Appeals Court upholds CON ruling, notes law’s ‘loophole’

The N.C. Court of Appeals has rejected an attempt to overturn a certificate-of-need decision in Wake County. Appellate judges declined to overstep their authority to try to close a CON “loophole.”

The unanimous decision in Wake Radiology Diagnostic Imaging v. N.C. Department of Health and Human Services means a loss for Wake Radiology. A competitor, the Bone and Joint Surgery Clinic, can keep a state government certificate allowing it to operate a magnetic resonance imaging, or MRI, scanner.

Wake Radiology had gone to court to block Bone and Joint’s CON. Wake Radiology had argued that Bone and Joint had secured its certificate without having to go through the standard CON process.

“The argument, in essence, is that the agency’s actions in this case would ‘interpret out of existence’ a central feature of the CON laws: the notion that, before a new piece of medical equipment (say, a whole-body MRI scanner) is purchased in our State, there must be a need determination by State regulators and an opportunity for all the interested medical providers to apply for the right to acquire it,” Judge Richard Dietz wrote for the court. “Those medical providers get to fight it out in a complicated regulatory process to see who comes out on top and gets the State’s permission to acquire the machine.”

“So, the argument goes, applying the plain language of [the law] to this case creates a loophole in the usual process,” Dietz added. “Bone and Joint got a new, whole-body MRI scanner (which, to be fair, it already possessed, but with restrictions on use) without affording Wake Radiology and other providers who may want a new MRI machine the chance to compete for the right to acquire it instead.”

“There is a fatal flaw in this policy argument: The role of the courts is to interpret statutes as they are written,” Dietz wrote. “We cannot reject what is written to avoid a loophole that we, or the parties in a lawsuit, believe might undermine the legislature’s policy goals.”

“This is particularly true for a complicated regulatory regime like our
State’s certificate-of-need laws — a regime that has spawned a legion of lawyers and other experts who learn to navigate the intricate language chosen by our General Assembly,” he added.

“The role of the judicial branch is not to speculate about the consequences of the language the legislature chose; we interpret that language according to its plain meaning and ‘if the result is unintended, the legislature will clarify the statute.’”

Judges Allegra Collins and Fred Gore signed on to the opinion from Dietz, a likely Republican candidate for state Supreme Court in 2022.

The decision arrives roughly two months after Dietz himself used the word “loophole” during the case’s oral arguments.

“I would describe it, in looking at what happened here, as sort of like a loophole,” Dietz said on Aug. 10.

“There’s a loophole in this process that would potentially allow someone to do exactly what happened here: Buy some piece of equipment, or maybe it’s an entire surgical suite that has all kinds of functionality to be used as a replacement for a more limited … machine or surgical equipment in some certificate of need, but say ‘We’re only going to use it for that more limited purpose,’” Dietz added. “Then, come in later and say, under this provision now, as long as it’s within one year of the [demonstration] project ending, ‘We’re going to ask for a change to allow us to use the expanded functionality.’”

During the same oral arguments, Dietz had questioned the basic premise of the CON law.

“I think part of the challenge we have is that even the fundamentals of the certificate-of-need regime are somewhat counterintuitive,” Dietz said. “If you were explaining to someone — we’re going to limit competition in order to reduce prices, they would say, ‘What? You just said that backward.’”

Yet Dietz noted in his opinion that judges’ jobs do not include fixing loopholes.

“That is not a concern for this Court,” he wrote in today’s opinion. “We interpret the law as it is written. If that interpretation results in an unintended loophole, it is the legislature’s role to address it.”

Wake Radiology could appeal the ruling to the N.C. Supreme Court. Since the Appeals Court decision was unanimous, the high court does not need to take the case.