Top NC court urged to address ‘contradictory,’ ‘confusing’ CON rulings

Lawyers for Mission Health are asking the North Carolina Supreme Court to address “contradictory” and “confusing” rulings involving the state’s certificate-of-need law. A petition Wednesday urges the high court to take up a CON dispute over 67 new hospital beds in western North Carolina.

Healthcare providers need a CON from state government before adding any new hospital beds in North Carolina.

The specific legal battle involves state regulators’ decision to award a CON to AdventHealth for a new 67-bed hospital to serve patients in Buncombe, Graham, Madison, and Yancey counties. Advent beat out Asheville’s Mission Hospital, which had proposed adding 67 beds at its existing site.

Mission challenged the decision. Based on court precedents involving CON disputes, Mission argued that the North Carolina Department of Health and Human Services committed “agency error.” That error led to “substantial prejudice” against Mission, according to its complaint.

An administrative law judge upheld the state’s CON ruling. A unanimous three-judge state Court of Appeals panel affirmed the administrative judge on June 18.

Now Mission is asking the Supreme Court to take the case. It has filed a motion for a temporary stay, along with a petition to block the lower court’s ruling.

“This petition raises two fundamental questions of administrative law,” Mission’s lawyers wrote.

“The first question asks this Court to decide what ‘substantial prejudice’ means under the Administrative Procedure Act (APA),” the petition explained. “Every petitioner challenging agency action under the APA must show not only that the agency erred, but also that the petitioner was substantially prejudiced. The Court of Appeals has addressed this substantial-prejudice requirement many times, but it has consistently refused to decide what is required under the standard. The partial answers that the Court of Appeals has given are contradictory and confusing.”

Mission’s petition cited Supreme Court Justice Richard Dietz’s observation in September 2024 that the substantial prejudice requirement “is clearly causing a lot of confusion in the lower courts.”

“The current state of the law is so incomprehensible that the Administrative Law Judge assigned to this case included a plea for clarification in his final decision. But the Court of Appeals ignored that plea,” Mission’s lawyers wrote.

“By deciding cases on a murky substantial-prejudice requirement, agencies can avoid judicial scrutiny of their errors,” the court filing continued. “That is harmful to the regulated public and the jurisprudence of this state. Because the Court of Appeals refuses to answer the question, the only remedy is discretionary review by this Court.”

The second question for the Supreme Court to address “is related to a question that three members of this Court recently flagged as needing a definitive answer,” Mission’s lawyers wrote. It cited a 2022 dissent in a case called Virginia Electric Justice Tamara Barringer, joined by Chief Justice Paul Newby and Justice Phil Berger Jr.

“Agencies have some discretion to change their policies over time. But when they do so, must they acknowledge the change and give a good reason for it? In Virginia Electric, the majority implied that reason-giving was necessary, but it gave no framework for resolving the issue, to the disappointment of the dissenting justices,” Mission’s lawyers argued.

“Since that time — just a few months ago — the U.S. Supreme Court unanimously adopted a framework to address this recurring question in administrative law,” according to Mission’s petition. “This case is an appropriate vehicle for addressing that question in North Carolina.”

In the current dispute, Mission argues that state regulators dropped a requirement, “existing as long as anyone could remember,” that any new hospital awarded a CON must have a licensed general operating room. The AdventHealth proposal did not meet that requirement, Mission argued.

“The Department of Health and Human Services changed one of its longstanding policies to the detriment of Mission,” the Supreme Court petition explained. “Medical providers like Mission had relied on this policy. But the Department gave no contemporaneous explanation for the change.”

“Mission respectfully asks this Court to decide whether the Department violated the APA when it failed to explain its change in position, and then decide whether this error substantially prejudiced Mission,” the hospital’s lawyers wrote.

There is no deadline for the state Supreme Court to decide whether to take the case.

The post Top NC court urged to address ‘contradictory,’ ‘confusing’ CON rulings first appeared on Carolina Journal.

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