Opinion
No. COA10-933
Filed 17 May 2011 This case not for publication
Appeal by Petitioner from a final agency decision entered 15 April 2010 by the North Carolina Department of Health and Human Services. Heard in the Court of Appeals 25 January 2011.
Kirschbaum, Nanney, Keenan Griffin, P.A., by Frank S. Kirschbaum and Chad Lorenz Halliday for Petitioner-Appellant. Attorney General Roy Cooper, by Assistant Attorney General June S. Ferrell, for Respondent-Appellee. Williams Mullen, by Marcus C. Hewitt for Respondent-Intervenor.
NC DHHS No. 09-DHR-2976.
Appellant, Wake Radiology Services, LLC, d/b/a Wake Radiology Northwest Raleigh Office, appeals from a Final Agency Decision of the North Carolina Department of Health and Human Services (DHHS). On appeal, Appellant contends that several of DHHS's findings were arbitrary and capricious. After a review of the record and relevant authority, we hold that there was substantial evidence to support the findings of fact. Accordingly, we affirm DHHS's decision.
On 14 November 2008, Appellant filed an application for a certificate of need (CON) with Appellee, DHHS, Division of Health Service Regulation, Certificate of Need Section. In its CON application, Appellant sought to obtain a digital mammography machine to replace the analog mammography machine located at its Northwest Raleigh Offices (NWRO). Because the total capital cost of the digital mammography machine would exceed $500,000, "the acquisition of the proposed digital mammography machine [would] result in the establishment of NWRO as a new diagnostic center," and therefore required a CON from DHHS.
On 29 April 2009, Appellee issued a letter denying Appellant's CON application. Attached to the letter, Appellee included the required factual findings to support its decision. Appellee determined that Appellant's CON application failed to comply with several statutory requirements for issuing a CON. Specifically, Appellee found that Appellant's application failed to comply with the statutory criteria provided in N.C. Gen. Stat. §§ 131E-183(a)(1), (3), (4), (5), (6), (13)(c) and 18(a).
On 5 May 2009, Appellant filed a "Petition For A Contested Hearing" with the Office of Administrative Hearings, challenging the Appellee's denial of the CON application. On 10 June 2009, Pinnacle Health Services of North Carolina, LLC d/b/a Raleigh Radiology at Cedarhurst (Pinnacle) moved to intervene in Appellee's case. In its motion, Pinnacle argued that it was an "affected person" and had the authority to intervene as of right. Pinnacle's motion to intervene was granted by order filed 25 June 2009.
Following a hearing, a temporary administrative law judge issued a "Recommended Decision," on 29 January 2010. After making numerous findings of fact and conclusions of law, the temporary administrative law judge "recommended that the decision of the Certificate of Need Section disapproving the Wake Radiology Application be affirmed." On 15 April 2010, DHHS issued an order by which it adopted the findings and conclusions provided in the "Recommended Decision," disapproving of Appellant's CON application. Thereafter, Appellant filed notice of appeal from the agency decision to this Court.
On appeal, Appellant contends: (I) DHHS erred by finding that the CON application failed to comply with N.C. Gen. Stat. § 131E-183 (3); (II) DHHS erroneously determined that Appellant failed to comply with the criterion set forth in N.C. Gen. Stat. § 131E-183 (13) c; and (III) DHHS erroneously granted Pinnacle's motion to intervene.
Standard of Review
"The fundamental purpose of the CON Law is to limit the construction of health care facilities in North Carolina to those that are needed by the public and that can be operated efficiently and economically for the public's benefit." Total Renal Care of N.C. LLC v. N.C. Dep't of Health Human Servs., 195 N.C. App. 378, 379, 673 S.E.2d 137, 139 (2009) (citations omitted). DHHS is tasked with reviewing CON applications. Before issuing a CON, DHHS must determine whether an application "is either consistent with or not in conflict" with the statutory criteria. N.C. Gen. Stat. § 131E-183(a) (2009). Each CON application reviewed by DHHS must comply with all the criteria set forth in the statute before a CON will be issued. Good Hope Health Sys., L.L.C. v. N.C. Dep't of Health Human Servs., 189 N.C. App. 534, 549, 659 S.E.2d 456, 466 (2008) (citation omitted). "The burden rests with the applicant to demonstrate that the CON review criteria are met." Id.
On review, an agency decision may be modified or reversed if it is shown that the substantial rights of an appellant were prejudiced by the Department's findings of fact. N.C. Gen. Stat. § 150B-51(b) (2009). Additionally, an agency decision may be reversed upon a showing that the findings of an agency were:
(1) In violation of constitutional provisions;
(2) In excess of the statutory authority or jurisdiction of the agency;
(3) Made upon unlawful procedure;
(4) Affected by other error of law;
(5) Unsupported by substantial evidence admissible under G.S. 150B-29(a), 150B-30, or 150B-31 in view of the entire record as submitted; or
(6) Arbitrary or capricious.
Parkway Urology, P.A. v. N.C. Dep't of Health Human Servs., ___ N.C. App. ___, ___ 696 S.E.2d 187, 192 (2010); N.C. Gen. Stat. § 150B-51(b). In this case, Appellants tend to argue that the Agency's conclusion that the CON application did not comply with criteria 3 is arbitrary and capricious. Accordingly, the findings adopted by DHHS will be reviewed under the whole record test. See id.
"A court applying the whole record test may not substitute its judgment for the agency's as between two conflicting views, even though it could reasonably have reached a different result had it reviewed the matter de novo." Trotter v. N.C. Dep't of Health Human Servs., 189 N.C. App. 655, 661, 659 S.E.2d 749, 753 (2008) (internal quotation marks omitted). Rather, "[t]he `whole record' test requires the reviewing court to examine all competent evidence . . . in order to determine whether the agency decision is supported by `substantial evidence.'" Amanini v. N.C. Dept. of Human Resources, 114 N.C. App. 668, 674, 443 S.E.2d 114, 118 (1994) (citation omitted). "Substantial evidence is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Comr. of Insurance v. Rating Bureau, 292 N.C. 70, 80, 231 S.E.2d 882, 888 (1977).
I.
Appellant contends that DHHS erred in finding that Appellant failed to meet the statutory requirements set forth in N.C. Gen. Stat. § 131E-183 (2009). Specifically, Appellant argues that criterion 3 was not applicable to their CON application because they sought merely to replace a mammography machine, not acquire an additional one. We disagree.
Our General Assembly has provided that an individual is prohibited from developing a "new institutional health service without first obtaining a certificate of need" from DHHS. N.C. Gen. Stat. § 131E-178(a) (2009). A "[n]ew institutional health service," as defined by statute, includes "[t]he construction, development, or other establishment of a new health service facility." N.C. Gen. Stat. § 131E-176(16)(a) (2009). A "diagnostic center" is a type of "health service facility." N.C. Gen. Stat. § 131E-176(9b) (2009). Because the capital cost of the digital mammography machine in this case exceeded $500,000, Appellant was required to obtain a CON as a diagnostic center:
"Diagnostic center" means a freestanding facility, program, or provider, including but not limited to, physicians' offices, clinical laboratories, radiology centers, and mobile diagnostic programs, in which the total cost of all the medical diagnostic equipment utilized by the facility which cost ten thousand dollars ($10,000) or more exceeds five hundred thousand dollars ($500,000).
N.C. Gen. Stat. § 131E-176(7a) (2009). To receive a CON, an applicant must comply with all the criteria set forth in N.C. Gen. Stat. § 131E-183(a)(3). Good Hope Health Sys., 189 N.C. App. at 549, 659 S.E.2d at 466.
Most pertinent to the current action, criterion 3 requires:
[t]he applicant . . . identify the population to be served by the proposed project, and shall demonstrate the need that this population has for the services proposed, and the extent to which all residents of the area, and, in particular, low income persons, racial and ethnic minorities, women, handicapped persons, the elderly, and other underserved groups are likely to have access to the services proposed.
N.C. Gen. Stat. § 131E-183(a)(3) (2009) (emphasis added). DHHS is permitted to adopt rules to assist in the review of CON applications, ensuring that each application complies with the statutory criteria. N.C. Gen. Stat. § 131E-183(b) (2009).
Rules set forth by the Administrative Code provide performance standards an applicant must attain before receiving a CON for a diagnostic center. Relevant here, the Code provision requires that in CON applicants provide:
(1) documentation that all existing health service facilities providing similar medical diagnostic equipment and services as proposed in the CON application in the defined diagnostic center service area were operating at 80% of the maximum number of procedures that the equipment is capable of performing for the twelve month period immediately preceding the submittal of the application;
(2) documentation that all existing and approved medical diagnostic equipment and services of the type proposed in the CON application are projected to be utilized at 80% of the maximum number of procedures that the equipment is capable of performing by the fourth quarter of the third year of operation following initiation of diagnostic services;
(3) documentation that the applicant's utilization projections are based on the experience of the provider and on epidemiological studies; and
(4) all the assumptions and data supporting the methodologies used for the projections in this Rule.
10A N.C. Admin. Code 14C.1804 (June 2010). On appeal, Appellant argues not that it complied with the performance standards set forth in the North Carolina Administrative Code, but that those performance standards are inapplicable to its CON application.
Specifically, Appellant argues that the performance standards were not applicable to its CON application because it sought merely to replace a mammography machine, not acquire an additional one. In support of its argument, Appellant cites to a number of declaratory rulings and prior CON applications arguing that they offer guidance as to how the regulatory criteria for diagnostic centers should be interpreted. Appellant contends that the Department's deviation from these prior decisions was arbitrary and capricious. Appellant's reasoning is unpersuasive.
In the declaratory ruling cited by Appellant, DHHS limited its ruling to those specific set of factual circumstances presented for review. Additionally, each prior CON application cited by Appellant is factually distinguishable from the one presented to this Court for review. Because each ruling and application cited by Appellant was considered on a case-by-case basis, deviation from one circumstance to the next is not necessarily evidence of a decision rendered arbitrarily or capriciously. The Commission's determination that Appellant failed to adequately present a need for the digital mammography machine is supported by statute and the appropriate North Carolina regulations.
Accordingly, our Court will defer to the agency's interpretation of its own rules. See Carpenter v. N.C. Dep't. of Human Resources, 107 N.C. App. 278, 279, 419 S.E.2d 582, 584 (1992) (holding that "[i]t is well settled that when a court reviews an agency's interpretation of a statute it administers, the court should defer to the agency's interpretation of the statute. This is so as long as the agency's interpretation is reasonable and based on a permissible construction of the statute.").
II.
As we have discussed above, Appellant was required to comply with each of the criteria set forth in N.C. Gen. Stat. § 131E-183. Good Hope Health Sys., 189 N.C. App. at 549, 659 S.E.2d at 466. Because we have determined that Appellant failed to comply with the requirement that it demonstrate a need for its proposed services, it is unnecessary to address Appellant's contention that DHHS erroneously determined that it failed to comply with other criteria listed in the statute.
III.
In its final argument on appeal, Appellant contends that because Pinnacle has failed to demonstrate that it was an "affected person," it should not have been permitted to intervene in the action. We disagree.
By order filed on 25 January 2010, the Office of Administrative Hearings granted Pinnacle's motion to intervene. In the order the administrative law judge explained that "[p]ursuant to N.C. Gen. Stat. § 1A-1, Rule 24, 131E-188, 150B-23 and 26 N.C.A.C. 3.0117, Pinnacle is allowed to intervene in this contested case, to participate in all aspects of this proceeding with all the rights of a party thereto."
Following a denial of a CON by DHHS, an "affected person" is entitled to a contested hearing. N.C. Gen. Stat. § 131E-188(a) (2009). Additionally, "[a]ny affected person shall be entitled to intervene in a contested case." Id. A person affected by the denial of a CON includes "any person who provides services, similar to the services under review, to individuals residing within the service area or the geographic area proposed to be served by the applicant[.]" N.C. Gen. Stat. § 131E-188(c) (2009). In support of its motion to intervene, Pinnacle offered the affidavit of Susan Hawkins (Hawkins), its Regional Administrator. In her affidavit, Hawkins explained that Pinnacle provided several types of diagnostic imaging services including mammography. Hawkins also stated that Pinnacle had two locations in Wake County that provided diagnostic imaging services, placing them in the same geographic region as Appellant's NWRO.
On appeal, Appellant contends that the affidavit of Hawkins was not admissible because Hawkins did not actually testify and she was prohibited from testifying by affidavit. In support of its contention, Appellant cites Rule 43(a) of the North Carolina Rules of Civil Procedure. The Rule provides that: "In all trials the testimony of witnesses shall be taken orally in open court, unless otherwise provided by these rules." N.C. Gen. Stat. § 1A-1, Rule 43(a) (2009). Appellant's reliance on the rule is misplaced. "When a motion is based on facts not appearing of record the court may hear the matter on affidavits presented by the respective parties, but the court may direct that the matter be heard wholly or partly on oral testimony or depositions." N.C. Gen. Stat. § 1A-1, Rule 43(e) (2009). Because Hawkins' affidavit was considered in relation to a motion to intervene and not a trial, the administrative law judge's reliance on the affidavit was appropriate.
Because there was substantial evidence to support DHHS's findings of fact, DHHS's conclusion based thereon was not arbitrary and capricious. Therefore, we affirm.
Affirmed.
Judges McGEE and BRYANT concur.
Report per Rule 30(e).