Court Opinion

ID: 9348761
Source: CourtListenerOpinion
Date Created: 2022-12-20 14:14:56.447464+00
Date Added: 2024-06-11T16:43:49.191481
License: Public Domain

IN THE COURT OF APPEALS OF NORTH CAROLINA

                               2022-NCCOA-199

                                No. COA21-318

                               Filed 5 April 2022

Office of Administrative Hearings, Nos. 20 DHR 2366–67

BIO-MEDICAL APPLICATIONS OF NORTH CAROLINA INC d/b/a BMA OF
SOUTH GREENSBORO and FRESINIUS KIDNEY CARE WEST JOHNSTON,
Petitioner,

            v.

NC DEPARTMENT OF HEALTH AND HUMAN SERVICES, DIVISION OF
HEALTH SERVICE REGULATION, HEALTH CARE PLANNING & CERTIFICATE
OF NEED SECTION, Respondent,

            and

TOTAL RENAL CARE OF NORTH CAROLINA, LLC, d/b/a CENTRAL
GREENSBORO DIALYSIS and CLAYTON DIALYSIS, Respondent-Intervenor.

      Appeal by Petitioner from final decision entered 3 November 2020 by

Administrative Law Judge Stacey Bice Bawtinhimer in the Office of Administrative

Hearings. Heard in the Court of Appeals 14 December 2021.

      Fox Rothschild LLP, by Marcus C. Hewitt and Elizabeth Sims Hedrick, for
      Petitioner-Appellant.

      Attorney General Joshua H. Stein, by Assistant Attorney General Derek L.
      Hunter and Assistant Attorney General Kimberly M. Randolph, for Respondent-
      Appellee.

      Wyrick Robbins Yates & Ponton LLP, by Lee M. Whitman and J. Blakely Kiefer,
      for Respondent-Intervenor-Appellee.

      GRIFFIN, Judge.
      BIO-MEDICAL APPLICATIONS OF N.C., INC. V. N.C. DEP’T OF HEALTH & HUM. SERVS.

                                         2022-NCCOA-199

                                        Opinion of the Court

¶1         Petitioner Bio-Medical Applications of North Carolina, Inc., appeals from a

     final decision granting summary judgment in favor of Respondent North Carolina

     Department of Health and Human Services and Respondent-Intervenor Total Renal

     Care, LLC.    BMA argues that the administrative law judge erred by granting

     summary judgment in favor of DHHS and TRC. After review, we affirm the ALJ’s

     decision.

                        I.   Factual and Procedural Background

¶2         BMA and TRC own and operate kidney dialysis clinics across North Carolina.

     N.C. Gen. Stat. § 131E-178(a) provides that any entity seeking to “offer or develop a

     new institutional health service[,]” including dialysis clinics, must first apply for and

     obtain a certificate of need (“CON”) from DHHS. N.C. Gen. Stat. § 131E-178(a)

     (2019).

¶3         In July 2019, a “Semiannual Dialysis Report (‘SDR’) identified a deficit of 20

     dialysis stations in Guilford County” and “a deficit of 12 dialysis stations in Johnston

     County.” Pursuant to the SDR, DHHS could approve no more than the number of

     stations necessary to satisfy the deficit in each county.

¶4         On 15 July 2019, BMA and TRC each “submitted competing applications to the

     CON Section[s]” for Guilford and Johnston Counties.          In its application for the

     Guilford County service area, “BMA proposed to relocate 12 existing dialysis stations”

     to Guilford County, and “TRC proposed to develop a new 10-station dialysis facility
      BIO-MEDICAL APPLICATIONS OF N.C., INC. V. N.C. DEP’T OF HEALTH & HUM. SERVS.

                                        2022-NCCOA-199

                                       Opinion of the Court

     in Guilford County[.]” Because the total number of stations proposed by BMA and

     TRC exceeded the deficit identified in the SDR, BMA’s and TRC’s applications “could

     not both be approved as proposed.” Similarly, BMA’s and TRC’s CON applications

     for the Johnston County service area could not both be approved because, collectively,

     the number of proposed stations in their applications exceeded the deficit identified

     in the SDR.

¶5         On 20 December 2019, “the CON Section found both Guilford County

     applications conforming to all applicable statutory and regulatory criteria.” DHHS

     approved TRC’s application in full and partially approved BMA’s application,

     allowing BMA to “develop 10 of the 12 dialysis stations it proposed.” DHHS also

     “found both Johnston County applications conforming to all applicable statutory and

     regulatory criteria.” DHHS again approved TRC’s application in full and partially

     granted BMA’s application, allowing BMA to “relocate 2 of the 4 requested dialysis

     stations” to Johnston County.

¶6         On 17 January 2020, BMA appealed DHHS’s decisions as to both its Guilford

     and Johnston County applications by filing petitions for contested case hearings with

     the Office of Administrative Hearings.        BMA subsequently filed a motion for

     summary judgment, arguing that its “rights were substantially prejudiced by

     [DHHS’s] decisions” and that DHHS erred by granting TRC’s applications. DHHS

     and TRC, as a party intervenor, jointly filed a cross-motion for summary judgment,
      BIO-MEDICAL APPLICATIONS OF N.C., INC. V. N.C. DEP’T OF HEALTH & HUM. SERVS.

                                         2022-NCCOA-199

                                        Opinion of the Court

     contending that BMA could not “show that it was substantially prejudiced by

     [DHHS’s] decision[s.]”

¶7         On 6 October 2020, a hearing was held on the parties’ motions for summary

     judgment, after which the ALJ entered a final decision granting DHHS’s and TRC’s

     joint motion for summary judgment because BMA failed to establish that DHHS

     substantially prejudiced BMA by denying its CON applications. BMA timely filed

     notice of appeal from the final decision.

                                       II.    Analysis

¶8         BMA argues that the ALJ erred by granting DHHS’s and TRC’s motion for

     summary judgment because (1) requiring BMA to demonstrate substantial prejudice

     violated its “unconditional statutory right to administrative review” and (2) even if

     BMA was required to demonstrate substantial prejudice, the ALJ erred in finding

     that BMA did not demonstrate substantial prejudice. We hold that BMA is required

     to demonstrate substantial prejudice pursuant to N.C. Gen. Stat. § 150B-23(a) and

     that BMA has not met its burden. We therefore affirm the ALJ’s final decision.

¶9         “As summary judgment is a matter of law, review by this Court in this matter

     is de novo.” Presbyterian Hosp. v. N.C. Dep’t of Health & Hum. Servs., 177 N.C. App.

     780, 782, 630 S.E.2d 213, 214 (citation omitted).

                  The burden is upon the moving party to show that no
                  genuine issue of material fact exists and that the moving
                  party is entitled to judgment as a matter of law. To meet
        BIO-MEDICAL APPLICATIONS OF N.C., INC. V. N.C. DEP’T OF HEALTH & HUM. SERVS.

                                             2022-NCCOA-199

                                            Opinion of the Court

                     its burden, the movant is required to present a forecast of
                     the evidence available at trial that shows there is no
                     material issue of fact concerning an essential element of
                     the non-movant’s claim and that the element could not be
                     proved by the non-movant through the presentation of
                     further evidence.

       Id. at 782–83, 630 S.E.2d at 215 (citation and internal quotation marks omitted).

       A. Substantial Prejudice Requirement

¶ 10          BMA argues that it is not required to demonstrate substantial prejudice “or

       other injury in fact because the legislature has granted it an unconditional right to

       administrative review[.]” We disagree.

¶ 11          “After a decision of the Department to issue, deny or withdraw a certificate of

       need[,] . . . , any affected person . . . shall be entitled to a contested case hearing under

       Article 3 of Chapter 150B of the General Statutes.” N.C. Gen. Stat. § 131E-188(a)

       (2019). Applicants for a certificate of need are considered “affected persons” under

       the CON statutes. Id. § 131E-188(c). “In addition to meeting this prerequisite to

       filing a petition for a contested case hearing regarding CONs, the petitioner must also

       satisfy the actual framework for deciding the contested case as laid out in section

       150B-23(a) of . . . the General Statutes.” Surgical Care Affiliates, LLC v. N.C. Dep’t

       of Health & Hum. Servs., 235 N.C. App. 620, 623, 762 S.E.2d 468, 471 (2014) (internal

       quotation marks and brackets omitted).

¶ 12          N.C. Gen. Stat. § 150B-23(a) provides in pertinent part:
 BIO-MEDICAL APPLICATIONS OF N.C., INC. V. N.C. DEP’T OF HEALTH & HUM. SERVS.

                                    2022-NCCOA-199

                                   Opinion of the Court

             A party that files a petition shall . . . state facts tending to
             establish that the agency named as the respondent has
             deprived the petitioner of property, has ordered the
             petitioner to pay a fine or civil penalty, or has otherwise
             substantially prejudiced the petitioner’s rights and that the
             agency did any of the following:

                 (1) Exceeded its authority or jurisdiction.

                 (2) Acted erroneously.

                 (3) Failed to use proper procedure.

                 (4) Acted arbitrarily or capriciously.

                 (5) Failed to act as required by law or rule.

             The parties in a contested case shall be given an
             opportunity for a hearing without undue delay. Any person
             aggrieved may commence a contested case under this
             section.

N.C. Gen. Stat. § 150B-23(a) (2019) (emphasis added). “This Court has interpreted

subsection (a) to mean that the ALJ in a contested case hearing must determine

whether the petitioner has met its burden in showing that the agency substantially

prejudiced the petitioner’s rights.” Surgical Care Affiliates, 235 N.C. App. at 624, 762

S.E.2d at 471 (internal quotation marks and brackets omitted); see also Parkway

Urology, P.A. v. N.C. Dep’t of Health & Hum. Servs., 205 N.C. App. 529, 536–37, 696

S.E.2d 187, 193 (2010) (“Under N.C. Gen. Stat. § 150B-23(a), the ALJ is to determine

whether the petitioner has met its burden in showing that the agency substantially

prejudiced petitioner’s rights. . . .     [The petitioner’s] contention that it was
        BIO-MEDICAL APPLICATIONS OF N.C., INC. V. N.C. DEP’T OF HEALTH & HUM. SERVS.

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                                          Opinion of the Court

       unnecessary for it to show substantial prejudice to be entitled to relief is contrary to

       our case law and is without merit.” (emphasis in original)). BMA is thus required to

       demonstrate substantial prejudice pursuant to N.C. Gen. Stat. § 150B-23(a) and our

       caselaw construing its requirements.

¶ 13         BMA likens the substantial prejudice requirement to an “injury in fact”

       requirement for purposes of standing, citing Committee to Elect Dan Forest v.

       Employees Political Action Committee, 376 N.C. 558, 2021-NCSC-6. This contention

       is misguided. Unlike standing, a petitioner has to demonstrate substantial prejudice

       as part of the merits of its case. See Parkway Urology, 205 N.C. App. at 536, 696

       S.E.2d at 193 (describing substantial prejudice as one of “the statutory requirements

       that must be met in order for a petitioner to be entitled to relief” and part of “[t]he

       actual framework of deciding the contested case” (emphasis in original)). BMA’s

       argument is an attempt to avoid proving the merits of its case by asking this Court

       to hold that it is exempt from the substantial prejudice requirement. This argument

       is without merit.

       B. Proof of Substantial Prejudice

¶ 14         BMA next argues that the ALJ “erroneously concluded that BMA did not

       forecast evidence of” substantial prejudice. By “limit[ing] the number of its own

       stations that [BMA] could move[,]” BMA contends that DHHS “infringed and

       deprived [BMA] of its liberty and property rights[,] thereby preventing [BMA] from
        BIO-MEDICAL APPLICATIONS OF N.C., INC. V. N.C. DEP’T OF HEALTH & HUM. SERVS.

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                                          Opinion of the Court

       conducting business as it chooses.” We disagree.

¶ 15         “In order to establish substantial prejudice, the petitioner must provide specific

       evidence of harm resulting from the award of the CON . . . that went beyond any

       harm that necessarily resulted from additional . . . competition[.]” Surgical Care

       Affiliates, 235 N.C. App. at 631, 762 S.E.2d at 476 (citation omitted). “The harm

       required to establish substantial prejudice cannot be conjectural or hypothetical” and

       instead must be “concrete, particularized, and actual or imminent.” Id. (internal

       quotation marks omitted).

¶ 16         We hold that BMA did not forecast sufficient evidence of substantial prejudice

       to survive summary judgment. BMA argues that it was substantially prejudiced by

       the partial denial of its CON application because it “limited the number of its own

       stations that [BMA] could move[.]”      However, this Court has previously held in

       multiple cases that a petitioner’s “mere status as a denied competitive CON applicant

       alone is insufficient [to establish substantial prejudice] as a matter of law.” Surgical

       Care Affiliates, LLC v. N.C. Dep’t of Health & Hum. Servs., 237 N.C. App. 99, 766

       S.E.2d 699, 2014 WL 5770252, at *3 (2014) (unpublished) (citing CaroMont Health,

       Inc. v. N.C. Dep’t of Health & Hum. Servs., 231 N.C. App. 1, 4–5, 751 S.E.2d 244, 248

       (2013); Parkway Urology, 205 N.C. App. at 536–37, 696 S.E.2d at 193); Bio-Medical

       Apps. Of N. Carolina v. N.C. Dep’t of Health & Hum. Servs., 247 N.C. App. 899, 788

       S.E.2d 684, 2016 WL 3166601, at *3–4 (2016) (unpublished) (holding that the
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                                          Opinion of the Court

       petitioner did not establish substantial prejudice where “the Agency approved [the

       petitioner] to develop seven dialysis stations instead of the 11 it requested” in its CON

       application). Accordingly, BMA’s argument that partial denial of its CON application

       constitutes substantial prejudice is without merit.

¶ 17         We note that “[t]his Court has previously held that, as material questions of

       fact will always exist, summary judgment is never appropriate” where, as here, “two

       or more applicants conform to the majority of the statutory criteria.” Presbyterian

       Hosp., 177 N.C. App. at 783, 630 S.E.2d at 215 (citing Living Centers-Southeast v.

       N.C. Dep’t of Health & Hum. Servs., 138 N.C. App. 572, 580–81, 532 S.E.2d 192, 197

       (2000)). In Living Centers, however, the Court held that summary judgment is never

       appropriate as to the statutory criteria, not as to substantial prejudice. See Living

       Centers, 138 N.C. App. at 580–81, 532 S.E.2d at 197 (“[W]e believe that it is inherent

       that where two or more certificate of need applicants conform to the majority of the

       criteria in N.C. Gen. Stat. § 131E-183, as in the case at bar, and are reviewed

       comparatively, there will always be genuine issues of fact as to who is the superior

       applicant.” (emphasis added)). Substantial prejudice, which was not at issue in

       Living Centers, is a distinct and separate element of a petitioner’s claim; agency error

       as to the statutory criteria is another element. See, e.g., Britthaven, Inc. v. N.C. Dep’t

       of Hum. Res., 118 N.C. App. 379, 382, 455 S.E.2d 455, 459 (1995) (“Under N.C. Gen.

       Stat. § 150B-23(a), the ALJ is to determine whether the petitioner has met its burden
        BIO-MEDICAL APPLICATIONS OF N.C., INC. V. N.C. DEP’T OF HEALTH & HUM. SERVS.

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                                           Opinion of the Court

       in showing that the agency substantially prejudiced petitioner’s rights, and that the

       agency also acted outside its authority, acted erroneously, acted arbitrarily and

       capriciously, used improper procedure, or failed to act as required by law or rule.”

       (emphasis added)).

¶ 18         Material questions of fact will of course always exist when both applicants for

       a competitive CON meet all of the statutory criteria. Living Centers, 138 N.C. App.

       at 580–81, 532 S.E.2d at 197. However, the same cannot be said as to substantial

       prejudice. The standard for substantial prejudice in our caselaw is clear. The mere

       fact that BMA will face increased competition because of the partial denial of its CON

       application is insufficient to establish substantial prejudice as a matter of law.

       Surgical Care Affiliates, 235 N.C. App. at 631, 762 S.E.2d at 476 (“In order to

       establish substantial prejudice, the petitioner must provide specific evidence of harm

       resulting from the award of the CON . . . that went beyond any harm that necessarily

       resulted from additional . . . competition[.]” (citation omitted)).

                                           III. Conclusion

¶ 19         For the reasons stated herein, we affirm the final decision granting summary

       judgment in favor of DHHS and TRC.

             AFFIRMED.

             Judges ZACHARY and WOOD concur.