Ga. Dep't of Cmty. Health v. Northside Hosp., Inc.

• Decision Date: 25 October 2013
• Docket Number: A13A0937.,Nos. A13A0936,s. A13A0936
• Citation: 750 S.E.2d 401,324 Ga.App. 326
• Parties: GEORGIA DEPARTMENT OF COMMUNITY HEALTH v. NORTHSIDE HOSPITAL, INC.; Kennestone Hospital, Inc. v. Northside Hospital, Inc.
• Court: Georgia Court of Appeals

324 Ga.App. 326

750 S.E.2d 401

GEORGIA DEPARTMENT OF COMMUNITY HEALTH

v.NORTHSIDE HOSPITAL, INC.;

Kennestone Hospital, Inc.

v.Northside Hospital, Inc.

Nos. A13A0936

A13A0937.

Court of Appeals of Georgia.

Oct. 25, 2013.

Certiorari Granted February 24, 2014.

Samuel S. Olens, Atty. Gen., Alex Fredrick Sponseller, Asst. Atty. Gen., Parker, Hudson, Rainer & Dobbs, Armando L. Basarrate II, Ashley L. Filip, David A. Cook, Roxana D. Tatman, for Appellants.

McKenna, Long & Aldrige, Kathlynn Butler Polvino, Robert Michael Rozier, Atlanta, for Appellee.

MILLER, Judge.

This case arises from the Department of Community Health's (the "Department") initial approval of the application of Kennestone Hospital, Inc. ("Kennestone") for a certificate of need ("CON") to develop an ambulatory surgery center ("ASC") in Cobb County based on the Department's determination that the ASC would be part of a hospital and, therefore, subject to less-stringent criteria to qualify for a CON. The Department determined that the ASC was part of a hospital under the provision for a case-by-case determination set forth under the Department's Rule 111–2–2–.40(1)(a). Northside Hospital, Inc. ("Northside") opposed the CON and sought administrative review of the Department's initial decision. An appeal panel and the Commissioner of the Department upheld the Department's initial determination. Northside then filed a petition for judicial review in the superior court. The superior court reversed the Department's final decision on the basis that the "case-by-case" provision in the Department's Rule 111–2–2–.40(1)(a) was unconstitutionally vague because it lacked ascertainable standards and specific guidelines to limit the Department's discretion. We granted the discretionary applications for review filed by the Department and Kennestone.

In Case No. A13A0936, the Department contends that Northside lacked standing to assert a vagueness challenge to Rule 111–2–2–.40(1)(a), and that the superior court erred in concluding that the rule was unconstitutionally vague. In Case No. A13A0937, Kennestone further contends that the superior court erred in finding the rule to be unconstitutionally vague and in failing to apply judicial estoppel to prevent Northside from challenging the constitutionality of the rule since it had previously obtained favorable determinations under it. We conclude that the superior court's decision must be affirmed because the lack of ascertainable standards to guide the Department's "case-by-case" review under Rule 111–2–2–.40(1)(a) gives the agency unfettered discretion and fails to provide fair notice to prospective applicants.¹

Although we review an agency's factual determinations under the "substantial evidence" standard, we conduct a de novo review of the agency's conclusions of law. See Palmyra Park Hosp., Inc. v. Phoebe Sumter Med. Ctr., 310 Ga.App. 487, 488, 714 S.E.2d 71 (2011) ; Walker v. Dept. of Transp., 279 Ga.App. 287, 291(2), 630 S.E.2d 878 (2006).

The record shows the following.² Kennestone, a subsidiary of WellStar Health System, Inc. ("WellStar"), operates two Cobb County acute care hospitals: WellStar Kennestone Hospital, a 633–bed hospital, and WellStar Windy Hill Hospital, a 115–bed long-term care hospital. Both hospitals are located in Marietta. Northside operates two acute care hospitals located in Atlanta and Alpharetta.

In 2010, Kennestone submitted an application for a CON to develop the ASC, to be called East Cobb Surgery Center, in Marietta. The ASC would be located approximately eight miles from WellStar Windy Hill Hospital and about seven miles from WellStar Kennestone Hospital. Kennestone explained that the ASC would be hospital-based, operate as a department from Windy Hill Hospital, and result in the decommission and transfer of three operating rooms from Windy Hill Hospital to the new location. Kennestone identified the ASC's primary service area as East Cobb County and secondary service area to include the rest of Cobb County and parts of Cherokee, Bartow, and Paulding counties.

In reviewing Kennestone's CON application, which was opposed by Northside, the Department determined that the ASC was "part of a hospital" under the "case-by-case" review provided by Rule 111–2–2–.40(1)(a). Pursuant to Rule 111–2–2–.40(1)(a), new ambulatory surgery services are subject to specific review considerations unless such service is or will be provided as "part of a hospital." An ambulatory surgery service is considered to be "part of the hospital" if it is located: (a) within the hospital; or (b) in a building on the hospital's primary campus and that building, or relevant portion thereof, is included in the hospital's permit issued by the State's licensing agency, subject to determination by the Department. Ga. Comp. R. & Regs. r. 111–2–2–.40(1)(a). Rule 111–2–2–.40(1)(a) further provides that "[t]he Department also will make a determination of reviewability on a case-by-case basis in other situations involving hospitals."

The Department concluded that the ASC would be "part of a hospital," reviewed the CON application under the general considerations of Rule 111–2–2–.09(1) and, under such review, decided to issue Kennestone a CON for its ASC.³ In concluding that the ASC was "part of the hospital" under a case-by-case review, however, the Department set forth no reasoning to explain its conclusion.

Northside appealed the Department's decision to issue a CON to an appeal panel, and an administrative hearing officer held a hearing on the appeal. At the hearing, the Department presented testimony from Marsha Hopkins, its primary witness, who during the relevant review period, was the executive director of the Division of Health Planning for the Department. Hopkins testified that she was the Department official who approved Kennestone's CON application, and that the Department concluded that the ASC was part of the hospital because the service was located within Windy Hill Hospital. Hopkins also testified that the ASC was part of the hospital because it was located in a building on the hospital's primary campus and included on the hospital's permit. Hopkins initially testified that she did not conduct a case-by-case determination as to whether the ASC was part of a hospital since it was within the hospital and on the hospital's permit. Hopkins reversed herself and later explained that she did in fact conduct a case-by-case analysis, and under such review, she concluded that the ASC was part of a hospital because the existing location of the operating rooms was in Windy Hill Hospital and the operating rooms were under the hospital's license. Hopkins confirmed, however, that the Department had no written guidelines or limitations, such as geographic distance, which would aid the Department in conducting a case-by-case determination, and she was unaware of prior Department decisions on the issue. Hopkins stated that aside from the common licensure factor, she was not aware of any other factors that she took into account when making the determination that the ASC was part of the hospital.

Hopkins also testified that she had consulted with Bruce Henderson, a senior review analyst with the Department, who also reviewed Kennestone's CON application. Henderson testified that he conducted a case-by-case determination of whether the ASC was part of a hospital, and in his review, he considered the fact that the ASC could be added to Windy Hill Hospital's permit. Hopkins and Henderson both testified that they also considered the fact that the ASC did not involve the addition of operating rooms to Windy Hill Hospital's inventory.

Following the hearing, the administrative hearing officer found that the Department's conclusion that the ASC was part of the hospital was reasonable and supported by the evidence. The hearing officer further found that the Department's consideration of a proposed ambulatory surgery service as part of a hospital when it would be included on the hospital's permit, while not specifically required under Rule 111–2–2–.40(1)(a), was reasonable and consistent with the Department's policies. As a result, the hearing officer upheld the Department's determination that Kennestone's ASC was "part of a hospital" and that it met the general considerations set forth in Rule 111–2–2–.09 to qualify for a CON.

Northside appealed the hearing officer's decision to the Commissioner of the Department, and the Commissioner, through an appointed representative, adopted the appeal panel's factual findings and affirmed the decision to issue a CON to Kennestone. Northside filed a petition for review in the superior court, and the superior court reversed the Department's final decision on the basis that the "case-by-case" language of Rule 111–2–2–.40(1)(a) was unconstitutionally vague because it lacked sufficient guidelines and standards to limit the Department's discretion.

Case No. A13A0936

1. The Department argues that Northside lacked standing to challenge Rule 111–2–2–.40(1)(a) on vagueness grounds. We disagree.

The appeal of the Department's ruling on a CON application is governed by the Administrative Practice Act. OCGA § 31–6–44(m). Under the Administrative Practice Act, a person must meet two requirements before seeking judicial review of an agency action: a person must have "exhausted all administrative remedies available within the agency and [must be] aggrieved by a final decision in a contested case[.]" OCGA § 50–13–19(a).

In the context of the Administrative Practice Act, the word "aggrieved" has been interpreted to mean that the person seeking to appeal must show that he has an interest in the agency decision that has been specially and adversely affected thereby.

(Citation and punctuation omitted.) Chattahoochee Valley Home Health Care, Inc. v. Healthmaster, Inc., 191 Ga.App. 42, 43(1)(a), 381 S.E.2d 56 (1989). "[O]ne who suffers or will suffer economic injury as the result of an administrative decision may be considered...