Court Opinion

ID: 9585946
Source: CourtListenerOpinion
Date Created: 2023-08-21 23:05:26.193555+00
Date Added: 2024-06-11T17:24:17.439044
License: Public Domain

TYSON, Judge
dissenting.
This appeal initially came before this Court over two and one- ■ half years ago on 14 September 2005. Good Hope Hospital System, *565L.L.C. (“GHHS”) appealed from the North Carolina Department of Health and Human Services, Division of Facility Services’s (“Agency”) Final Decision denying GHHS’s 2003 Certificate of Need (“CON”) application. Good Hope Health Sys., L.L.C. v. N.C. Dep’t of Health & Human Servs., 175 N.C. App. 296, 623 S.E.2d 307 (2006). A divided panel of this Court dismissed GHHS’s appeal as moot based upon GHHS’s submission of its 2005 CON application. Id. The North Carolina Supreme Court per curiam reversed and remanded this case to this Court eighteen months ago on 17 November 2006 “for consideration on the merits.” Good Hope Health Sys., L.L.C. v. N.C. Dep’t of Health & Human Servs., 360 N.C. 635, 637, 637 S.E.2d 517, 518 (2006). Our Supreme Court stated:
Our decision is primarily directed by the fundamental differences between the criteria used to evaluate GHHS’s 2003 and 2005 CON applications. The 2003 CON review process was non-competitive in that GHHS was the sole applicant proposing that particular project, which was ostensibly intended to replace an existing facility. In contrast, the 2005 CON application process, which arose out of an amended State Medical Facilities Plan designating a need for a new hospital in Harnett County, involved additional applicants.
Id. (emphasis supplied).
The majority’s opinion misinterprets our Supreme Court’s instructions on remand and erroneously holds the Agency correctly analyzed GHHS’s 2003 CON application as one for a competitive new project and not as a non-competitive replacement of a respected and long-existing, but physically deteriorated, hospital. I disagree with the analysis and conclusion of the majority’s opinion and vote to reverse the Agency’s Final Decision. I respectfully dissent.
I. Standard of Review
When reviewing the decision of an agency, this Court has stated:
The proper standard of review by the [appellate] court depends upon the particular issues presented by the appeal. If appellant argues the agency’s decision was based on an error of law, then de novo review is required. If appellant questions whether the agency’s decision was supported by the evidence or whether it was arbitrary or capricious, then the reviewing court must apply the whole record test.
*566The reviewing court must determine whether the evidence is substantial to justify the agency’s decision. A reviewing court may not substitute its judgment for the agency’s, even if a different conclusion may result under a whole record review.
Carillon Assisted Living, LLC v. N.C. Dep’t of Health & Human Servs., 175 N.C. App. 265, 269, 623 S.E.2d 629, 633 (2006) (internal citations and quotations omitted) (emphasis supplied).
“The whole record test is not a tool of judicial intrusion; instead, it merely gives a reviewing court the capability to determine whether an administrative decision has a rational basis in the evidence." Hospital Group of Western N.C., Inc. v. N.C. Dep’t of Human Resources, 76 N.C. App 265, 268, 332 S.E.2d 748, 751 (1985) (emphasis supplied) (citation and quotation omitted). If the Agency’s decision misinterprets or misapplies the law under de novo review or has no “rational basis in the evidence,” under whole record review, it must be reversed. See generally In re Appeals of Southern Railway Co., 313 N.C. 177, 187, 328 S.E.2d 235, 242 (1985).
II. Legislative Policy
The fundamental purpose and legislative intent of the CON Act is set forth in N.C. Gen. Stat. § 131E-175 (2003). The General Assembly listed ten findings of fact used to regulate health care and service facilities in North Carolina. These legislative findings are particularly relevant to this appeal, as they address equal access to health care facilities for all citizens and rising health care costs.
Monopolistic concentrations in the allocation and delivery of health care services by a sole provider diminishes the availability of health services, threatens the health and welfare of citizens, who need economical and readily available health services, and violates the public policy as articulated by the General Assembly. Id. N.C. Gen. Stat. § 131E-175(3a) (2003) states, “access to health care services and health care facilities is critical to the welfare of rural North Carolinians, and to the continued viability of rural Communities, and that the needs of rural North Carolinians should be considered in the [CON] review process.”
Here, it is undisputed that Harnett County’s rural population has significantly increased since 2000 and is anticipated to do so in the foreseeable future. The United States Census Bureau confirmed on 20 March 2008 that Harnett County is 13th fastest growing out of North Carolina’s 100 counties with a population of 108,721 residents. *567Jennifer Calhoun, Hoke, Harnett Growing Quickly: Counties Near Top in Population Boom, Fayetteville Observer, March 21, 2008 § B at 1. The great majority of this growth is occurring in the western portions of Harnett County toward Lillington, south of Raleigh along U.S. Highway 401, and north of Fayetteville along N.C. Highways 210 and 27. Id.
Other facts are also undisputed: (1) Good Hope Hospital Inc., (“Good Hope”) has provided Harnett County and other residents with needed and life-saving health services for nearly a century and (2) the existing Good Hope hospital does not and cannot meet current requirements and certifications, is physically and “functionally obsolete,” and must be replaced. The fundamental purposes and legislative intent of the CON Act must be considered and lawfully applied by the Agency when analyzing GHHS’s 2003 CON application. Id. The Agency utterly failed to correctly apply the statute and unlawfully assumed authority over decisions not subject to CON review, and which are properly within Good Hope’s Board of Trustees’s discretion.
III. Analysis
GHHS argues the Agency exceeded its statutory authority and erred by ignoring or misapplying controlling statutes, plans, its prior decisions, and its 2001 Settlement Agreement. I agree.
A. Background
On 26 September- 2003, the Agency’s CON Section denied GHHS’s 2003 CON application. The Agency concluded the application failed to conform with the requisite statutory criteria set forth in N.C. Gen. Stat. § 131E-183(a) (2003). The Agency found “that the current application submitted by [GHHS] is for a new project, not a change in scope of a previous[] project. . . [therefore, [GHHS] must demonstrate that the addition of a third operating room is consistent with the need determinations in the 2003 State Medical Facilities Plan . . . .” (Emphasis supplied).
The Agency found there was no need for any additional operating rooms in Harnett County and GHHS’s application failed to conform with the operating room need determination in the 2003 State Medical Facilities Plan (“SMFP”). The Agency failed to honor and enforce Good Hope’s 2001 approved CON and Settlement Agreement, which specifically authorized the relocation of the acute patient care facilities and three operating rooms.
*568On 23 October 2003, GHHS filed a petition for a contested case hearing in the Office of Administrative Hearings. On 9 July 2004, after hearing the evidence and making extensive findings of fact, Administrative Law Judge Gray (“Judge Gray”) filed his recommended decision reversing the Agency’s decision. Judge Gray found, inter alia, “[t]he applicant is not seeking to replace any operating room which does not already exist or had not already been approved by the CON Section for Harnett County.” Judge Gray concluded, “[petitioner has persuaded me by the greater weight of the evidence presented that the agency substantially prejudiced its rights when it denied the 2003 application for a CON to build a much.needed, centrally located, replacement hospital in Lillington, North Carolina.”
On 10 September 2004, the Agency, without taking additional evidence, rejected Judge Gray’s well-reasoned decision and denied GHHS’s 2003 CON application. The Agency found that “[development of new or additional operating rooms are a new institutional health service, the need for which is subject to any determinative limitations set in the [SMFP].” The Agency further found:
[t]he operating room provided for in [Good Hope’s] 2001 CON is an “approved operating room,” but it retains that status only with regard to the project for which it was approved, and for the named applicant, [Good Hope], location (near Erwin), and scope authorized in the 2001 SMFP ... The 2001 CON was not approved for GHHS, nor for this location in Lillington, nor for this project.
B. N.C. Gen. Stat. § 131E-181
N.C. Gen. Stat. § 131E-181 (2003) states, “[a] certificate of need shall be valid, only for the defined scope, physical location, and person named in the application.” The Agency’s Final Decision states and the majority’s opinion holds that GHHS’s 2003' CON application proposed a wholly new project and is not properly reviewed as a modification to the previously approved 2001 CON and Settlement Agreement because the 2003 CON application changed the scope, location and person of the proposed project. I disagree.
1. Change in Scope
The majority’s opinion apparently holds that because the 2003 CON application proposed doubling the size of the facility and increased its capital expenditures, it changed the scope of the project previously approved in the 2001 CON and Settlement Agreement. I disagree.
*569In its 2001 CON application, Good Hope proposed to partially replace its existing facility by constructing a new hospital to house acute patient care services for a total capital cost of $16,159,950.00. The new hospital was proposed as a one-story building, totaling 61,788 square feet. All acute care and inpatient psychiatric services were to relocate to the new site. Good Hope proposed and the Agency expressly allowed Good Hope to maintain the hospital’s ancillary and support services at the existing facility. The new hospital was approved to contain a total of forty-six beds: thirty-four acute care beds and twelve inpatient psychiatric beds.
The Agency approved Good Hope’s 2001 CON application based upon the condition that Good Hope only develop two operating rooms. Good Hope successfully challenged that portion of the Agency’s decision. Good Hope and the Agency entered into a binding Settlement Agreement, which expressly approved the development of a third operating room.
On 14 December 2001, the Agency issued a CON to Good Hope authorizing the relocation of the acute care and inpatient services of the hospital to a new facility with forty-six beds and three operating rooms, with ancillary and support services remaining at the existing facility. Good Hope was unable to raise the necessary financing to build the approved project at that time.
In 2002, Good Hope secured private financing and partnered with Triad Hospitals, Inc. to form GHHS. GHHS proposed to recombine all services and totally replace its existing facility at an estimated capital cost of $33,488,750.00. The facility was proposed as a two-story building with a total of 112,945 square feet. This facility would also contain forty-six beds and three operating rooms — exactly the same number of beds and operating rooms the Agency had approved in the 2001 CON and Settlement Agreement. The existing facility was to be used for general storage or leased as office space. CON review was not required for the relocation of these ancillary and non-medical services. None of these services are statutorily defined as “[n]ew institutional health service[s].” See N.C. Gen. Stat. § 131E-178 (2003) (“No person shall offer or develop a new institutional health service without first obtaining a [CON] . . . .”); see generally N.C. Gen. Stat. § 131E-176(16) (2003) (stating the definitions of “[n]ew institutional health services”). The 2003 CON application also included the development of ten observation beds, also not subject to CON review. N.C. Gen. Stat. § 131E-176(16).
*570As a sole applicant, GHHS’s 2003 CON application extensively detailed the proposed changes to the previously approved 2001 partial relocation. The 2003 CON application did not change the number of beds or operating rooms contained in the facility and did not propose any new health services or equipment. The 2003 CON application modified the 2001 CON project by: (1) proposing private patient rooms; (2) changing the design of the hospital from a one-story building to a two-story building to accommodate the ancillary and support services previously planned to remain at the existing location; (3) designating additional office space for staff members; and (4) designating additional space for ancillary and support services. It is undisputed that the 2003 CON application did not alter the scope of services that are subject to CON review, and proposed exactly the same number of beds and operating rooms as were previously approved by the Agency in the 2001 CON and Settlement Agreement.
2, Change in Location
N.C. Gen. Stat. § 131E-176(24a) (2003) defines “[s]ervice area” as, “the area of the State, as defined in the [SMFP] or in rules adopted by the Department, which receives services from a health service facility.” Undisputed evidence shows Good Hope’s and GHHS’s service area is Harnett County, as is defined by the 2003 SMFP.
The 2001 CON approved Good Hope’s proposal to relocate the acute and patient care services from its existing facility to a new building located on fifty-one acres situated on Highway 421, northwest of Erwin. GHHS’s 2003 CON application proposed to build the replacement facility on a thirty-five acre site also located on U.S. Highway 421, nearer to the town of Lillington.
The existing hospital, the 2001 approved site and the 2003 proposed site are all located within the same service area, Harnett County. The CON Section Chief, Lee Hoffman (“Hoffman”), testified that the Agency “did not find fault with the Lillington location.” Hoffman also testified that the proposed site in Lillington “was not a factor that was used to find [GHHS] nonconforming with any of the review criteria.”
Further, the following colloquy took place during oral arguments before this Court on 14 September 2005, the same day as this appeal was argued, in the companion case of Good Hope Health Sys., L.L.C. v. N.C. Dep’t of Health & Human Servs., 175 N.C. App. 309, 623 S.E.2d 315 (2006):
*571[The Court]: Was the fact that the application in 2003 was made by the joint venture, as opposed to Good Hope alone, was that a factor in the Agency’s decision to deny?
[Attorney General]: No your honor. The Agency found no fault in the applicants in this case. There is ... I think you will find some because [sic] there are multiple parties involved you will find other evidence to the contrary but from the Agency’s perspective, the Agency had no problem with either who the applicant was in this case nor did the Agency have a problem with where the proposal was to be built.
[The Court]: So in terms of the applicant, the composition of the applicant being a joint venture, as well as the physical location, that the Agency agreed with both of those?
[Attorney General]: Yes your honor.
(Emphasis supplied).
By the CON Section Chief’s and the Attorney General’s own admissions and stipulations, the physical location where the proposed replacement hospital was to be built was within the Harnett County service area and was not an issue in the Agency’s Final Decision. No conflicting evidence appears in the record to support a contrary finding or conclusion. The Agency’s finding that the 2003 CON application proposed a change in service area location is not supported by any evidence, and has been conceded by the Agency’s CON Section Chief and counsel as irrelevant to any issue on appeal.
3. Change in Person
The majority’s opinion states that the agreement attached to the 2003 CON application was ineffective to assign Good Hope’s rights under the 2001 CON and Settlement Agreement to GHHS. I disagree. As noted above, the Attorney General expressly conceded that “the composition of the applicant being a joint venture” was wholly irrelevant to the Agency’s decision.
The 2001 Settlement Agreement between Good Hope and the Agency explicitly states, “[t]his agreement shall be binding upon the Parties and their successors and assigns.” The term “assigns” is defined as “those to whom property is, will, or may be assigned.” Black’s Law Dictionary 119 (6th ed. 1990) (emphasis supplied).
The 2003 CON application contained a written agreement between Good Hope and GHHS that contained the following clause:
*572A. Transfer of Assets. At closing, [Good Hope] shall convey and deliver to [GHHS] all assets owned or used by [Good Hope] in connection with the operation of the Existing Hospital including without limitation, all licenses, permits, governmental approvals, normal operating contracts, goodwill, patient lists, records, employees, services, beds, operating rooms, procedure rooms, equipment, furniture, supplies and receivables.
(Emphasis supplied). This agreement is sufficient to establish that GHHS is Good Hope’s “assign” to the 2001 CON and Settlement Agreement. The terms contained therein are binding upon the Agency and GHHS.
GHHS’s 2003 CON application was for the same scope, location, and person named in the previously approved 2001 CON. N.C. Gen. Stat. § 131E-181. The Agency was statutorily required to analyze GHHS’s 2003 CON application as a modification to the previously approved relocation in the 2001 CON and Settlement Agreement and not as a wholly new project.
C. N.C. Gen. Stat. § 131E-176fl61
GHHS argues the proposed changes to the 2001 CON were the only terms subject to review in their 2003 CON application. GHHS further argues that the Agency had statutory authority to request information and review only the proposed increases in capital expenditures for new institutional health services pursuant to N.C. Gen. Stat. § 131E-176(16)(e).
N.C. Gen. Stat. § 131E-176(16)(e) (2003) states:
(16) “New institutional health services” means any of the following:
(e) A change in a project that was subject to certificate of need review and for which a certificate of need was issued, if the change is proposed during the development of the project or within one year after the project was completed. For purposes of this subdivision, a change in project is a change of more than fifteen percent (15%) of the approved capital expenditure amount or the addition of a health service-that is to be located in the facility, or portion thereof, that was constructed or developed in the project.
(Emphasis supplied).
*573N.C. Gen. Stat. § 131E-182(b) (2003) provides, in relevant part:
The -application forms, which may vary according to the type of proposal, shall require such information as the [Agency], by its rules deems necessary to conduct the review. An applicant shall be required to furnish only that information necessary to determine whether the proposed new institutional health service is consistent with the review criteria implemented under G.S. 131E-183 and with duly adopted standards, plans and criteria.
(Emphasis supplied). Based upon the preceding statutes, the Agency had authority to review only the criteria relating to the increase in capital expenditures pursuant to N.C. Gen. Stat. § 131E-176(16)(e). The additional costs were inflationary increases due to the Agency’s delays. The costs to construct the ancillary and support services, originally intended to remain at the existing location, are not “new institutional health services” and are not subject to CON review.'See generally N.C. Gen. Stat. § 131E- 176(16) (2003) (stating the definitions of “[n]ew institutional health services”).
D. Review Criteria
N.C. Gen. Stat. § 131E-183 (2003) sets forth the relevant criteria the Agency is to review prior to issuing a CON. The Agency’s Final Decision found that GHHS’s 2003 CON application failed to conform with statutory review criteria 1, 3, 4, 5, 6, 12, 18a, and 10 N.C.A.C. 14C Section 2100.1 disagree.
1. Criterion 1
N.C. Gen. Stat. § 131E-183(a)(l) (2003) states:
The proposed project shall be consistent with applicable policies and need determinations in the [SMFP], the need determination of which constitutes a determinative limitation on the provision of any health service, health service facility, health service facility beds, dialysis stations, operating rooms, or home health offices that may be approved.
i. Third Operating Room
The majority’s opinion holds that GHHS failed to demonstrate that the provisions of the 2003 SMFP and criterion 1 did not apply to its 2003 CON application. The majority’s opinion states that there were only two existing operating rooms at Good Hope at the time the 2003 CON application was submitted to the Agency and that GHHS *574obtained no rights to a third operating room under the 2001 Settlement Agreement. I disagree.
The Agency’s Final Decision specifically states the third operating room provided for in Good Hope’s 2001 CON was an “approved operating room.” The Agency found that it only retained that status for the project for which it was approved and for the named applicant, location, and scope authorized in 2001. As discussed above, the Agency and its counsel conceded that GHHS’s 2003 CON application was for the same scope, location, and person named in the 2001 CON and Settlement Agreement. The development and relocation of a third operating room had been previously approved by the CON Section for Harnett County. Criterion 1 does not apply to GHHS’s 2003 CON application. The Agency erred in subjecting GHHS to a further need determination for operating rooms set forth in the 2003 SMFP under this criterion.
ii. SMFP Policy AC-5
There is also no need for this Court to review whether GHHS complied with criterion 1 regarding the replacement of acute care bed capacity. In its Final Decision, the Agency stated, “[b]ased upon the growth in population in Harnett County, the Agency determined that it the applicant [sic] provided sufficient evidence to demonstrate that it is reasonable to project the facility would increase utilization to reach occupancy of 65% in its 34 acute care beds by 2008.” GHHS demonstrated it complied with Criterion 1 regarding acute care bed capacity. The Governor specifically amended the 2005 SMFP to create a need for 50 additional hospital beds with operating rooms over and above those approved for the existing Good Hope and Betsy Johnson hospitals in Harnett County. See Good Hope Health Sys., L.L.C. v. N.C. Dep’t of Health & Human Servs., 188 N.C. App. 68, -, - S.E.2d -, -(2008).
2. Criteria 3 and 3ra)
GHHS argues the Agency erred by applying N.C. Gen. Stat. § 131E-183(a)(3) to their review because “the common numbering indicates criteria 3 and 3(a) are alternative and not independent criteria.” I agree.
“[0]ur primary task in statutory construction is to ensure that the purpose of the Legislature in enacting the law, the legislative intent, is accomplished.” Hunt v. Reinsurance Facility, 302 N.C. 274, 288, *575275 S.E.2d 399, 405 (1981) (citation omitted). “Legislative purpose is first ascertained from the plain words of the statute.” Electric Supply Co. v. Swain Electrical Co., 328 N.C. 651, 656, 403 S.E.2d 291, 294 (1994) (citation omitted). This Court is also guided by “the structure of the statute and certain canons of statutory construction.” Id. (citations omitted). The plain language of N.C. Gen. Stat. § 131E-183(a)(3) and (3a) (2003) controls the proper analysis.
N.C. Gen. Stat. § 131E-183(a)(3) applies to new projects and provides:
The applicant shall identify the population to be served by the proposed project, and shall demonstrate the need that this population has for the services proposed, and the extent to which all residents of the area, and, in particular, low income persons, racial and ethnic minorities, women, handicapped persons, the elderly, and other underserved groups are likely to have access to the services proposed.
(Emphasis supplied).
N.C. Gen. Stat. § 131E-183(a)(3a) applies to changes in existing services and provides:
In the case of a reduction or elimination of a service, including the relocation of a facility or a service, the applicant shall demonstrate that the needs of the population presently served will be met adequately by the proposed relocation or by alternative arrangements, and the effect of the reduction, elimination or relocation of the service on the ability of low income persons, racial and ethnic minorities, women, handicapped persons, and other underserved groups and the elderly to obtain needed health care.
(Emphasis supplied).
Criterion 3(a) specifically addresses CON applications that seek approval of the relocation of an existing facility and its impact on “underserved groups and the elderly” whereas criterion 3 addresses CON applications for a wholly new project and the ability of the new applicant to serve these same “underserved groups.” Id. Based upon the plain language of the statutes, N.C. Gen. Stat. § 131E-183(a)(3) and (3a) are alternative criteria. Criterion 3 is inapplicable to GHHS’s 2003 CON application, which proposed a “relocation of a facility or a service.” Id. In its Final Decision, the Agency expressly found that *576GHHS’ application conformed with criterion 3a. Further review of criterion 3a is unnecessary.
3. Remaining Criteria
The majority’s opinion fails to address the remaining statutory review criteria for GHHS’s 2003 CON application. Because I vote to reverse the Agency’s Final Decision, it is necessary to review the Agency’s decision of criteria 4, 5, 6, 12, 18a and 10 N.C.A.C. 14C Section 2100.
i. Criterion 4
N.C. Gen. Stat. § 131E-183(a)(4) (2003) states, “[w]here alternative methods of meeting the needs for the proposed project exist, the applicant shall demonstrate that the least costly or most effective alternative has been proposed.” In its Final Decision, the Agency made the following findings of fact:
111. GHHS in its application understood the need to demonstrate the need for the larger-sized facility proposed in the 2003 application and, as a part of that demonstration, included a comparison of the proposed facility with both the existing facility and with the facility proposed approved in the 2001 CON ....
115. ... [T]he GHHS application for the most part did not explain why the specific spaces described above were needed, or why they were more effective than the space proposed in the replacement facility described in [the 2001 CON],
The Agency concluded, “[t]he Agency’s conclusion that GHHS’[s] application was non-conforming with Statutory Review Criterion 4 was not erroneous, in excess of statutory authority, arbitrary and capricious, or based on improper procedure or a failure to act as required by law or rule.” I disagree.
In its Final Decision, the Agency wholly failed to take into consideration that the proposed replacement facility in the approved 2001 CON relocated only portions of the hospital’s services, whereas, the proposed replacement facility in the 2003 CON application was a recombination of all facilities. In the approved 2001 CON, the new facility was to be constructed as a one-story building containing all acute care and inpatient psychiatric services. Good Hope originally proposed and the Agency expressly consented in the 2001 CON for *577Good Hope to maintain the existing facility for the hospital’s ancillary and support services.
In GHHS’s 2003 CON application, the relocated facility: (1) contained the same number of acute care and inpatient psychiatric services; (2) contained three approved operating rooms; and (3) proposed to rejoin all the hospital’s ancillary and support services at one location. During the review process, other State and Federal agencies determined that the existing Good Hope facility failed to comply with life safety codes, licensure standards, and other physical and environmental requirements, to allow Good Hope’s non-CON ancillary and support services to remain at the existing building.
Attached to its 2003 CON application, GHHS provided extensive information regarding the proposed facility including: (1) a complete table concerning construction costs per square foot and construction cost per bed; (2) a table comparing the square feet by department in the existing facility to the proposed facility; (3) a table containing a detailed comparison of the proposed project to the existing facility, including the rationale for each change; (4) several documents comparing GHHS’s proposed facility to the Betsy Johnson Regional Hospital project plans, which tended to show that GHHS’s facility plan was more efficient than the Betsy Johnson facility design; and (5) a detailed summary of why GHHS’s 2003 CON application was less costly and a more effective alternative to the 2001 approved facility.
Applying the whole record test, the agency’s conclusion that GHHS failed to demonstrate it had conformed with criterion 4, does not have “a rational basis in the evidence.” Hospital Group of Western N.C., Inc., 76 N.C. App. at 268, 332 S.E.2d at 751. GHHS presented substantial and unchallenged evidence that established GHHS’s 2003 CON application conformed with criterion 4.
ii. Criterion 5
N.C. Gen. Stat. § 131E-183(a)(5) (2003) provides, “[financial and operational projections for the project shall demonstrate the availability of funds for capital and operating needs as well as the immediate and long-term financial feasibility of the proposal, based upon reasonable projections of cost of and charges for providing health services by the person proposing the service.”
The Agency found that GHHS’s 2003 CON application did not conform with criterion 5 even though GHHS presented uncontested evidence consisting of: (1) a letter stating “Triad will meet these obliga*578tions through a combination of available cash; $68.3 million as of December 31, 2002 as evident from the enclosed financial statements and draws on an existing line of credit in the amount of $250 million[]” and (2) a Form 10-K Triad had filed with the United States Securities and Exchange Commission, referencing a line of credit. The Agency applied criterion 3, not 3(a), and concluded that GHHS “failed to adequately demonstrate that the immediate and long-term financial feasibility of the proposal is based upon reasonable projections of costs and revenues.”
As noted above, the Agency improperly applied criterion 3 and not 3(a), regarding a relocation of a facility, to its determination concerning criterion 5 and committed an error of law. GHHS presented undisputed evidence of the financial feasibility to construct and operate the proposed replacement facility and demonstrated GHHS’s 2003 CON application conformed with criterion 5.
iii. Criteria 6, 12. and 18a
The Agency found GHHS non-conforming with: (1) criterion 6 because it was found non-conforming with criteria 1 and 3; (2) criterion 12 because it was found non-conforming with criteria 3 and 4; and (3) criterion 18a because it was non-conforming with criteria 1, 3, and 6.
GHHS’s 2003 CON application conformed with criteria 1 and 4. Only criterion 3(a) and not criterion 3 applies to an application for a modification to the relocation of an existing CON. No evidence contradicts that GHHS’s 2003 CON application conformed with criteria 6, 12, and 18a.
iv. 10 N.C.A.C. 140 Section 2100
“The rules contained in 10 N.C.A.C. 14C Sect. 2100, et seq., apply to any applicant proposing to increase the number of operating rooms.” This provision is inapplicable to GHHS’s 2003 CON application. The 2001 CON and Settlement Agreement specifically authorized the development and relocation of three operating rooms.
IV. Conclusion
The Agency was statutorily required to analyze GHHS’s 2003 CON application as a modification to the previously approved 2001 CON and Settlement Agreement to relocate an existing institutional health service. The 2003 CON application did not change the statutorily defined scope, location, or person of the proposed project. The Agency and its counsel conceded that the location of the facility and *579the entity status of GHHS was not an issue to the Agency. The record clearly shows the 2003 CON proposed exactly the same number of beds and operating rooms approved in the 2001 CON and Settlement Agreement. The Agency had statutory authority to request information and review only the proposed increase in capital expenditures pursuant to N.C. Gen. Stat. § 131E-176(16)(e). Good Hope was not required to secure CON approval as a “new institutional health service” to recombine its ancillary and support services at one location. The Agency was aware of and consented to these services remaining at the existing facility in 2001.
GHHS’s 2003 CON application demonstrated it had conformed with all applicable statutory review criteria pursuant to N.C. Gen. Stat. § 131E-183(a). The Agency committed an error of law in its interpretation and application of the CON statutes to GHHS’s 2003 CON application.
Under whole record review, the Agency’s Final decision does not have “a rational basis in the evidence” and should be reversed. See N.C. Gen. Stat. § 150B-51(b) (2003) (stating this Court can reverse or modify the agency’s decision if the agency’s findings, inferences, conclusions, or decisions are, inter alia, affected by error of law). The Administrative Law Judge’s findings of fact are supported by substantial and uncontested evidence and its recommended decision should have been adopted by the Agency as its Final decision. I respectfully dissent.