COURT OF APPEALS OF VIRGINIA 

Present: Chief Judge Fitzpatrick, Judges Elder and Clements 

Argued at Richmond, Virginia 

CHIPPENHAM & JOHNSTON-WILLIS 

 HOSPITALS, INC. 

 OPINION BY 

v. Record No. 3075-00-2 JUDGE LARRY G. ELDER 

 OCTOBER 9, 2001 

E. ANNE PETERSON, M.D., 

 STATE HEALTH COMMISSIONER, 

 BON SECOURS-RICHMOND HEALTH SYSTEM, INC., 

 BON SECOURS-STUART CIRCLE HOSPITAL, INC. AND 

 BON SECOURS-ST. FRANCIS MEDICAL CENTER, INC. 

FROM THE CIRCUIT COURT OF CHESTERFIELD COUNTY 

James W. Haley, Jr., Judge Designate 

 Robert T. Adams (Thomas J. Stallings; 

McGuireWoods, on briefs), for appellant. 

 Roscoe C. Roberts, Assistant Attorney General 

(Mark L. Earley, Attorney General; Ashley L. 

Taylor, Jr., Deputy Attorney General; Jane D. 

Hickey, Senior Assistant Attorney General, on 

brief), for appellee E. Anne Peterson, M.D., 

State Health Commissioner. 

 Matthew D. Jenkins (Mark S. Hedberg; Hunton & 

Williams, on brief), for appellees Bon 

Secours-Richmond Health System, Inc., Bon 

Secours-Stuart Circle Hospital, Inc. and Bon 

Secours-St. Francis Medical Center, Inc. 

 Chippenham and Johnston-Willis Hospitals, Inc., 

(Chippenham) appeals from a circuit court ruling affirming the 

decision of E. Anne Peterson, the State Health Commissioner, 

(the Commissioner). In that decision, the Commissioner 

concluded that Chippenham was not a "person showing good cause," 
as that term is defined in Code § 32.1-102.6(D), and, thus, was 

ineligible to participate in the informal fact finding 

conference held on the application of Bon Secours-Richmond 

Health Systems, Inc., Bon Secours-Stuart Circle Hospital, Inc., 

and Bon Secours-St. Francis Medical Center, Inc., (Bon Secours) 

for a certificate of public need to construct a new hospital in 

Chesterfield County. On appeal, we hold that Chippenham 

demonstrated at least one substantial material mistake of law in 

the report submitted to the Commissioner by the local health 

planning agency charged with review of the application. Thus, 

we hold the Commissioner erroneously denied Chippenham's 

petition to participate in the application process as a "person 

showing good cause," and we reverse and remand to the circuit 

court with instructions to remand the matter to the Commissioner 

and order her to reverse her good cause determination and to 

conduct further proceedings consistent with this opinion. 

I. 

BACKGROUND 

 On July 1, 1999, Bon Secours applied to the State 

Department of Health for a certificate of public need (COPN) to 

build a new hospital in Chesterfield County, St. Francis Medical 

Center (St. Francis), intended to replace Stuart Circle Hospital 

(Stuart Circle), located in the City of Richmond. Following a 

public hearing on the application, the Central Virginia Health 

Planning Agency (CVHPA), the local health planning agency 

 - 2 - 
charged by Code § 32.1-102.6 to conduct an initial review of the 

application, recommended conditional approval. However, during 

simultaneous review, the Division of Certificate of Public Need 

(DCOPN) of the State Department of Health (Department), the 

Commissioner's professional health planning staff, recommended 

denying the COPN application because it concluded, inter alia, 

that the application did not satisfy the State Medical 

Facilities Plan (SMFP). 

 The Department scheduled an informal fact finding 

conference pursuant to the Virginia Administrative Process Act 

(VAPA), Code § 9-6.14:11. Chippenham, by counsel, petitioned 

the Commissioner to allow it to participate in the conference as 

"a person showing good cause" pursuant to Code § 32.1-102.6. 

The Commissioner concluded that Chippenham did not establish 

good cause and refused Chippenham's request. 

 Chippenham appealed the "good cause" determination to the 

circuit court.1 During the hearing on that issue, counsel for 

the Commissioner conceded that Bon Secours' application for St. 

Francis was not consistent with the provisions of the SMFP 

setting minimum occupancy rate requirements for replacing a 

hospital on a non-contiguous site and limiting the ability of a 

 

 - 3 - 

1

 The Commissioner also granted conditional approval to Bon 

Secours' COPN application. Because the Commissioner held 

Chippenham did not establish good cause and the circuit court 

affirmed, Chippenham lacked standing to appeal the issuance of 

the COPN. See Tidewater Psychiatric Inst., Inc. v. Buttery, 8 

Va. App. 380, 383-84, 382 S.E.2d 288, 290 (1989). 
new hospital to locate within a ten-mile radius of existing 

hospitals whose occupancy rates did not meet those same minimum 

standards. Counsel for the Commissioner agreed that the 

demonstrated annual occupancy rate for medical/surgical beds at 

Stuart Circle was less than one-half the rate stated by the SMFP 

and that two existing hospitals within eight miles of the site 

proposed for St. Francis had underutilized beds. Counsel 

argued, however, that the Commissioner had the discretion to 

deviate from the SMFP based on projected future need and 

consideration of all the circumstances. The circuit court 

acknowledged the deficiency in the occupancy rates and proximity 

to other underutilized beds but concluded that Chippenham 

demonstrated no "substantial mistake of fact or law . . . in the 

report submitted by the [CVHPA]" and that the Commissioner acted 

within her discretion in concluding that Chippenham failed to 

demonstrate good cause. 

 Chippenham timely appealed the good cause determination to 

this Court. 

II. 

ANALYSIS 

 On appeal of an agency decision, "[t]he sole determination 

as to factual issues is whether substantial evidence exists in 

the agency record to support the agency's decision. The 

reviewing court may reject the agency's findings of fact only 

if, considering the record as a whole, a reasonable mind 

 - 4 - 
necessarily would come to a different conclusion." 

Johnston-Willis, Ltd. v. Kenley, 6 Va. App. 231, 242, 369 S.E.2d 

1, 7 (1988). In making this determination, "the reviewing court 

shall take due account of the presumption of official 

regularity, the experience and specialized competence of the 

agency, and the purposes of the basic law under which the agency 

has acted." Id.

 On appeal of an agency's determination on issues of law, 

the standards differ. "'If the issue falls outside the area 

generally entrusted to the agency, and is one in which the 

courts have special competence, i.e., the common law or 

constitutional law,'" the court need not defer to the agency's 

interpretation. Id. at 243-44, 369 S.E.2d at 8 (quoting 

Hi-Craft Clothing Co. v. NLRB, 660 F.2d 910, 914-15 (3d Cir. 

1981)). 

However, where the question involves an 

interpretation which is within the 

specialized competence of the agency and the 

agency has been entrusted with wide 

discretion by the General Assembly, the 

agency's decision is entitled to special 

weight in the courts[, and] . . . "'judicial 

interference is permissible only for relief 

against the arbitrary or capricious action 

that constitutes a clear abuse of delegated 

discretion.'" 

Id. at 244, 369 S.E.2d at 8 (quoting Va. Alcoholic Beverage 

Control Comm'n v. York St. Inn, Inc., 220 Va. 310, 315, 257 

S.E.2d 851, 855 (1979) (quoting Schmidt v. Bd. of Adjustment, 88 

A.2d 607, 615-16 (N.J. 1952))). 

 - 5 - 
 Under Virginia's Health Care Planning 

law, before certain projects may be 

commenced, a medical care facility shall 

first obtain a [COPN] issued by the 

Commissioner. The Commissioner must 

determine that a public need for the project 

has been demonstrated[,] and any decision to 

issue a [COPN] must be consistent with the 

most recent applicable provisions of the 

State Health Plan (SHP) and the State 

Medical Facilities Plan (SMFP). . . . 

 . . . . For a [COPN] to be consistent 

with the SHP and SMFP means "in harmony with 

. . . or in general agreement with." 

Id. at 245-46, 369 S.E.2d at 8-9 (quoting Roanoke Mem. Hosps. v. 

Kenley, 3 Va. App. 599, 606, 352 S.E.2d 525, 529 (1987)); see 

also Code § 32.1-102.3(A) (providing that "[a]ny decision to 

issue . . . a [COPN] shall be consistent with the most recent 

applicable provisions of the [SMFP]" (emphasis added)). 

The [SHP and the related SMFP are] planning 

and development blueprint[s] for the health 

activities of the Commonwealth. . . . The 

[SHP and SMFP] . . . do[] not bind the 

Department and the Commissioner to act in 

accordance therewith. Code § 32.1-102.3 

does, however, limit the authority of the 

Commissioner with respect to the issuance of 

a [COPN]. First, a decision to issue or 

approve the issuance of a certificate must

be consistent with the most recent 

applicable provisions of the [SHP and SMFP]. 

Second, in determining whether such public 

need for a project has been demonstrated, 

the Commissioner must consider the twenty 

criteria set forth in Code § 32.1-102.3(B). 

 - 6 - 
Roanoke Mem. Hosps., 3 Va. App. at 605, 352 S.E.2d at 528-29 

(emphasis added).2

 2

 The statute provides as follows: 

A. 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. 

If it is determined that a public need 

exists for only a portion of a project, a 

certificate may be issued for that portion 

and any appeal may be limited to the part of 

the decision with which the appellant 

disagrees without affecting the remainder of 

the decision. 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. 

B. In determining whether a public 

need for a project has been demonstrated, 

the Commissioner shall consider [twenty 

enumerated factors, including]: 

1. The recommendation and the reasons 

therefor of the appropriate health planning 

agency [and] 

2. The relationship of the project to 

the applicable health plans of the Board and 

the health planning agency. . . . 

Code § 32.1-102.3 (emphasis added); see also 12 VAC 5-220-160; 

12 VAC 5-220-270. 

 - 7 - 
 "If the Commissioner finds that the provisions of either 

[the SHP or SMFP] are inaccurate, outdated, inadequate, or 

otherwise inapplicable, the Commissioner may nevertheless issue 

a [COPN] and institute procedures to amend the plan 

appropriately." Johnston-Willis, Ltd., 6 Va. App. at 245, 369 

S.E.2d at 9 (citing Code § 32.1-102.3(A)). Where the 

Commissioner does not make an express finding that either of the 

plans is "inaccurate, outdated, inadequate, or otherwise 

inapplicable," the exception does not apply. Roanoke Mem. 

Hosps., 3 Va. App. at 601, 352 S.E.2d at 526. 

 In this appeal, Chippenham does not directly contest the 

decision to issue the COPN because it lacks standing to do so. 

See supra footnote 1. Rather, it challenges the Commissioner's 

denial of its request to participate in the proceedings as a 

"person showing good cause," as that term is defined in Code 

§ 32.1-102.6. An entity may show "good cause" by establishing 

the existence of "a substantial material mistake of fact or law 

in the Department staff's report on the application or in the 

report submitted by the health planning agency[, the CVHPA,]" or 

"significant relevant information not previously presented at 

and not available at the time of the public hearing." Code 

§ 32.1-102.6(G). 

 In reviewing the Commissioner's conclusion that Chippenham 

failed to establish good cause, we must consider the 

relationship between the code's direction that issuance of a 

 - 8 - 
COPN shall be consistent with the SMFP, Code § 32.1-102.1(A); 

see Roanoke Mem. Hosps., 3 Va. App. at 606, 352 S.E.2d at 529, 

and various portions of the SMFP, which provide that a specific 

criterion "should" or "should not" be met, e.g., 12 VAC 

5-240-30, 12 VAC 5-240-50.3 We addressed this relationship in 

Roanoke Memorial Hospitals, which involved the licensure of new 

"megavoltage radiation therapy unit[s]" (megavoltage unit(s)). 

3 Va. App. at 603-08, 352 S.E.2d at 527-30. The relevant 

provision of the SMFP4 stated that "'there should be no 

additional megavoltage units opened unless each existing 

megavoltage unit in a given medical services area is performing 

at least 6,000 treatment visits per year.'" Id. at 605, 352 

S.E.2d at 529. We held that "use of the word 'should' in the 

context of the [SMFP] was intended to confer an appropriate 

amount of discretionary authority in the administrative body." 

Id. at 606, 352 S.E.2d at 529. Confronted with the argument 

 3

 The requirement of Code § 32.1-102.3(A) that a decision to 

issue a COPN must be consistent with the SMFP applies directly 

only to the decision made by the Commissioner. However, if a 

report of the CVHPA or DCOPN recommends that the Commissioner 

issue a COPN when such issuance would be inconsistent with the 

SMFP, the report contains a "substantial material mistake of 

fact or law," and the entity demonstrating such a mistake must 

be permitted to participate in the proceedings as a "person 

showing good cause" under Code § 32.1-102.6. 

4 Roanoke Memorial Hospitals actually involved consistency 

with the SHP rather than the SMFP. However, the relevant 

provisions of the SHP have been superceded by the SMFP, and Code 

§ 32.1-102.3 requires consistency with "the most recent 

applicable provisions of the [SMFP]." 

 - 9 - 
that "the words 'consistent with' as used in Code 

§ 32.1-102.3(A) contradict[ed] any notion of flexibility[] and 

demand[ed] that the Commissioner's ruling accord exactly with 

the requirements of the Code," we held that "'consistent with'" 

means "'compatible with' . . . or 'in general agreement with'" 

rather than "'exactly alike' or 'the same in every detail.'" 

Id. Thus, we concluded, 

[b]oth the Code and the [SMFP] recognize 

that the Commissioner will exercise some 

discretion in issuing a [COPN] to determine 

whether [her] decision is "consistent with" 

the standard in the [SMFP], including the 

proviso that there "should be no additional 

megavoltage units opened, unless each 

existing megavoltage unit in a given medical 

services area is performing at least 6,000 

treatment visits per year." 

Id.

 In applying this standard to the facts of that case, we 

concluded data showing that one megavoltage unit fell well below 

the 6,000-visits-per-year standard did not prevent the data as a 

whole from being found "consistent with" the SMFP. Id. at 607, 

352 S.E.2d at 529. The average number of annual visits for all 

existing treatment units in the medical services area combined 

was at least 97% of the 6,000-visits standard and was expected 

to exceed that standard in future years. Id. at 607, 352 S.E.2d 

at 530. Under those facts, we held the Commissioner's decision 

to issue the COPN was "consistent with" the SMFP. Id. at 

607-08, 352 S.E.2d at 530. 

 - 10 - 
 Thus, we give deference to the CVHPA's determination, 

implicit in its recommendation that the Commissioner issue the 

requested COPN, that issuance of the COPN was consistent with 

the SMFP. We may reverse the good cause determination only if 

we conclude the CVHPA's recommendations were arbitrary and 

capricious in light of the consistency requirement or that its 

findings of fact were not supported by substantial evidence. 

 The SMFP provides that: 

No proposal to replace acute care inpatient 

beds off-site, to a location not contiguous 

to the existing site, should be approved 

unless: (i) off-site replacement is 

necessary to correct life safety or building 

code deficiencies; (ii) the population 

served by the beds to be moved will have 

reasonable access to the acute care beds at 

the new site, or the population served by 

the facility to be moved will generally have 

comparable access to neighboring acute care 

facilities; and (iii) the beds to be 

replaced experience an average annual 

utilization of 85% for general 

medical/surgical beds and 65% for intensive 

care beds in the relevant reporting period. 

12 VAC 5-240-30(B)(1). 

 The CVHPA conceded in its October 8, 1999 report that "the 

beds to be replaced do not meet the 85% medical/surgical or the 

65% intensive care occupancy standard." Based on an occupancy 

rate of 41.2% for medical/surgical beds and 51.6% for intensive 

care beds during the 1998 reporting period, the CVHPA concluded 

that the 85%/65% occupancy standard would "justify the 

relocation of [only] 65 medical/surgical and 7 intensive care 

 - 11 - 
beds." It opined, however, that the "development of a hospital 

of 72 beds likely would not be feasible and may not meet the 

demand of the proposed service area into the future should [Bon 

Secours' St. Francis Medical Center] capture a significant 

market share of the relatively less competitive proposed service 

area." "Based on the SMFP methodology" and given an existing 

inventory of 2,449 general medical/surgical beds in Planning 

District 15 in 1998, it projected a surplus of 918 general 

medical/surgical beds through 2004. Although acknowledging "no 

need for additional beds in the planning district," the CVHPA 

projected a need for additional beds in St. Francis' proposed 

service area by 2003, opining that "the 130 beds proposed to be 

relocated to the [St. Francis] site could meet some of the 

potential demand . . . at a more convenient location" and 

"would be well utilized by the area." The CVHPA reached a 

similar conclusion in regard to intensive care beds, noting an 

expected surplus in the planning district but predicting the 

likelihood of an increased need in the proposed service area, 

opining that the new intensive care beds also likely would be 

"well utilized." 

 Following Chippenham's petition to demonstrate good cause, 

the Department's hearing officer concluded that the CVHPA's 

deviation from the 85%/65% occupancy standard did not constitute 

a substantial, material mistake of fact or law because the CVHPA 

"properly applied the standards" but concluded that "the 

 - 12 - 
development of a 72-bed hospital would not be feasible and may 

not meet the demand of the proposed service area into the 

future." The Commissioner adopted this rationale without 

elaboration. 

 The circuit court concluded that 

the Commissioner's interpretation of Va. 

Code § 32.1-102.3 as giving [her] discretion 

in determining the degree to which a COPN 

application must be, or may not be, 

consistent with the SMFP is a correct 

interpretation of that statute. Moreover, 

it is only one of the statutory factors 

which must be considered in a decision to 

grant or deny the application. There was no 

mistake of law. Accordingly, that 

interpretation is not arbitrary and 

capricious. 

We conclude, pursuant to our holding in Roanoke Memorial 

Hospitals, that the CVHPA's recommendation for issuance of the 

COPN need not be supported by average annual occupancy data 

which exactly meets or exceeds the 85%/65% occupancy standard of 

the SMFP. 3 Va. App. at 606-08, 352 S.E.2d at 529-30. Rather, 

the report does not contain a substantial material mistake of 

law if it recommends the Commissioner exercise "some 

discretion," an "appropriate amount," in concluding the issuance 

of the COPN is "consistent with" the SMFP. Id. at 606, 352 

S.E.2d at 529. Here, however, the record demonstrated an 

undisputed average annual occupancy rate of 41.2% for Stuart 

Circle's 135 medical/surgical beds, less than one-half of the 

SMFP's standard of 85%. Although Stuart Circle did not seek to 

 - 13 - 
replace all 135 beds and the CVHPA recommended approval of 122, 

use of these figures yields an average annual occupancy rate of 

46%, still significantly below the SMFP's 85% standard. Thus, 

we hold the CVHPA's report recommending issuance of the COPN 

contained a substantial material mistake of law and, therefore, 

was arbitrary and capricious because its recommendation that the 

Commissioner issue the COPN under those circumstances was not 

consistent with the SMFP. 

Because we hold the CVHPA's recommendation to the 

Commissioner to approve the COPN, despite an average annual 

occupancy rate of 46% for general medical/surgical beds which is 

not consistent with the SMFP's standard of 85%, constituted a 

material mistake of law, we need not consider Chippenham's 

remaining assignments of error.5

 5

 Thus, we do not consider whether the CVHPA's 

recommendation to the Commissioner to approve the COPN based on 

an average annual occupancy rate of 51.6% for intensive care 

beds as compared to the SMFP's standard of 65% constituted a 

material mistake of law. We also need not consider Chippenham's 

assignments of error regarding whether the CVHPA's deviation 

from the combined ten-mile/minimum average occupancy standard 

constituted a substantial material mistake of fact or law; 

whether the CVHPA's failure specifically to mention one of the 

COPN program's guiding principles was a material mistake of fact 

or law; whether the CVHPA's acceptance of Bon Secours' 

representations regarding its primary and secondary service 

areas constituted a material mistake of fact; and whether the 

fact that Bon Secours held an option to purchase land for the 

construction of a hospital at an alternate site in Chesterfield 

County was information "significant" and "relevant" within the 

meaning of Code § 32.1-102.6. 

 - 14 - 
Accordingly, we hold the Commissioner erred in concluding 

Chippenham was not entitled to participate in the application 

proceeding as "a person showing good cause." Therefore, we 

reverse and remand to the circuit court with instructions to 

remand the matter to the Commissioner and order her to reverse 

her good cause determination and to conduct further proceedings 

consistent with this opinion. 

 Reversed and remanded.

 - 15 -