Humana Hosp. Corp. Inc. v. Dept. of Human Resources, Div. of Facility Services

345 S.E.2d 235 (1986)

In the Matter of HUMANA HOSPITAL CORPORATION, INC., Petitioner-Appellant,
v.
NORTH CAROLINA DEPARTMENT OF HUMAN RESOURCES, DIVISION OF FACILITY SERVICES, Certificate of Need Section, Respondent-Appellee, and
Wake County Hospital System, Inc.; Hospital Building Company, d/b/a Raleigh Community Hospital; and Cornelia Allen, Mary Dunn, Hubert A. Evans, et al., Intervenors.

No. 8510DHR1028.

Court of Appeals of North Carolina.

July 1, 1986.

Sanford, Adams, McCullough & Beard by Charles H. Montgomery and Renee J. Montgomery, Cary, for petitioner-appellant.

Atty. Gen. Lacy Thornburg by Asst. Attys. Gen., Barbara P. Riley and John R. Corne, Raleigh, for respondent-appellee.

Manning, Fulton & Skinner by Howard E. Manning, and Hollowell & Silverstein by Edward E. Hollowell and Robert L. Wilson, Jr., Raleigh, for intervenor-appellee Wake County Hosp. System, Inc.

Jordan, Price, Wall, Gray & Jones by John R. Jordan, Jr., Stephen R. Dolan, and Steven M. Shaber, Raleigh, for intervenor-appellee Hospital Bldg. Co., d/b/a Raleigh Community Hosp.

East Central Community Legal Services by Gregory C. Malhoit, N.C. Legal Services Resource Center by Pam Silberman, Raleigh, and Legal Services of The Lower Cape Fear by Richard Klein, Wilmington, for intervenors-appellees Cornelia Allen, Mary Dunn, Hubert A. Evans, et al.

PHILLIPS, Judge.

Since this matter was initiated before the effective date of the rewritten Administrative Procedure Act, N.C.Sess. Laws (1st Sess.1985) c. 746, s. 19, codified at G.S. Chapter 150B, the Administrative Procedure Act of 1973 (APA), G.S. Chapter 150A, governs our review of this case. Section 51 of the APA provides as follows:

The court may affirm the decision of the agency or remand the case for further proceedings; or it may reverse or modify the decision if the substantial rights of the petitioners may have been prejudiced because the agency findings, inferences, conclusions, or decisions are:

(1) In violation of constitutional provisions; or

(2) In excess of the statutory authority or jurisdiction of the agency; or

(3) Made upon unlawful procedure; or

(4) Affected by other error of law; or

(5) Unsupported by substantial evidence admissible under G.S. 150A-29(a) or G.S. 150A-30 in view of the entire record as submitted; or

(6) Arbitrary or capricious.

In a brief upwards of 100 pages long Humana argues that the respondent agency, both in processing the competing applications and in ruling on them, exceeded its authority, abused its discretion, and acted arbitrarily and capriciously in several respects. The only action by the respondent that fits any of these characterizations in our opinion was its decision to permit the Wake County Hospital to determine how many of its 20 beds at Wake Medical Center should be transferred to the new Western Wake facility. G.S. 131-177(4) places the responsibility for determining the need for new hospital beds in this state upon the respondent agency, and G.S. 131-182(b) authorizes it to approve the construction of such facilities with or without conditions; but no statute authorizes it to delegate any of its authority to others and the attempted delegation is void. Even so, this unauthorized act, which affected only 19 hospital beds at the most and could not have prejudiced Humana's application to construct a 160 bed hospital, does not require any further action on Humana's application, which is the subject of this appeal. The error can be corrected on remand by the respondent determining the number of beds to be closed at Wake Medical Center and transferred to the new facility.

Another agency decision that Humana earnestly argues was unauthorized was permitting the competing applicants to construct facilities that were not covered by their applications. The argument seems to be that the agency must either approve or disapprove of applications for certificates of need but has no authority to either require more or grant less than is applied for. In our opinion the law does not require that applications for certificates of need be approved precisely as submitted or not at all, and it would be folly if it did so. G.S. 131-182(b) provides, "The Department shall issue as provided in this Article a certificate of need with or without conditions or reject the application within the review period." (Emphasis supplied.) The fundamental purpose of the certificate of need law is to limit the construction of health care facilities in this state to those that the public needs and that can be operated efficiently and economically for their benefit. G.S. 131-175; Schonbrun, Making Certificate of Need Work, 57 N.C.L.Rev. 1259 (1979). In serving that purpose adjustments are often needed and under the foregoing statute the agency has discretion to make them by granting only some of the things applied for and by imposing conditions not applied for. The record in this case indicates that additional hospital beds are needed in more than one part of Wake County, while some hospital beds are located where they are not needed. The agency's decision to put some of the additional beds in one place and some in another and to transfer beds to those places from unneeded facilities was both authorized and justified, in our opinion.

The several other agency acts that Humana contends were illegal, unfair or unconstitutional are of somewhat the same substance, and we will discuss only two of them. One is that HBC was permitted to amend its application, whereas DHR regulation, 10 N.C.Admin.Code 3R .0306(b) prohibits the amending of certificate of need applications after they have been declared complete for review. But HBC did not amend its application. What happened, as the record shows, was that: In its original application HBC indicated that in admitting uninsured, non-emergency indigents to the proposed new facility its policy was to require a deposit commensurate with the treatment anticipated; that policy was later changed by HBC's board of directors and when the CON Section received a hearsay report to that effect, it wrote HBC's attorney for verification, and added his reply to the file. Adding this up-to-date information to the file was not unauthorized and, in any event, did not cause the agency to determine that a new 160 bed hospital is not needed in Cary, as Humana proposed. Another unauthorized act complained of is that the agency revised Humana's estimates as to the cost of operating the proposed facility. But according to the record an adjustment of these estimates was necessary because of discrepancies in Humana's application and in making the adjustment the agency used Humana's costs at its similar facility in Greensboro, which was neither unfair nor prejudicial.

The main question before us, of course, is whether the agency decision has adequate evidentiary support. Agency findings of fact are conclusive if, upon review of the whole record, they are supported by competent, material, and substantial evidence. G.S. 150A-51(5); Thompson v. Wake County Board of Education, 292 N.C. 406, 233 S.E.2d 538 (1977). In arguing that the agency findings are not so supported, however, Humana dwells mostly on the perceived soundness of the hearing officer's recommended findings in its favor. While the hearing officer's recommendations were entitled to consideration and apparently received it, the responsibility for making the decision is that of the DHR. G.S. 131-177. And it is neither decisive nor persuasive that the hearing officer's findings may be supported by evidence, as Humana argues, because the agency's findings are similarly supported. Making deductions from the evidence before it was the prerogative as well as the responsibility of the DHR; and the deductions made, so our review of the whole record indicates, were both lawful and proper. Thus the decision is affirmed except for that part which would permit WCHS to determine how many of its 20 beds at Wake Medical Center will be transferred to the new western Wake facility, and that determination is reversed. Upon remand the respondent agency will determine the number of beds to be transferred from Wake Medical Center to the new western Wake facility as it should have done to start with.

Affirmed in part; reversed in part, and remanded.

ARNOLD and EAGLES, JJ., concur.