a
later suit involving a different cause of action between the
parties or their privies. Thomas M. McInnis & Associates, Inc. v.
Hall, 318 N.C. 421, 428, 349 S.E.2d 552, 556 (1986).
In a Final Decision Order of Dismissal dated 14 December 2005,
the ALJ dismissed as moot Charlotte Hospice's petition for a
contested case hearing regarding the CON Section's 26 May 2005 No
Review determination. The ALJ found that Liberty is no longer
relying on the [26 May 2005] ['N]o [R]eview['] letter . . . and the. . . license issued . . . in connection with that ['N]o
[R]eview['] letter. The ALJ held that [a]ny determination made
. . . regarding the validity of the [26 May 2005] '[N]o [R]eview'
letter at issue in this case is moot . . . .
The ALJ specifically found Liberty is permitted to operate a
branch office of the Hoke Hospice in Mecklenburg County pursuant to
the new ['N]o [R]eview['] letter and new license Liberty received
on December 6 and 7, 2005 in its order dismissing as moot
Charlotte Hospice's original petition for a contested case hearing
on the 26 May 2005 No Review letter and 6 June 2005 license.
Liberty asserts that Charlotte Hospice's failure to appeal the
ALJ's dismissal estopps it from relitigating the issues before us.
The statement relied upon by Liberty in the 14 December 2005
final decision is not a decision regarding the ultimate legal
validity of the CON Section's 6 December 2005 No Review letter or
the Licensure Section's 7 December 2005 license issuance. This
statement is merely an acknowledgment of the fact that Liberty
received a wholly new hospice license based on a new 6 December
2005 No Review determination. The issues of the validity of the
26 May 2005 No Review letter and the 6 June 2005 issuance of the
license were not actually litigated and were rendered moot by the
December 2005 No Review letter and license under review here.
Id. DHHS did not err by denying Liberty's motion to dismiss and
for judgment on the pleadings. This assignment of error is
VI. Summary Judgment
Liberty argues DHHS erred by den[ying] [its] motion for
Summary Judgment because the CON law [in effect] at the relevant
time did not require that Liberty obtain a CON for its hospice
branch office in Mecklenburg County and that Charlotte Hospice
failed to allege, establish or forecast any evidence that agency
action substantially prejudiced Charlotte Hospice's rights. We
[A]ny person seeking to construct, develop, or otherwise
establish a hospice must first obtain a CON from DHHS. Hospice at
Greensboro, Inc., ___ N.C. App. at ___, 647 S.E.2d at 657. [T]he
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. Id. at ___, 647 S.E.2d at 658. Service area means
the hospice planning area in which the hospice is located. Id. at
___, 647 S.E.2d at 659 (quotation omitted). Liberty holds a CON
for its hospice located in Hoke County. Liberty's planning and
service area as defined by the State Medical Facilities Plan is
Liberty's proposed hospice branch office in Mecklenburg County
is not located within its current Hoke County service area.
Liberty's proposed Mecklenburg County office is a new
institutional health service for which it is required to obtain a
CON. [T]he issuance of a '[n]o [r]eview' 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.
Id. at ___, 647 S.E.2d at 661.
[T]he 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
[Charlotte Hospice's] service area without a
prior determination of need was prejudicial as
a matter of law.
Id. at ___, 647 S.E.2d at 661-62. We hold DHHS did not err by
denying Liberty's motion for summary judgment. This assignment of
error is overruled. In light of the above holdings, it is
unnecessary for us and we do not reach Charlotte Hospice's cross-
assignment of error.
The CON Section's issuance of a No Review letter is the
issuance of an exemption under N.C. Gen. Stat. § 131E-188(a).
This Court has jurisdiction to hear Liberty's appeal pursuant to
N.C. Gen. Stat. § 131E-188(b). Id
. at ___, 647 S.E.2d at 655.
DHHS did not err by denying Liberty's motion to dismiss and for
judgment on the pleadings. The issues in Charlotte Hospice's 5
January 2006 petition for contested case hearing were not
previously litigated on the merits. Thomas M. McInnis &
, 318 N.C. at 428, 349 S.E.2d at 556. Liberty's proposed Mecklenburg County office is not located
within its current Hoke County planning and service area. The
agency correctly found that Liberty must obtain a CON and license
for its Mecklenburg County office. Charlotte Hospice was
substantially prejudiced based on the issuance of a No Review
letter to Liberty, which resulted in the establishment and
licensure of a new institutional health service without a prior
determination of need. Hospice at Greensboro, Inc.
, ___ N.C. App.
at ___, 647 S.E.2d at 661. DHHS's final agency decision is
Judges MCCULLOUGH and STROUD concur.
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