08.03.2010 Court of Appeals Flags Vulnerability in Agency Review of N.C. CON Applications
The North Carolina Court of Appeals issued a decision in July suggesting that the Certificate of Need agency might not have adequately considered all of the required CON review criteria. The decision was in the case Parkway Urology, P.A. d/b/a Cary Urology, P.A. v. N.C. Dept. of Health and Human Services, Div. of Health Svc. Regulation, Certificate of Need Section, et al., N.C. Court of Appeals Case No. COA09-1490 (July 20, 2010), which affirmed the approval of a Certificate of Need (“CON”) application by Cancer Centers of North Carolina (“CCNC”) for a new linear accelerator in Wake County. The approval was appealed by several providers, including Rex Hospital and Cary Urology.

State agency decisions approving or denying North Carolina CON applications must be based on written findings explaining the applicant’s conformity or nonconformity with the required statutory review criteria and any applicable CON rules.1 Under common agency practice, a finding of conformity or nonconformity with one statutory criterion or rule is often cited as a basis for a similar finding under another criterion or rule. The opinion by the Court of Appeals suggested that this practice might result in inadequate consideration of all of the required criteria.

One petitioner, Rex Hospital, argued that the CON Section failed to independently review the CCNC application’s conformity with Criterion 6.2 The agency findings included a statement that, if the application conformed with Criteria 1 and 3, the agency would also find that it conformed with Criterion 6, which requires that the proposed project not unnecessarily duplicate existing services. The Court of Appeals recognized that “[s]tanding alone, this finding by NCDHHS is problematic. Each criterion contained in N.C. Gen. Stat. § 131E-183(a) must be separately analyzed by NCDHHS.” However, the court went on to determine that other findings by the agency showed that the agency did in fact separately consider the issue of unnecessary duplication of existing services.

Another petitioner, Cary Urology, similarly argued that the CON Section failed to separately apply Criterion 18a (which requires that the applicant demonstrate the effect of the proposed project on competition in the service area). The Court again acknowledged that the language of the agency’s findings was “unfortunate,” implicitly recognizing that such language suggested no independent analysis of Criterion 18(a). But the Court determined that the final agency decision “contains additional findings that indicate that NCDHHS did in actuality separately consider whether CCNC’s new LINAC would enhance competition under Criterion 18a.”

Although the agency decision was approved despite the language discussed in the opinion, the discussion in the CCNC opinion suggests that future CON agency decisions might be reversed if the associated findings do not reflect a specific review of each of the required criteria and standards.

1 N.C. Gen. Stat. § 131E-186. The review criteria are set forth in N.C. Gen. Stat. § 131E-183(a), and the CON rules set forth in 10A NCAC 14C.0100 et seq.
2 N.C. Gen. Stat. § 131E-183(a)(6).
Williams Mullen Health Care Certificate of Need Law Alert. Copyright 2010. This alert is provided as an educational service and is not meant to be and should not be construed as legal advice. Readers with particular needs on specific issues should retain the services of competent counsel. Editorial inquiries should be directed to Marcus C. Hewitt at  or 919.981.4308.