Chippenham & Johnston-Willis v. Peterson

• Decision Date: 09 October 2001
• Docket Number: Record No. 3075-00-2.
• Citation: 36 Va. App. 469,553 S.E.2d 133
• Court: Virginia Court of Appeals
• Parties: CHIPPENHAM & JOHNSTON-WILLIS HOSPITALS, INC., v. E. Anne PETERSON, M.D., State Health Commissioner, Bon Secours-Richmond Health System, Inc., Bon Secours-Stuart Circle Hospital, Inc. and Bon Secours-St. Francis Medical Center, Inc.

553 S.E.2d 133

36 Va. App. 469

CHIPPENHAM & JOHNSTON-WILLIS HOSPITALS, INC., v. E. Anne PETERSON, M.D., State Health Commissioner, Bon Secours-Richmond Health System, Inc., Bon Secours-Stuart Circle Hospital, Inc. and Bon Secours-St. Francis Medical Center, Inc.

Record No. 3075-00-2.

Court of Appeals of Virginia, Richmond.

October 9, 2001.

Robert T. Adams (Thomas J. Stallings; McGuireWoods, on briefs), Richmond, for appellant.

Roscoe C. Roberts, Assistant Attorney General (Mark L. Earley, Attorney General; Ashley L. Taylor, Jr., Deputy Attorney General; Jane D. Hickey, Senior Assistant Attorney General, on brief), for appellee E. Anne Peterson, M.D., State Health Commissioner.

Matthew D. Jenkins (Mark S. Hedberg; Hunton & Williams, on brief), Richmond, for appellees Bon Secours-Richmond Health System, Inc., Bon Secours-Stuart Circle Hospital, Inc. and Bon Secours-St. Francis Medical Center, Inc.

Present: FITZPATRICK, C.J., and ELDER and CLEMENTS, JJ.

ELDER, Judge.

Chippenham and Johnston-Willis Hospitals, Inc., (Chippenham) appeals from a circuit court ruling affirming the decision of E. Anne Peterson, the State Health Commissioner, (the Commissioner). In that decision, the Commissioner concluded that Chippenham was not a "person showing good cause," as that term is defined in Code § 32.1-102.6(D), and, thus, was ineligible to participate in the informal fact finding conference held on the application of Bon Secours-Richmond Health Systems, Inc., Bon Secours-Stuart Circle Hospital, Inc., and Bon Secours-St. Francis Medical Center, Inc., (Bon Secours) for a certificate of public need to construct a new hospital in Chesterfield County. On appeal, we hold that Chippenham demonstrated at least one substantial material mistake of law in the report submitted to the Commissioner by the local health planning agency charged with review of the application. Thus, we hold the Commissioner erroneously denied Chippenham's petition to participate in the application process as a "person showing good cause," and we reverse and remand to the circuit court with instructions to remand the matter to the Commissioner and order her to reverse her good cause determination and to conduct further proceedings consistent with this opinion.

I. BACKGROUND

On July 1, 1999, Bon Secours applied to the State Department of Health for a certificate of public need (COPN) to build a new hospital in Chesterfield County, St. Francis Medical Center (St. Francis), intended to replace Stuart Circle Hospital (Stuart Circle), located in the City of Richmond. Following a public hearing on the application, the Central Virginia Health Planning Agency (CVHPA), the local health planning agency charged by Code § 32.1-102.6 to conduct an initial review of the application, recommended conditional approval. However, during simultaneous review, the Division of Certificate of Public Need (DCOPN) of the State Department of Health (Department), the Commissioner's professional health planning staff, recommended denying the COPN application because it concluded, inter alia, that the application did not satisfy the State Medical Facilities Plan (SMFP). The Department scheduled an informal fact finding conference pursuant to the Virginia Administrative Process Act (VAPA), Code § 9-6.14:11. Chippenham, by counsel, petitioned the Commissioner to allow it to participate in the conference as "a person showing good cause" pursuant to Code § 32.1-102.6. The Commissioner concluded that Chippenham did not establish good cause and refused Chippenham's request.

Chippenham appealed the "good cause" determination to the circuit court.¹ During the hearing on that issue, counsel for the Commissioner conceded that Bon Secours' application for St. Francis was not consistent with the provisions of the SMFP setting minimum occupancy rate requirements for replacing a hospital on a non-contiguous site and limiting the ability of a new hospital to locate within a ten-mile radius of existing hospitals whose occupancy rates did not meet those same minimum standards. Counsel for the Commissioner agreed that the demonstrated annual occupancy rate for medical/surgical beds at Stuart Circle was less than one-half the rate stated by the SMFP and that two existing hospitals within eight miles of the site proposed for St. Francis had underutilized beds. Counsel argued, however, that the Commissioner had the discretion to deviate from the SMFP based on projected future need and consideration of all the circumstances. The circuit court acknowledged the deficiency in the occupancy rates and proximity to other underutilized beds but concluded that Chippenham demonstrated no "substantial mistake of fact or law ... in the report submitted by the [CVHPA]" and that the Commissioner acted within her discretion in concluding that Chippenham failed to demonstrate good cause.

Chippenham timely appealed the good cause determination to this Court.

II. ANALYSIS

On appeal of an agency decision, "[t]he sole determination as to factual issues is whether substantial evidence exists in the agency record to support the agency's decision. The reviewing court may reject the agency's findings of fact only if, considering the record as a whole, a reasonable mind necessarily would come to a different conclusion." Johnston-Willis, Ltd. v. Kenley, 6 Va.App. 231, 242, 369 S.E.2d 1, 7 (1988). In making this determination, "the reviewing court shall take due account of the presumption of official regularity, the experience and specialized competence of the agency, and the purposes of the basic law under which the agency has acted." Id.

On appeal of an agency's determination on issues of law, the standards differ. "`If the issue falls outside the area generally entrusted to the agency, and is one in which the courts have special competence, i.e., the common law or constitutional law,'" the court need not defer to the agency's interpretation. Id. at 243-44, 369 S.E.2d at 8 (quoting Hi-Craft Clothing Co. v. NLRB, 660 F.2d 910, 914-15 (3d Cir.1981)).

However, where the question involves an interpretation which is within the specialized competence of the agency and the agency has been entrusted with wide discretion by the General Assembly, the agency's decision is entitled to special weight in the courts[, and] ... "`judicial interference is permissible only for relief against the arbitrary or capricious action that constitutes a clear abuse of delegated discretion.'"

Id. at 244, 369 S.E.2d at 8 (quoting Va. Alcoholic Beverage Control Comm'n v. York St. Inn, Inc., 220 Va. 310, 315, 257 S.E.2d 851, 855 (1979) (quoting Schmidt v. Bd. of Adjustment, 9 N.J. 405, 88 A.2d 607, 615-16 (1952))).

Under Virginia's Health Care Planning law, before certain projects may be commenced, a medical care facility shall first obtain a [COPN] issued by the Commissioner. The Commissioner must determine that a public need for the project has been demonstrated[,] and any decision to issue a [COPN] must be consistent with the most recent applicable provisions of the State Health Plan (SHP) and the State Medical Facilities Plan (SMFP)....

.... For a [COPN] to be consistent with the SHP and SMFP means "in harmony with ... or in general agreement with."

Id. at 245-46, 369 S.E.2d at 8-9 (quoting Roanoke Mem. Hosps. v. Kenley, 3 Va.App. 599, 606, 352 S.E.2d 525, 529 (1987)); see also Code § 32.1-102.3(A) (providing that "[a]ny decision to issue ... a [COPN] shall be consistent with the most recent applicable provisions of the [SMFP]" (emphasis added)).

The [SHP and the related SMFP are] planning and development blueprint[s] for the health activities of the Commonwealth.... The [SHP and SMFP] ... do[ ] not bind the Department and the Commissioner to act in accordance therewith. Code § 32.1-102.3 does, however, limit the authority of the Commissioner with respect to the issuance of a [COPN]. First, a decision to issue or approve the issuance of a certificate must be consistent with the most recent applicable provisions of the [SHP and SMFP]. Second, in determining whether such public need for a project has been demonstrated, the Commissioner must consider the twenty criteria set forth in Code § 32.1-102.3(B).

Roanoke Mem. Hosps., 3 Va.App. at 605, 352 S.E.2d at 528-29 (emphasis added).²

"If the Commissioner finds that the provisions of either [the SHP or SMFP] are inaccurate, outdated, inadequate, or otherwise inapplicable, the Commissioner may nevertheless issue a [COPN] and institute procedures to amend the plan appropriately." Johnston-Willis, Ltd., 6 Va.App. at 245, 369 S.E.2d at 9 (citing Code § 32.1-102.3(A)). Where the Commissioner does not make an express finding that either of the plans is "inaccurate, outdated, inadequate, or otherwise inapplicable," the exception does not apply. Roanoke Mem. Hosps., 3 Va.App. at 601, 352 S.E.2d at 526.

In this appeal, Chippenham does not directly contest the decision to issue the COPN because it lacks standing to do so. See supra footnote 1. Rather, it challenges the Commissioner's denial of its request to participate in the proceedings as a "person showing good cause," as that term is defined in Code § 32.1-102.6. An entity may show "good cause" by establishing the existence of "a substantial material mistake of fact or law in the Department staff's report on the application or in the report submitted by the health planning agency[, the CVHPA,]" or "significant relevant information not previously presented at and not available at the time of the public hearing." Code § 32.1-102.6(G).

In reviewing the Commissioner's conclusion that Chippenham failed to establish good cause, we must consider the relationship between the code's direction that issuance of a COPN shall be consistent with the SMFP, Code § 32.1-102.1(A); see Roanoke Mem. Hosps.,3 Va.App. at 606,352 S.E.2d at 529, and various portions of the SMFP, which provide that a specific criterion "should" or "should not" be met, e.g., 12 VAC...