Cumberland Cnty. Hosp. Sys., Inc. v. N.C. Dep't of Health & Human Servs.

• Decision Date: 18 August 2015
• Docket Number: No. COA14–1376.,COA14–1376.
• Citation: 776 S.E.2d 329,242 N.C.App. 524
• Parties: CUMBERLAND COUNTY HOSPITAL SYSTEM, INC. d/b/a Cape Fear Valley Health System and Hoke Healthcare, LLC, Petitioners, v. N.C. DEPARTMENT OF HEALTH AND HUMAN SERVICES, Division of Health Service Regulation, Certificate of Need Section, Respondent, and Firsthealth of the Carolinas, Inc. d/b/a Firsthealth Moore Regional Hospital, Respondent–Intervenor.
• Court: North Carolina Court of Appeals

242 N.C.App. 524

776 S.E.2d 329

CUMBERLAND COUNTY HOSPITAL SYSTEM, INC. d/b/a Cape Fear Valley Health System and Hoke Healthcare, LLC, Petitioners,

v. N.C. DEPARTMENT OF HEALTH AND HUMAN SERVICES, Division of Health Service Regulation, Certificate of Need Section, Respondent,andFirsthealth of the Carolinas, Inc. d/b/a Firsthealth Moore Regional Hospital, Respondent–Intervenor.

No. COA14–1376.

Court of Appeals of North Carolina.

Aug. 18, 2015.

K & L Gates LLP, Morrisville, by Gary S. Qualls, Susan K. Hackney, Steven G. Pine, and Colleen M. Crowley, for petitioners-appellants.

Attorney General, Roy Cooper, by Special Deputy Attorney General, June S. Ferrell, for respondent-appellee CON section.

Nelson Mullins Riley & Scarborough LLP, by Noah H. Huffstetler, III, Raleigh, Denise M. Gunter, and Candace S. Friel, Winston–Salem, for respondent-appellee FirstHealth.

INMAN, Judge.

The appeal in this case arises from a dispute over the Department of Health and Human Services' decision that a hospital was not required to obtain a new certificate of need in order to reallocate the ratio of inpatient and emergency services on a temporary basis to meet fluctuations in demand, where the hospital did not propose to increase or decrease its facility, equipment, or expenditures. We hold that, based on the record before us, a new certificate of need was not necessary because the hospital did not add a new institutional health service, change the scope of services previously approved in a certificate of need, or fail to materially comply with the existing certificate of need.

Cumberland County Hospital System, Inc., d/b/a Cape Fear Valley Health System and Hoke Healthcare, LLC (jointly, "Cape Fear" or "Petitioners"), appeal from the Administrative Law Judge's ("ALJ's") final decision dismissing Cape Fear's contested case against the North Carolina Department of Health and Human Services, Division of Health Service Regulation, Certificate of Need Section ("DHHS" or "the Agency") and respondent-intervenor FirstHealth of the Carolinas, d/b/a FirstHealth Moore Regional Hospital ("FirstHealth") (jointly, "Respondents"). The ALJ concluded (1) that the Office of Administrative Hearings ("OAH") lacked subject matter jurisdiction to determine the controversy because the case had been rendered moot and, in the alternative, (2) that Cape Fear's petition failed to state any claim upon which relief could be granted. On appeal, Petitioners argue that the ALJ erred in each of these conclusions and in dismissing their petition.

After careful review, we conclude that the matter was not subject to dismissal on mootness grounds but that the petition was fatally deficient on the merits. Accordingly, we affirm the dismissal.

Background

In April 2012, DHHS issued a certificate of need ("CON") to FirstHealth to construct a hospital in Hoke County ("FirstHealth Hoke") with eight inpatient or "acute care" beds, one operating room, and an Emergency Department ("ED") containing eight ED treatment rooms. The hospital opened in October 2013. As of February 2015, when Petitioners' appeal to this Court was filed, FirstHealth Hoke was the only hospital and the only ED in Hoke County.¹

In its CON application, submitted in 2010, FirstHealth projected a need of 25 ED visits per day; however, according to FirstHealth, ED visits at FirstHealth Hoke have never been below 30 per day since its opening in 2013, peaking at 91 visits on Christmas Day, 2013. In 2014, the hospital continued experiencing ED visit volumes nearly four times higher than originally projected, but because it only operated eight ED treatment rooms, an increased number of patients left without being seen. In an effort to relieve this disparity, FirstHealth sent a request letter ("No Review Request") to DHHS in February 2014 seeking permission to use any available inpatient beds for overflow ED treatment on a temporary, as-needed basis. The No Review Request did not propose adding equipment or increasing the scope of services permitted by FirstHealth's CON. Cape Fear opposed FirstHealth's No Review Request in comments filed with DHHS on 14 March 2014.²

Over Cape Fear's objection, DHHS on 21 March 2014 issued its decision ("No Review Decision") approving the No Review Request, concluding that the proposal described in FirstHealth's correspondence "is not governed by, and therefore does not currently require, a certificate of need." DHHS provided notice of its decision to Cape Fear on 10 April 2014.

Cape Fear challenged DHHS's decision in a petition filed in the OAH on 21 April 2014, commencing a contested case proceeding. FirstHealth withdrew its No Review Request from DHHS on 6 May 2014 and obtained permission from the ALJ to intervene in the proceeding on 13 May 2014. On 28 May 2014, DHHS withdrew its No Review Decision, which was the subject of Cape Fear's petition.

On 30 May 2014, DHHS and FirstHealth jointly filed a motion to dismiss the contested case proceeding. The ALJ issued a final decision on 21 August 2014 dismissing the matter on two alternative grounds: (1) concluding that the OAH lacked subject matter jurisdiction over the case because it was moot and (2) further concluding that Cape Fear had failed to state a claim upon which relief could be granted. Cape Fear filed timely notice of appeal.

Standard of Review

In certificate of need cases, an appeal from a final OAH decision proceeds directly to this Court. AH North Carolina Owner LLC v. N.C. Dep't of Health and Human Servs., ––– N.C.App. ––––, ––––, 771 S.E.2d 537, 541–42 (2015) ; see also N.C. Gen.Stat. §§ 7A–29(a), 131E–188(b) (2015).

In reviewing a CON determination, [m]odification or reversal of the Agency's decision is controlled by the grounds enumerated in [N.C. Gen.Stat.] section 150B–51(b) ; the decision, findings, or conclusions must be:

(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 and Human Servs., 205 N.C.App. 529, 534, 696 S.E.2d 187, 192 (2010) (quoting Total Renal Care of N.C., LLC v. N.C. Dep't of Health and Human Servs., 171 N.C.App. 734, 739, 615 S.E.2d 81, 84 (2005) ). "The first four grounds for reversing or modifying an agency's decision ... are law-based inquiries. On the other hand, [t]he final two grounds ... involve fact-based inquiries." Id. at 535, 696 S.E.2d at 192 (quoting N.C. Dep't of Revenue v. Bill Davis Racing, 201 N.C.App. 35, 42, 684 S.E.2d 914, 920 (2009) ). "In cases appealed from administrative tribunals, we review questions of law de novo and questions of fact under the whole record test." Surgical Care Affiliates, LLC v. N.C. Dep't of Health and Human Servs., ––– N.C.App. ––––, ––––, 762 S.E.2d 468, 470 (2014) (quoting Diaz v. Div. of Social Servs., 360 N.C. 384, 386, 628 S.E.2d 1, 2 (2006) ). In conducting de novo review, this Court considers matters anew and freely substitutes its own judgment for that of the administrative body. N.C. Dep't of Env't & Natural Res. v. Carroll, 358 N.C. 649, 660, 599 S.E.2d 888, 895 (2004). In conducting "whole record" review, we must examine all the record evidence in order to determine whether there is substantial evidence to support the agency's decision. Id.

Accordingly, we review de novo the ALJ's decision granting Respondents' motion to dismiss for failure to state a claim upon which relief could be granted and dismissing the case as moot. We apply the whole record test in reviewing Petitioners' claims that the ALJ failed to take all of their factual allegations as true and reached conclusions of law unsupported by the findings of fact.³

Analysis

I. Mootness

We first address the conclusion below that the OAH lacked subject matter jurisdiction to hear Petitioners' claim because the case was moot. Because we conclude that DHHS's withdrawal of its No Review Decision falls within at least one exception to the mootness doctrine—as a measure capable of repetition, yet evading review—we decline to dismiss the case for mootness, and we will reach the merits of this appeal.

"A case is ‘moot’ when a determination is sought on a matter which, when rendered, cannot have any practical effect on the existing controversy. Thus, the case at bar is moot if [an intervening event] had the effect of leaving plaintiff with no available remedy." Roberts v. Madison Cty. Realtors Ass'n, Inc., 344 N.C. 394, 398–99, 474 S.E.2d 783, 787 (1996) (citation omitted). "[A] moot claim is not justiciable, and a trial court does not have subject matter jurisdiction over a non-justiciable claim [.]" Yeager v. Yeager, 228 N.C.App. 562, 565, 746 S.E.2d 427, 430 (2013) (citations omitted). Moreover, "[i]f the issues before the court become moot at any time during the course of the proceedings, the usual response is to dismiss the action" for lack of subject matter jurisdiction. Simeon v. Hardin, 339 N.C. 358, 370, 451 S.E.2d 858, 866 (1994) (citation omitted).

One exception to the mootness doctrine permits our courts to address on the merits an otherwise moot claim where the case is "capable of repetition, yet evading review." Ass'n for Home and Hospice Care of North Carolina, Inc. v. Div. of Medical Assistance, N.C. Dep't of Health and Human Servs., 214 N.C.App. 522, 525, 715 S.E.2d 285, 288 (2011) (quoting Thomas v. N.C. Dep't of Human Resources, 124 N.C.App. 698, 705, 478 S.E.2d 816, 820–21 (1996) ).⁴ Where a CON holder obtains through the administrative process an agency decision allowing it to reallocate its services, even within the scope of the existing certificate, any challenge to the agency decision would be rendered meaningless if the holder of the certificate and the agency could preclude appellate review by withdrawing the underlying...