UNC Health asks to take part in Appeals Court case on CON public hearings

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  • UNC Health wants to take part in oral arguments at the state Court of Appeals in case with no direct UNC involvement.
  • The case focuses on a certificate-of-need dispute in western North Carolina. A judge struck down a CON because state regulators held no public hearing.
  • UNC Health's lawyers argue that they can add useful information about the public hearing requirement in state law.

Lawyers for the UNC Health Care System hope to take part in oral arguments later this month in a certificate-of-need dispute at the state Appeals Court. The dispute does not involve any UNC Health facilities or equipment.

Oral arguments are scheduled Feb. 20 in the case Fletcher Hospital Inc. v. NC Department of Health and Human Services.

Both health care providers directly involved in the CON fight oppose UNC Health’s participation, according to a court filing Friday. Yet the state department that oversees CON is willing to give up five minutes of its argument time to UNC lawyers.

UNC Health says its portion of the oral argument would support neither disputing health care provider.

UNC Health’s interest in the case stems from its potential impact on other CON decisions state regulators have made since the COVID-19 pandemic.

The case focuses on an administrative law judge’s March 2023 decision to strike down a CON. The judge cited the absence of a public hearing during the CON process.

Court filings suggest that state regulators held no public hearings in CON cases between February 2020 and September 2022. The state conducted 86 reviews involving 152 applicants during that time period, Affected projects “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.”

“UNC Health’s participation in oral argument would aid this Court’s decision-making process on the issue of whether the public hearing provision contained in N.C.G.S. § 131E-185(a1)(2) is mandatory or directory,” according to the private lawyers representing UNC Health.

“UNC Health is more issue-focused than counsel to one of the parties, who are seeking a specific resolution of this case,” the court filing added.

The current legal dispute 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 2023, 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 an Appeals Court brief in October. It explained 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.

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.

Lawyers for UNC Health also filed paperwork in October indicating their interest in the case.

“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.