COURT OF APPEALS OF VIRGINIA

Present: Judges Hu ff, Chafin and Decker Argued at Richmond, Virginia

LEWIS-GALE MEDICAL CENTER, LLC MEMORANDUM OPINION * BY v. Record No. 1289-13-3 J UDGE MARLA GRAFF DECKER APRIL 29, 2014 CYNTHIA C. ROMERO, M.D., STATE HEALTH COMMISSIONER, COMMONWEALTH OF VIRGINIA

FROM THE CIRCUIT COURT OF THE CITY OF SALEM J. Michael Gamble, Judge Designate Jeffrey D. McMahan, Jr. (Robert L. Hodges; Nathan A. Kottkamp; Thomas J. Stallings; Mc Guire Woods LLP, on briefs), for appellant. Ishneila G. Moore, Assistant Attorney Genera l (Kenneth T. Cuccinelli, II, Attorney General; Rita W. Beale, Deputy Attorney General; Allyson K. Tysinger, Senior Assistant Attorney General, on brief), for appellee.

Lewis-Gale Medical Center, LLC (Lewis-Gale), appeals from th e circuit court’s affirmance

of the decision of the Commissi oner of the Department of He alth (Department) denying its application for a certificate of public need (COPN). Lewis-Gale contends that the circuit court erred in upholding the Commissioner’s decision denying the COPNbecause the Commissioner: (1) deviated from prior agency de cisions without explanation; (2) applied the wrong legal standard, thereby treating Lewis-Galedifferently from other Virginia ho spitals; (3) applied the public need calculation required under the State Medical Facilities Pl an (SMFP) in an improper manner; and (4) reached a decision that was not supported by su bstantial evidence in the record. We hold that the record does not support thes e claims. Therefore, we affi rm the circuit court’s ruling.

* Pursuant to Code § 17.1-413, this opin ion is not designated for publication.UNPUBLISHED- 2 - I. BACKGROUND Lewis-Gale, a for-profit hospital owned by HCA, Inc., and located in Salem, sought a COPN to renovate space in its existing newborn nurs ery. At the ti me the July 1, 2010 application was filed, Lewis-Gale’s nursery contained five general-level bassinets. 1 It was licensed for twenty-three obstetrics beds but was not staffing all of those beds due to low demand. In an effort to increase usage rates for its obst etrics beds, Lewis-Gale sought to create a neonatal intensive care unit (NICU) by adding eight specialty-level bassinets. 2 It indicated, as permitted by the applicable regulations, an intent to provide both specialty-lev el and intermediate-level services within those

bassinets. 3 Lewis-Gale averred that the only other hospitalin the health planning region specifically licensed to provide specialty-level newborn care, Centra Virginia Baptis t Hospital (CVBH), was located sixty miles aw ay in Lynchburg, in a different planning district, and was not a realistic option for Lewis-Gale patients. It further noted that Carilion Roanoke Memorial Hospital (Carilion), located eight miles from Lewis-Gale in the same planning district, was the on ly facility in that

district that was licensed to provide any level of NICU care. Carilion, as a licensed provider of subspecialty-level care, was also permitted to provi de all lower levels of care in those bassinets,

1 The applicable regulations classify newborn infant bassinet space according to four levels of medical need: general, intermediate, spec ialty, and subspecialtycare. See 12 VAC 5-410-443(B).

2 The term “[n]eonatal special care” encompasses care “in one or more of the higher service levels”— intermediate, specialty, and subspecialty care. 12 VAC 5-230-10. “[N]eonatal intensive care” refers to care at the speci alty and subspecialty levels. Compare 12 VAC 5- 410-443(B)(1), (B)(2) (stating that general-level and intermediate-level services “s hall provide care [to newborns]” with specified lower-level medical needs), with 12 VAC 5-410-443(B)(3), (B)(4) (stating that specialty-level and subspecialty -level services “shall provide intensive care [to] high-risk [neonates]” with certain “neonatal illnesses” (emphases added)).

3 The regulations define the requirements for eachlevel of care as including the ability to care for infants requiring all lesser levels of care. See 12 VAC 5-410-443(B)(1) to (4).- 3 - including specialty-level care. Because Carilion was the only provider of NICU services in the local planning district, Lewis-Gale asserted that no real competition exis ted for such services. Lewis-Gale suggested that an increasing need for specialized NICU services existed in the geographical area due to increasing maternal age and a high proportio n of at-risk patients. Finally,

Lewis-Gale offered evidence that its proposed proj ect enjoyed significant p ublic support as a means to avoid separating infants needing sp ecialized care from their mothers. The only public opposition to Lewis-Gale’s COPN application came fro m Carilion, which was licensed for thirty intermediate-level and thirty subspecialty-l evel bassinets. Carilion contended the geographical market for NICU care was “overs upplied” and that the ne ed for such care was “diminishing.” It pointed to statistics showing downward trends in occu pancy rates for Carilion’s NICU bassinets over a pe riod of years and notedstudies showing “a high, positive correlation between larger size/volumes of NICU’s and infant s having a higher level of overall health and a significantly lower le vel of mortality.” The Department’s Division of Certificate of Public Need (the DCOPN) reviewed Lewis-Gale’s applicati on and contacted Carilion for additi onal NICU occupancy data. Once it completed its review, the DCOPN issued a detailed report recommending denial of the application.

It concluded that “reasonable avai lability and access to special care nursery services exists in the [health planning region], especial ly within the service areas of both [Lewis -Gale] and Carilion.” At the subsequent informal fact-findingconference, Lewis-Gale presented evidence challenging the DCOPN recommendation. The ad judication officer (AO), like the DCOPN, recommended denying Lewi s-Gale’s COPN application. The AO provid ed a detailed written analysis of the statutory and regulatory factors, in cluding an assessment of the consistency of the application with the SMFP. He considered Carilion’s declinin g occupancy statistics for its subspecialty-level ba ssinets in his an alysis of both the SMFP and non-SMFP fact ors. Additionally,- 4 - the AO observed that authorizing Lewis-Gale’s requested eight addi tional specialty-level bassinets “pose[d] a risk of further reducing utilization” of existing specialty-level and subspecialty-level

newborn services. The Commissioner expressly adopted the fi ndings, conclusions, and recommendation of the AO and denied the application. In doing s o, she analyzed the administrative record pertaining to the proposed projec t and considered all the criteria in Code § 32.1-102.3 required to make a determination of public need. The Co mmissioner noted that she was “mindful of the emotional challenge created when a needful infant is separated from its family in order to receive special level nursery services at another hospita l.” However, she opined that such services “should not be allowed to be duplicated when ev idence strongly shows that sufficient volume would not exist to support profic iency and quality in neonatal care delivery.” She also opined

that the addition of such servic es at Lewis-Gale would “stand[] to harm” the quality of care at Carilion, the facility then provi ding those services. The Commi ssioner further held that the proposed project was inconsistent with applicab le provisions of the SMFP, including its 85% occupancy standard, as well as the “purposes to which that plan is devoted.” She concluded that the project would “reduce the frequency and du ration of medical transp ortation for only some infants in the Lewis-Gale system of hospitals ”—those actually deliver ed at Lewis-Gale—and that the economic viability of the plan wa s “readily questionable.” As a result, the Commissioner denied the COPN ap plication despite her acknowle dgement of “many expressions of community support for the project.” Lewis-Gale sought circuit court review of th e Commissioner’s decision . The circuit court, in affirming the decision, found that the Comm issioner had “complied with her duty to thoroughly

consider the factors under Code §32.1-102.3(B)[,] . . . includ[ing] . . . the regulations adopted pursuant to the [SMFP].” The circ uit court held that Lewis-Gale had not established an error of- 5 - law subject to review under Code § 2.2-4027. The court further held that the agency record contained “substantial evidence . . . with respec t to issues of fact upon which the Commissioner could deny the COPN.” The court concluded th at it could not “find th at the Commissioner’s factual findings should [have] be[en] rejected.” Lewis-Gale appeals the circuit court’s ruling affirming the denial of the COPN.

II. ANALYSIS

A. STATUTORY AND REGULATORY FRAMEWORK Code § 32.1-102.3(A) provides that “[n]o pe rson shall commence any [medical care facilities] project without first obtaining a [C OPN] issued by the Commissioner.” It further provides that “[n]o [COPN] may be issued unless the Commissioner has determined that a public need for the project has been demonstrated.” Code § 32.1-102.3(A). That statute also requires that “[a]ny decision to issue or approve the issu ance of a [COPN] shall be consistent with the most recent applicable provisions of the [SMFP].” Id. As relevant to the instant case, the SMFP sets out certain size and occupanc y standards, based on the level of neonatal care to be provided, for use in determining whether a COPN for additi onal neonatal bassinet sp ace should issue. See 12 VAC 5-410-443 (levels of care) ; 12 VAC 5-230-940, -960 to -980 (standards for determining additional need). Consistency with the SMFP, however, is only one of eight st atutory factors for consideration. Code § 32.1-102.3(B). The Commissione r is not required to award a COPN if the evidence supports a finding that the applicant has failed to dem onstrate a public need based on

any of the enumerated factors. See State He alth Comm’r v. Sentara Norfolk Gen. Hosp., 260 Va. 267, 273, 534 S.E.2d 325, 329 (2000). The other seve n factors are whether the project: improves access to needed health care services, enjoys community support, fosters institutional competition, improves utilization and efficiency of existing services, is feasible in financial and- 6 - human resources terms, provides improvements or innovations in hea lth care financing and delivery, and positively impacts a teaching hospital or medical school. Code § 32.1-102.3(B). Further, when denying a COPN application, the Commissioner is not required to make specific findings with respect to the SMFP and th e seven other statutory criteria. See, e.g., Va. Ret. Sys. v. Cirillo, 54 Va. App. 193, 199, 676 S.E.2d 368, 371 (2009). She needs only to notify the parties “‘briefly and generally in writing[] of the factual basi s for an adverse decision.’” Id. (quoting Code § 2.2-4019(A)(v)).

B. STANDARDS OF REVIEW On appeal of an administrative agency’s de cision, “the party complaining . . . has the burden of demonstrating an error of law subject to review.” Hilliar ds v. Jackson, 28 Va. App. 475, 479, 506 S.E.2d 547, 549 (1998). Reviewable issu es of law include determining whether the agency: (1) acted in accordan ce with the law; (2) committed a procedural error that was not harmless; and (3) had sufficient evidential support for its findings of fact. Johnston-Willis, Ltd. v. Kenley, 6 Va. App. 231, 241-42, 369 S.E .2d 1, 6-7 (1988); see Code § 2.2-4027. In the face of a challenge to the Commissione r’s findings of fact, a reviewing court must defer to the exercise of her expert discreti on as long as substantia l evidence supports those findings. Loudoun Hosp. Ctr. v. Stroube, 50 Va. App. 478, 491, 650 S.E.2d 879, 885-86 (2007).

Substantial evidence is “‘more than a mere sc intilla.’” Johnson v. Va. Ret. Sys., 30 Va. App. 104, 110, 515 S.E.2d 784, 787 (1999) (quoting Consol. Edison Co. v. NLRB, 305 U.S. 197, 229 (1938)). “Under the substantial evidence standar d, the reviewing ‘court may reject the agency’s findings of fact only if, considering the r ecord as a whole, a reasonable mind would necessarily

come to a different conclusion.’” Loudoun Hosp., 50 Va. App. at 491, 650 S.E.2d at 885-86 (quoting Va. Real Estate Comm’n v. Bias, 226 Va. 264, 269, 308 S.E.2d 123, 125 (1983)) (internal quotation marks omitted). Further, when an agency has accepted witness testimony, a- 7 - court reviewing the agency’s action may not set aside the hearing officer’s credibility determination unless the testimony is “‘inherently incredible.’” Va. Real Est. Bd. v. Kline, 17 Va. App. 173, 177, 435 S.E.2d 596, 599 (1993) (quoting Gamble-Skogmo, Inc. v. FTC, 211 F.2d 106, 115 (8th Cir. 1954)); see Comm’r v. Fulton, 55 Va. App. 69, 80, 683 S.E.2d 837, 842 (2009). Where an issue is purely one of statutory inte rpretation, this Court, like the circuit court,

reviews the issue de novo . Va. Dep’t of Health v. NRV Real Estate, LLC, 278 Va. 181, 185, 677 S.E.2d 276, 278 (2009). However, “an agency’s interpretation of its governing statutes, as reflected in its regulations , is entitled to great weight.” Manassas Autocars, Inc. v. Couch, 274 Va. 82, 87, 645 S.E.2d 443, 445-46 (2007) (emphasis adde d). “‘[A]n agency’s interpretation of its own regulations is controlli ng unless plainly erroneous or inc onsistent with the regulations being interpreted.’” Mathews v. PHH Mortg. Corp., 283 Va. 723, 738, 724 S.E.2d 196, 204 (2012) (alteration in or iginal) (quoting Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158, 171 (2007)). “The General Assembly has gran ted the Commissioner broad discretion in rendering case decisions. Th e Commissioner’s determination [of what is] relevant to understanding public need lies with in an area of [her] experience and specialized competence and[,] therefore, is entitled to great deference.” Doctors’ Hosp. of Williamsburg, LLC v. Stroube, 52 Va. App. 599, 609-10, 665 S.E.2d 862, 867 (2008) (citation omitted). When an agency decision is challenged as arbitrary, “judici al interference is permi ssible only for relief against arbitrary or capricious ac tion that constitutes a clear abuse of the discretion delegated to the agency.” NRV Real Estate, 278 Va. at 188, 677 S.E.2d at 280. “‘The reviewing judicial authority may not exercise anew the jurisdic tion of the administrative agency and merely substitute its own independent judgment for thatof the body entrusted by the Legislature with- 8 - the administrative function.’” Doctors’ Ho sp., 52 Va. App. at 607, 665 S.E.2d at 866 (quoting Johnston-Willis, 6 Va. App. at 244, 369 S.E.2d at 8) (internal quotation marks omitted).

This Court reviews this case under these well-established standards.

C. DENIAL OF LEWIS-GALE’S COPN APPLICATION 1. Explanation for Decision and Lega l Standard Applied to Lewis-Gale

Lewis-Gale contends in its first and second assignments of error that the Commissioner erred in deviating from prior agency decisions without explanation and in arbitrarily treating Lewis-Gale differently by applying the outdated regionalized model of care to assess its application. The record, how ever, refutes these claims.

It is well established that “in its or dinarily accepted meaning, the doctrine of stare decisis is inapplicable . . . to the deci sions of an administrative agency.” Courtesy Motors, Inc. v. Ford Motor Co., 9 Va. App. 102, 106, 384 S.E.2d 118, 120 (1989). “Erroneous statutory interpretations an administrativ e agency may have adopted in the past can never cause the subsequent adoption of a correct application of the law to be arbitrary and capricious. If an agency has acted in error, it has no obligation to c ontinue to err in perpetu ity.” NRV Real Estate, 278 Va. at 188, 677 S.E.2d at 280. Instead, “‘[a]n agency may refuse to follow its own precedent [as long as] it [does] not act arbitrarily in doi ng so.’” Courtesy Motors, 9 Va. App. at 106, 384 S.E.2d at 120 (quoting 1 Charles H. Koch, Jr., Ad ministrative Law and Practice § 6.57 (1985)). The issue, therefore, is “whether [the decision] is a departure and indis tinguishable from [prior] decisions . . . and, if so, whether the commi ssioner acted arbitrarily in disregarding the precedent.” Id. at 106, 384 S.E.2d at 121. The decision of the Commissioner, viewed in context of the evidence before her and applying the appropriate legal st andard, is distinguishable from the prior decisions upon which

Lewis-Gale relies. All but two of those decision s were rendered prior to the amendments to the- 9 - SMFP that became effective February 15, 2009. Le wis-Gale argues that the regulatory changes make no difference here. However, the previous version of the SMFP, in assessing various size, volume, and occupancy standards, required the aggregation of statis tics for all levels of neonatal special care within a health planning region. See 12 VAC 5-2 50-90 (repealed). The current regulations, by contrast, provide for separate consideration of such statistics for bassinets of the

same classification level. See 12 VAC 5- 230-960 to -980. Thus, for example, under the previous regulations, high occ upancy rates for one level of ne onatal care could inflate overall bassinet occupancy rates and justify the addition of bassinet space at another level even though the occupancy rates for that level were signif icantly lower than 85%. Such a skewing of occupancy rates is less likely to occur under the new regulatory sc heme, and this fact provides a legitimate basis for distinguishing between pr e-amendment and post-amendment case decisions. Only two of the projects relied upon by Lewis- Gale involved review under current SMFP standards, and both are readily distinguishable. The first COPN application involved merely relocating eight existing specialty -level bassinets by moving them from Sentara Virginia Beach General Hospital to Sentara’s new Princess Anne Hospital, located nine miles away in an underserved part of the same city. 4 The second application—the re quest of Stafford Hospital,

4 Lewis-Gale offered the related DCOPN report into evidence. See Sentara Hosps., Inc., COPN Applic., No. VA-7787, at 1-2 (Va. Dep’t of Health Oct. 19, 2010). The report noted that although Virginia Beach’s population was concentrat ed in the southern portion of the city, no acute care hospital was located there. It concl uded that moving these specialty-level bassinets to Princess Anne would improve access without harming other facilities. Id. at 1-4, 7-8. Lewis-Gale contends that an earlier phase of Sentara’s project involved significant deviation from current SMFP bassi net standards. The record does not support this claim. Sentara’s 2008 COPN for construc tion of the hospital included au thorization for more than one hundred beds and four intermediate-level bassin ets. See Sentara Hosps. COPN Applic., No. VA-7535, at 4, 9 (Va. Dep’t of Health Feb. 18, 2009) (DCOPN staff rep.) (citing COPN No. VA-04138 (issued Mar. 21, 2008)). Se ntara later sought authorizati on for a larger number of beds and agreed, as part of th at proposal, to surrender its 2008 COPN. Id. In reviewing Sentara’s second proposal in 2009, th e DCOPN applied the amended SM FP. Id. at 4. However, Lewis-Gale’s evidence shows that the Depart ment reviewed only the new components of the application and does not indicate that it revisited the licensing of the bassinets. Id. at 4, 9, 27.- 10 - LLC, to introduce intermediate-level services with six bassinets—is also readily distinguishable from Lewis-Gale’s application because the regulations as revised in 2009 require the

Commissioner to evaluate considerations for interm ediate-level and specialty-level bassinets that overlap but are not identical. 5 The regulations, which suggest a minimum of six bassinets for intermediate-level care and a much higher minimu m of eighteen bassinets for specialty-level and subspecialty-level care, reflect the Department’s recognition that NICU-level treatment is more

volume sensitive than intermediate-level nurse ry care. Compare 12 VAC 5-230-960(B), with 12 VAC 5-230-970(B), and -980(B). As the Department has observed, [a] well-trained and experienced staff is critical to the success of [specialty-level and subspeci alty-level NICU] programs. Regionalization of this service c oncentrates patients at the most appropriate sites, which in turn cr eates the most experienced staff. The American Academy of Pediatrics advocates the regionalization of neonatal care in order to optimize the care and outcomes of all newborn infants. Dep’t of Health, Ann. Rep. on the Status of Va.’ s Med. Care Facilities COPN Pgm. 17 (2010). Further reflecting these principles, the regula tions also require that an applicant for specialty-level or subspecialty-level care “shall demonstrate that service volumes of existing . . . providers” of the same type within the same area will not be “significantly reduced.” See 12 VAC 5-230-970(D), -980(D). No such requirement applies to applications for intermediate-level care. 12 VAC 5-230-960. Thus, for these reas ons, we hold the Comm issioner did not act arbitrarily to the extent that her denial of Le wis-Gale’s application resulted in treating it differently from applicants seeking intermediate-level bassinets. Lewis-Gale argues next thatthe Commissioner has acknowledged that specialty-level NICU services are a “safe and reasonable expe ctation of patients and physicians,” i.e., the

5 Lewis-Gale offered the DCOPN report regarding the Stafford Hospital COPN application into evidence. See Stafford Ho sp., LLC, COPN Applic., No. VA-7718 (Va. Dep’t of Health Apr. 27, 2010) (DCOPN staff rep.).- 11 - standard of care, for all hospitals that provide obstetrics servi ces. However, as the AO pointed out, the Commissioner has not he ld that such services are the standard of care. Instead, as recognized by the Commissioner here, a previous Co mmissioner, in a case involving Chesapeake General Hospital, held only that “[a]ccess to some level of on-site specialty care . . . appears to be becoming the standard of care for hospitals providing substantial [volumes of] newborn care as safety has improved and technology and expe ctations have evolved.” Chesapeake Gen’l Hosp. COPN Applic., No. VA-7376 [hereinafter C GH Applic.], at 8, 10 (Va. Dep’t of Health Apr. 2, 2007) (recommended dec. of adjud. offi cer) (emphases added), adopted by CGH Applic., at 1 (Va. Dep’t of Health Apr. 3, 2007) (dec. of comm’r). Further, as the AO held here with regard to that prior case decision: Th[at] language does not establis h a standard of care[;] it only recognizes that, . . . in an appropriate setting where need can be observed and volumes can be sustained , special care nursery services may be approved while preserving the proficiency and quality of care across an area’s hospitals. [Therefore,] [r]eliance on this language for determinative effect in the present case is misplaced. (Emphasis added). The DCOPN also concluded that Lewis-Gale “does not operate a ‘busy’ obstetrical service,” one of the factors considered relevant by th e Commissioner in the prior case

decision. Here, after independent revi ew, the AO adopted the findings in the DCOPN report, and the Commissioner, after her own review, adopted the findings in the AO’s report. Substantial evidence in the record supports these findings. The Chesapeake General proceeding involved evidence that the hospital performed over 3,000 deliveries per year, more than any other non-military hospital in its perinatal region. CGH Applic., supra, at 7-8 (recommended dec. of adjud. officer). Chesapeake General also o ffered evidence that at the time of its 2007 application, “‘there [were] no othe r hospitals in Virginia that de liver[ed] more than 2,500 babies- 12 - per year that [were] not also authorized to prov ide at least specialty[-]le vel care.’” Id. at 8. Lewis-Gale, by contrast, delivered 497 babies in 2009; calculated an annualized delivery rate of 780 babies in 2010 based on figures for nine months of that year ; and “conservatively” predicted deliveries of 1,035 babies per year by 2013. Although Lewis-Gale’s application demonstrated it had experienced some increase in obstetrical ca ses and hoped to achieve a greater increase, the record, viewed under the proper standard, supports a finding that even its projected volume of 1,035 was not high as compared to Chesapeake Ge neral’s 3,000 annual deliveries. Under the standard for reviewing an agency’s interpretation and application of its re gulations, we defer to the Commissioner’s exercise of her specialized competence in this area. See Doctors Hosp., 52 Va. App. at 609-10, 665 S.E.2d at 867. Lewis-Gale further challenges the Commi ssioner’s decision, contending that this outcome upholds “the [previously favored] regiona lized model of neonatal care” in the health planning region. Lewis-Gale cont ends that this finding contradi cts circumstances elsewhere in Virginia which reflect an effort to move away from the regionalized model. To the contrary, as a previous Commissioner recognized in 2007, alth ough “protecting a regionalized model for subspecialty-level neonatal care is important,” it must be balanced against the need for “specialty-level care . . . [within] a busy obs tetrics program.” CGH Applic., supra, at 8 (recommended dec. of adjud. officer), adopted by CGH Applic., at 1 (dec. of comm’r). Similarly here, the Commissioner’s ruli ng indicates a need to balance these interests ra ther than to uphold the regionalized model at any cost. It is true that the SMFP no longer provides for a single regional perinatal center in each geographica l area. See 12 VAC 5-250-80 (repealed). Nevertheless, for all facilities authorized to provide subspecialty-level NICU care, the regulations continue to require staff members with the same qualif ications previously required of such perinatal centers. Compare 12 VAC 5- 410-443(B)(4) (eff. Feb. 14, 2005), with 12 VAC- 13 - 5-410-440(D)(2)(a)(4) (2004) (repealed ). Further, as Lewis-Gale concedes, research shows better outcomes at the subspecia lty level if treatment is provi ded in a higher-volume setting because staff are more experienced in dealing with infants needing such high levels of care. See, e.g., Ann. Rep., supra, at 17. This research s upports the Commissioner’s effort to achieve a balance between these interests, a determination that falls within her expert discretion. Consequently, we hold that Lewis-Gale ha s failed to prove the Commissioner committed an error of law by applying the wrong legal standa rd to assess its app lication or abused her discretion by arbitrarily orcapriciously deviating from prior agency decisions. 2. Application of the SMFP Need Calculation

Lewis-Gale contends in its third assignment of error th at its COPN application was consistent with the SMFP’s various standards for assessing the need for additional NICU bassinets. Evaluating this assignment of erro r involves interpreting the SMFP, which is contained in the Department’s regulations. Ther efore, the Department’s interpretation of the SMFP “is entitled to great weight.” Couch, 274 Va. at 87, 645 S.E.2d at 445-46; see also Roanoke Mem. Hosps. v. Kenley, 3 Va. A pp. 599, 605-06, 352 S.E.2d 525, 529 (1987) (holding

that the word “should” as used in the COPN re gulations at issue “conf er[red] an appropriate amount of discretionary authority” on the Com missioner). We hold that the Commissioner’s construction of the applicable regulations was no t “‘plainly erroneous or inconsistent with the regulations being interp reted.’” See Mathews, 283 Va. at 738, 724 S.E.2d at 204 (quoting Coke, 551 U.S. at 171). a. Subsection (A): 85% Mini mum Annual Occupancy Standard Lewis-Gale correctly asserts that the only ba ssinets in the health planning region that are formally classified as specialty-level bassinets are the thirteen located at CVBH. Lewis-Gale points to CVBH’s reported occupancy level for 2009 of approximately 87%. Because this rate- 14 - exceeded the SMFP’s recommended minimum o ccupancy standard of 85%, Lewis-Gale contends that it proved its propos ed project was consistent with this provision of the SMFP. 6 These facts, standing alone, do not establish th at the Commissioner’s application of the 85% occupancy guideline was erroneous. The record shows that the Commissi oner considered other occupancy data in addition to CVBH’s occupa ncy rate. By adopting the AO’s recommendation, the Commissioner interpreted the 85% minimu m annual occupancy standard as permitting consideration of the occupancy rate for bassinets of the highe r subspecialty-level because, consistent with the regulations, these bassinets were available to provide lower specialty-level

NICU care. Lewis-Gale avers th at the Commissioner’s considerati on of these subspecialty-level bassinets in assessing th e consistency of the proj ect with the 85% occupanc y standard was error. We disagree. The Commissioner’s interpretation of the regul ations in this fashion is entitled to deference. See Couch, 274 Va. at 87, 645 S.E.2d at 445-46. In addition, the evidence supports the finding that Carilion was using its subspecialty bassinets to provide specialty-level care and still was not achieving an 85% occupancy rate . Data from Carilion, which the evidence established was “the primary site for NICU transfers from Lewis-Gale,” showed a subspecialty-level bassinet occupancy rate of 61.52% for Carilion’s fiscal year 2010. 7

6 Lewis-Gale argues that the Commissioner erred in ruling that the 85% standard was “problematic” and in rejecting th e project for that reason. The r ecord shows, however, that the AO ultimately concluded that “[r]egardless” of any problems with this standard, “reasonable availability and access to special care nursery se rvices exists in [the health planning region], especially within the service areas of both [L ewis-Gale] and Carilion.” Thus, the record demonstrates that no such error occurred.

7 Data that Carilion provided on October 1, 2010, covered the period of October 1, 2009, to August 31, 2010, eleven-twelfths of Carili on’s fiscal year 2010. Although Carilion had reported a 2009 occupancy rate of 93% to Virgin ia Health Information (VHI), the body charged with compiling and disseminating health ca re data, see Code § 32.1-276.4; 12 VAC 5-230-10, Lewis-Gale conceded that this figure was for “s taffed” bassinets, and th e evidence showed that Carilion, due to low occupancy rates, was not staffing all of its bassinets.- 15 - Lewis-Gale conceded that Carilion’s NICU was th e only realistic option for its newborn patients needing special care services. Carilion’s 2010 occupancy figure of 61.52% was more than twenty percentage points lower than the 85% re gulatory minimum that the SMFP suggested each level of existing specialized neonatal care shouldachieve before new space at the same level should be added. It was also the lowest subspeci alty-level bassinet occupa ncy rate that Carilion had recorded for the five-year period of 2006 to 2010. 8 The report further showed that 2010 was the year with the lowest average length of st ay over the five-year pe riod. The DCOPN inferred from these figures, which did not separately acco unt for specialty-level and subspecialty-level use, that Carilion “proportionally provided care to fewer sub[]specialty[-]level newborns and provided more care to specialty[-]l evel newborns [within its subspecialty-level] bassinets than in 2009.” This evidence supports a finding that the demand for specialty -level NICU bassinet space within a reasonable distance from Carilion and Lewis-Gale was well below the 85% occupancy level recommended for approving a COPN for new services. Using figures for 2009, the last year for which occupancy rates for both Carilion and CVBH are contained in the record, yields similar results. Carilion’ s thirty subspecialty bassinets

8 The report showed a rate meeting the 85% regulatory minimum during only two of those five years, 86.59% in 2006 and 85.60% in 2008, adjusted downward to compensate for a temporary unavailability of NICU bassinet space when Carilion, in 2008, moved its NICU services from one location to another. Du ring 2007 and 2009, Carilion’s rates were 78.64% and 75.21% respectively. The chair of pediatrics at Carilion, Dr. Alice Ackerman, noted recent demographic data suggested “that the birth rate within the [health pl anning region] is falling despite the expansion in obstetr ics services by hospita ls in the region,” pointing to an 11% decline in the region’s birth rate from 2007 to 2009. She al so noted the fact that the region “ha[d] fewer annual live births than any other region in the state.” She further pointed out a decrease in the rate of infants born prematurely, a figure considered predictive of the number of infants likely to need neonatal special care. Dr. Ackerman posited that these trends “suggest that the demand for NICU services in the Health Planning Region will be significantly lower in coming years and [that] NICU [bassinets] may be oversupplied even at the levels currently licensed.” Finally, she noted the quantity of medical research recognizing a “high, positive correlation between larger size/volume NICU’s and infants having a higher level of overall health and a significantly lower level of mortality.”- 16 - had an occupancy rate of 75.2% which, combin ed with CVBH’s 2009 rate of 86.8% for its thirteen specialty bassinets, yields a functiona l occupancy rate of 78.7% for the health planning region for 2009, also below the 85% floor set out by the SMFP.

Lewis-Gale contends that a comparison of the regulations before and after the 2009

amendments makes clear that the Commissione r erred by considering occupancy rates for subspecialty bassinets in applying the SMFP’s 85% standard to its COPN request for specialty-level bassinets. The purpose of the 2009 amendment, it argues, was to assure sufficient bassinet space for each separate level of care a nd the Commissioner’s conflation of the data for specialty-level and subspecialty-l evel bassinets defeats that pur pose, “effectively . . . undo[ing] the amendment” and creating a new regulation. We hold, however, based on the record, that the Commissioner’s interpretation of the regulations was not plain error. When reviewing a claim of regulatory interpre tive error, the court “‘[must] accept only those agency interpretations that are reasonabl e in light of the prin ciples of [statutory] construction courts normally employ.’” Bd. of Supers. v. State Bldg. Code Tech. Rev. Bd., 52 Va. App. 460, 466, 663 S.E.2d 571, 574 (2008) (quoting EEOC v. Arabian Am. Oil Co., 499 U.S. 244, 260 (1991) (Scalia, J., concurring)). Consequently, in inte rpreting the relevant regulations, we apply the same principles of construction applied to interpreting ambiguous statutes. See Avalon Assisted Living Facil ities, Inc. v. Zager, 39 Va. App. 484, 503, 574 S.E.2d 298, 307 (2002). One of those principles directs th at “an amendment to an existing [regulation]” carries “a presumption that a s ubstantive change in law was inte nded.” Dale v. City of Newport News, 243 Va. 48, 51, 412 S.E.2d 701, 702 (1992). A s econd counsels that regulations “on the same subject matter, i.e., those standing in pari materia , must be considered together and harmonized if possible.” Avalon, 39 Va. App. at 503, 574 S.E.2d at 307.- 17 - Lewis-Gale averred in its COPN application that its specialty-level bassinets would serve roughly equal numbers of intermediate-level and speci alty-level patients. I nherent in this claim is the admission that the SMFP permits a facility to care for infants needing a lower level of neonatal care in bassinets officially classified as capable of providing a higher level of such care. This practice is supported by the text of the SMFP, which expressly defines each successive level of neonatal care space as including equipment a nd treatment capabilities in addition to the equipment and treatment capabilitie s required of the next lowest level of neonatal care. See 12 VAC 5-410-443(B). Allowing for such care without also permitting the Department to consider that provision of care in the calculation of needwould defeat the purposes of the SMFP. Thus, the Commissioner’s application of the regulations in a way that permitted her to consider the functional use of all existing bassinet space rather than merely its formal classification best achieved the SMFP’s purpose. For example, under the pre-2009 regulations, evaluating the need for specialty-level bassinets required consideration of occupancy rates not only for existing subspecialty-level

bassinets but also for intermediate-level bass inets. See 12 VAC 5-250-90 (repealed). Such consideration was required in spite of the fact that the regulations do not permit the use of intermediate-level bassinets to provide higher specialty-level care. See 12 VAC 5-410-443. Under this prior regulatory scheme, the existence of an excess of intermediate-level bassinets could make it difficult to remedy a s hortage of specialty-level bassinets. 9 The 2009 revisions to the regulations provide for separate consid eration of the occupancy statistics for

9 If existing intermediate-level bassinets were not achieving the recommended minimum occupancy of 85%, this fact could cause aggregate occupancy statistics for all bassinet levels to fall below 85%. Under this scenario, even if sp ecialty and subspecialty bassinets had occupancy rates significantly in excess of 85% , thereby tending to indicate a need for additional bassinets of those classifications, a strict application of the prior regulations would nevertheless have counseled against the issuance of a COPN for such bassinets becau se of the low occupancy rate for intermediate-level bassinets.- 18 - intermediate-level, specialty-level, and subsp ecialty-level bassinets, thereby remedying this problem. See 12 VAC 5-230-960 to -980. Lewis-Gale concedes that, as a practical ma tter, patients needing sp ecialty-level care may receive that care in subspecialty-level bass inets, but it would simu ltaneously require the Commissioner to ignore this func tional capacity of existing subs pecialty-level bassinets in assessing the need for additional specialty-level bassinets. The regulatory structure and evidence in this case support the Commissi oner’s conclusion that such an approach is unwise for two reasons. First, such an expansion is not necessary to ensure adequate bassinet space because, as Lewis-Gale concedes, “[n]eonatal special care ba ssinets are generally not licensed as beds in Virginia . . . . [T]herefore[, ex isting] capacity can be expanded . . . , within the authorized level of care, as needed without [additional] COPN or license authorization.” Ann. Rep., supra, at 19. Second, allowing the unnecessary proliferation of specialty-level bassinetspace could cause a corresponding decrease in the qua lity of care. Id. at 17. The functional approach applied by the Commissioner did not nullify the change in the regulations and was well within the parameters of her authority to exercise her expert discretion. The prior regulation allowed occupa ncy rates of lower levels of care to impact the ability to approve the addition of bassinets to provide higher levels of care . Under the functional approach applied here, only bassinets capable of providing the level of serv ice for which a COPN is being sought may be considered under the SMFP in assessing need for those new bassinets. 10 Requiring the Commissioner to b lindly ignore the apparent over supply of subspecialty-level bassinet space at Carilion, which the Commissi oner found was available a nd actually being used

10 We need not determine whether the Depa rtment could appropriately consider the expected functional use of the proposed bassinets, i.e., Lewis-Gale’s estimation that the eight specialty-level bassin ets it sought would routinely treat a ro ughly equal number of specialty-level and intermediate-level patients. Lewi s-Gale has not made this argument.- 19 - to care for infants needing specialty-level treat ment, would contravene the purposes of the SMFP to assure both adequate capacity and quality of care. See id. at 17, 19. Deferring to the Commissioner’s interpretation of the regulations, as required by the applicable standard of review, we conclude that the Commissioner’s cons ideration of the functiona l use of the bassinets at issue was not plain error. 11 See Mathews, 283 Va. at 738, 724 S.E.2d at 204.

Lewis-Gale further contends that the Commissioner erred by considering Carilion’s 2010 occupancy figures because they were not for the “[r]elevant reporting period,” 12 VAC 5-230-10, and were received from Carilion rather than Virginia Health Information (VHI), the body charged with compiling and disseminating health care data, see Code § 32.1-276.4; 12 VAC 5-230-10. The regulations, however, do not support Lewis-Gale’s contention. The SMFP defines the “[r]elevant reporting period,” “ when used in this chapter ,” as “the most recent 12-month period, prior to the beginni ng of the applicable batch review cycle, for which data is available from VHI or a demogra phic entity as determined by the commissioner.” 12 VAC 5-230-10 (emphasis added). However, no regulation pertaining to determining whether a COPN for neonatal bassinet space should be issu ed requires the Commissioner to use data from the “[r]elevant reporting period.” 12 Consequently, this definitio n of “relevant reporting period”

11 Lewis-Gale contends this c onflation was error with regardto all four SMFP standards for specialty-level care in 12 VAC 5-230-970. To the extent this argument is relevant to the standards in subsections (B), (C ) or (D), we hold the Commissione r did not err in considering the functional capacity of Carilion’ s subspecialty-level beds under these subsections for the same reasons she did not err in consid ering them under subsection (A).

12 The neonatal bassinet regulations do notuse this term. Compare 12 VAC 5-230-10, 12 VAC 5-230-940 to -1000, and 12 VAC 5-410-443 (establishing definitions and usage standards for issuing COPNs for neonatal special care se rvices without menti oning the “[r]elevant reporting period”), with, e.g., 25 Va. Reg. Regs. 1706, 1711, 1714-22, 1724-25, 1727, 1729, 1736-37 (Jan. 5, 2009) (revising and re-enacting the SMFP) (directi ng the use of data for the “relevant reporting period,” “when us ed in this chapter,” to provide usage standards for a variety of other types of equipment, services, and beds), and 12 VAC 5-230-10 (defining “bed” as “includ[ing] cribs and bassinets used for pediat ric patients” but expressly “[excluding] cribs and bassinets in the newborn nursery or neonatal special care setting”).- 20 - does not limit the time period for which the Commi ssioner may consider occupancy data. It also does not limit the Department to considering da ta only from VHI or a demographic entity as determined by the Commissioner. Finally, no ot her provision of the SM FP relating to neonatal special care requires reliance on statistics solely from VHI. 13 As a result, the agency had the discretion to rely on the statistical evidence r eceived directly from Carilion. See Fulton, 55 Va. App. at 80, 683 S.E.2d at 842; Loudoun Hosp., 50 Va. App. at 490-91, 650 S.E.2d at 885-86. In sum, based on the deference owed to the agency’s interpretation and application of its regulations, here the SMFP, we hold that th e Commissioner did not abuse her discretion by including in her analysis the occupancy rates for both CVBH’s specialty-level bassinets and Carilion’s subspecialty-level bassinets. This interpretation is cons istent with the 2009

amendments to the SMFP because Carilion’s subs pecialty bassinets were functionally able to provide specialty-level care. Fu rther, we hold that the Commi ssioner’s consideration of data covering multiple years and received from sources other than VHI, some of which was provided directly by Carilion, was not plain error. Finally, we hold that substantial eviden ce supports the Commissioner’s finding that these existing bassinets had occupancy rates signi ficantly below the recommended level of 85%. b. Subsection (B): Eighteen -Bassinet Minimum Standard Lewis-Gale proposed a NICU of eight specialty-level bassinets , despite the fact that the SMFP provides that the minimum number of bassinets for specialty-level or subspecialty-level care should be eighteen. Lewis- Gale’s justification for asking the Commissioner to disregard

13 The only parts of the SMFP requiring the use of VHI statistics relate to: surgical operating rooms, 12 VAC 5-230-500; medical/surgi cal beds, 12 VAC 5-230- 540; pediatric beds, 12 VAC 5-230-550; intensive care beds, 12 VAC 5-230-560; nursing home beds, 12 VAC 5-230-610, -620; and rehabilitation beds, 12 VAC-230-810. As stated supra in footnote 12, the SMFP’s definition of “bed” expres sly excludes “cribs and bassinet s in the newborn nursery or neonatal special care setting.” 12 VAC 5-230-10.- 21 - this requirement is that “no specialty-level NICU s in Virginia . . . meet this standard” because the Commissioner has not previously enforcedit. As already discussed, however, the Commissioner’s prior deviation from the SMFP does not require her to deviate in this instance as long as that action is not arbi trary or capricious. See NRV Real Estate, 278 Va. at 188, 677 S.E.2d at 280. As the AO concluded, the creation of “yet another” small specialty-level NICU, in close proximity to a subspecialty-level NICU , “would tend to cut against the quality-based benefits of a larger, well-utilized service.” The 2009 amendments to the SMFP, which increased

the recommended minimum number of neonatal bassi nets operated by a part icular facility from fifteen bassinets of all levels combined to eighteen bassinets of either the specialty or subspecialty category, follow this same theory that a larger number of NICU bassinets in a single facility supports profic iency and quality of care. See Ann. Rep., supra, at 17 (noting that “[a] well-trained and experienced st aff is critical to the succe ss of [specialty-level and subspecialty-level NICU] programs”). The Co mmissioner opined that “sufficient volume would not exist to support proficiency and quality [of car e at Lewis-Gale].” She also concluded that granting the application would “stand[] to harm” the quality of such car e at Carilion, the only regional provider of subspecialty care, whic h was already experienci ng a sharp decline in occupancy due to a decrease in premature births in the region. Given the demonstrated lack of need for additional bassinets and the potential fo r harm that authorizing such bassinets could cause, the record does not support deviation below the eighteen-bass inet minimum. Therefore,

the Commissioner’s refusal to deviate from this minimum requirement, despite having done so in earlier cases, was not arbitrary or capricious. c. Subsection (C): Four Specialty-Level Bassinets Per 1,000 Births Standard Subsection (C) of the re gulation states that “ [n]o more than four bassinets for specialty[-]level newborn services . . . per 1,000 live births should be estab lished in each health- 22 - planning region.” 12 VAC 5-230-970( C) (emphasis added). The subsection, through its plain language, provides a maximum rather than a min imum figure. Therefore, even assuming that Lewis-Gale’s COPN application was consistent with this subsection in that it would not result in more than four specialty-level bassinets per 1,000 live births, such consistency is only one component of the SMFP analysis and does not compel the issuance of the requested COPN. Lewis-Gale argues that if th e Commissioner properly consider ed Carilion’s thirty existing subspecialty-level bassinets along with CVBH’s specialty-level ba ssinets, which we have held was not error, these figures still permit the a ddition of seven specialty -level bassinets. Lewis-Gale’s application, howev er, requested eight bassinets. The request for eight bassinets, therefore, is inconsistent not only with the subsection (B) requirement that specialty-level

newborn services should contain a minimum of eighteen bassinets bu t also with the capacity of

seven bassinets under subsect ion (C). See Mathews, 283 Va. at 738, 724 S.E.2d at 204. Consequently, the finding that Lewis-Gale’s application was inconsis tent with subsection (C) requirements was not plain error. d. Subsection (D): No Significant Reduction in Service Volumes of Existing Providers Subsection (D) of the regulati on provides that “[p]roposals to establish specialty[-]level

services . . . shall demonstrate that service volu mes of existing specialty[-]level newborn service providers located within [‘90 minutes drivi ng time one way under normal conditions’] will not be significantly reduced.” 12 VAC 5-230-970( D); see 12 VAC 5-230-940(B) (ninety-minute travel time limit incorporated by reference). Th is subsection places the burden of proof squarely upon the applicant. In addition, it requires that the applicant “ shalldemonstrate” that no significant reduction in existing specialty-le vel service volumes will result. 12 VAC 5-230-970(D) (emphasis added). This language sta nds in marked contrast to the permissive- 23 - language “should achieve,” “should contain,” and “shoul d be established,” as used in subsections (A), (B), and (C) of the regul ation, respectively. 12 VAC 5-230-970. Lewis-Gale avers that the Commissioner “gross ly exaggerates the potential impact” of its proposed eight NICU bassinets on Carilion. It contends, based on its own occupancy projections, that Carilion would c ontinue to be the third-largest pr ovider of NICU services in the state “even in the unlikely even t that Lewis-Gale’s NICU volume [was] taken entirely from Carilion.” It also points to the DCOPN’s statem ent that it is “unable to quantify the negative impact” that granting Lewis-Gale’s application would have on Carilion. Lewis-Gale, in making these claims, fails to acknowledge key facts in the record. The vast majority of Lewis-Gale’s patients needing neonatal special care services are transferred to Carilion, and no competition exists for Carilion’s sp ecialty-level NICU services because the next closest specialty-level provider is located sixty miles away. 14 Lewis-Gale’s COPN application projects an increase in obstetrical admissions and deliveries. The DCOPN observed, however, that “[s]ince the applicant has presented no new source of obstetric admissions, this increase could only come at the expense of existing pr oviders.” (Emphasis added). The reasonable

inference from this evidence is that Lewis-Gale would obtain the specialty-level infants it would treat entirely at the expense of Carilion.

Lewis-Gale’s claim that Cari lion would continue to remain the third largest provider of NICU services in Virginia, if accurate, nevertheless is not dispositive of the subsection (D) requirement that Lewis-Gale “shall demonstrate” that service volumes at Carilion “will not be significantly reduced” by its projec t. Lewis-Gale posits that its projected numbers would take no

14 The DCOPN report indicates that, of the fi fty-four infants requi ring transfers from Lewis-Gale between 2007 and J une 2010, fifty-two of them, or 96.3%, were transferred to Carilion. During that same period of time, infant s from three other HCA ne twork hospitals in the same health planning region transf erred fifty-seven infants for sp ecial care, and fifty-three of them, or 93%, were transferred to Carilion. No infants were transferred to Lynchburg’s CVBH.- 24 - more than 5% of Carilion’s neonatal special care patients. The evidence in the record, however, supports the finding, made by the DCOPN and ad opted by the AO and the Commissioner, that approving Lewis-Gale’s project would adversely affect Car ilion’s “[sub]specialty [and] specialty[-]level nursery program.” The DCOP N noted that Carilion’s program “has seen a significant decline in cen sus since 2008 (85.6%) to 61.5% projectedin 2010.” It also noted that Lewis-Gale’s proposed addition of eight specialty- level bassinets of its own “poses a risk of further reducing utilization of ex isting [NICU] services” at Cari lion. The DCOPN further opined that allowing Lewis-Gale to in troduce specialty-level bassinets “at this ti me would compromise [Carilion’s] role and major investment” in bei ng the regional perinatal center or, in post-2009 amendment language, the sole prov ider of subspecialty-level se rvices in the health planning region. Consequently, because subsection (D) places the burden on Lewis-Gale to demonstrate that its project will notsignificantly reduce the number of patients receiving specialty-level services at Carilion, the DCOPN’ s inability to quantify the impact on Carilion with precision is

not determinative of the Commissioner’s asse ssment of the project for consistency with subsection (D). Instead, this evidence suppor ts the Commissioner’s fi nding that Lewis-Gale failed to prove that its proposed NICU woul d not significantly reduce Carilion’s volume of specialty-level care. Thus, the evidence also s upports her finding that the COPN application was inconsistent with this provision of the SMFP. 15

15 The Commissioner suggested that Lewis-Gale apply instead for a COPN to offer intermediate-level neonatal care, for which the regulations permitted a minimum of six bassinets and did not require proof of a l ack of significant impact on existi ng area providers of the same level of service. See 12 VAC 5-230-960. The Co mmissioner avers on brief that if Lewis-Gale operated a “busy” intermediate-level neonatal progr am, this fact could pr ovide a reasonable basis for her to conclude that an advancement in serv ice level was appropriate. Lewis-Gale concluded this suggestion was “not viable ” and declined to follow it.- 25 - 3. Substantial Evidence to Support the Denial

Lewis-Gale contends in its final assignment of error that the record contains substantial evidence compelling the Commissione r to issue the requested COPN and that the circuit court erred in holding to the contrary. Code § 32.1- 102.3(B) requires consideration of whether the project: (1) increases access to needed services; (2) meets community needs as demonstrated by factors such as community support, reasonable al ternatives, costs and benefits, and financial accessibility to residents; (3) is consistent with the SMFP; (4) fosters institutional competition while improving health care access; (5) improves u tilization and efficiency of existing services; (6) is feasible in financial and human resource s terms; (7) provides improvements or innovations in financing and delivering health care; and (8) positively impacts a teaching hospital or medical school or is positively impacted by the hospital or sc hool in terms of the deliv ery of health care. The Commissioner is not required to award a COPN if the appli cant has failed to demonstrate a public need based on any of these factors. See Sentara Norfolk Gen. Hosp., 260 Va. at 273, 534 S.E.2d at 329. Contrary to Lewis-Gale’s assessm ent, we conclude that the record contains substantial evidence to support th e Commissioner’s decision to deny the COPN. This conclusion

is based on the lack of consiste ncy with the SMFP and several of the remaining statutory factors. a. Factor (3): Cons istency with the SMFP

The Commissioner did not err in concluding that the proposed project is not consistent with the SMFP. As previously discussed, see su pra Part II.C.2, substantial evidence supports the finding that “reasonable availability and access to special care nursery services exists in the [health planning region], especially within the service areas of both [Lewis-Gale] and Carilion” as judged under the standards of 12 VAC 5-230-970(A) to (D). First, despite Lewis-Gale’s claim that existing specialty-level bassinets met the 85% minimum occupancy standard which, if substa ntiated, could support the claim of need for- 26 - additional bassinet space, the record supports the finding that the availability of subspecialty-level bassinet space met the region’s functional need for specialty-level space. This evidence, in turn, supports the finding that granting Lewis-Gale’s application to add specialty-level bassinet space would be inconsistent with subsection (A). Second, Lewis-Gale concedes that its applic ation for eight bassinets was inconsistent with the subsection (B) requirement that spec ialty-level newborn serv ices should contain a minimum of eighteen bassinets. Although Lewis-Gale contended th at “no specialty -level NICUs in Virginia . . . meet this standard,” all sp ecialty-level NICUs were licensed prior to the 2009

amendments. 16 Further, the AO concluded that “[r]egar dless, the creation of yet another small special[ty-]level NICU, in close proximity to a subspecial[ty-]level NICU, would tend to cut against the quality-based benefits of a larger, well-utilized service.” The evidence supports this finding that Lewis-Gale failed to meet the subsection (B) requir ement in both fact and spirit. Third, the evidence supports a finding that Le wis-Gale’s application was also inconsistent with the subsection (C) provision that a health planning region s hould have no more than four bassinets per 1,000 live births for eac h level of care. Lewis-Gale concedes that considering the functional use of Carilion’s subspecialty-level bassi nets in this calculation supports a need for no more than seven additional specialty-level bassine ts. Given that Lewis-Ga le’s application is for eight and that the SMFP suggests a minimum of eighteen bassinets for the creation of a neonatal special care nursery, substantia l evidence supports a finding that Lewis-Gale’s application was

also inconsistent with this standard of the SMFP.

16 Sentara’s Princess Anne Hospital in Virg inia Beach received a COPN for eight specialty-level bassinets in 2010. However, this COPN merely permitted the relocation of eight existing bassinets from another of Sentara’s hosp itals in Virginia Beach. See supra note 4 and accompanying text.- 27 - Fourth, the evidence supports a finding that Lewis-Gale fail ed to prove under subsection (D) that no significant reduction in existing specialty-level serv ices would result from its proposal. The evidence showed that Ca rilion provided both specialty-level and subspecialty-level care in its subspecialty bassinets. The DCOPN found that the number of specialty-level patients at Carilion was increasi ng in proportion to the s ubspecialty patients.

Statistics also showed that virt ually all of Lewis-Gale’s patients in need of neonatal special care were then being referred to Carilion for trea tment. Despite this dual usage of Carilion’s subspecialty bassinets and the number of referrals received fr om Lewis-Gale, occupancy rates for Carilion’s subspecialty bassinets had dropped more than twenty percentage points below the SMFP’s 85% mark. Lewis-Gale’s pl an to retain all but its subs pecialty-level infants and to attract additional obstetrics pati ents without identifying any ne w source for them virtually assured a negative impact on Carilio n’s already declining statistics. b. Factors (1), (2), and (4) to (8): Broade r Assessment of the Existence of Public Need In addition to the statutory criterion requiring consistency with the SMFP, the

Commissioner determined that several of the seven remaining factors in Code § 32.1-102.3(B) also weighed against a finding of public need. S ubstantial evidence in the record supports that determination. Although the Commissioner was not required to make sp ecific findings with regard to the eight stat utory criteria for assessing public need , she adopted the detailed discussion and findings of the AO and, in addition, provide d a summary of the basis for her decision. The Commissioner found that “[d]espite many expressions of community support,” the project would “unnecessarily duplicate existing se rvices, such as those at Carilion.” Although this duplication would introduce co mpetition and provide parents w ith a choice of providers, she determined that the negative effects of duplication would outweigh its benefits. She found that both services “depend on sufficient volume in or der to maintain [the] clinical proficiency”- 28 - necessary to provide “exac ting clinical care . . . to frail infant s.” As a result, she concluded that duplication would “exert[] an adverse impact on the utilization and quality ” of both the existing services at Carilion and the proposed services at Lewis-Gale. These findings are supported by

evidence in the record. That evidence include s scholarly studies regarding proficiency in subspecialty-level care, which the Department has also applied to specialty-level care. See Ann. Rep., supra, at 17. It also includes statistics showing a decline in the need for NICU care (specialty and subspecialty) in the health planning region. This decline reduced Carilion’s subspecialty-level bassinet occ upancy by twenty-five percentage points from previous years and more than twenty percentage points below th e level recommended by the SMFP for introducing new special care services. This evidence negates a finding of public need under factors (1), (2), (4), and (5). The Commissioner also found that the proj ect would reduce the frequency and duration of medical transportation for only some of the infants in the Lewis-Gale system of hospitals— those actually delivered at Le wis-Gale—and the record shows th is would likely be fewer than

half the total number of infants delivered at HCA hospitals who needed neonatal special care. 17 These findings contribute to the determination of lack of public need under factors (1), (2), and (5). Additionally, in keeping with Lewis-Gale’s representati ons in its ap plication, the Commissioner found that the project would result in a financial loss for at least two years. The Commissioner also questioned whet her it would ever be economi cally viable or capable of

17 The evidence showed that over the forty- two-month period prior to Lewis-Gale’s application, it transferred almost exactly the same number of patients to Carilion as HCA’s other three regional hospitals did in combination. If Lewis-Gale’s CO PN application were granted, the infants delivered at the other HCA hospitals woul d still require transfer , as would all infants delivered at Lewis-Gale needing subspecialty-lev el care. Therefore, the number of infants needing transfer would still be greater than half those delivere d at HCA’s four area hospitals.- 29 - maintaining a sufficiently skilled staff. The evid ence in the record supports these concerns. As the Commissioner observed, Lewis-Gale provided no evidence of any new source of obstetric admissions, and the Commissioner concluded th at it was “evident from the applicant’s projections . . . of obstetrical discharges . . . thatit anticipate[d] that approval of the proposed project [would] increase its obstetrical market share, prim arily by reallocating admissions from Carilion . . . to [Lewis-Gale].” The Commissioner’s concerns regarding economic viability and skill proficiency are supported by the record and demonstrate a lack of public need under factors (2) and (6). The record shows that the Commissioner, in addition to considering consistency with the SMFP as required by subsection (3) of Code § 32.1-102.3(B), also co nsidered the other statutory

factors. Substantial evidence in the record supports the Commi ssioner’s determination, made in the exercise of her expert disc retion, that the application was in consistent with both the SMFP and non-SMFP factors. Accordingly, the Commissi oner did not err in her application of the law

or abuse her discretion in concludi ng that Lewis-Gale failed to demonstrate a public need for its proposed project.

III. For these reasons, we hold that the circuit court did not err inrejecting Lewis- Gale’s claims and concluding that the Commission er (1) adequately explained her deviations from prior agency decisions; (2) applied proper legal standards and did not arbitrarily treat Lewis-Gale differently from other hospitals in the Co mmonwealth; (3) properly applie d the SMFP calculations; and (4) reached a decision regarding the existence of public need th at was supported by substantial evidence in the record. Therefore, we affirm the circ uit court’s ruling.

Affirmed.