STATE HEALTH v. SENTARA NORFOLK GEN. HOSP., Record No. 992018.

• Decision Date: 15 September 2000
• Docket Number: Record No. 992018.
• Parties: STATE HEALTH COMMISSIONER v. SENTARA NORFOLK GENERAL HOSPITAL.
• Court: Virginia Supreme Court

534 S.E.2d 325

260 Va. 267

STATE HEALTH COMMISSIONER v. SENTARA NORFOLK GENERAL HOSPITAL.

Record No. 992018.

Supreme Court of Virginia.

September 15, 2000.

Ashley L. Taylor, Jr., Deputy Attorney General (Mark E. Earley, Attorney General; Jane D. Hickey, Senior Assistant Attorney General; Carol S. Nance, Assistant Attorney General, on briefs), for appellant.

Thomas W. McCandlish, Richmond, (Jamie B. Martin, Mary Jane Hall, Norfolk; McCandlish Kaine & Grant, on brief), for appellee.

Present: CARRICO, C.J., LACY, HASSELL, KEENAN, KOONTZ, and KINSER, JJ., and COMPTON, Senior Justice.

LACY, Justice.

In this appeal, we consider whether the Court of Appeals erred in concluding the State Health Commissioner (Commissioner) exceeded his statutory authority and committed reversible error by relying on evidence outside the record and on a mistake of fact when he denied a Certificate of Public Need (COPN) for creation of an additional liver transplant program in Virginia. On July 31, 1996, Sentara Norfolk General Hospital (Sentara) submitted an application for a COPN pursuant to Code § 32.1-102.3 to establish a liver transplant facility in Norfolk. In accordance with the procedures governing consideration of an application for COPN, § 32.1-102.6, a public hearing was held in Norfolk on September 16, 1996. Following the hearing, the staff of the Eastern Virginia Health Systems Agency Board recommended that the application be denied. The Board disagreed with the staff recommendation and voted to recommend approval of the application.

The application was then forwarded to the Virginia Department of Health (VDH), Division of Certificate of Public Need, for review. The staff of VDH recommended denial of the application. An informal non-adversarial fact finding conference was convened pursuant to § 9-6.14:11, and a VDH adjudication officer recommended that the application be approved.

The adjudication officer's recommendation along with the entire record of the proceeding was submitted to the Commissioner for decision. The Commissioner reviewed the agency record, rejected the adjudication officer's recommendation, and, by letter dated November 3, 1997, denied Sentara's application for a COPN, finding that there was currently no public need for the project. In his letter, the Commissioner stated three reasons for this decision. First, the Commissioner determined that the provisions of the State Medical Facilities Plan (SMFP) relating to liver transplants are "inaccurate, outdated, inadequate or otherwise inapplicable" and that "rblecause they fail to reflect current standards, they should not be applied here." The Commissioner based this finding on the fact that although the SMFP only requires that facilities perform a minimum of 12 liver transplant procedures annually, 12 VAC 5-280-70, "[t]he average number of liver transplants performed per transplant center nationally in 1994 was 36. In 1996 the average number of liver transplants performed per transplant center in Virginia was 52."

Second, the Commissioner concluded that the establishment of an additional liver transplant facility at Sentara "may erode the quality of other transplant centers by reducing the volume of liver transplants at the other centers." The Commissioner made this statement based on his finding that "[i]ndications in the healthcare system are that the numbers of available organs may be reaching a plateau; consequently, the actual numbers of transplantations performed appear to be stabilizing."

Finally, the Commissioner stated that "an additional liver transplant center at [Sentara] may seriously impact the established liver transplant fellowship training program at MCVH [Medical College of Virginia Hospital]" because MCVH is required by the American College of Surgeons "to perform 45 liver transplants annually."

In conclusion, the Commissioner found that Sentara's application for a COPN was premature because "the system presently (i) reflects no need for additional liver transplantation sites in light of organ supply; (ii) appears to have no excess of transplantation procedures requiring accommodation whereas approval of another site could result in an excess of facilities lacking volume to meet the national average or to assure essential technical experience; and (iii) should maintain and sustain necessary training programs in the Commonwealth."

Sentara filed a petition for appeal in the Circuit Court for the City of Norfolk, arguing that the Commissioner's decision should be reversed because the Commissioner exceeded the scope of his authority, relied on evidence not contained in the record, and relied on a mistake of fact regarding the impact of the proposed transplant program on accreditation of the liver transplant fellowship program at MCVH. During the circuit court proceedings, the Commissioner conceded that his recitation of the accreditation requirement was incorrect.

The circuit court affirmed the Commissioner's decision and dismissed Sentara's petition, holding that the Commissioner did not abuse his discretion in denying the COPN and that, considering the record as a whole, "a reasonable mind could not necessarily conclude that Sentara's COPN should be approved." Additionally, the circuit court held that the Commissioner's reliance on the mistake of fact regarding accreditation requirements was harmless error.

Sentara appealed to the Court of Appeals, raising the same three issues. The Court of Appeals resolved each issue adversely to the Commissioner, holding that: (1) the Commissioner exceeded his authority in denying the petition because § 32.1-102.3(A) does not allow the Commissioner to deny an application for a COPN based on his determination that the SMFP standards are outdated, inaccurate, inadequate, or otherwise inapplicable; (2) the Commissioner's finding that the number of livers available for transplantation "may be reaching a plateau" was based on evidence outside the record, reliance on this finding prejudiced Sentara and, therefore, it was reversible error; and (3) the Commissioner's reliance on a mistake of fact regarding the number of transplant procedures necessary for a facility to maintain teaching accreditation constituted reversible error and was not harmless. Sentara Norfolk Gen. Hosp. v. State Health Comm'r, 30 Va.App. 267, 283, 516 S.E.2d 690, 698 (1999). The Commissioner appealed, assigning error to the holding of the Court of Appeals on each issue. We consider these assignments of error in order.

I. Commissioner's Statutory Authority

In his letter denying the COPN, the Commissioner stated that the SMFP standard of 12 liver transplants per year was "inaccurate and outdated" and "should not be applied" in this case. The Commissioner directed that procedures for amending the SMFP standard be initiated. Sentara claims that, in making this determination, the Commissioner "set aside the SMFP in order to impose a higher volume standard, rather than a less strict standard as permitted by the statute." In doing so, Sentara asserts, the Commissioner exceeded his statutory authority because § 32.1-102.3(A) allows the Commissioner to set aside the SMFP if it is outdated and inaccurate only to grant a COPN application, not to deny an application.

Agreeing with Sentara, the Court of Appeals held that "[t]he plain language of the statute provides that the Commissioner `may issue or approve' a petition that does not comply with an outdated or inaccurate SMFP" but it does not provide "that he may deny or disapprove a petition on this basis." Sentara, 30 Va.App. at 277, 516 S.E.2d at 695.

Section 32.1-102.3(A) provides in relevant part:

No person shall commence any project without first obtaining a certificate issued by the Commissioner. No certificate may be issued unless the Commissioner has determined that a public need for the project has been demonstrated. . . . Any decision to issue or approve the issuance of a certificate shall be consistent with the most recent applicable provisions of the State Medical Facilities Plan; however, if the Commissioner finds, upon presentation of appropriate evidence, that the provisions of such plan are not relevant to a rural locality's needs, inaccurate, outdated, inadequate or otherwise inapplicable, the Commissioner, consistent with such finding, may issue or approve the issuance of a certificate and shall initiate procedures to make appropriate amendments to such plan.

This section clearly authorizes the Commissioner to conclude that provisions of the SMFP are outdated and directs the Commissioner to initiate the process for changing the provisions found to be outdated. Thus, in this case, the Commissioner acted within his statutory authority when he determined that the existing SMFP requiring a minimum of 12 liver transplants was outdated and directed that procedures be instituted to adopt appropriate amendments.

We agree with the Court of Appeals, however, that the section specifically authorizes the Commissioner to grant a COPN even if he finds provisions of the SMFP "outdated" or "otherwise inapplicable," but does not contain similar specific authorization to deny a COPN under such circumstances. Denial of the COPN under such circumstances would allow the Commissioner to unilaterally impose new, and presumably higher, standards. The statute contemplates that new standards would be imposed as a result of amendment procedures initiated, not pursuant to unilateral adoption and application of new standards by the Commissioner in the course of the COPN process.

Section 32.1-102.3(A) does not, however, require the Commissioner to grant a COPN simply because a COPN application complies with the provisions of the existing SMFP. The Commissioner correctly points out that compliance with the SMFP is only one factor in the decision. The statute provides that to grant a COPN, the Commissioner must conclude that "a public need for the project has been demonstrated."...