State Appeals Court to tackle Duke, UNC battle over Durham County CON

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  • Duke Health and UNC Health are battling at the state Court of Appeals over state regulators' decision to allow a new 40-bed UNC Health hospital in Durham County.
  • The two major health care providers are competing for a certificate of need. It's a government permission slip providers are required to secure before adding 40 new hospital beds and two operating rooms in Durham.
  • An administrative law judge upheld regulators' decision to award the CON to UNC Health.

One of the latest legal battles over North Carolina’s certificate-of-need regime involves a fight in Durham County between two of the region’s major health care providers. At stake are 40 new hospital beds and two operating rooms.

State regulators and lawyers representing UNC Health filed separate briefs this week with the state Court of Appeals. Both briefs defended the Department of Health and Human Services’ September 2021 decision to award a certificate of need to UNC Health for a new 40-bed hospital with two operating rooms in southern Durham County.

The CON is a government permission slip health care providers must secure before moving forward with new hospital beds, facilities, and major pieces of medical equipment.

The state’s decision favoring UNC Health came at the same time regulators rejected competing proposals to add 40 beds and two operating rooms to Duke Health’s existing campus at Duke University Hospital.

Duke Health challenged the decision. An administrative law judge upheld the state’s ruling.

“After eleven days of testimony and evidence, the Administrative Law Judge (“ALJ”) issued a 110-page Final Decision with 506 findings of fact and 140 conclusions of law fully upholding Respondent-Appellee North Carolina Department of Health and Human Services, Division of Health Service Regulation, Healthcare Planning and Certificate of Need Section’s (the “Agency”) Decision,” wrote UNC Health’s lawyers. “Petitioner-Appellant Duke University Health System (“Duke”) cannot — and does not — take issue with the law which was applied thoroughly and correctly below. Instead, Duke seeks reversal of the ALJ’s Final Decision based on circuitous policy and equity arguments — the same arguments that the lower Tribunal already heard and rejected.”

The UNC Health brief noted Duke Health’s current dominance of health care supply in Durham. “Duke does not seek error correction, but rather seeks to reforge settled legal analysis to thwart competition through the certificate of need (“CON”) process,” according to the brief. “Duke currently controls 98 percent of all acute care beds (“beds”) and 87 percent of all operating rooms (“ORs”) in the Durham/Caswell service area, as defined by the annual State Medical Facilities Plan.”

UNC’s winning proposal would be “the first new hospital to be developed in Durham County in over 45 years,” according to the brief.

The state’s brief emphasized that UNC Health’s proposal was the “more effective alternative” and “comparatively superior” to the Duke Health plan. That was based on the proposed location and the fact that UNC Health would serve as a new provider in Durham.

“Here, all of the existing and approved acute care beds in Durham County are allocated between three hospitals that are located within a five-mile radius of one another in central Durham County,” state lawyers wrote. “UNC proposed to develop its new hospital in southern Durham County, where there are currently no existing or approved acute care beds. As such, it is axiomatic that UNC’s proposal would expand geographic access to acute care beds in Durham County by developing the beds in an area where no acute care beds currently exist.”

Duke Health filed its opening brief in the case in June. It challenged both the regulators’ decision and the administrative law judge’s ruling.

“The evidence of record demonstrates that the Agency’s decision in this review was inconsistent with both the CON law and the Agency’s own past decisions,” Duke lawyers argued. “The Agency disregarded both the statutory and regulatory framework in which it is required to operate. Duke submits that, under the legally applicable standard, this Court should hold that the OAH Final Decision in this case was not supported by the law and that the Agency erred as a matter of law and its decision was arbitrary and capricious.”

Lawyers for Duke Health will have a chance to respond to the latest arguments from state regulators and UNC Health before a three-judge Appeals Court panel considers the case.