Colon Health Ctrs. of Am., LLC v. Hazel

• Decision Date: 21 January 2016
• Docket Number: No. 14–2283.,14–2283.
• Citation: 813 F.3d 145
• Parties: COLON HEALTH CENTERS OF AMERICA, LLC; Washington Imaging Associates –Maryland, LLC, d/b/a Progressive Radiology, Plaintiffs–Appellants, v. Bill HAZEL, in his official capacity as Secretary of Health and Human Resources; Bruce Edwards, in his official capacity as Chair of the Virginia State Board of Health ; James E. Edmondson, Jr., in his official capacity as member of the Virginia State Board of Health ; Steven R. Escobar, in his official capacity as member of the Virginia State Board of Health ; M. Catherine Slusher, in her official capacity as member of the Virginia State Board of Health ; Amy Vest, in her official capacity as member of the Virginia State Board of Health ; Eric O. Bodin, in his official capacity as Director of the Office of Licensure and Certification; John W. Seeds, in his official capacity as member of the Virginia State Board of Health ; Marissa Levine, in her official capacity as the State Health Commissioner; Bradley Beall, in his official capacity as member of the Virginia State Board of Health ; Theresa Middleton Brosche, in her official capacity as member of the Virginia State Board of Health ; Megan C. Getter, in her official capacity as member of the Virginia State Board of Health ; Henry N. Kuhlman, in his official capacity as member of the Virginia State Board of Health ; Honorable Faye Prichard, in her official capacity as member of the Virginia State Board of Health ; Benita Miller, in her official capacity as member of the Virginia State Board of Health ; Peter Boswell, in his official capacity as Director of the Division of Certificate of Public Need; Tom East, in his official capacity as member of the Virginia State Board of Health ; Linda Hines, in her official capacity as member of the Virginia State Board of Health ; Honorable Mary Margaret Whipple, in her official capacity as member of the Virginia State Board of Health, Defendants–Appellees. Shenandoah Independent Practice Association, Inc. ; Shenandoah Surgeons LLC; Christoper Koopman, Research Fellow, The Mercatus Center at George Mason University; Matthew Mitchel, Senior Research Fellow, The Mercatus Center at George Mason University; Thomas Stratmann, University Professor of Economics and Law, Department of Economics, George Mason University; Robert Graboyes, Senior Research Fellow, Mercatus Center at George Mason University; Jake Russ, Graduate Fellow, Mercatus Center at George Mason University; James Bailey, Assistant Professor of Economics, Department of Economics and Finance, Creighton University, Amici Supporting Appellants, The Virginia Hospital & Healthcare Association; The Virginia Health Care Association; The State of Washington; The State of Arizona; The State of Hawaii; The State of Mississippi; The State of Vermont, Amici Supporting Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

813 F.3d 145

COLON HEALTH CENTERS OF AMERICA, LLC; Washington Imaging Associates –Maryland, LLC, d/b/a Progressive Radiology, Plaintiffs–Appellants,

v.Bill HAZEL, in his official capacity as Secretary of Health and Human Resources; Bruce Edwards, in his official capacity as Chair of the Virginia State Board of Health ; James E. Edmondson, Jr., in his official capacity as member of the Virginia State Board of Health ; Steven R. Escobar, in his official capacity as member of the Virginia State Board of Health ; M. Catherine Slusher, in her official capacity as member of the Virginia State Board of Health ; Amy Vest, in her official capacity as member of the Virginia State Board of Health ; Eric O. Bodin, in his official capacity as Director of the Office of Licensure and Certification; John W. Seeds, in his official capacity as member of the Virginia State Board of Health ; Marissa Levine, in her official capacity as the State Health Commissioner; Bradley Beall, in his official capacity as member of the Virginia State Board of Health ; Theresa Middleton Brosche, in her official capacity as member of the Virginia State Board of Health ; Megan C. Getter, in her official capacity as member of the Virginia State Board of Health ; Henry N. Kuhlman, in his official capacity as member of the Virginia State Board of Health ; Honorable Faye Prichard, in her official capacity as member of the Virginia State Board of Health ; Benita Miller, in her official capacity as member of the Virginia State Board of Health ; Peter Boswell, in his official capacity as Director of the Division of Certificate of Public Need; Tom East, in his official capacity as member of the Virginia State Board of Health ; Linda Hines, in her official capacity as member of the Virginia State Board of Health ; Honorable Mary Margaret Whipple, in her official capacity as member of the Virginia State Board of Health, Defendants–Appellees.

Shenandoah Independent Practice Association, Inc. ; Shenandoah Surgeons LLC; Christoper Koopman, Research Fellow, The Mercatus Center at George Mason University; Matthew Mitchel, Senior Research Fellow, The Mercatus Center at George Mason University; Thomas Stratmann, University Professor of Economics and Law, Department of Economics, George Mason University; Robert Graboyes, Senior Research Fellow, Mercatus Center at George Mason University; Jake Russ, Graduate Fellow, Mercatus Center at George Mason University; James Bailey, Assistant Professor of Economics, Department of Economics and Finance, Creighton University, Amici Supporting Appellants,

The Virginia Hospital & Healthcare Association; The Virginia Health Care Association; The State of Washington; The State of Arizona; The State of Hawaii; The State of Mississippi; The State of Vermont, Amici Supporting Appellees.

No. 14–2283.

United States Court of Appeals, Fourth Circuit.

Argued: Dec. 10, 2015.

Decided: Jan. 21, 2016.

ARGUED:Darpana Sheth, Institute for Justice, Arlington, Virginia, for Appellants.

Stuart Alan Raphael, Office of the Attorney General of Virginia, Richmond, Virginia, for Appellees. ON BRIEF:Robert J. McNamara, William H. Mellor, Mahesha P. Subbaraman, Institute for Justice, Arlington, Virginia, for Appellants. Mark R. Herring, Attorney General, Cynthia V. Bailey, Deputy Attorney General, Christy W. Monolo, Assistant Attorney General, Carly L. Rush, Assistant Attorney General, Farnaz F. Thompson, Assistant Attorney General, Trevor S. Cox, Deputy Solicitor General, Office of the Attorney General of Virginia, Richmond, Virginia, for Appellees. Milad Emam, Wiley Rein LLP, Washington, D.C., for Amici Shenandoah Independent Practice Association and Shenandoah Surgeons LLC. Jared M. Bona, Aaron R. Gott, Bona Law P.C., La Jolla, California, for Amici Scholars of Economics and Scholars of Law and Economics. Robert W. Ferguson, Attorney General, Alan D. Copsey, Deputy Solicitor General, Richard A. McCartan, Senior Counsel, Office of The Attorney General of Washington, Olympia, Washington; Mark Brnovich, Attorney General, Office of the Attorney General of Arizona, Phoenix, Arizona; Douglas S. Chin, Attorney General, Office of the Attorney General of Hawaii, Honolulu, Hawaii; Jim Hood, Attorney General, Office of the Attorney General of Mississippi, Jackson, Mississippi; William H. Sorrell, Attorney General, Office of the Attorney General of Vermont, Montpelier, Vermont, for Amici States of Washington, Arizona, Hawaii, Mississippi and Vermont. James J. O'Keeffe, IV, Johnson, Rosen & O'Keeffe, LLC, Roanoke, Virginia; Jamie Baskerville Martin, Jeremy A. Ball, Jennifer L. Ligon, McCandlish Holton, Richmond, Virginia, for Amici Virginia Hospital & Healthcare Association and Virginia Health Care Association.

Before WILKINSON, KING, and WYNN, Circuit Judges.

Affirmed by published opinion. Judge WILKINSON

wrote the opinion, in which Judge KING and Judge WYNN joined.

WILKINSON

, Circuit Judge:

Virginia's certificate of need (CON) program governs the establishment and expansion of certain medical facilities inside the state. In this case two providers of medical imaging services, Colon Health Centers of America and Progressive Radiology, argue that the CON law unconstitutionally violates the dormant aspect of the Commerce Clause. The district court held that the certificate requirement neither discriminated against nor placed an undue burden on interstate commerce, and granted summary judgment to the Commonwealth. For the reasons that follow, we affirm.

I.

A.

Much of the background and many of the claims in this case have been set forth in our prior opinion. See Colon Health Centers of Am., LLC v. Hazel, 733 F.3d 535 (4th Cir.2013)

. Virginia is one of thirty-six states that requires medical service providers to obtain a "certificate of public need" in order to establish or expand operations within its borders. Va.Code Ann. §§ 32.1–102.1 et seq.; 12 Va. Admin. Code §§ 5–220–10 et seq. Virginia's CON program applies to most health care capital expenditures, including investments in new computed tomographic (CT) and magnetic resonance imaging (MRI) facilities. See Va.Code Ann. § 32.1–102.2. It does not, however, cover the "[r]eplacement of existing equipment." Id. at § 32.1–102.1. The program requires that an applicant show a sufficient public need for its proposed venture in the relevant geographic area. Virginia asserts that this preapproval mechanism helps prevent the redundant accretion of medical facilities, protect the economic viability of existing providers, promote indigent care, and assist cost-effective health care spending.

Firms that seek to obtain a certificate of need must file their completed applications with the Department of Health and the appropriate regional health planning agency. Id. at § 32.1–102.6. Applicants pay a fee of one percent of the project's expected capital cost, but no less than $1,000 and no more than $20,000. 12 Va. Admin. Code § 5–220–180(B)

. The submissions are grouped into subcategories based on project type and evaluated in a process called "batching." The code mandates that the review process be completed within 190 days of the start of the applicable batch cycle. Va.Code Ann. § 32.1–102.6.

Five regional health planning agencies across the state are charged with conducting, within 60 days, initial investigations into their respective regions' applications. During this stage of review the agencies must hold a public hearing in the vicinity of the proposed investment site, where interested individuals and local governing bodies may submit comments to assist the agencies in their evaluations. After examining the data and reviewing the testimony before them, the agencies are directed to provide the Department of Health with their recommendations to approve or deny each application. Id.

The Department, concurrently with the regional health planning agencies, reviews the completed applications upon the commencement of the appropriate batch cycle. The Department is required to assess whether an informal fact-finding conference is warranted. Such a proceeding will be held if the Department independently determines that it is necessary or if an intervening party demonstrates that good cause exists to conduct it. Va.Code Ann. § 32.1–102.6(E)

. The date on which the record closes on the application varies depending on whether an informal fact-finding conference is conducted.

The code instructs that a certificate may not be issued unless the State Health Commissioner "has determined that a public need for the project has been demonstrated." Id. at § 32.1–102.3(A). The Commissioner's decision is due forty-five days after the record closes, but that period may be extended by an additional twenty-five days. Id. at § 32.1–102.6(E)

. In making his assessment, the Commissioner must consider a number of factors, although no single factor is dispositive. Id. at § 32.1–102.3(B)(1)–(8). For example, the Commissioner evaluates "[t]he extent to which the proposed service or facility will provide or increase access to needed services for residents of the area to be served," and "[t]he relationship of the project to the existing health care system of the area to be served, including the utilization and efficiency of existing services or facilities." Id. at § 32.1–102.3(B)(1),(5). An application is considered approved and a certificate is granted if the Commissioner fails to issue a decision within seventy days after the closing of the record.

Constructing new facilities or augmenting existing operations without a certificate of need is a Class 1 misdemeanor, punishable by fines of up to $1,000 for each day a service provider is in violation of the statute. Id. at § 32.1–27.1. Applicants and other interested persons dissatisfied with the Commissioner's decision may seek judicial review under the Virginia Administrative Procedure Act. See id. at § 32.1–24.

B.

Appellants Colon Health Centers and Progressive Radiology are out-of-state medical providers who wish to establish,...