Palmyra Park Hosp. Inc. v. Phoebe Sumter Med. Ctr..Ga. Dep't of Cmty. Health v. Phoebe Sumter Med. Ctr..Palmyra Park Hosp. Inc. v. Phoebe Putney Mem'l Hosp..Ga. Dep't of Cmty. Health v. Phoebe Putney Mem'l Hosp..

• Decision Date: 05 July 2011
• Docket Number: A11A0733.,A11A0732,Nos. A11A0730,A11A0731,s. A11A0730
• Citation: 11 FCDR 2208,310 Ga.App. 487,714 S.E.2d 71
• Parties: PALMYRA PARK HOSPITAL, INC.v.PHOEBE SUMTER MEDICAL CENTER.Georgia Department of Community Healthv.Phoebe Sumter Medical Center.Palmyra Park Hospital, Inc.v.Phoebe Putney Memorial Hospital.Georgia Department of Community Healthv.Phoebe Putney Memorial Hospital.
• Court: Georgia Court of Appeals

310 Ga.App. 487

714 S.E.2d 71

11 FCDR 2208

PALMYRA PARK HOSPITAL, INC.

v.PHOEBE SUMTER MEDICAL CENTER.Georgia Department of Community Health

v.Phoebe Sumter Medical Center.Palmyra Park Hospital, Inc.

v.Phoebe Putney Memorial Hospital.Georgia Department of Community Health

v.Phoebe Putney Memorial Hospital.

Nos. A11A0730

A11A0731

A11A0732

A11A0733.

Court of Appeals of Georgia.

July 5, 2011.

Nelson Mullins, Riley & Scarborough, Stanley S. Jones, Jr., Keri F. Conley, Atlanta, Thurbert E. Baker, Atty. Gen., Isaac Byrd, Deputy Atty. Gen., Sidney R. Barrett, Sr. Asst. Atty. Gen., E. Tandy Menk, Alex F. Sponseller, Asst. Attys. Gen., for appellants.Gatewood, Skipper & Rambo, James M. Skipper, Jr., Parker, Hudson Rainer & Dobbs, John H. Parker, Jr., David L. Fenstermacher, June G. Veazey, Thomas D. Watry, Joshua B. Belinfante, for appellees.Robert C. Threlkeld, amicus curiae.BARNES, Presiding Judge.

We have consolidated for review these cases appealing two superior courts' decisions to reverse the grant of a hospital certificate of need (CON) issued by the Georgia Department of Community Health (DCH). The primary issue on appeal is whether DCH properly applied the applicable statutes and rules when it granted Palmyra Park Hospital's application for a CON to provide basic perinatal services. A 2008 amendment to the CON statute, OCGA § 31–6–42(b.2), provides that a hospital seeking a CON for these services does not have to establish a “need” for them. In deciding Palmyra's application, DCH considered how the exclusion of the “need” consideration affected its determination. Two competing hospitals opposed the application and appealed DCH's final decision to the superior courts in their counties. Both courts held that DCH erred in granting the CON, and both Palmyra and DCH appeal these superior court decisions. After reviewing the record, briefs, statutes, and case law, we conclude that the superior courts erred in reversing the final agency decision approving the CON.¹

Neither the superior nor the appellate courts review DCH decisions de novo. Dept. of Community Health v. Gwinnett Hosp. System, 262 Ga.App. 879, 882, 586 S.E.2d 762 (2003). Instead, the reviewing court determines whether “substantial evidence” supports the agency's findings of fact, and whether the conclusions of law drawn from those findings of fact are sound. Pruitt Corp. v. Ga. Dept. of Community Health, 284 Ga. 158, 161(3), 664 S.E.2d 223 (2008). The reviewing courts may reverse an agency decision if it was based on legal error and unlawful procedures, was arbitrary and capricious, or prejudiced the opposing parties' substantial rights. OCGA § 31–6–44.1(a) (formerly OCGA § 31–6–44(m)).

The CON program, OCGA § 31–6–40 et seq., establishes a comprehensive system of planning for the orderly development of adequate health care services throughout the state. OCGA § 31–6–1. HCA Health Svcs. v. Roach, 263 Ga. 798, 801(3)(b), 439 S.E.2d 494 (1994). DCH is the “lead planning agency for all health issues” in Georgia. OCGA § 31–2–1(1). OCGA § 31–6–42(a) specifies that DCH will issue a CON that is “consistent with” a list of general considerations, including the establishment of a need for the services. Under DCH regulations, “need” is based on several factors, including area population and the use of existing services. OCGA § 31–6–42(a)(2); Ga. Comp. R. & Regs. r. 111–2–2–.24(3)(b).

The Georgia General Assembly overhauled the CON statute in 2008. Among other things, the 2008 legislation added three additional criteria for consideration, ² for a total of seventeen, OCGA § 31–6–42(a)(15)–(17), and introduced a second subsection addressing CON applications for “ Destination Cancer Hospitals,” OCGA § 31–6–42(b.1).³ The amendments revised the appeals process, abolishing the former Health Planning Review Board and creating a State Certificate of Need Panel, “an agency separate and apart from the department” consisting of a panel of independent hearing officers “to review the department's initial decision to grant or deny a certificate of need application.” OCGA § 31–6–44(a). They also added a third level of administrative review, which did not exist previously, allowing an aggrieved party to appeal the hearing officer's decision to the commissioner of community health. OCGA §§ 31–6–42(a), 31–6–44(i); Ga. Comp. R. & Regs. r. 274–1–.12(2).

As part of the overhaul, the General Assembly also included a new subsection specifically relevant to a CON application for basic perinatal services. OCGA § 31–6–42(b.2). “Basic perinatal services” are defined as basic inpatient care and follow-up for pregnant women and newborns without complications, as well as community education on prenatal care and the identification and transfer of high-risk patients. OCGA § 31–6–2(3). ⁴

One of the seventeen considerations in OCGA § 31–6–42(a) is that a CON applicant must show that the population to be served has a “need” for the services under certain circumstances. OCGA § 31–6–42(a)(2). The new subsection related to CON applications for basic perinatal services provides that under some circumstances, DCH shall not apply the “need” consideration. OCGA § 31–6–42(b.2) (the “Areawide Need Exception”). Those circumstances are that only one facility in the applicant's county, and fewer than three facilities in contiguous counties, offer basic perinatal services. Id.

Palmyra Park Hospital in Dougherty County sought a CON in August 2008 for basic perinatal services. The application met the requirements for the Areawide Need Exception in OCGA § 31–6–42(b.2), as only one other facility in Dougherty County, Phoebe Putney Memorial Hospital, and fewer than three in contiguous counties, one of which is Phoebe Sumter Medical Center in Sumter County, offers this service. Palmyra sought to renovate unused hospital space and convert seven of its existing 248 beds to “labor/delivery/recovery/postpartum” (LDRP) beds, which allow a new mother to remain in the same room with her baby and family during her hospital stay. No other hospital in the area offers LDRP rooms. The project would primarily serve Dougherty County residents, and secondarily serve nine other counties, including Sumter County.

Phoebe Putney and Phoebe Sumter opposed Palmyra's application. DCH staff reviewed the application and awarded a CON to Palmyra for basic perinatal services. The Phoebe hospitals appealed the initial decision to the Certificate of Need Panel, which appointed a hearing officer. OCGA § 31–6–44(d).

The hearing officer conducted a de novo review and considered Palmyra's application in light of the general considerations in OCGA § 31–6–42(a) and Ga. Comp. R. & Regs. r. 111–2–2–.09(1), the Areawide Need Exception in OCGA § 31–6–42(b.2) and Ga. Comp. R. & Regs. r. 111–2–2–.09(3), and DCH's specific review considerations for perinatal services, Ga. Comp. R. & Regs. r. 111–2–2–.24. In a 37–page opinion containing 95 findings of fact and 35 conclusions of law, the hearing officer determined that Palmyra met the requirements for a CON allowing it to offer basic perinatal services.

Upon further request for review from the Phoebe hospitals, the commissioner of community health affirmed the hearing officer's decision, adopting his findings of fact and conclusions of law as the final DCH agency decision. The Phoebe hospitals filed suit in their respective counties, enumerating errors involving the merits of the decision and the propriety of the administrative procedures applied.

Both superior courts reversed DCH's grant of a CON to Palmyra to deliver basic perinatal services, holding, among other things, that DCH exceeded the scope of its statutory authority by improperly interpreting the effect of the 2008 Areawide Need Exception amendment to the CON statute, and that the initial staff decision granting the CON was insufficient in scope and content. The Sumter County Superior Court also found as error DCH's failure to consider the project's adverse effect on Phoebe Sumter's staffing, which was severely affected by a tornado that destroyed the hospital in 2007.

Palmyra and DCH argue on appeal that the trial courts erred in failing to defer to the agency's interpretation of the applicable rules and statutes, improperly interpreted the 2008 CON statute amendment that applies specifically to applications for basic perinatal services, OCGA § 31–6–42(b.2), and erred in finding prejudicial procedural deficiencies in DCH's 13–page initial staff decision.

1. Palmyra and DCH argue that the trial courts erred in failing to defer to DCH's interpretation of the statute and in concluding that DCH exceeded its statutory authority by improperly expanding the scope of the Areawide Need Exception in OCGA § 31–6–42(b.2). They also argue that the trial court erred in interpreting the Areawide Need Exception based on the more-specific 2008 amendments related to the requirements for Destination Cancer Hospitals in OCGA § 31–6–42(b.2).

While reviewing courts defer to agency interpretations of the statutes they are charged with administering, that deference applies only as far as the agency interpretation is consistent with the statute. Administrative agencies may not “change a statute by interpretation, or establish different standards within a statute that are not established by a legislative body.” (Footnote omitted.) North Fulton Med. Center v. Stephenson, 269 Ga. 540, 544(1), 501 S.E.2d 798 (1998). DCH “is authorized only to adopt and implement rules sufficient to administer the Act's provisions, including the CON program.” (Citation and punctuation omitted.) Id. The judicial branch determines independently whether the agency's interpretation “correctly reflects the plain language of the statute and comports with the legislative intent.” Handel v. Powell, 284 Ga. 550, 553, 670 S.E.2d 62 (2008).

If reviewing courts find that DCH has acted within the authority granted the agency by statute, they defer to DCH's interpretation and...