Bio-Med. v. N.C. Dep't of Health & Hum. Serv. ( 2022 )

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.
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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,
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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
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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:
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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
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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
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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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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
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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.