Recent CON decisions threatened by absence of public hearings

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  • A recent decision in a western North Carolina certificate-of-need legal dispute could affect dozens of other CON cases across the state.
  • An administrative law judge reversed regulators' decision to award MH Mission Hospital a CON for a new $14.7 million emergency department in Candler. The judge said regulators violated state law by failing to hold a public hearing.
  • Mission's new brief to the state Court of Appeals suggests the decision could affect 86 CON decisions made from 2020-22, when regulators held no public hearings during the COVID pandemic.
  • UNC Health asked to submit a friend-of-the-court brief in the case. UNC urged the Appeals Court to overturn the administrative judge's decision.

A recent decision in a legal dispute from western North Carolina could shake up multiple cases involving state certificates of need. The decision prompted one of the state’s largest health care providers to file a friend-of-the-court brief Monday.

The case is called Fletcher Hospital Inc. v. NC Department of Health and Human Services. It stems from state regulators’ 2022 decision to grant a CON to MH Mission Hospital to build a free-standing emergency department in Candler.

Fletcher Hospital, also known as AdventHealth Hendersonville, challenged the CON. In March, state Administrative Law Judge David Sutton reversed the state’s CON decision. Sutton cited the lack of a public hearing during the CON process.

A state law — NC Gen. Stat. § 131E-185(a1)(2) — calls on DHHS to “ensure that a public hearing is conducted at a place within the appropriate service area” in a CON case if an affected party requests a hearing or if the CON involves a project of at least $5 million. Mission’s new emergency department is estimated to cost more than $14.7 million.

Mission filed a brief Monday with the state Court of Appeals. It explains how Sutton’s ruling could impact other CON cases.

“It is undisputed that during the period from February of 2020 through September of 2022, the Agency did not hold public hearings with respect to any CON applications because of the COVID pandemic and out of concern for public safety,” Mission’s lawyers wrote. “During that time period, the Agency conducted eighty-six (86) CON application reviews which, pursuant to the provisions of N.C. Gen. Stat. § 131E-185(a)(2), would have required a public hearing because they were competitive reviews or involved projects costing more than five million dollars ($5,000,000.00).”

“Those eighty-six (86) reviews involved a total of one hundred and fifty-two (152) applicants and proposed projects,” the Mission brief continued. “The vast majority of those reviews resulted in at least one CON application being approved, including Mission’s. The projects involved ranged from new hospitals to the acquisition of major medical equipment such as fixed cath labs, MRIs, PET Scanners, linear accelerators, new diagnostic centers, new facilities such as hospices and home health agencies, new hospitals, and a wide range of other services and facilities.”

Affected providers included “not only Mission, but Pardee Hospital; UNC Hospitals (with multiple projects approved including a new hospital in Durham County and new diagnostic centers); Duke University Health System; Novant Health; Cone Health; Wake Forest Baptist Hospital; Atrium Health; and others.”

Mission reminded the court of public health conditions in April 2020, when state law called for a public hearing on the Candler emergency department CON. “North Carolina and the entire United States were under an ongoing federal and state declared public health emergency due to the COVID pandemic,” according to the brief. “While conditions related to COVID were generally improving at that time, the pandemic was far from over.”

The challenge to state regulators’ decision argued that the “failure to hold a public hearing regarding the Mission Application during the COVID pandemic was Agency error which substantially prejudiced” AdventHealth, according to Mission’s brief.

Sutton’s ruling “was based entirely on his conclusion that the Agency’s failure to hold a public hearing in connection with its review of the Mission … Application was a violation of N.C. Gen. Stat. § 131E-185(a)(2) that substantially prejudiced” AdventHealth’s rights.

Mission is not alone in urging the state Appeals Court to reverse the administrative law judge’s decision. Lawyers for UNC Health filed paperwork Monday seeking permission to file a friend-of-the-court brief.

“UNC submits this brief because of its strong interest in ensuring that a technicality like the one relied upon by the Administrative Law Judge in rendering the decision below, as well as other petitioners dissatisfied with an Agency decision, does not impede the expansion of healthcare services that would benefit North Carolinians,” according to motion from UNC Health. “As a frequent participant in the Certificate of Need process, UNC understands that although public hearings are part of the CON process, they rarely result in public interest or feedback on an application, and typically just offer health care providers a chance to tout their own application and/or critique their competitors.”

“During the COVID-19 pandemic, UNC (and every other CON applicant and interested party) participated in interim public hearing procedures established by the Agency without prejudice to their ability to offer the typical critiques provided to the Agency at a public hearing,” UNC Health argued. “Rather than addressing the MH Mission Hospital, LLP CON application on its merits, the decision by the ALJ below advances a theory that threatens to undo the important work of the Agency and unfairly punish applicants who were subject to the same interim public hearing procedures as all interested parties.”

UNC Health explained how the “theory” advanced by Sutton’s decision could affect its own projects. “This same theory has been advanced against UNC in a contested case hearing in which Duke University Health System, Inc. challenged the Agency’s approval of UNC’s application to expand its already-approved … new community hospital in Durham County, which is also pending appeal in this Court.”

“UNC offers the perspective of another frequent participant in the CON process that would have its growth hampered based on an alleged error that it had no part in causing,” the motion added.

UNC Health urged the Appeals Court to rule that “the public hearing provision should not preclude the issuance of a CON; in fact, whether it is directory … or mandatory, the result here should be issuance of the requested CON. The public hearing provision is merely directory because it does not provide for any consequence in the event it is not followed.”

UNC Health argued Sutton’s decision “runs roughshod” over a “well-established” burden AdventHealth faced to show that the CON decision involved both agency error and substantial prejudice.