By Carolina Journal Staff
- A split North Carolina Court of Appeals panel has blocked UNC Health’s plans for a new 40-bed hospital in Research Triangle Park.
- The majority in a 2-1 decision determined that the case should return to an administrative law judge to determine whether the absence of zoning for a hospital in RTP would kill UNC’s chances for winning a state-required certificate of need.
- In a separate case, a unanimous Appeals Court panel helped revive the prospects for Mission Health’s proposed emergency department in Arden. An administrative law judge had blocked Mission’s CON because state regulators had failed to hold a required public hearing.
The North Carolina Court of Appeals has created a new roadblock for UNC Health’s plans to build a 40-bed hospital in Research Triangle Park. In a separate ruling, the court has revived the possibility of a new Mission Health emergency department in Buncombe County.
The court released both decisions Tuesday morning in its latest cases involving certificate-of-need disputes. The CON is a state government document health care providers must secure before building or expanding facilities in North Carolina.
In the RTP case, the court split, 2-1, over whether an administrative law judge had ruled correctly in affirming UNC’s plans to expand into Durham County. Duke Health had challenged UNC’s plans. State regulators had chosen UNC over Duke to win a CON for 40 new beds in the Durham-Caswell county area.
Appellate Judges Hunter Murphy and Michael Stading upheld much of Administrative Law Judge Melissa Owens Lassiter’s decision favoring UNC Health. But Murphy and Stading agreed to send the case back to Lassiter to deal with one issue.
Current RTP zoning rules would prevent a new hospital. The Appeals Court majority questioned Lassiter’s treatment of that concern, including her consideration of an alternate hospital site not included in the original CON application.
“[M]uch of the ALJ’s reasoning was unsound insofar as it treated the presence of the zoning requirements and covenants as unproblematic and considered the alternative site in the determination of whether the CON should issue,” Murphy wrote.
“In particular, the ALJ should give due consideration to the possibility that a potential inability to change RTP’s applicable covenants could result in substantial cost being passed to patients,” he added. “While the ALJ appears to have been satisfied with the likelihood that both the zoning restrictions and applicable covenants could be amended as necessary to accommodate the proposed UNC facility given a recent history of amendments to permit the construction of a fire station and a school, the final decision makes no meaningful reference to the financial ramifications of a failure to amend either.”
Judge Jefferson Griffin agreed with Murphy and Stading in upholding the portions of Lassiter’s ruling favoring UNC Health. He dissented from the decision to send the case back to the ALJ.
“UNC provided drawings of its site plan and floor plan and explained how the construction was designed to be efficient for the provision of services based on ‘best practice methodologies’ while preventing unnecessary costs,” Griffin wrote. “UNC also explained that even though the project would be capital intensive, there was funding set aside to ensure the project could be completed without increasing costs.”
“Although UNC’s proposed site required rezoning, UNC anticipated having the property rezoned and indicated that it would work with Durham County and the Research Triangle Foundation to achieve the rezoning required,” Griffin added. “UNC also supplied a letter of support from the CEO of the Research Triangle Foundation. There was also testimony at the hearing indicating CON applications are almost never denied due to the fact that a site needs to be rezoned.”
In the Buncombe County case, Administrative Law Judge David Sutton issued a June 2023 decision rejecting a CON for Mission Health’s proposed emergency department in Arden. Sutton based the decision on the fact that state regulators held no public hearing during the CON application process as required by law.
Competitor health care providers had argued that the lack of a public hearing hurt them.
“Here, Advent and Pardee do not satisfy their burden to show substantial prejudice occurred,” Murphy wrote. “Setting aside the procedural harm done to Advent, Pardee, and the public when the Agency failed to hold a public hearing, the ALJ did not evaluate specific evidence on the record which would indicate whether or not any concrete harm came to Advent and Pardee that was not the result of generalized market competition. As we have repeatedly held, ‘mere competitive advantage [is] an insufficient basis upon which to argue prejudice.’”
Opponents of the new emergency department will have another chance to show harm from Mission’s plans.
“[J]ust as the absence of a hearing does not automatically constitute substantial prejudice, our caselaw does not categorically preclude increased competition from constituting substantial prejudice; rather, to constitute substantial prejudice, a market competitor appealing to the ALJ must make a specific argument as to how that increased competition concretely affects their provision of services,” Murphy wrote.
Judge Fred Gore joined Murphy’s opinion. Griffin concurred in the result of the case without signing on to Murphy’s opinion.
