North Carolina restricts medical infrastructure and equipment purchases through a certificate-of-need system. In a ruling Sept. 19, the state’s second-highest court addressed a legal challenge to a proposed increase in kidney dialysis capacity based upon admittedly faulty data.
The N.C. Court of Appeals held that the means to address such cases is through a petition to the governor to change the state’s health care plan, and not a lawsuit against the state agency responsible.
Bio-Medical Applications of North Carolina is the sole provider of kidney dialysis services in Wake County. Dialysis stations are covered by the state’s certificate-of-need (CON) regulations.
On July 1, 2004, BMA received the July 2004 Semiannual Dialysis Report from the Medical Facilities Planning Section of the Division of Facility Services, which is, in turn, part of the Department of Health & Human Services. The Dialysis Report is part of the State Medical Facilities Plan. The report found that there was a need for 10 additional dialysis stations in Wake County, and invited health organizations to apply for the resulting certificate of need.
BMA soon discovered an error in the data that the Kidney Council had supplied to the planning section. There was actually one fewer dialysis patient (51 instead of 52) at BMA’s Fuquay-Varina facility than in the Kidney Council’s data. One less patient would keep kidney dialysis usage in the county below the threshold that would trigger the certificate of need for the additional stations.
The Kidney Council informed the planning section of the error on July 16. BMA requested that the planning section amend the Semiannual Dialysis Report to reflect the correct number of patients. The agency refused to do so.
BMA then sought judicial review of the planning section’s decision, seeking to prevent issuance of the certificate for additional dialysis stations. Superior Court Judge Henry W. Hight, Jr., however, dismissed the case, finding that the doctrine of sovereign immunity preclude BMA’s lawsuit. The state, he found, had not consented to be sued in this manner.
Upon appeal, the N.C. Court of Appeals upheld Hight’s decision to dismiss the ruling.
“As the State has not consented to suit in this case and there is no statutory waiver of sovereign immunity under this set of circumstances, we hold that the doctrine of sovereign immunity applies in this case,” Judge Barbara Jackson wrote for a majority of the three-judge panel of the Court of Appeals.
She noted that the Semiannual Dialysis Report is not a rule but merely a portion of the State Medical Facilities Plan. The power to alter the plan rests with the governor, not the planning agency.
“…The Governor has the authority to amend the SMFP, and in the instant case, there is no evidence indicating that such a request was made to or denied by the Governor,” she wrote.
“As the SDR is a part of the SMFP, it is only logical that the Governor is the proper party with the authority to amend the SDR. BMA sought to have the Planning Section amend the report, when in actuality, the Governor was the proper party to whom the proposed amendment should have been addressed.”
“In the case sub judice, there is no indication in the record, nor argument from BMA, that BMA is precluded from applying for a CON for the additional ten dialysis stations identified by the SDR. In fact, BMA made such an application for the additional stations. Accordingly, BMA is not being prevented from benefiting from ‘the fruits and advantages of [its] own enterprise, industry, skill and credit,’ but is merely being required to compete for such benefit. As BMA has no constitutional right to be protected from lawful competition, it is unable to overcome defendant’s sovereign immunity on constitutional grounds.”
Judge John Tyson dissented from the majority holding.
“The practical effect of the majority’s decision is to remove from judicial review and remedy a state administrative agency’s decision under the guise of sovereign immunity,” he wrote.
“The North Carolina General Assembly expressly waived sovereign immunity by enacting N.C. Gen. Stat. § 150B-43 and the Declaratory Judgment Act, N.C. Gen. Stat. § 1-254. A state agency cannot assert sovereign immunity as a defense to claims by an aggrieved party adversely affected by that agency’s action or inaction.”
Tyson noted that state case law distinguishes between discretionary duties and ministerial duties. Sovereign immunity generally does not apply to ministerial duties. Tyson found that revising the plan was ministerial, not discretionary.
“Under the plain language of the Administrative Code, defendants were ministerially required to continuously revise need determinations,” he wrote.
“The execution of this specific ministerial duty arose from fixed and admitted facts and regulations pursuant the Administrative Code.”
Tyson also found that previous N.C. Supreme Court decisions did not envision the governor as the sole means to address errors of this sort.
N.C. Court of Appeal rulings are controlling interpretations of state law unless overruled by the N.C. Supreme Court. Because of Tyson’s dissent, the high court must hear the case if BMA asks it to.
The case is Bio-Medical Applications of N.C. v. N.C. Dep’t of Health & Human Services, (05-294).
Michael Lowrey is an associate editor of Carolina Journal.