Nasa v. Department of Community Health, A05A1668.

• Decision Date: 24 January 2006
• Docket Number: No. A05A1668.,A05A1668.
• Citation: 277 Ga. App. 583,627 S.E.2d 67
• Parties: NORTH ATLANTA SCAN ASSOCIATES, INC. v. DEPARTMENT OF COMMUNITY HEALTH et al.
• Court: Georgia Court of Appeals

277 Ga. App. 583

627 S.E.2d 67

NORTH ATLANTA SCAN ASSOCIATES, INC. v. DEPARTMENT OF COMMUNITY HEALTH et al.

No. A05A1668.

Court of Appeals of Georgia.

January 24, 2006.

Reconsideration Denied February 14, 2006.

Arnall, Golden & Gregory, Charles L. Gregory, Jason E. Bring, Atlanta, for appellant.

Thurbert E. Baker, Attorney General, James D. Coots, Assistant Attorney General, Parker, Hudson, Rainer & Dobbs, Thomas D. Watry, Ray & Sherman, John W. Ray, Schreeder, Wheeler & Flint, Alexander J. Simmons, Jr., Atlanta, for appellees.

ELLINGTON, Judge.

North Atlanta Scan Associates, Inc. ("NASA") filed a petition for judicial review of an administrative decision issued by the Georgia Department of Community Health. In that administrative decision, the Department determined that NASA's operation of its diagnostic imaging center without a certificate of need violated the State Health Planning Act and ordered that NASA cease operations until it obtained a certificate of need. The Superior Court of Fulton County affirmed the Department's decision, and we granted NASA's ensuing application for discretionary appeal. On appeal, NASA contends the Department lacked the authority to reverse an earlier administrative ruling in which the Department determined that the diagnostic imaging center did not require a certificate of need and that the trial court accordingly erred in affirming the Department's decision. NASA further contends that the trial court erred in failing to require the Department to comply with notice requirements for revocation of a license and in allowing Georgia Alliance of Community Hospitals, Inc. and Diagnostic Imaging of Atlanta, LLC to intervene. For the following reasons, we affirm.

The Georgia Administrative Procedure Act, OCGA § 50-13-1 et seq., provides for the judicial review of final agency decisions and authorizes the superior court to reverse or modify the agency decision only

if substantial rights of the appellant have been prejudiced because the administrative findings, inferences, conclusions, or decisions are:

(1) In violation of constitutional or statutory provisions;

(2) In excess of the statutory authority of the agency;

(3) Made upon unlawful procedure;

(4) Affected by other error of law;

(5) Clearly erroneous in view of the reliable, probative, and substantial evidence on the whole record; or

(6) Arbitrary or capricious or characterized by abuse of discretion or clearly unwarranted exercise of discretion.

OCGA § 50-13-19(h). "The [superior] court shall not substitute its judgment for that of the agency as to the weight of the evidence on questions of fact." Id. The subsection addressing the sufficiency of the evidence, OCGA § 50-13-19(h)(5), "has been interpreted to preclude review if any evidence on the record substantiates the administrative agency's findings of fact and conclusions of law." (Citations and punctuation omitted.) Professional Standards Comm. v. Alberson, 273 Ga.App. 1, 4-5(1), 614 S.E.2d 132 (2005). "Upon further discretionary appeal to this Court, our duty is not to review whether the record supports the superior court's decision but whether the record supports the final decision of the administrative agency." (Citations and punctuation omitted.) Id. at 5(1), 614 S.E.2d 132. "Our function is to determine whether the superior court has in its own final ruling committed an error of law." (Punctuation and footnote omitted.) Ga. Dept. of Community Health v. Freels, 258 Ga.App. 446, 446-447, 576 S.E.2d 2 (2002).

The record shows the following undisputed facts. NASA operates several full service diagnostic imaging centers in metropolitan Atlanta. NASA began providing diagnostic imaging services in December 1988, with its first center located at 4500 North Shallowford Road, Suite 100 ("the old location"). In 1991, the General Assembly amended the State Health Planning Act, OCGA § 31-6-1 et seq. ("the Act"), expanding the scope of required certificate of need ("CON") review of new health care projects. Ga. L. 1991, p. 1871. Via a letter from the Department's predecessor agency¹ dated January 28, 1992, NASA received a "grandfather exemption" from the new CON requirements for its existing diagnostic imaging center. See OCGA § 31-6-40(c) (exemptions for certain existing providers). By its terms, the exemption was valid only for the location (the old address) and the scope ("[p]rovision of diagnostic imaging services utilizing one magnetic resonance imaging ("MRI") system [valued at approximately $1,480,000], one computerized tomography ("CT") system [valued at approximately $525,000], and any other equipment not subject to CON review") listed in the written exemption.

In 2001, NASA's owner decided to relocate the center because nearby Dunwoody Medical Center was slated to be closed. A replacement site was located at 5505 Peachtree Dunwoody Road ("the new location") which was approximately three miles from the old location. On February 22, 2001, an agent of NASA e-mailed Clyde Reese, the Department's deputy general counsel, to request a "short-form" CON application for the new location. Reese responded that the rule for a "short-form" procedure for relocations had been repealed but that it was possible that the Department could "do something outside of CON review." Reese asked that NASA submit a letter detailing the history of the diagnostic imaging center and its proposed move, including "the equipment to be used at the new location, the capital expenditure incurred, etc."

On March 1, 2001, with the landlord at the new location demanding proof of a CON or a CON exemption before finalizing a lease agreement, NASA submitted a request for a "letter of nonreviewability" ("LNR"), a formal Department determination that its planned relocation of the center was exempt from CON review. In its request, NASA informed the Department that its existing equipment would be moved to the new location and that the same services would be offered. NASA informed the Department that necessary renovations to the new site would cost approximately $324,720² and that moving and installing the equipment would cost less than $100,000. On March 9, 2001, the Department issued NASA an LNR in which it determined that the relocation was not subject to prior CON review and approval because the services to be offered at the new location would not be considered a new institutional health service under the Act. The Department based this opinion on NASA's representations that relocating the center would not involve a capital expenditure over the applicable threshold ($1,155,881 at that time)³ and that NASA was not going to purchase or lease new diagnostic equipment but would use the same equipment it used at the old location.

After the Department issued the March 9, 2001 LNR but before the relocation of the center in May 2002, the center's diagnostic imaging equipment began malfunctioning and needed to be replaced. The CT scanner was replaced before the move with a new unit costing over $1.2 million. On May 2, 2001, NASA requested an LNR in connection with the acquisition of a new MRI system. The Department issued an LNR, finding the new MRI system fell within the replacement equipment exemption. Because of the cost of installation, NASA delayed installing the new MRI system, which cost $1,975,664, until the new location was ready.

On July 3, 2002, within two months after the move, the Georgia Alliance of Community Hospitals, Inc. ("GACH")⁴ notified the Department that NASA was using a new CT scanner and a new MRI system at the new location, contrary to its representations in the March 1, 2001 request for an LNR. GACH asked the Department to direct NASA to cease and desist operation at the new location.

In February 2003, after NASA had been operating in the new location for about nine months, the Department conducted an inspection of the new location. NASA employees informed the Department's investigators of the replacement of the CT scanner and of the MRI system and of the first installation of the MRI system in connection with the move. The investigators were also aware that the cost of the replacement equipment, although believed to be exempt from review, exceeded the equipment threshold for CON review.

On February 28, 2003, Diagnostic Imaging of Atlanta, LLC ("DIA"), which competes with NASA, filed a mandamus petition against the Department and the Commissioner, seeking to compel the Department to enforce the Act. DIA's action alleged that NASA's relocation and the cost of the replacement equipment required a CON. On March 3, 2003, the Department responded to GACH's inquiry in a letter summarizing its inspection of the new location. In that letter, the Department stated that the replacement of NASA's MRI system and CT scanner was exempt from prior CON review and approval pursuant to the replacement equipment exemption⁵ and concluded that the center was not violating any CON laws or rules. On May 29, 2003, GACH filed a mandamus action, seeking a declaration that NASA's relocation violated the Act. In responding to the two mandamus actions, the Department denied that NASA was required to undergo CON review for the relocation of its center and the replacement of its equipment and maintained that its LNR decision was correctly issued to NASA.

While the mandamus actions were pending, NASA prepared and submitted to the Department a CON application for the relocation of its diagnostic imaging center in which it claimed that the project was exempt from CON approval and review pursuant to the replacement equipment exemption but nonetheless, "out of an abundance of caution," sought CON approval for the project. On November 6, 2003, the Department rejected NASA's CON application, "due to pending litigation associated with the instant relocation project."

On November 14, 2003, the Department issued a cease and desist letter directing NASA to cease operating its diagnostic imaging center at...