HOPE-A WOMEN'S CANCER CENTER v. DHHS

• Decision Date: 06 April 2010
• Docket Number: No. COA08-1548.,COA08-1548.
• Parties: HOPE-A WOMEN'S CANCER CENTER, P.A., Plaintiff-Petitioner, v. NORTH CAROLINA DEPARTMENT OF HEALTH AND HUMAN SERVICES, DIVISION OF HEALTH SERVICE REGULATION, Defendant-Respondent, and Asheville Radiology Associates, P.A., the Charlotte-Mecklenburg Hospital Authority d/b/a/ Carolinas Healthcare System, AMI Sub of North Carolina, Inc. d/b/a Central Carolina Hospital, Cumberland County Hospital System, Inc. d/b/a Cape Fear Valley Health System, Duke University Health System, Inc., Frye Regional Medical Center, Inc., High Point Regional Health System, Hugh Chatham Memorial Hospital, Inc., North Carolina Hospital Association, Henderson County Hospital Corporation d/b/a Margaret R. Pardee Memorial Hospital, Mission Hospitals, Inc., Rex Hospital, Inc., and WakeMed, Respondent-Intervenors.
• Court: North Carolina Court of Appeals

691 S.E.2d 421

HOPE-A WOMEN'S CANCER CENTER, P.A., Plaintiff-Petitioner, v. NORTH CAROLINA DEPARTMENT OF HEALTH AND HUMAN SERVICES, DIVISION OF HEALTH SERVICE REGULATION, Defendant-Respondent, and Asheville Radiology Associates, P.A., the Charlotte-Mecklenburg Hospital Authority d/b/a/ Carolinas Healthcare System, AMI Sub of North Carolina, Inc. d/b/a Central Carolina Hospital, Cumberland County Hospital System, Inc. d/b/a Cape Fear Valley Health System, Duke University Health System, Inc., Frye Regional Medical Center, Inc., High Point Regional Health System, Hugh Chatham Memorial Hospital, Inc., North Carolina Hospital Association, Henderson County Hospital Corporation d/b/a Margaret R. Pardee Memorial Hospital, Mission Hospitals, Inc., Rex Hospital, Inc., and WakeMed, Respondent-Intervenors.

No. COA08-1548.

Court of Appeals of North Carolina.

April 6, 2010.

Nelson Mullins Riley & Scarborough LLP, by Noah H. Huffstetler, III, Denise M. Gunter, Wallace C. Hollowell, III, Raleigh, and Franklin Scott Templeton, Winston-Salem, for Petitioner-Appellant.

Attorney General Roy A. Cooper, by Assistant Attorney General June S. Ferrell, for Respondent-Appellee.

Bode, Call & Stroupe, LLP, by Robert V. Bode, Diana Evans Ricketts, and S. Todd Hemphill, Raleigh, for Respondent-Intervenor-Appellees AMI SUB of North Carolina Inc. d/b/a Central Carolina Hospital, Frye Regional Medical Center, Inc., Hugh Chatham Memorial Hospital, Inc., NCHA, Inc., d/b/a North Carolina Hospital Association.

K & L Gates LLP, by Gary S. Qualls, Colleen M. Crowley, and William W. Stewart, Jr., Morrisville, for Respondent-Intervenors-Appellees The Charlotte-Mecklenburg Hospital Authority d/b/a Carolinas Health-Care System, Cumberland County Hospital System, Inc. d/b/a Cape Fear Valley Health System, High Point Regional Health System, and Rex Hospital, Inc.

Smith Moore Leatherwood LLP, by Maureen Demarest Murray, Terrill Johnson Harris, and Allyson Jones Labban, Greensboro, for Respondent-Intervenor-Appellees WakeMed, Mission Hospitals, Inc., and Henderson County Hospital Corporation d/b/a Margaret R. Pardee Memorial Hospital.

Kirschbaum, Nanney, Keenan & Griffin, PA, by Frank S. Kirschbaum, Raleigh, for Respondent-Intervenor-Appellee Asheville Radiology Associates, P.A.

Catharine W. Cummer, Raleigh, for Respondent-Intervenor Appellee Duke University Health System, Inc.

BEASLEY, Judge.

Hope-A Women's Cancer Center, P.A. (Hope) appeals from a judgment, affirming a declaratory ruling by the North Carolina Department of Health and Human Services, Division of Health Service Regulation (DHHS). DHHS denied Hope's request for a declaratory ruling that its "entry into the Services Agreement described in its request and its provision of diagnostic and radiation oncology services to its patients by means of that Services Agreement (the `project'¹)" would not constitute a "new institutional health service" as defined in N.C. Gen. Stat. § 131E-176(16), but instead ruled that Hope would be required to obtain a certificate of need (CON) for the project. For the reasons stated below, we affirm.

Hope is a health service facility, located in Asheville, North Carolina, dedicated to the diagnosis and treatment of cancer and related diseases in women. In its request for declaratory ruling, Hope proposed to enter into a Services Agreement with an unidentified "out-of-state business corporation" (Provider). By the terms of the Services Agreement, the Provider would furnish Hope with diagnostic and radiation oncology services to provide for its patients. These services would be provided using the following equipment: a linear accelerator with a multi-leaf collimator, a dual use positron emission tomography (PET) scanner with computerized tomography (CT) capability (which would be used for both diagnostic and treatment simulation purposes), and a magnetic resonance imaging (MRI) scanner (collectively, Equipment). The Provider would also furnish personnel, ancillary equipment, disposable supplies, maintenance services, and technical support necessary to the functioning of the Equipment. The terms of the Services Agreement would also provide for the following, in pertinent part:

The Provider will retain the risk of any loss or damage to the Equipment, and will be responsible for its insurance. The Provider will be liable for any property or other taxes on the Equipment. No specifically identified unit of the Equipment will be required to be furnished under the Services Agreement. So long as the Equipment meets the specifications set forth in the Services Agreement, the Provider will have the option to select the particular units of the Equipment to be used, and substitute units of the Equipment as may become necessary. Hope will not purchase, lease or otherwise acquire any ownership or property interest in the Equipment.

In November 2007, Hope submitted a request for a declaratory ruling pursuant to N.C. Gen.Stat. § 150B-4 and N.C. Admin. Code tit. 10A, r. 14A-0103 (June 2008). Hope requested a determination that its proposed project, including entry into the Services Agreement, did not constitute a "new institutional health service" as defined in N.C. Gen.Stat. § 131E-176(16) and therefore, did not require it to obtain a CON. Hope's request for declaratory ruling was opposed by Asheville Radiology Associates, P.A., North Carolina Hospital Association, The Charlotte Mecklenburg Hospital Authority d/b/a Carolinas HealthCare System (CHS), Cumberland County Hospital System, Inc. d/b/a Cape Fear Valley Health System (Cape Fear), High Point Regional Health System (High Point), Rex Hospital, Inc. (Rex), Onslow Memorial Hospital, Inc., Southeast Radiation Oncology Group, P.A., Wake Med, Central Carolina Hospital, Hugh Chatham Memorial Hospital, Inc., Mission Hospitals, Inc., and Margaret R. Pardee Memorial Hospital (collectively, Commentators); all filed comments with DHHS opposing Hope's request for declaratory judgment. The North Carolina Medical Society submitted written comments in support of Hope's declaratory ruling request.

On 16 January 2008, DHHS filed a declaratory ruling denying Hope's request for a ruling that its proposed project would not require a CON. In February 2008, Hope petitioned for judicial review of DHHS's ruling in Wake County Superior Court, pursuant to N.C. Gen.Stat. §§ 150B-4, 150B-43, 150B-45, and 150B-46. Respondent-Intervenors-Appellees AMI SUB of North Carolina, Inc. d/b/a Central Carolina Hospital, Frye Regional Medical Center, Inc., Hugh Chatham Memorial Hospital, Inc., NCHA, Inc. d/b/a The North Carolina Hospital Association, Asheville Radiology Associates, P.A., Duke University Health System, Inc., Henderson County Hospital Corporation d/b/a Margaret R. Pardee Memorial Hospital, Mission Hospitals, Inc., Rex Hospital, Inc., Cumberland County Hospital System, Inc. d/b/a Cape Fear Valley Health System, High Point Regional Health System, The Charlotte-Mecklenburg Hospital Authority d/b/a Carolinas HealthCare System and WakeMed (collectively, Intervenors) filed motions to intervene on 4 April 2008, and these motions were granted by an order entered on 26 June 2008. The order allowing intervention permitted each Intervenor to have the same rights as a party and to participate fully in all aspects of the proceeding. In June 2008, the Wake County Superior Court affirmed DHHS's ruling. From this order, Hope appeals.

Hope first argues that the trial court erred in affirming DHHS's declaratory ruling that Hope's project was a "new institutional health service" requiring a CON. Hope contends that its proposed project is not a "new institutional health service" under any subsection of N.C. Gen.Stat. § 131E-176(16). We disagree.

The standard of review

regarding an administrative decision consists of examining the superior court order for errors of law; i.e. determining first whether the superior court utilized the appropriate scope of review and, second, whether it did so correctly. The nature of the error asserted by the party seeking review of the agency decision dictates the proper scope of review.

Christenbury Surgery Ctr. v. N.C. Dep't of Health & Human Servs., 138 N.C.App. 309, 311-312, 531 S.E.2d 219, 221 (2000) (citing In re Declaratory Ruling by North Carolina Com'r of Ins., 134 N.C.App. 22, 517 S.E.2d 134 (1999)). If the appellant claims that the agency decision was based upon an error of law, review is de novo. Christenbury, 138 N.C.App. at 312, 531 S.E.2d at 221. If the alleged error is "one of statutory interpretation, the reviewing court is not bound by the agency's interpretation of the statute, although some deference is traditionally afforded the agency interpretation." Id. (citation omitted).

The trial court's order states that it reviewed DHHS's declaratory ruling de novo. Thus, the trial court applied the proper standard of review. We must now consider whether the trial court correctly applied de novo review to the legal issues raised by this appeal.

The General Assembly has set forth the activities requiring a CON in N.C. Gen.Stat. § 131E-178 as follows, in pertinent part:

(a) No person shall offer or develop a new institutional health service without first obtaining a certificate of need from the Department....

. . . .

(a) No person shall make an acquisition by donation, lease, transfer, or comparable arrangement without first obtaining a certificate of need from the Department, if the acquisition would have been a new institutional health service if it had been made by purchase. In determining whether an acquisition would have been a new institutional health service, the capital expenditure for the asset shall be deemed to be the fair market value of the asset or the cost of the asset, whichever is greater.

N.C. Gen.Stat. § 131E-178(a)-(b) (2009) (emphasis added). "The fundamental purpose of the certificate of need law is to limit the construction of health care facilities in this state to those that the...