{ "id": 4157245, "name": "MISSION HOSPITALS, INC., Petitioner, and NORTH CAROLINA RADIATION THERAPY MANAGEMENT SERVICES, INC. d/b/a 21st CENTURY ONCOLOGY, Petitioner-Intervenor v. N.C. DEPARTMENT OF HEALTH AND HUMAN SERVICES, DIVISION OF FACILITY SERVICES, CERTIFICATE OF NEED SECTION, Respondent, and ASHEVILLE HEMATOLOGY AND ONCOLOGY ASSOCIATES P.A., Respondent-Intervenor", "name_abbreviation": "Mission Hospitals, Inc. v. N.C. Department of Health & Human Services", "decision_date": "2008-03-18", "docket_number": "No. COA06-1642", "first_page": "263", "last_page": "276", "citations": [ { "type": "official", "cite": "189 N.C. App. 263" } ], "court": { "name_abbreviation": "N.C. Ct. App.", "id": 14983, "name": "North Carolina Court of Appeals" }, "jurisdiction": { "id": 5, "name_long": "North Carolina", "name": "N.C." }, "cites_to": [ { "cite": "615 S.E.2d 81", "category": "reporters:state_regional", "reporter": "S.E.2d", "case_ids": [ 12633410 ], "weight": 4, "year": 2005, "pin_cites": [ { "page": "83-84", "parenthetical": "detailing the interplay of the CON statutes with the 1999 Administrative Procedure Act" }, { "page": "83-84" } ], "opinion_index": 0, "case_paths": [ "/se2d/615/0081-01" ] }, { "cite": "398 S.E.2d 466", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 3, "year": 1990, "pin_cites": [ { "page": "470", "parenthetical": "concluding that applicable time limits established in the CON law are jurisdictional in nature" } ], "opinion_index": 0 }, { "cite": "327 N.C. 573", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 2493346 ], "year": 1990, "pin_cites": [ { "page": "579", "parenthetical": "concluding that applicable time limits established in the CON law are jurisdictional in nature" } ], "opinion_index": 0, "case_paths": [ "/nc/327/0573-01" ] }, { "cite": "599 S.E.2d 888", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 2, "year": 2004, "pin_cites": [ { "page": "894" } ], "opinion_index": 0 }, { "cite": "358 N.C. 649", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 2987357 ], "year": 2004, "pin_cites": [ { "page": "658-59" } ], "opinion_index": 0, "case_paths": [ "/nc/358/0649-01" ] }, { "cite": "171 N.C. App. 734", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8439431 ], "weight": 2, "year": 2005, "pin_cites": [ { "page": "737-39", "parenthetical": "detailing the interplay of the CON statutes with the 1999 Administrative Procedure Act" }, { "page": "737-39" } ], "opinion_index": 0, "case_paths": [ "/nc-app/171/0734-01" ] } ], "analysis": { "cardinality": 996, "char_count": 29162, "ocr_confidence": 0.751, "pagerank": { "raw": 6.848989183728895e-08, "percentile": 0.41756816710163414 }, "sha256": "12446dd1babe86c8324bfd6a58aa5d726489925ec9e4edc0296caa79b66e621c", "simhash": "1:49aa0145dbbb2119", "word_count": 4558 }, "last_updated": "2023-07-14T16:47:52.494477+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "Judges BRYANT and GEER concur." ], "parties": [ "MISSION HOSPITALS, INC., Petitioner, and NORTH CAROLINA RADIATION THERAPY MANAGEMENT SERVICES, INC. d/b/a 21st CENTURY ONCOLOGY, Petitioner-Intervenor v. N.C. DEPARTMENT OF HEALTH AND HUMAN SERVICES, DIVISION OF FACILITY SERVICES, CERTIFICATE OF NEED SECTION, Respondent, and ASHEVILLE HEMATOLOGY AND ONCOLOGY ASSOCIATES P.A., Respondent-Intervenor" ], "opinions": [ { "text": "STEELMAN, Judge.\nThe North Carolina Department of Health and Human Services, Division of Facility Services erred by engaging in ex parte communications with one party without notice to the other parties or affording an opportunity to all parties to be heard. Because the ex parte communications were prejudicial to appellant\u2019s substantial right to a fair and impartial process, the Final Agency Decision is vacated. Upon remand, the Agency shall address all unadopted findings of the Administrative Law Judge (\u201cALJ\u201d) in its Final Agency Decision as required by N.C. Gen. Stat. \u00a7 150B-34(c).\nI. Factual and Procedural History\nOn 1 February 2005, Asheville Hematology (\u201cAHO\u201d or appellant), an oncology treatment center, sought a \u201cno-review\u201d determination from the Certificate of Need (\u201cCON\u201d) Section of the North Carolina Department of Health and Human Services, Division of Facility Services (\u201cAgency\u201d), for a proposed relocation of its offices and acquisition of medical equipment that would allow AHO to provide radiation therapy. AHO presented four proposals: acquisition of a linear accelerator (\u201cLINAC\u201d), acquisition of a CT scanner, acquisition of treatment planning equipment, and relocation of their oncology treatment center. AHO sought a ruling that its proposals \u201cdo not require certificate of need review and are not new institutional health services, within the meaning of the CON law.\u201d\nIn determining the allocable costs for the CT scanner and LINAC projects, AHO applied upfitting costs to accommodate the CT scanner and LINAC and did not allocate general office construction costs, which were instead attributed to the base costs of the developer. AHO clearly specified in its letter which costs were attributed to each project and which costs were attributed to the developer\u2019s base costs. The submitted costs for the four projects, and associated thresholds against which AHO analyzed each of the proposals as a new institutional health service under the statute, were as follows:\nProject AHO\u2019s Statutory Threshold Cost Projection for \u201cNo Review\u201d\nCT Scanner $ 488,547 $ 500,000\nLINAC $ 746,416 $ 750,000\nTreatment Planning $ 381,135 $ 750,000\nRelocation $ 1,985,278 $ 2,000,000\nOn 2 August 2005, the CON Section issued four \u201cno-review\u201d letters, reviewing each proposal separately and confirming that none required a Certificate of Need. Each letter stated that \u201cthis determination is binding only for the facts represented by you.\u201d Shortly thereafter, the General Assembly amended N.C. Gen. Stat. \u00a7 131E~176(16) to require a CON for the acquisition of linear accelerators, regardless of cost, as a new institutional health service. (2005 Sess. Laws ch. 325, \u00a7 1). The relevant portion of the amendment became effective on 26 August 2005.\nOn 1 September 2005, Mission Hospitals, Inc. (\u201cMission\u201d or \u201cpetitioner\u201d), a nonprofit hospital in Asheville, North Carolina, filed a petition for a contested case hearing in the Office of Administrative Hearings (\u201cOAH\u201d), challenging each of the No-Review Determinations. North Carolina Radiation Therapy Management Services, Inc. d/b/a 21st Century Oncology (\u201c21st Century\u201d and, with Mission, \u201cpetitioners\u201d), an oncology treatment center in Asheville, North Carolina, intervened in the proceeding, also contesting the No-Review Determinations. AHO intervened in support of the CON Section\u2019s No-Review Determinations.\nOn 26 May 2006, the ALJ entered a 65-page Recommended Decision affirming the No-Review Determinations. The ALJ agreed with the CON Section that the relocation of the existing oncology treatment center and the acquisition of equipment as proposed by AHO and addressed in the August 2005 No-Review determinations did not require Certificates of Need. The ALJ recommended that no CON was necessary because neither the relocation nor the acquisition projects \u201cconstitute[d] a \u2018new institutional health service\u2019 as defined by N.C. Gen. Stat. \u00a7 I31E-176 at the time that [AHO] acquired vested rights to develop these services.\u201d\nOAH filed the official record with the Agency on 8 June 2006, requiring the Agency to make its final decision by 7 July 2006. See N.C. Gen. Stat. \u00a7 131E-188(a)(5) (2005). On 27 June 2006, the Director of the Agency\u2019s Division of Facility Services (\u201cDirector\u201d) granted the Attorney General\u2019s request that the Agency extend the filing deadline for exceptions and written arguments, to 17 July 2006, and the decision deadline, to 7 August 2006.\nPetitioners filed joint exceptions to the AU\u2019s Recommended Decision. Petitioners also filed written argument and a 64-page proposed Final Agency Decision on 17 July 2006 (\u201coriginal proposed FAD\u201d). The Director heard argument from all parties on 24 July 2006. The key issue was AHO\u2019s allocation methodology for construction costs under a proposed lease arrangement.\nNear the conclusion of the 24 July 2006 hearing, the Director stated:\nMR. FITZGERALD: Okay. (INCOMPREHENSIBLE FOR 1 SECOND). Let\u2019s see, I don\u2019t, it is possible that after I review some of this material, I might schedule another conference call (INCOMPREHENSIBLE FOR 2 SECONDS) a lot of time before the decision (INCOMPREHENSIBLE FOR 1 SECOND) sooner rather than later.\nThere was no statement by the Director to indicate that he had reached any decision at the conclusion of the 24 July 2006 hearing.\nThere is nothing in the 3,088-page record in this matter as to what may have transpired between Monday, 24 July 2006, and Friday, 4 August 2006, three days prior to the Agency\u2019s deadline for issuance of the Final Agency Decision.\nOn Friday morning, 4 August 2006, counsel for petitioner e-mailed a 73-page proposed Final Agency Decision to the Director, with a copy to all parties. The e-mail stated \u201cPursuant to your instructions, attached please find a revised decision.\u201d The record, however, is devoid of any communication from the Director which may have triggered this submission. The record falls silent, until Sunday afternoon, 6 August 2006.\nOn Sunday, the Director e-mailed petitioner\u2019s counsel, asking whether counsel had a \u201ctable\u201d of actual costs. Petitioner\u2019s counsel was the sole recipient of this e-mail.\nOn Monday morning, 7 August 2006, petitioner\u2019s counsel responded with two electronic documents, stating in a cover e-mail: \u201c[Attached] is the material that we understand you have requested.\u201d One attachment, AHO\u2019s exhibit from the contested case hearing, showed totals for each project under the statutory thresholds. The other attachment contained a modified page from the AHO exhibit which showed totals that exceeded the statutory thresholds for the LINAC, the CT scanner, and the oncology treatment center. The e-mail and the two attached documents were copied to all parties. Within ten minutes, the Director again e-mailed petitioner\u2019s counsel, again without copying any other party. An hour later, petitioner\u2019s counsel sent a modified version of AHO\u2019s exhibit with footnotes and calculations, accompanied by a further explanation.\nOn Monday, 7 August 2006, the Agency entered a Final Agency Decision reversing the Recommended Decision of the ALJ, rejecting the ALJ\u2019s conclusion that AHO had vested rights, classifying the previously-described relocation as a \u201cproposed expansion,\u201d and ruling that AHO\u2019s proposed expansion, acquisition of a LINAC, and acquisition of the CT scanner each required a CON because the costs as computed in the Final Agency Decision exceeded the statutory thresholds.\nThe Final Agency Decision vacated and stayed all four No-Review Determinations and included a cease and desist order that stated, in relevant part:\n. . . Ashville [sic] Hematology and U.S. Oncology must immediately cease and desist the installation, use of, operation of the linear accelerator, and/or billing for services provided on the linear accelerator;\n. . . Ashville [sic] Hematology and U.S. Oncology must immediately cease and desist the installation, use of, operation of the CT scanner/simulator, and/or billing for services provided on the CT scanner/simulator;\n. . . Asheville Hematology and U.S. Oncology must immediately cease and desist the use of, operation of, or billing for any facility services related to radiation therapy, including but not limited to linear accelerator services, CT simulator services and treatment planning services[.]\nAHO appeals.\nII. Standard of Review\nThis matter is before us pursuant to N.C. Gen. Stat. \u00a7 131E-188 (2005), which affords appellant an appeal to this Court for review of the Final Agency Decision entered 7 August 2006. Since the 2001 amendments to N.C.G.S. \u00a7 150B-34(c) of the North Carolina Administrative Procedure Act, the scope of review of a final agency decision arising under the CON statute continues to be governed by the 1999 Administrative Procedure Act rather than the amended provisions of N.C. Gen. Stat. \u00a7 150B-51. See Total Renal Care of N.C., LLC v. N.C. Dep\u2019t of Health & Human Servs., 171 N.C. App. 734, 737-39, 615 S.E.2d 81, 83-84 (2005) (detailing the interplay of the CON statutes with the 1999 Administrative Procedure Act).\nWhile the scope of review of an Agency decision involving a \u201cno review\u201d determination for a certificate of need is governed by statute, the substantive nature of each assignment of error dictates the appropriate standard of review. N.C. Dep\u2019t of Env\u2019t & Natural Res. v. Carroll, 358 N.C. 649, 658-59, 599 S.E.2d 888, 894 (2004). Errors of law are reviewed de novo. Id.\nIII. Analysis\nA. Ek narte Communications\nIn its first argument, appellant contends that the Agency erred in engaging in ex parte communications with petitioner\u2019s counsel prior to issuing the Final Agency Decision, and, because the violation compromised its due process rights to a fair and impartial hearing, the Final Agency Decision must be reversed. We agree.\nThe Final Agency Decision was entered on 7 August 2006, the statutory deadline. See N.C. Gen. Stat. \u00a7 131E-188(a)(5). Absent a decision that did not adopt the AU\u2019s recommended decision, the ALJ\u2019s recommendation could become de facto effective thereafter. See HCA Crossroads Residential Ctrs. v. N.C. Dep\u2019t of Human Res., 327 N.C. 573, 579, 398 S.E.2d 466, 470 (1990) (concluding that applicable time limits established in the CON law are jurisdictional in nature).\n(1)Statutory Prohibition on Ex Parte Communications\nN.C. Gen. Stat. \u00a7 150B-35 states:\nUnless required for disposition of an ex parte matter authorized by law, neither the administrative law judge assigned to a contested case nor a member or employee of the agency making a final decision in the case may communicate, directly or indirectly, in connection with any issue of fact, or question of law, with any person or party or his representative, except on notice and opportunity for all parties to participate.\nN.C. Gen. Stat. \u00a7 150B-135 (2005).\n(2)The Director\u2019s E-mails\nOn Sunday, 6 August 2006, before the Director had announced his decision, the Director e-mailed petitioner\u2019s counsel:\nDo you have a table of what the actual costs of the development of this project was [sic] using the cost of the equipment, the cost of the construction associated with the space occupied by the oncology treatment center, and the upfit required to accomodate [sic] the equipment compared to the threshold amounts for the various components? Incidently [sic], if the cost of the space is included in the total there is no reason to include the HVAC cost as it would already be part of the total. Bob\nNo other party was copied on this e-mail.\nOn Monday morning, 7 August 2006, the Director again e-mailed petitioner\u2019s counsel:\nIt appears there must be at least two pages to the Word Document labeled Mission-Chart.-1 only received the last page with your e-mail.\nAgain, no other party was copied on the e-mail.\n(3)\u00a7 150B-35 and the Director\u2019s Conduct\nUnder the broad language of N.C. Gen. Stat. \u00a7 150B-35, no \u201cmember or employee of the agency making a final decision in the case may communicate, directly or indirectly, in connection with any issue of fact, or question of law, with any person or party or his representative, except on notice and opportunity for all parties to participate.\u201d Id. (2005).\nAt a time when no decision had been made on the record, the Director corresponded on at least two occasions with one party\u2019s counsel without notice to the other parties or affording an opportunity for other parties to participate. In response, petitioner\u2019s counsel e-mailed documents that were not before the Agency at the 24 July 2006 hearing. Petitioner\u2019s counsel, unlike the Director, copied all parties on the e-mail communications. Nonetheless, these actions afforded appellant no opportunity to participate.\nNeither petitioners nor the Agency suggest that the ex parte communications were \u201crequired for disposition of an ex parte matter authorized by law,\u201d which is the sole exception to the prohibition against ex parte communications under the statute. N.C. Gen. Stat. \u00a7 150B-35. Consequently, the communications are subject to the statute if they were made \u201cin connection with any issue of fact or question of law.\u201d Id.\nfa) Content of the Communications\nOn 17 July 2006, petitioner filed a 64-page proposed Final Agency Decision, containing 107 findings of fact and 47 conclusions of law. On Friday, 4 August 2006, with a cover stating \u201cPursuant to your instructions, attached please find a revised decision[,]\u201d petitioner e-mailed a 73-page document containing 145 findings of fact and 53 conclusions of law. Two days later, following the Director\u2019s ex parte inquiry regarding a table of \u201cactual costs\u201d and a second ex parte e-mail, petitioner made modifications to one of AHO\u2019s exhibits and submitted the revised exhibit to the Director.\nThe pivotal issue before the Agency was whether appellant\u2019s costs for each of four projects was below or above the applicable statutory thresholds. If the costs of any particular project were above the statutory threshold, a CON would be required; if below, the project would remain exempt from CON requirements. When ex parte communications involve an exhibit demonstrating totals for each project based upon costs below the statutory thresholds that is modified to reflect costs above the statutory thresholds, on the basis of statutorily-governed cost allocation methodologies, we hold that those communications involve both \u201can issue of fact\u201d and a \u201cquestion of law\u201d before the Agency. N.C. Gen. Stat. \u00a7 150B-35.\nfb) Conduct of Agency Controlled bv APA\nAppellees argue that it was appropriate for the Director to solicit assistance from petitioner\u2019s counsel in the preparation of the order since trial judges in North Carolina routinely direct counsel to prepare orders for them.\nProceedings pursuant to the Administrative Procedure Act (Chapter 150B of the General Statute) are not proceedings in the General Court of Justice of North Carolina. Nor are Administrative Law Judges and Agency decision-makers judges under Article IV of the Constitution of North Carolina. Administrative agencies and departments exist pursuant to Section 11 of Article III of the Constitution of North Carolina, and as such are part of the Executive Branch of our State\u2019s government. While the Administrative Procedure Act adopts many concepts from the North Carolina Rules of Civil Procedure (N.C. Gen. Stat. \u00a7 150B-33) and the North Carolina Rules of Evidence (N.C. Gen. Stat. \u00a7 150B-29), the Act does not adopt the Code of Judicial Conduct, which governs General Court proceedings and communications among the parties.\nThe Director\u2019s conduct is thus governed exclusively by N.C. Gen. Stat. \u00a7 150B-35 and its plain meaning, and not by analogy to what is appropriate conduct for Article IV trial judges.\n(c) Result is an Error of Law\nWe acknowledge that cases involving Certificates of Need are highly complex, and that the Agency was placed in a very tight statutory time frame within which to render a decision. However, this cannot excuse the Director\u2019s clear violation of the provisions of N.C. Gen. Stat. \u00a7 150B-35, which prohibits such ex parte communications. We hold that the Director\u2019s ex parte communication with petitioner\u2019s counsel in the preparation of the Final Agency Decision violated the plain language of N.C. Gen. Stat. \u00a7 150B-135 and that this violation constitutes an error of law under N.C. Gen. Stat. \u00a7 150B-51(b) (1999), as discussed in (4) below.\n(4) Ramifications of Violation\nUnder the provisions of N.C. Gen. Stat. \u00a7 150B-34(c) and Total Renal Care, 171 N.C. App. 734, 737-39, 615 S.E.2d 81, 83-84, this Court may reverse or modify an agency decision if:\n[T]he substantial rights of the petitioners may have been prejudiced because the agency\u2019s findings, inferences, conclusions, or decisions are:\n(1) In violation of constitutional provisions;\n(2) In excess of the statutory authority or jurisdiction of the agency;\n(3) Made upon unlawful procedure;\n(4) Affected by other error of law;\n(5) Unsupported by substantial evidence admissible under G.S. 150B-29(a), 150B-30, or 150B-31 in view of the entire record as submitted; or\n(6) Arbitrary or capricious.\nN.C. Gen. Stat. \u00a7 150B-51(b) (1999). Thus, we must determine whether appellant may have been prejudiced by the error of law.\nfa) Parties\u2019 Rights under N.C. Gen. Stat. \u00a7 150B-25 et sea.\nN.C. Gen. Stat. \u00a7 150B-25 governs the conduct of contested case hearings. In relevant part, this statute affords parties the opportunity to \u201ccross-examine any witness, including the author of a document prepared by, on behalf of, or for use of the agency and offered in.evidence.\u201d Id. (2005).\nN.C. Gen. Stat. \u00a7 150B-29 provides rules of evidence for agency proceedings. In relevant part, it states:\nEvidence in a contested case, including records and documents, shall be offered and made a part of the record. Factual information or evidence not made a part of the record shall not be considered in the determination of the case, except as permitted under G.S. 150B-30.\nN.C. Gen. Stat. \u00a7 150B-29(b) (2005). The referenced exception in N.C. Gen. Stat. \u00a7 150B-30 allows for official notice of certain facts provided that:\nThe noticed fact and its source shall be stated and made known to affected parties at the earliest practicable time, and any party shall on timely request be afforded an opportunity to dispute the noticed fact through submission of evidence and argument.\nN.C. Gen. Stat. \u00a7 150B-30 (2005).\n(b) Prejudice Analysis\nIn determining whether AHO\u2019s rights were prejudiced; we consider the content of the proscribed communications, the extent of the revisions to petitioner\u2019s original proposed FAD, and AHO\u2019s opportunity to respond.\nThe documents submitted by petitioner\u2019s counsel ex parte incorporated cost allocations that were not part of the ALJ\u2019s recommended decision. Moreover, the Final Agency Decision contains numerous findings of fact and conclusions of law from the proposed FAD submitted on 4 August 2006 that not only were not in the proposed FAD submitted on 17 July 2006, but also applied the cost allocation method referenced in the ex parte communications. At least 43 new findings of fact were not before the Agency at the 24 July 2006 hearing but were incorporated at petitioner\u2019s suggestion three days before the Final Agency Decision was due. A careful review of the two proposed FADs reveal that many of the revisions incorporate cost allocation concepts that were the subject of the proscribed communications.\nThe timing of the proscribed communications, the Director\u2019s failure to include all parties, and the statutory timeframe for issuing a Final Decision not only violated AHO\u2019s right to notice under the APA but also effectively precluded any opportunity to respond.\nWe hold that the Agency exceeded its statutory authority and that AHO\u2019s substantial right to notice and a genuine opportunity to be heard was prejudiced by the process through which the Agency issued its final decision.\n(51 Remedy for Violation\nAppellant argues that the appropriate remedy is to adopt the decision of the ALJ. We decline to impose such a drastic remedy. Rather we hold that the decision of the Agency is reversed and vacated, and we remand the matter to the Agency for a new hearing upon a Final Agency Decision. Since Director Robert Fitzgerald engaged in the improper ex parte communications, he is prohibited from conducting the new hearing. The Agency shall designate another person to conduct the hearing. All parties shall have a full and equal opportunity to be heard, and there shall be no ex parte communications.\n\u00cdB) Compliance with N.C. Gen. Stat. \u00a7 150B-34(c)\nIn its second argument, appellant contends that the Agency\u2019s failure to recite and address all of the facts set forth in the recommended decision, as required by N.C. Gen. Stat. \u00a7 150B-34(c), violated its right to meaningful appellate review. We agree in part and disagree in part.\nAppellant contends that the Agency\u2019s failure to reference over sixty numbered findings of fact from the recommended decision implicitly rejects those findings \u201cwithout stating the specific reason based on substantial, admissible evidence as required by the APA.\u201d Appellant asserts that the omitted findings eliminated evidence in conflict with the Agency\u2019s \u201cdesired outcome\u201d and enabled the Agency to write a decision that \u201cmay appear facially plausible but in fact is insupportable on the record.\u201d\nWe address this issue because it is otherwise likely to recur upon remand. The relevant provision of N.C. Gen. Stat. \u00a7 150B-34(c) states:\nA final decision shall be made by the agency in writing after review of the official record as defined in G.S. 150B-37(a) and shall include findings of fact and conclusions of law. The final agency decision shall recite and address all of the facts set forth in the recommended decision. For each finding of fact in the recommended decision not adopted by the agency, the agency shall state the specific reason, based on the evidence, for not adopting the findings of fact and the agency\u2019s findings shall be supported by substantial evidence admissible under G.S. 150B-29(a), 150B-30, or 150B-31.\nN.C. Gen. Stat. \u00a7 150B-34(c) (2005) (emphasis added). First, we note that appellant mistakenly conjoins the principles of the last sentence. The statute does not require that specific reasons be supported by substantial, admissible evidence. Instead, it requires that: (1) for each finding of fact not adopted by the Agency, the Agency state the specific reason, based upon the evidence, for not adopting the findings, and (2) the Agency\u2019s findings (not its reasons) be supported by substantial evidence admissible under N.C. Gen. Stat. \u00a7\u00a7 150B-29(a), 150B-30, or 150B-31.\nNonetheless, the Agency did not comply with the statute insof\u00e1r as it failed to state \u201cthe specific reason\u201d for not adopting certain findings of facts, or omitting certain findings from itemized lists of related findings. The decision gives no reason why certain findings are itemized and others are omitted. Moreover, the Agency declined to adopt a large number of findings and conclusions of law simply as \u201cimmaterial\u201d and \u201cirrelevant\u201d to substantive issues without reference to its findings, conclusions, or decision regarding those issues. We agree that this approach does not comport with the dual intent of the statute to safeguard against arbitrary decisions and facilitate meaningful appellate review.\nWe hold that the Agency\u2019s failure to comply with the statutory mandate of N.C. Gen. Stat. \u00a7 150B-34(c) prejudiced appellant\u2019s right to meaningful appellate review to the limited extent that appellant was not afforded the opportunity to address the Agency\u2019s reasoning for rejecting material and essential findings by the ALJ, including findings related to the initial agency determination and its consistency with earlier no-review determinations. On remand, all findings in the ALJ\u2019s recommended decision should be addressed in any Final Agency Decision that declines to adopt the ALJ\u2019s recommendation.\nIV. Conclusion\nWe hold that the Agency violated the provisions of N.C. Gen. Stat. \u00a7 150B-35 by engaging in ex parte communications with counsel for the petitioner to the exclusion of other parties. We further hold that the substantial rights of appellant were prejudiced by this conduct. The Agency\u2019s decision is hereby vacated.\nWe remand this matter to the Agency for proceedings consistent with this opinion. The Agency may adopt the ALJ\u2019s recommended decision or it may conduct a new hearing in accordance with Article III of the Administrative Procedure Act. Any hearing shall be conducted by a person other than Director Fitzgerald.\nA decision that fails to adopt the recommended decision must state its specific reason, based on the evidence, for not adopting each material or essential finding of fact that it declines to adopt, in accordance with N.C. Gen. Stat. \u00a7 150B-34(c), and its own findings shall be supported by substantial evidence admissible under N.C. Gen. Stat. \u00a7\u00a7 150B-29(a), 150B-30, or 150B-31.\nBecause of these holdings, we need not address appellant\u2019s remaining arguments.\nVACATED and REMANDED.\nJudges BRYANT and GEER concur.\n. See N.C. Gen. Stat. \u00a7 131E-176(7a) (2003) (governing diagnostic centers).\n. See N.C. Gen. Stat. \u00a7 131E-176(14f) (2003) (governing acquisition of major medical equipment).\n. Id.\n. See N.C. Gen. Stat. \u00a7 131E-176(16) (2003) (governing capital expenditures). ,\n. Specifically Findings of Fact 1-3, 31-33,36,38, and 60 in the Administrative Law Judge\u2019s Recommended Decision.", "type": "majority", "author": "STEELMAN, Judge." } ], "attorneys": [ "Smith Moore, LLP, by Maureen Demarest Murray, William W. Stewart, Jr., and Ally son Jones Labban, for petitioner-appellee, Mission Hospitals, Inc.", "Smith, Anderson, Blount, Dorsett, Mitchell & Jemigan, LLP, by Susan H. Hargrove, Sean A. Timmons, and Courtney H. Mischen, for petitioner-intervenor-appellee, North Carolina Radiation Therapy Management Services, Inc. d/b/a 21st Century Oncology.", "Attorney General Roy Cooper, by Assistant Attorney General June S. Ferrell, for respondent-appellee N.C. Department of Health and Human Services, Division of Facility Services.", "Bode, Call & Stroupe, LLP, by S. Todd Hemphill, Diana Evans Ricketts and Matthew A. Fisher, for respondent-intervenorappellant Asheville Hematology and Oncology Associates, P.A.", "Nelson, Mullins, Riley & Scarborough LLP, by Wallace C. Hollowell, III, on behalf of Alliance Imaging, Inc., amicus curiae.", "Wyrick Robbins Yates &\u2022 Ponton, LLP, by K. Edward Greene, Lee M. Whittman, and Sarah M. Johnson on behalf of BioMedical Applications of North Carolina, Inc., amicus curiae." ], "corrections": "", "head_matter": "MISSION HOSPITALS, INC., Petitioner, and NORTH CAROLINA RADIATION THERAPY MANAGEMENT SERVICES, INC. d/b/a 21st CENTURY ONCOLOGY, Petitioner-Intervenor v. N.C. DEPARTMENT OF HEALTH AND HUMAN SERVICES, DIVISION OF FACILITY SERVICES, CERTIFICATE OF NEED SECTION, Respondent, and ASHEVILLE HEMATOLOGY AND ONCOLOGY ASSOCIATES P.A., Respondent-Intervenor\nNo. COA06-1642\n(Filed 18 March 2008)\n1. Administrative Law\u2014 certificates of need \u2014 ex parte communications \u2014 new hearing\nThe director of the Department of Health and Human Services, Division of Facility Services violated the provision of N.C.G.S. \u00a7 150B-35 prohibiting ex parte communications in contested cases between the agency decision maker and any party in connection with any issue of fact or question of law when, on two occasions prior to reversing the recommended decision of an ALJ that an oncology treatment center was not required to obtain certificates of need (CONs) in order to relocate its offices and acquire radiation therapy equipment, the director requested cost information from counsel of a hospital opposing the oncology treatment center without notice to other parties or affording an opportunity for the other parties to participate; the information provided by the hospital in response to those requests pertained to the pivitol issue as to whether the treatment center\u2019s costs were above or below the statutory threshold for CONSs; and the ex parte communications thus involved both issues of fact and questions of law. Therefore, the agency decision is reversed and remanded for a new hearing to be held by a person other than the director who engaged in the improper ex parte communications.\n2. Administrative Law\u2014 certificates of need \u2014 rejection of ALJ\u2019s recommended decision \u2014 reasons for not adopting ALJ\u2019s findings\nThe Department of Health and Human Services, Division of Facility Services violated N.C.G.S. \u00a7 150B-34(c) and prejudiced an oncology treatment center\u2019s right to appellate review by failing to set forth specific reasons for not adopting certain findings of fact by an ALJ when it rejected the ALJ\u2019s recommended decision that the treatment center was not required to obtain certificates of need in order to relocate its offices and to acquire radiation therapy equipment. On remand, all findings in the ALJ\u2019s recommended decision should b\u00e9 addressed in any final agency decision that declines to adopt the ALJ\u2019s recommendation.\nAppeal by respondent-intervenor Asheville Hematology and Oncology Associates, P.A., from a Final Agency Decision entered 7 August 2006 by the North Carolina Department of Health and Human Services. Heard in the Court of Appeals 20 September 2007.\nSmith Moore, LLP, by Maureen Demarest Murray, William W. Stewart, Jr., and Ally son Jones Labban, for petitioner-appellee, Mission Hospitals, Inc.\nSmith, Anderson, Blount, Dorsett, Mitchell & Jemigan, LLP, by Susan H. Hargrove, Sean A. Timmons, and Courtney H. Mischen, for petitioner-intervenor-appellee, North Carolina Radiation Therapy Management Services, Inc. d/b/a 21st Century Oncology.\nAttorney General Roy Cooper, by Assistant Attorney General June S. Ferrell, for respondent-appellee N.C. Department of Health and Human Services, Division of Facility Services.\nBode, Call & Stroupe, LLP, by S. Todd Hemphill, Diana Evans Ricketts and Matthew A. Fisher, for respondent-intervenorappellant Asheville Hematology and Oncology Associates, P.A.\nNelson, Mullins, Riley & Scarborough LLP, by Wallace C. Hollowell, III, on behalf of Alliance Imaging, Inc., amicus curiae.\nWyrick Robbins Yates &\u2022 Ponton, LLP, by K. Edward Greene, Lee M. Whittman, and Sarah M. Johnson on behalf of BioMedical Applications of North Carolina, Inc., amicus curiae." }, "file_name": "0263-01", "first_page_order": 295, "last_page_order": 308 }