IN THE COURT OF APPEALS OF NORTH CAROLINA

2021-NCCOA-451

No. COA20-102

Filed 7 September 2021

Office of Administrative Hearings, No. 19 DHR 01091

FMSH L.L.C., Petitioner,

v.

North Carolina Department of Health and Human Services, Division of Health 

Service Regulation, Healthcare Planning and Certificate of Need Section, 

Respondent,

 and

Sentara Albemarle Regional Medical Center, LLC, and Sentara Healthcare, 

Respondent-Intervenors.

Appeal by Respondents from Final Decision entered 9 October 2019 by 

Administrative Law Judge Donald W. Overby in the Office of Administrative 

Hearings. Heard in the Court of Appeals 12 May 2021.

Attorney General Joshua H. Stein, by Assistant Attorney Generals Bethany A. 

Burgon and Kimberly Randolph, and Fox Rothschild LLP, by Marcus C. Hewitt 

and Elizabeth Sims Hedrick, for the Respondent- and Respondent-IntervenorAppellants.

FMSH, L.L.C., by Managing Member Catherine Fleming, pro se.

Wyrick Robbins Yates & Ponton LLP, by Frank Kirschbaum and Charles 

George, for amicus curiae The County of Franklin, North Carolina.

Nelson Mullins Riley & Scarborough LLP, by Denise M. Gunter and Chelsea K. 

Barnes, for amicus curiae FirstHealth of the Carolinas, Inc.
FMSH, L.L.C., V. N.C. DEP’T OF HEALTH AND HUMAN SERVS.

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Poyner Spruill, LLP, by Matthew Fisher, for amici curiae NCHA, Inc., and 

North Carolina Baptist Hospital.

K&L Gates, LLP, by Gary Qualls and Susan Hackney, for amici curiae 

University Health Systems of Eastern Carolina, Inc. d/b/a Vidant Health and 

The Outer Banks Hospital, Inc.

Fox Rothschild, LLP, by Terrill Johnson Harris, for amici curiae The Moses H. 

Cone Memorial Hospital Operating Corporation and The Moses H. Cone 

Memorial Hospital.

GRIFFIN, Judge.

¶ 1 Respondent Healthcare Planning and Certificate of Need Section of the North 

Carolina Department of Health and Human Services (the “Agency”) and RespondentIntervenors Sentara Albemarle Regional Medical Center, LLC, and Sentara 

Healthcare (together, “Sentara”) appeal from the final decision of an administrative 

law judge in the Office of Administrative Hearings directing the Agency to transfer 

two Certificates of Need authorizing operation of a Legacy Medical Care Facility from 

Sentara to Petitioner FMSH, L.L.C. (“FMSH”). The final decision held that FMSH 

could not be required to acquire the physical facilities previously operated under the 

Certificates of Need as a condition precedent to its receipt of the Certificates of Need. 

We reverse the final decision and remand for entry of an order granting summary 

judgment to the Agency and Sentara.

I. Factual and Procedural History
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¶ 2 The Sentara Kitty Hawk Ambulatory Surgery Center (‘the Facility”) was a 

multi-specialty ambulatory surgery facility operated from 1989 to 2017 in Kitty 

Hawk. In 1989, the Agency issued a Certificate of Need (“CON”) to Regional Medical 

Services, Inc. (“RMS”), for the establishment of an ambulatory surgery facility at 5200 

North Croatan Highway in Kitty Hawk. In 2002, the Agency issued to RMS a second 

CON authorizing RMS to open a diagnostic center at the Facility. Together, the two

CONs allowed RMS to maintain two operating rooms and diagnostic equipment 

within the Facility.

¶ 3 In late 2013 or early 2014, Sentara acquired all of RMS’s assets regarding the 

Facility, including the CONs, and continued operating the Facility. In late 2017, 

Sentara closed the Facility. At the time of the administrative hearing in this case, 

Sentara had no plans to reopen or resume operation of either the ambulatory facility 

or diagnostic center portion of the Facility. 

¶ 4 On 25 June 2018, FMSH notified the Agency that it intended to reopen the 

Facility. FMSH proposed that its intended reopening of the Facility was exempt from 

the CON review process because the Facility qualified as a “Legacy Medical Care 

Facility [“LMCF”]” under N.C. Gen. Stat. 131E-184(h). At the time of its request, 

FMSH had no legal interest in the Facility, and had not contacted Sentara about 

purchasing or reopening the Facility.

¶ 5 On 31 January 2019, the Agency advised FMSH by response letter that it 
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agreed FMSH’s “proposal [was] exempt from [CON] review under N.C. Gen. Stat. § 

131E-184(h).” The Agency further stated that it knew FMSH had not entered into 

any negotiations to purchase the Facility from Sentara, and that it would not 

“knowingly issue [an] exempt from review determination[] for [a] hypothetical 

proposal[] to acquire an existing health service facility.” The Agency informed FMSH 

that its request to reopen the Facility would be exempt from the CON review process 

under two conditions: First, FMSH was required to legally acquire the Facility from 

Sentara. Second, FMSH would be required to reopen the Facility by 24 June 2021, 

within thirty-six months of FMSH’s written notice of intent to reopen.

¶ 6 FMSH filed a petition for a contested case hearing which challenged the 

Agency’s two conditions for exemption approval. FMSH and the Agency each moved 

for summary judgment. On 9 October 2019, an administrative law judge (“ALJ”)

entered a Final Decision from the Office of Administrative Hearings, determining

that the Agency did not have the authority to impose its first condition requiring

FMSH to acquire a legal interest in the Facility. The Final Decision granted 

summary judgment to FMSH and directed the Agency to transfer the CONs from 

Sentara to FMSH. The Agency and Sentara timely appeal.

II. Analysis

¶ 7 The Agency and Sentara argue that, by granting summary judgment in 

FMSH’s favor, the ALJ reached an “impermissible” decision which “fail[ed] to defer 
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to the Agency’s interpretation, which [was] reasonable and consistent with the 

language of the statute.” We agree.

¶ 8 We review an ALJ’s final decision granting summary judgment de novo, 

considering all evidence presented in the light most favorable to the non-moving 

party. Blue Ridge Healthcare Hosps. Inc., v. N.C. Dep’t of Health & Hum. Servs., Div. 

of Health Serv. Regul., Healthcare Plan. & Certificate of Need Section, 255 N.C. App. 

451, 455–56, 808 S.E.2d 271, 274 (2017) (citations omitted). Summary judgment is 

properly granted if the record shows “that there is no genuine issue as to any material 

fact and that any party is entitled to a judgment as a matter of law.” Ron Medlin 

Const. v. Harris, 364 N.C. 577, 580, 704 S.E.2d 486, 488 (2010) (citation and quotation 

marks omitted); N.C. R. Civ. P. 56(c). A Court reviewing the final decision of an ALJ 

may “affirm the decision[,]” “remand the case for additional proceedings[,]” or 

“reverse or modify the decision if the substantial rights of the petitioners may have 

been prejudiced because the findings, inferences, conclusions, or decisions are . . . (4) 

[a]ffected by . . . error of law[.]” N.C. Gen. Stat. § 150B-51(b) (2019).

¶ 9 Our analysis begins by acknowledging that no issues of material fact were 

present in the Record before the ALJ. The parties agreed on the material facts of the 

case in their pleadings in the contested hearing below, and each motioned for the ALJ 

to determine the case in their favor as a matter of law. The only issue before this 

Court is whether the ALJ properly construed the relevant statutory authority.
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¶ 10 The Agency initially determined that it would not issue an exemption to 

“reopen” the Facility without CON review because FMSH did not own it and required 

FMSH to first “acquire” the Facility by acquiring legal ownership of the Facility from 

Sentara. The ALJ held that the Agency had misinterpreted the statutory meaning of 

“acquire or reopen” as the terms are used in N.C. Gen. Stat. § 131E-184(h). The 

question, then, is whether section 131E-184(h) requires a party who intends to 

“acquire or reopen” a LMCF to first have legal ownership of that facility.

¶ 11 Chapter 131E of the North Carolina General Statutes details the purpose of 

North Carolina’s CON law and the review process by which the Agency may 

determine the need for and distribute CONs. Upon its determination that a 

geographical area is in need of health services, the Agency first establishes a schedule 

of time in which it will receive applications from entities that offer to provide the 

needed services. N.C. Gen. Stat. §§ 131E-177, 131E-182 (2019). Applicant-entities 

then submit applications to the Agency describing the entity’s plan to fulfill certain 

criteria, including: how the area’s health service need will be fulfilled; which 

population will be served and why that population needs service; how increased 

health service competition will affect the service area; and what is the availability of 

human and financial resources to accommodate the plan. N.C. Gen. Stat. § 131E-183 

(2019). 

¶ 12 The Agency reviews submitted applications for a period of up to ninety days.
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During this time it may solicit or receive written comments and/or conduct public 

hearings to discuss the applications. N.C. Gen. Stat. § 131E-185 (2019). This review 

period may be extended by up to sixty days if additional information is requested 

from the applicants. N.C. Gen. Stat. § 131E-185(c). The Agency then issues a written 

decision to “approve,” “approve with conditions,” or “deny” each application, outlining 

its findings, conclusions, and criteria used. N.C. Gen. Stat. § 131E-186 (2019). The 

Agency ordinarily issues a CON to an applicant-entity within thirty-five days of its 

decision to approve, or approve with conditions, the application. N.C. Gen. Stat. § 

131E-187(c)(1) (2019). However, the issuance of a CON may be delayed indefinitely 

by an applicant’s filing of a contested case hearing challenging the Agency’s decision. 

N.C. Gen. Stat. § 131E-187 (2019).

¶ 13 The routine CON review process is statutorily sanctioned to take between 125 

and 190 days. At the end of this process, an entity which receives or “subsequently 

acquire[s], in any matter whatsoever permitted by law[,]” a CON is thereafter 

“required to materially comply with the representations made in its application for 

that [CON].” N.C. Gen. Stat. § 131E-181(b) (2019).

¶ 14 A CON may be transferred or reassigned by an active health service provider, 

but only if the transfer or reassignment complies with the terms of N.C. Gen. Stat. § 

131E-189(c). N.C. Gen. Stat. § 131E-181(a). The transfer or reassignment of a CON 

by an active health service provider does not require the recipient to undergo the full 
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CON review process. N.C. Gen. Stat. § 131E-184(a)(8) (2019) (“[T]he [Agency] shall 

exempt from [CON] review a new institutional health service if it receives prior 

written notice from the entity proposing . . . [t]o acquire an existing health service 

facility, including equipment owned by the health service facility at the time of 

acquisition.”).1 Rather, the recipient-entity “will be subject to the requirement that 

the service be provided consistent with the representations made in the application 

and any applicable conditions the [Agency] placed on the [CON].” N.C. Gen. Stat. § 

131E-189(c) (2019); see N.C. Gen. Stat. § 131E-190(i) (2019) (subjecting CON holder 

to civil suit for “operating a service which materially differs from the representations 

made in its application for that [CON]”).

¶ 15 An entity may also obtain a CON to operate a health facility without 

undergoing the usual CON review process if it meets one of the other exemptive 

criteria in N.C. Gen. Stat. § 131E-184. Under section 131E-184(h), relevant to this 

appeal, the Agency “must exempt from [CON] review the acquisition or reopening of 

a [LMCF].” N.C. Gen. Stat. § 131E-184(h) (2019). A “LMCF” is defined in chapter 

131E as a facility that (1) “[i]s not presently operating[,]” (2) [h]as not continuously 

operated for at least the last six months[,]” and (3) was operated within the last 

twenty-four months by a licensed operator for the primary purpose of offering 

 

1 Cf. Fla. Stat. §§ 408.036, 408.042 (2019) (requiring the transfer of a CON to undergo 

an expedited review process verifying the recipient’s financial resources).
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diagnostic, therapeutic, or rehabilitative services. N.C. Gen. Stat. § 131E-176(14f) 

(2019). Section 131E-184(h) also requires the entity to provide the Agency with 

written notice of how, where, and when it intends to operate the LMCF:

The person seeking to operate a [LMCF] shall give the 

[Agency] written notice of all of the following:

(1) Its intention to acquire or reopen a [LMCF] within the 

same county and the same service area as the facility that 

ceased continuous operations. If the [LMCF] will become 

operational in a new location within the same county and 

the same service area as the facility that ceased continuous 

operations, then the person responsible for giving the 

written notice required by this section shall notify the 

[Agency], as soon as reasonably practicable and prior to 

becoming operational, of the new location of the [LMCF]. 

For purposes of this subdivision, “service area” means the 

service area identified in the North Carolina State Medical 

Facilities Plan in effect at the time the written notice 

required by this section is given to the Department.

(2) That the facility will be operational within 36 months of 

the notice.

N.C. Gen. Stat. § 131E-184(h).

¶ 16 The “cardinal principle” of statutory construction is “to give effect to the 

legislative intent.” State v. Tew, 326 N.C. 732, 738–39, 392 S.E.2d 603, 607 (1990). 

This Court strives to give “the language of the statute its natural and ordinary 

meaning unless the context requires otherwise.” Carolina Power & Light Co. v. City 

of Asheville, 358 N.C. 512, 518, 597 S.E.2d 717, 722 (2004) (citation and quotation 

marks omitted). “Where the statutory language is clear and unambiguous, the Court 
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does not engage in judicial construction but must apply the statute to give effect to 

the plain and definite meaning of the language.” Id. (citation and quotation marks 

omitted). When engaging in judicial construction, this Court ascertains legislative 

intent by considering “the purpose of the statute and the evils it was designed to 

remedy, the effect of proposed interpretations of the statute, and the traditionally 

accepted rules of statutory construction.” Tew, 326 N.C. at 738–39, 392 S.E.2d at 

607.2

All parts of the same statute dealing with the same subject 

are to be construed together as a whole, and every part 

thereof must be given effect if this can be done by any fair 

and reasonable interpretation. Duke Power Co. v. Clayton, 

Comr. of Revenue, 274 N.C. 505, 164 S.E.2d 289 (1968). A 

construction of a statute which operates to defeat or impair 

its purpose must be avoided if that can reasonably be done 

without violence to the legislative language. State v. Hart, 

287 N.C. 76, 213 S.E.2d 291 (1975). Individual expressions 

must be construed as a part of the composite whole and be 

accorded only that meaning which other modifying 

provisions and the clear intent and purpose of the act will 

permit. In re Hardy, 294 N.C. 90, 240 S.E.2d 367 (1978).

Id.

¶ 17 We agree with the ALJ’s assessment that there is little ambiguity in section 

131E-184(h) on its face. “Acquire” and “reopen” are each terms with ordinary usages, 

and each appear to be used in their ordinary way. Neither “acquire” nor “reopen” is 

 

2 “These rules apply to both criminal and civil statutes.” Tew, 326 N.C. at 739, 392 

S.E.2d at 607.
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defined within section 131E-184. Section 131E-176, the definitions statute for 

chapter 131E, also does not define the terms “acquire” and “reopen.” See N.C. Gen. 

Stat. § 131E-176 (2019). “Acquire” is ordinarily defined as “to get as one’s own.” 

Acquire, Merriam-Webster.com, https://www.merriamwebster.com/dictionary/acquire (last visited Aug. 18, 2021). “Reopen” naturally

means “to open again.” Reopen, Merriam-Webster.com, https://www.merriamwebster.com/dictionary/reopen (last visited Aug. 18, 2021). Any ambiguity in these 

terms arises from the particular legal effect of the words when used together in the 

statute, and in the phrase “acquire or reopen.” Notably, this phrase signals an 

implicit contrast between the two terms.

¶ 18 The ALJ’s decision focuses, in large part, on the implicit contrast that the word 

“or” creates between “acquire” and “reopen.” Under the ALJ’s view, making the 

acquisition of a facility a condition precedent to an entity’s ability to reopen that 

facility (as the Agency interpreted the statute) would change the plain meaning of 

the statutory language from “acquire or reopen” to “acquire and reopen.” The Final 

Decision states, inter alia:

Clearly, the language [of N.C. Gen. Stat. § 131E-184(h)] is 

a directive to the Agency that it “must exempt from [CON] 

review” without qualification. The question then becomes 

what is exempt. The answer is the “acquisition or 

reopening” of a [LMCF]. The statute specifically applies to 

the acquisition or reopening of a “facility.” It specifically 

does not speak to the acquisition of anything else in 
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particular, including the actual [CON].

. . . .

According to [the Agency and Sentara], regarding a 

[LMCF], a person cannot “reopen” a facility that they do 

not own. They contend that the exemption “affords 

providers a finite time period in which to either exercise 

their right to reopen a [LMCF], or to transfer the facility to 

someone else who will operate it as permitted by the CON 

law.”

This interpretation changes the plain meaning of the 

statute from “acquire or reopen” to “acquire and reopen.” 

. . . .

To rule with [the Agency and Sentara], one must conclude 

that the [LMCF] exemption was enacted to protect the 

financial interests of the entity that has failed and given 

up the provision of health care services to that service area. 

To put control of health care services in the hands of a 

failed business and for that entity to be able to hold up the 

provision of those services for two years, rather than the 

healthcare needs of North Carolinians in rural 

communities, is an absurdity.

¶ 19 We disagree with this interpretation. The statute specifically does “speak to 

the acquisition of . . . the actual [CON].” The language of section 131E-184(h)

illustrates an instance where an entity may acquire a CON without undergoing the 

usual CON review process: when that entity intends to acquire or reopen a LMCF. 

Under this specific statute, the acquisition of a CON is tied to the entity’s possession 

of a previously established and constructed health services facility. Under the initial

CON review process, an applicant-entity whose application is approved is given a 
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reasonable time to construct its facility following that approval and may not begin 

constructing a facility before CON approval. See N.C. Gen. Stat. §§ 131E-189, 131E190(b).

¶ 20 The act of using an awarded CON and engaging in the provision of medical 

services is acknowledged by section 131E-184(h) in the word “operate.” N.C. Gen. 

Stat. § 131E-184(h) (“The person seeking to operate a [LMCF] shall give the [Agency]

written notice of . . . [i]ts intention to acquire or reopen a [LMCF][.]” (emphasis 

added)). In its flawed interpretation, the ALJ assigns the pragmatic role of 

“operating” the facility to the word “reopen.” The Agency’s interpretation does not 

alter the plain meaning of the statute from “acquire or reopen” to “acquire and

reopen.” Rather, this interpretation reveals the statute’s contemplation of two 

distinct avenues to operating a LMCF: “acquire and operate” or “reopen and operate.” 

Which avenue is available to an entity stems from the entity’s legal right to the 

facility at the time the Agency initially issued the CON. If we accept the ALJ’s 

interpretation, it would require us to read “acquire” to mean “obtain and not use” and 

read “reopen” to mean “open again and operate;” there would then be no need for the 

legislature to have included the word “operate” earlier in the statute. See N.C. Dep’t 

of Correction v. N. C. Med. Bd., 363 N.C. 189, 201, 675 S.E.2d 641, 649 (2009)

(“Because the actual words of the legislature are the clearest manifestation of its 

intent, we give every word of the statute effect, presuming that the legislature 
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carefully chose each word used.”). The ALJ’s view contemplates a world where an 

entity may evoke section 131E-184 to simply acquire the facility without an intent to 

actually operate it. Such a world is a legal nullity because the entity’s intent to 

operate the LMCF is a previously addressed, material component of section 131E184(h).3

¶ 21 When reading the sections of chapter 131E outlining the general CON review 

process in pari materiae, it becomes clear that the intent of section 131E-184 as a 

whole is to alleviate the need to undergo a minimally 125-day, investigatory review 

period before an entity may operate a healthcare facility in specifically enumerated 

circumstances. The LMCF exemption in section 131E-184(h) acknowledges that,

where an entity and its licensed facility have previously passed scrutiny and intend 

to once again offer those services in the same manner and form, there is less risk that 

the new services will not pass scrutiny when services are resumed. Written notice 

under section 131E-184(h) does not trigger the same regiment of comments, hearings, 

and extensive review that is necessitated under section 131E-185.

 

3 The ALJ’s Final Decision alludes to three other instances where N.C. Gen. Stat. § 

131E-184(h) has been used by an applicant-entity but does not provide citations to these 

instances. The ALJ contends that, in two of these cases, the entity invoking section 131E184(h) actually acquired, in the ordinary meaning of the term, the subject LMCF and then 

never operated it. We note that the fact that an entity may have acquired and never operated 

an LMCF under the statute does not eliminate the materiality of that entity’s expressed 

intent to operate the LMCF in order to first qualify for exemption from CON review—it 

means only that the entity did not follow through with the intent expressed in its notice to 

the Agency.
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¶ 22 If the entity who wishes to operate the facility is the same entity who owns or 

has acquired the facility, that entity would be bound to adhere to “the representations 

made in the application and any applicable conditions the [Agency] placed on the 

[CON].” N.C. Gen. Stat. § 131E-189(c). Likewise, there would be a single, easily 

identifiable entity with a legal claim to the facility. The ALJ’s interpretation leaves 

open a significant question to be answered in a subsequent case: If an entity does not 

need to first own a LMCF before it is given a CON to operate that LMCF, and multiple 

entities all notify the Agency of their intent to operate that LMCF, which entity is 

awarded the CON? Developing an answer to this hypothetical question in the present 

case would be advisory, but consideration of the hypothetical reveals a pivotal concern 

in the ALJ’s interpretation. If multiple entities all expressed an intent to operate the 

LMCF, the Agency would need to undergo some additional review process to 

determine which entity is awarded the CON for the LMCF. The need for additional, 

perhaps attenuated review defeats the legislative intent of section 131E-184—to 

avoid a bidding war when the circumstances have a unique set of situational 

characteristics.

¶ 23 The ALJ refers to the Agency’s decision as effecting an “absurdity,” asserting 

that an adoption of the Agency’s interpretation would necessitate holding that the 

legislative intent of section 131E-184(h) was to protect the financial interests of a 

failed business entity. We disagree. Rather, it would be an “absurdity” to force a new 
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entity to give a failed business an economic windfall by buying their assets, but it 

would be equally absurd to allow a new entity to step into the shoes of another entity, 

take on the economic benefits of operating a health service facility, and obtain a CON

without paying for the privilege to avoid the associated burdens first.

¶ 24 Finally, we note that the language of section 131E-184(h) allows an entity to 

physically relocate the LMCF that it intends to “acquire or reopen.” We do not find 

section 131E-184(h)’s acknowledgement that the LMCF may “become operational in 

a new location within the same county and the same service area as the facility that 

ceased continuous operations” to conflict with our holding in this case. See N.C. Gen. 

Stat. § 131E-184(h). After acquiring the subject LMCF, including the facility itself 

and the associated assets which were amassed under the scrutiny of CON review, the 

operating entity may exercise its ownership rights and move its property to a new 

location.

¶ 25 We hold that N.C. Gen. Stat. 131E-184(h) requires an entity which wishes to 

operate a LMCF to either already own and “reopen” that facility or to “acquire” legal 

ownership of the facility prior to operating it. When we construe all of chapter 131E 

together as a whole, the statutory language shows our General Assembly intended 

for the LMCF exemption to function as a shortcut around the normal CON process 

where the circumstances inherently guarantee a substantially similar level of 

healthcare services would be provided to the same geographical area. The only way 
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this can occur without additional, considerable review by the Agency is if the entity

who wishes to operate a closed LMCF first steps into the shoes of the LMCF’s prior 

operator and acquires the LMCF—a facility which previously endured scrutiny under 

the normal CON process and received clearance to operate.

III. Conclusion

¶ 26 We hold that the ALJ’s final decision was reached upon an erroneous 

construction of the law. We reverse the ALJ’s decision and remand for entry of an 

order granting the Agency and Sentara’s motion for summary judgment, denying 

FMSH’s motion for summary judgment, and requiring FMSH to first acquire 

Sentara’s interests in the Facility before obtaining a CON under section 131E-184(h) 

and operating the Facility.

REVERSED AND REMANDED.

Judges DILLON and JACKSON concur.