Title: State Health Comm'r v. Sentara Norfolk Gen. Hosp.
Citation: N/A
Docket Number: 992018
State: Virginia
Issuer: Virginia Supreme Court
Date: September 15, 2000

Present:  Carrico, C.J., Lacy, Hassell, Keenan, Koontz, and 
Kinser, JJ., and Compton, Senior Justice 
 
STATE HEALTH COMMISSIONER  
 
v.  Record No. 992018    OPINION BY JUSTICE ELIZABETH B. LACY 
 
 
 
September 15, 2000 
SENTARA NORFOLK GENERAL HOSPITAL 
 
FROM THE COURT OF APPEALS OF VIRGINIA 
 
 
In this appeal, we consider whether the Court of Appeals 
erred in concluding the State Health Commissioner 
(Commissioner) exceeded his statutory authority and committed 
reversible error by relying on evidence outside the record and 
on a mistake of fact when he denied a Certificate of Public 
Need (COPN) for creation of an additional liver transplant 
program in Virginia. 
 
On July 31, 1996, Sentara Norfolk General Hospital 
(Sentara) submitted an application for a COPN pursuant to Code 
§ 32.1-102.3 to establish a liver transplant facility in 
Norfolk.  In accordance with the procedures governing 
consideration of an application for a COPN, § 32.1-102.6, a 
public hearing was held in Norfolk on September 16, 1996.  
Following the hearing, the staff of the Eastern Virginia 
Health Systems Agency Board recommended that the application 
be denied.  The Board disagreed with the staff recommendation 
and voted to recommend approval of the application. 
The application was then forwarded to the Virginia 
Department of Health (VDH), Division of Certificate of Public 
Need, for review.  The staff of VDH recommended denial of the 
application.  An informal non-adversarial fact finding 
conference was convened pursuant to § 9-6.14:11, and a VDH 
adjudication officer recommended that the application be 
approved. 
 
The adjudication officer's recommendation along with the 
entire record of the proceeding was submitted to the 
Commissioner for decision.  The Commissioner reviewed the 
agency record, rejected the adjudication officer's 
recommendation, and, by letter dated November 3, 1997, denied 
Sentara's application for a COPN, finding that there was 
currently no public need for the project.  In his letter, the 
Commissioner stated three reasons for this decision.  First, 
the Commissioner determined that the provisions of the State 
Medical Facilities Plan (SMFP) relating to liver transplants 
are "inaccurate, outdated, inadequate or otherwise 
inapplicable" and that "[b]ecause they fail to reflect current 
standards, they should not be applied here."  The Commissioner 
based this finding on the fact that although the SMFP only 
requires that facilities perform a minimum of 12 liver 
transplant procedures annually, 12 VAC 5-280-70, "[t]he 
average number of liver transplants performed per transplant 
 
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center nationally in 1994 was 36.  In 1996 the average number 
of liver transplants performed per transplant center in 
Virginia was 52." 
 
 Second, the Commissioner concluded that the 
establishment of an additional liver transplant facility at 
Sentara "may erode the quality of other transplant centers by 
reducing the volume of liver transplants at the other 
centers."  The Commissioner made this statement based on his 
finding that "[i]ndications in the healthcare system are that 
the numbers of available organs may be reaching a plateau; 
consequently, the actual numbers of transplantations performed 
appear to be stabilizing." 
 
Finally, the Commissioner stated that "an additional 
liver transplant center at [Sentara] may seriously impact the 
established liver transplant fellowship training program at 
MCVH [Medical College of Virginia Hospital]" because MCVH is 
required by the American College of Surgeons "to perform 45 
liver transplants annually." 
 
In conclusion, the Commissioner found that Sentara's 
application for a COPN was premature because "the system 
presently (i) reflects no need for additional liver 
transplantation sites in light of organ supply; (ii) appears 
to have no excess of transplantation procedures requiring 
accommodation whereas approval of another site could result in 
 
3
an excess of facilities lacking volume to meet the national 
average or to assure essential technical experience; and (iii) 
should maintain and sustain necessary training programs in the 
Commonwealth." 
 
Sentara filed a petition for appeal in the Circuit Court 
for the City of Norfolk, arguing that the Commissioner's 
decision should be reversed because the Commissioner exceeded 
the scope of his authority, relied on evidence not contained 
in the record, and relied on a mistake of fact regarding the 
impact of the proposed transplant program on accreditation of 
the liver transplant fellowship program at MCVH.  During the 
circuit court proceedings, the Commissioner conceded that his 
recitation of the accreditation requirement was incorrect. 
The circuit court affirmed the Commissioner's decision 
and dismissed Sentara's petition, holding that the 
Commissioner did not abuse his discretion in denying the COPN 
and that, considering the record as a whole, "a reasonable 
mind could not necessarily conclude that Sentara's COPN should 
be approved."  Additionally, the circuit court held that the 
Commissioner's reliance on the mistake of fact regarding 
accreditation requirements was harmless error. 
Sentara appealed to the Court of Appeals, raising the 
same three issues.  The Court of Appeals resolved each issue 
adversely to the Commissioner, holding that:  (1) the 
 
4
Commissioner exceeded his authority in denying the petition 
because § 32.1-102.3(A) does not allow the Commissioner to 
deny an application for a COPN based on his determination that 
the SMFP standards are outdated, inaccurate, inadequate, or 
otherwise inapplicable; (2) the Commissioner's finding that 
the number of livers available for transplantation "may be 
reaching a plateau" was based on evidence outside the record, 
reliance on this finding prejudiced Sentara and, therefore, it 
was reversible error; and (3) the Commissioner's reliance on a 
mistake of fact regarding the number of transplant procedures 
necessary for a facility to maintain teaching accreditation 
constituted reversible error and was not harmless.  Sentara 
Norfolk Gen. Hosp. v. State Health Comm'r, 30 Va. App. 267, 
283, 516 S.E.2d 690, 698 (1999).  The Commissioner appealed, 
assigning error to the holding of the Court of Appeals on each 
issue.  We consider these assignments of error in order. 
I.  Commissioner's Statutory Authority 
 
In his letter denying the COPN, the Commissioner stated 
that the SMFP standard of 12 liver transplants per year was 
"inaccurate and outdated" and "should not be applied" in this 
case.  The Commissioner directed that procedures for amending 
the SMFP standard be initiated.  Sentara claims that, in 
making this determination, the Commissioner "set aside the 
SMFP in order to impose a higher volume standard, rather than 
 
5
a less strict standard as permitted by the statute."  In doing 
so, Sentara asserts, the Commissioner exceeded his statutory 
authority because § 32.1-102.3(A) allows the Commissioner to 
set aside the SMFP if it is outdated and inaccurate only to 
grant a COPN application, not to deny an application. 
Agreeing with Sentara, the Court of Appeals held that 
"[t]he plain language of the statute provides that the 
Commissioner 'may issue or approve' a petition that does not 
comply with an outdated or inaccurate SMFP" but it does not 
provide "that he may deny or disapprove a petition on this 
basis."  Sentara, 30 Va. App. at 277, 516 S.E.2d at 695. 
Section 32.1-102.3(A) provides in relevant part: 
No person shall commence any project without first 
obtaining a certificate issued by the Commissioner.  
No certificate may be issued unless the Commissioner 
has determined that a public need for the project 
has been demonstrated . . . .  Any decision to issue 
or approve the issuance of a certificate shall be 
consistent with the most recent applicable 
provisions of the State Medical Facilities Plan; 
however, if the Commissioner finds, upon 
presentation of appropriate evidence, that the 
provisions of such plan are not relevant to a rural 
locality's needs, inaccurate, outdated, inadequate 
or otherwise inapplicable, the Commissioner, 
consistent with such finding, may issue or approve 
the issuance of a certificate and shall initiate 
procedures to make appropriate amendments to such 
plan. 
 
This section clearly authorizes the Commissioner to conclude 
that provisions of the SMFP are outdated and directs the 
Commissioner to initiate the process for changing the 
 
6
provisions found to be outdated.  Thus, in this case, the 
Commissioner acted within his statutory authority when he 
determined that the existing SMFP requiring a minimum of 12 
liver transplants was outdated and directed that procedures be 
instituted to adopt appropriate amendments. 
We agree with the Court of Appeals, however, that the 
section specifically authorizes the Commissioner to grant a 
COPN even if he finds provisions of the SMFP "outdated" or 
"otherwise inapplicable," but does not contain similar 
specific authorization to deny a COPN under such 
circumstances.  Denial of the COPN under such circumstances 
would allow the Commissioner to unilaterally impose new, and 
presumably higher, standards.  The statute contemplates that 
new standards would be imposed as a result of amendment 
procedures initiated, not pursuant to unilateral adoption and 
application of new standards by the Commissioner in the course 
of the COPN process. 
Section 32.1-102.3(A) does not, however, require the 
Commissioner to grant a COPN simply because a COPN application 
complies with the provisions of the existing SMFP.  The 
Commissioner correctly points out that compliance with the 
SMFP is only one factor in the decision.  The statute provides 
that to grant a COPN, the Commissioner must conclude that "a 
public need for the project has been demonstrated."  
 
7
Subsection B of § 32.1-102.3 lists 20 factors which the 
Commissioner must consider in addition to compliance with the 
SMFP in determining whether a public need has been 
demonstrated.  In this case, therefore, the Commissioner 
exceeded his authority under § 32.1-102.3(A) if the 
Commissioner denied Sentara's application solely on the basis 
that the SMFP regarding the average number of transplants was 
outdated and inapplicable.  While the Court of Appeals opinion 
states that the Commissioner exceeded his authority "to the 
extent" he denied the COPN on the ground the SMFP was 
outdated, there is no discussion of the extent to which the 
denial was based on that ground.  
Sentara argues that the Commissioner exceeded his 
authority because, in setting aside the existing SMFP, he 
applied "some higher, impromptu, unspecified standard" as a 
basis for denying the COPN.  The record, however, contains no 
evidence that the Commissioner required Sentara to satisfy 
some higher standard in order to secure the COPN.  The 
Commissioner's only references to higher standards were those 
regarding the national average for annual liver 
transplantations.  First, the Commissioner observed that it 
was "reasonable to assume" that over time there would be an 
increase in the number of liver transplants performed by 
Sentara and that this would reduce the number of procedures at 
 
8
other existing transplant centers.  This redistribution of 
patients, the Commissioner wrote, "would place the 
Commonwealth's programs below the national average of 36 
transplants per center."  A second reference is contained 
within one of the three considerations cited in his 
conclusion:  "[a]pproval of another site could result in an 
excess of facilities lacking volume to meet the national 
average or to assure essential technical experience." 
These references to the national average were made in 
regard to future events, not requirements which the 
Commissioner imposed on Sentara as a prerequisite to securing 
a COPN in this proceeding.  They are a reflection of the 
record evidence that the quality of transplant medical 
expertise is directly related to the number of procedures 
performed, and that the clinical outcome for liver transplants 
improves as the number of procedures performed in a facility 
increases.  Thus, they cannot be the "higher, impromptu, 
unspecified standard" that Sentara argues the Commissioner 
applied as a basis for denying the COPN. 
Furthermore, although the Commissioner stated that the 
SMFP standard was outdated and would not be applied, he 
nevertheless relied on the provisions of the existing SMFP in 
support of his decision that no public need existed for 
Sentara's proposed project.  Citing the portion of the SMFP 
 
9
that states that transplantation programs are expected "to 
perform substantially larger numbers of transplants annually" 
and that meeting the minimum volume "does not necessarily 
indicate a need for additional transplantation capacity or 
programs," the Commissioner concluded that the existing SMFP 
was "not binding as to minimum acceptable volumes."  The 
Commissioner also stated that even the existing SMFP "does not 
support" the grant of a COPN to Sentara at this time. 
In his letter denying Sentara's application, specifically 
in the section relating to the existing SMFP standards, the 
Commissioner made no statements which support the proposition 
that the COPN was denied solely on the basis of a 
determination that the existing SMFP was outdated and 
inapplicable.  Rather, the statements as set out above 
indicate that the Commissioner found that even though Sentara 
complied with the existing SMFP, it had not demonstrated a 
public need for the project.  This conclusion was within the 
discretion and authority of the Commissioner under both 
§ 32.1-102.3 and the provisions of the SMFP. 
For these reasons, we hold that the Commissioner did not 
exceed his statutory authority in denying the COPN in this 
case. 
II.  Evidence Outside the Record 
 
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The Commissioner's determination that a liver transplant 
facility at Sentara might reduce the quality of transplants at 
other facilities because a new facility would reduce the 
number of such procedures at those facilities was based on his 
conclusion that "the numbers of available organs may be 
reaching a plateau."  The Court of Appeals concluded that the 
evidence on trends in organ donation rates was, at best, 
inconclusive and that the proposition was faulty because the 
number of liver transplants performed in Virginia increased in 
1995 and 1996.  Based on this rationale, the Court of Appeals 
held, "as a matter of law that the evidence contained in the 
record is insufficient to support the Commissioner's finding 
that organ donation rates have reached a plateau," 30 Va. App. 
at 279, 516 S.E.2d at 696, and, therefore, that the 
Commissioner must have relied upon evidence outside the record 
in making his decision.  Because such evidence outside the 
record constituted neither "institutional knowledge" nor "a 
public statistic," the Commissioner's reliance on it was 
improper.  Id. at 280, 516 S.E.2d at 696.  Reliance on this 
improper evidence was reversible error, according to the Court 
of Appeals, because the record did not otherwise support the 
concerns of the Commissioner and, therefore, Sentara was 
prejudiced by the Commissioner's consideration of evidence 
outside the record regarding organ donation rates.  Id. at 
 
11
282, 516 S.E.2d at 697.  We disagree with the Court of 
Appeals' analysis and conclusion. 
In considering whether the record evidence is sufficient 
to support a factual finding made by an agency, we apply the 
substantial evidence standard of review.  Virginia Real Estate 
Comm'n v. Bias, 226 Va. 264, 268-69, 308 S.E.2d 123, 125 
(1983).  Under that standard, substantial evidence is " 'such 
relevant evidence as a reasonable mind might accept as 
adequate to support a conclusion.' "  Id. at 269, 308 S.E.2d 
at 125 (citations omitted).  An agency's factual findings 
should only be rejected if, " 'considering the record as a 
whole, a reasonable mind would necessarily come to a different 
conclusion.' "  Id.
As the Court of Appeals and trial court acknowledged, the 
record in this case contains testimonial and documentary 
evidence suppporting the proposition that the number of livers 
available for transplantation has reached a plateau.  Examples 
of this evidence include a chart prepared by MCVH showing a 
decline in liver donations in Virginia, testimony that MCVH 
must import livers from out of state for its transplant 
program, and various letters from members of the medical 
community involved in liver transplantation programs.  These 
letters state that "there remains throughout the world, a 
scarcity of donor solid organs for transplantation"; that 
 
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"[t]here has been an increase in the numbers of liver 
transplants in the state with addition of programs at UVA 
(1988) and Fairfax (1992); however, over the past three years 
. . . this number has reached a state-steady plateau, 
indicating the driving force is now only the numbers of 
available donor organs"; that "the number of livers donated in 
our procurement region is inadequate to support the existing 
capacity of the region to perform liver transplantations"; 
that "[a]t the present time, the availability of liver 
transplants is limited primarily by the availability of 
transplantable livers.  A second transplant program . . . will 
do nothing to change the one limiting factor.  In addition, it 
may diminish the overall quality and effectiveness of this 
procedure in our area"; and "[t]he most dramatic improvements 
in access to liver transplantation for the residents of 
Virginia can be accomplished through initiatives directed at 
improving the rate of organ donations."  (Emphasis omitted.)  
Applying the substantial evidence standard of review, we 
conclude that the character of this evidence would not require 
a reasonable person to reject it as untrustworthy or 
incredible and that a "reasonable mind might accept" it to 
support the conclusion that the availability of livers "may 
have reached a plateau."  And, in light of this evidence, we 
 
13
cannot say that a reasonable person would necessarily come to 
a different conclusion. 
For these reasons, we hold that the Court of Appeals 
erred in finding that the Commissioner relied on evidence 
outside the record in making a factual finding regarding organ 
donation rates.  Because the Commissioner did not improperly 
base his finding on evidence outside the record, questions of 
prejudice to Sentara do not arise. 
III.  Mistake of Fact 
The third reason cited by the Commissioner for denying 
Sentara's application for a COPN was that the new transplant 
center "may seriously impact the established liver transplant 
fellowship training program at MCVH."  This conclusion was 
based on the Commissioner's factual finding that "the American 
College of Surgeons requires the training institution to 
perform 45 liver transplants annually."  This factual finding 
was wrong.  The accreditation requirement, which had been 
changed by the American College of Surgeons during the course 
of the application process, no longer required a specific 
number of procedures annually by the institution but rather 
required 45 procedures by the fellow as primary surgeon in the 
course of the fellowship, usually two years. 
The Court of Appeals determined that "[i]n the absence of 
substantial credible evidence supporting the Commissioner's 
 
14
decision to deny the COPN, we must assume that Sentara was 
also prejudiced by this mistake of fact."  Sentara at 282, 516 
S.E.2d at 698.  We disagree with the Court of Appeals. 
In determining whether an error is reversible, we apply 
familiar principles.  
Error will be presumed prejudicial unless it plainly 
appears that it could not have affected the result.  
A plaintiff in error must always show, not only 
error . . . , but also error of a substantial 
nature.  When once he has pointed out an error of a 
substantial character, he is entitled to have it 
corrected if it appears from the record that there 
is reasonable probability that it did him any harm. 
 
Breeding v. Johnson, 208 Va. 652, 659, 159 S.E.2d 836, 842 
(1968).  The Commissioner argues that the factual mistake was 
not substantial and that there is no reasonable probability 
that it did Sentara any harm.  We agree with the Commissioner. 
In determining whether there was a public need for 
Sentara's transplant program, the Commissioner was required to 
consider the program's impact on "the clinical needs of health 
professional training programs in the area in which the 
project is proposed."  § 32.1-102.3(B)(12).  The gravamen of 
the Commissioner's expressed concern was whether the volume of 
liver transplant procedures would be sufficient to sustain  
MCVH's liver transplant training accreditation if Sentara 
established a transplant program.  According to the record, 
                     
 
 
15
MCVH performed 66 liver transplants in 1996.  That year, 
Sentara referred 28 patients for liver transplants and the 
majority of these patients went to MCVH for the procedure.  
Based on these figures, the Commissioner stated that, if the 
COPN were granted, over time Sentara would perform those 
transplant procedures and the volume of liver transplants at 
MCVH would be reduced by 40-50%.  That degree of reduction in 
transplant procedures at MCVH would impact the accreditation 
of MCVH's liver transplant fellowship training program under 
either the current accreditation standard or the erroneous 
standard considered by the Commissioner. 
 
Furthermore, the number of procedures which must be 
performed at MCVH each year to retain its accreditation under 
the current standard may be as many as 45 because, under the 
new standard, the requisite number of procedures must be 
performed by the fellow as primary surgeon.  Presumably, a 
fellow will have to assist on some number of procedures before 
assuming the role of primary surgeon.  As noted by the trial 
court, "[a]ssuming there is one new fellow each year, as well 
as an expert surgeon directing the program and performing the 
majority of procedures during the first year of each fellow's 
training, the training facility will exceed forty-five 
transplants per year." 
 
16
 
Therefore, we conclude that the Commissioner's use of an 
accreditation requirement of 45 transplants per institution 
per year, rather than 45 transplants per fellow as primary 
surgeon, in considering the impact of Sentara's proposed 
transplant program on MCVH's liver fellowship training 
program, was not "error of a substantial nature." 
Finally, as we have already noted, the Commissioner's 
decision to deny the COPN was based on multiple grounds.  In 
addition to concern about the continued accreditation of 
MCVH's training program, the Commissioner's denial was based 
on the need to maintain the quality of the technical 
experience and the need for additional transplant centers in 
light of the availability of donated livers.  These other 
reasons for denying the COPN are not affected by the mistake 
of fact.  Thus, we cannot conclude that a different result 
would have occurred in the absence of the factual error. 
In summary, we hold (1) that the Commissioner did not 
exceed his authority when he did not apply certain standards 
in the SMFP because he found that they were outdated, 
inaccurate, inadequate, and otherwise inapplicable; (2) that 
he did not rely on evidence outside the record when finding 
that "the numbers of available organs may be reaching a 
plateau"; and (3) that his reliance on a mistake of fact was 
harmless error. 
 
17
For the foregoing reasons, the judgment of the Court of 
Appeals will be reversed and the judgment of the trial court 
dismissing Sentara's petition for appeal will be reinstated. 
Reversed and final judgment. 
 
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