{ "id": 8358236, "name": "In The Matter of: CHARTER PINES HOSPITAL, INC., A North Carolina Corporation, Petitioner-Appellant v. NORTH CAROLINA DEPARTMENT OF HUMAN RESOURCES, Respondent-Appellee, PITT COUNTY MEMORIAL HOSPITAL, INC., Intervenor, and COMMUNITY HOSPITAL OF ROCKY MOUNT, Intervenor", "name_abbreviation": "Charter Pines Hospital, Inc. v. North Carolina Department of Human Resources", "decision_date": "1986-11-04", "docket_number": "No. 8510SC1081", "first_page": "161", "last_page": "179", "citations": [ { "type": "official", "cite": "83 N.C. App. 161" } ], "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": "345 S.E. 2d 235", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1986, "opinion_index": 0 }, { "cite": "81 N.C. App. 628", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8524768 ], "year": 1986, "opinion_index": 0, "case_paths": [ "/nc-app/81/0628-01" ] }, { "cite": "287 S.E. 2d 786", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 2, "year": 1982, "pin_cites": [ { "page": "798" } ], "opinion_index": 0 }, { "cite": "305 N.C. 1", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8565938 ], "year": 1982, "opinion_index": 0, "case_paths": [ "/nc/305/0001-01" ] }, { "cite": "253 S.E. 2d 912", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1979, "opinion_index": 0 }, { "cite": "297 N.C. 48", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8566826 ], "year": 1979, "opinion_index": 0, "case_paths": [ "/nc/297/0048-01" ] }, { "cite": "276 S.E. 2d 472", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1981, "opinion_index": 0 }, { "cite": "51 N.C. App. 275", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 2644506 ], "year": 1981, "opinion_index": 0, "case_paths": [ "/nc-app/51/0275-01" ] }, { "cite": "233 S.E. 2d 538", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1977, "pin_cites": [ { "page": "541" } ], "opinion_index": 0 }, { "cite": "292 N.C. 406", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8569880 ], "year": 1977, "pin_cites": [ { "page": "410" } ], "opinion_index": 0, "case_paths": [ "/nc/292/0406-01" ] }, { "cite": "231 S.E. 2d 882", "category": "reporters:state_regional", "reporter": "S.E.2d", "year": 1977, "pin_cites": [ { "page": "888" } ], "opinion_index": 0 }, { "cite": "292 N.C. 70", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8567415 ], "year": 1977, "pin_cites": [ { "page": "80" } ], "opinion_index": 0, "case_paths": [ "/nc/292/0070-01" ] }, { "cite": "332 S.E. 2d 748", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 2, "year": 1985, "pin_cites": [ { "page": "752" } ], "opinion_index": 0 }, { "cite": "76 N.C. App. 265", "category": "reporters:state", "reporter": "N.C. App.", "case_ids": [ 8527016 ], "year": 1985, "opinion_index": 0, "case_paths": [ "/nc-app/76/0265-01" ] }, { "cite": "301 N.C. 107", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8564256, 8564233, 8564290, 8564187 ], "year": 1980, "opinion_index": 0, "case_paths": [ "/nc/301/0107-03", "/nc/301/0107-02", "/nc/301/0107-04", "/nc/301/0107-01" ] }, { "cite": "269 S.E. 2d 547", "category": "reporters:state_regional", "reporter": "S.E.2d", "weight": 2, "year": 1980, "pin_cites": [ { "page": "573", "parenthetical": "citations omitted" } ], "opinion_index": 0 }, { "cite": "300 N.C. 381", "category": "reporters:state", "reporter": "N.C.", "case_ids": [ 8562647 ], "year": 1980, "opinion_index": 0, "case_paths": [ "/nc/300/0381-01" ] } ], "analysis": { "cardinality": 1238, "char_count": 40943, "ocr_confidence": 0.796, "pagerank": { "raw": 2.3578891999654487e-07, "percentile": 0.7939372141001271 }, "sha256": "46bff187c570c766923c210d485d5f4ced5129bc9d0d192a689c8723c4d6ebff", "simhash": "1:f5e0c5a216c9966c", "word_count": 6287 }, "last_updated": "2023-07-14T16:07:52.921422+00:00", "provenance": { "date_added": "2019-08-29", "source": "Harvard", "batch": "2018" }, "casebody": { "judges": [ "Chief Judge Hedrick and Judge WELLS concur." ], "parties": [ "In The Matter of: CHARTER PINES HOSPITAL, INC., A North Carolina Corporation, Petitioner-Appellant v. NORTH CAROLINA DEPARTMENT OF HUMAN RESOURCES, Respondent-Appellee, PITT COUNTY MEMORIAL HOSPITAL, INC., Intervenor, and COMMUNITY HOSPITAL OF ROCKY MOUNT, Intervenor" ], "opinions": [ { "text": "MARTIN, Judge.\nThe applicable standard of judicial review of a final decision of the Department of Human Resources with respect to an application for a certificate of need was set out in G.S. 150A-51 (1983), amended and recodified at G.S. 150B-51 (1985) (effective 1 January 1986).\nThe court may affirm the decision of the agency or remand the case for further proceedings; or it may reverse or modify the decision if the substantial rights of the petitioners may have been prejudiced because the agency findings, inferences, conclusions or decisions are:\n(1) In violation of constitutional provisions; or\n(2) In excess of the statutory authority or jurisdiction of the agency; or\n(3) Made upon unlawful procedure; or\n(4) Affected by other error of law; or\n(5) Unsupported by substantial evidence admissible under G.S. 150A-29(a) or G.S. 150A-30 in view of the entire record as submitted; or\n(6) Arbitrary or capricious.\nCharter assigns error to the findings, inferences, conclusions and decision of DHR concerning Charter\u2019s application for a certificate of need, contending that DHR\u2019s decision was in violation of constitutional and statutory provisions, grounded upon unlawful procedure, affected by error of law, unsupported by substantial evidence, and was arbitrary and capricious. Charter urges this court to reverse the judgment of the Superior Court which affirmed DHR\u2019s decision, and grant Charter a certificate of need. We disagree with Charter\u2019s contentions and, for the following reasons, affirm the decisions of the Superior Court and DHR.\nThe lengthy and detailed briefs submitted for our consideration by the parties and intervenors in this action focused our attention on three (3) primary questions presented by this appeal. (1) Whether DHR correctly applied the statutory criteria relating to community health care support for the Charter proposal; (2) Whether DHR correctly determined that Charter\u2019s proposal exceeded the psychiatric bed need within the applicable Health Service Area; and (3) Whether DHR\u2019s determination that Charter\u2019s proposal was nonconforming was arbitrary and capricious. The governing CON law at the time of Charter\u2019s application, and therefore dispositive of the issues in this appeal, was G.S. 131-175 to -188 (1981), amended and recodified at G.S. 131E-175 to -191 (Cum. Supp. 1985), and the corresponding provisions of the North Carolina Administrative Code effective at that time. We will address Charter\u2019s assignments of error as they relate to these issues and the appropriate standards of review.\nI\nCharter first contends that DHR, through project analyst Heffner, improperly required Charter to provide letters of support as a part of its CON application. Charter argues that DHR acted upon unlawful procedure, exceeded its statutory authority, and denied Charter equal protection under the law by imposing the requirement for letters of support without first promulgating the requirement as a regulation. Charter further argues that DHR erred as a matter of law and denied Charter due process of law by excluding critical evidence on the issue of support and by failing to give Charter proper notice of the support requirement. Finally, Charter argues that DHR\u2019s findings and conclusions on the issue of support are not based on substantial evidence. We find no merit in Charter\u2019s contentions and overrule these assignments of error.\nCharter first contends that DHR\u2019s request for letters of support (as specified in the notice of incompleteness forwarded to Charter on 18 February 1983) exceeded its statutory authority and was based upon unlawful procedure because the letters requirement was not specified in CON regulations promulgated by DHR pursuant to G.S. 131-181(a) (1981). Charter correctly argues that there is no requirement in any statute or department regulation or plan that letters of support must accompany a CON application, and that criteria to be used by DHR to review CON applications should be promulgated as regulations. G.S. 131-177(5) (1981). We hold, however, that DHR\u2019s request for additional information, including its request that Charter provide letters of support for the proposed hospital, did not amount to the establishment of a criterion for review of Charter\u2019s application, and was, therefore, neither unlawful nor improper.\nThe record is clear as to the circumstances leading to project analyst Heffner\u2019s request for letters of support from various health-care professionals and service groups. Upon receipt of Charter\u2019s application, Heffner conducted a preliminary review to determine whether Charter had furnished sufficient information for the CON review. The application form submitted was provided to Charter by DHR pursuant to G.S. 131-180 (1981) and specifically requested the following information:\nPlease list the physicians who have expressed support FOR THE PROPOSAL, BY SPECIALTY. HOW HAVE THESE INDIVIDUALS AND OTHER MEDICAL PERSONNEL CRUCIAL TO THE VIABILITY OF THE PROPOSAL BEEN INVOLVED IN THE PLANNING PHASE OF THE PROJECT? PLEASE INDICATE IF OTHER GROUPS/INDIVIDUALS, WHO COULD AFFECT THE PROJECT\u2019S SUCCESS, HAVE EXPRESSED SUPPORT FOR IT.\nCharter responded as follows:\nFrom the earliest contacts made in the area up to the present, the physicians of the area, particularly the psychiatrists in private practice and those on the faculty of the ECU Medical School, have been included in the entire development process: assessment of need, program determination, and the like. Since the Charter Pines Hospital will have an open staff, these physicians will be the Medical Staff for the Charter Pines Hospital. This is why their involvement was solicited from the very beginning.\nAll of the following physicians have been involved to a greater or lesser degree in the initial planning and development efforts to establish Charter Pines Hospital. All of them will continue to be invited to participate in the development and eventual operations of Charter Pines Hospital once it is approved by the State.\nJarrett Barnhill, M.D. ECU Medical School Faculty\nJascha Danoff, M.D. ECU Medical School Faculty\nRay Evan, M.D. Private Psychiatrist\nWilliam Fore, M.D. Past President, Pitt Co. Medical Soc.\nJerry Gregory, M.D. ECU Medical School Faculty\nWilliam Laupus, M.D. Dean, ECU Medical School\nJames Mathis, M.D. ECU Medical School Faculty\nLeslie Mega, M.D. ECU Medical School Faculty\nBarry Moore, M.D. Private Psychiatrist\nPhilip Nelson, M.D. Private Psychiatrist\nRobert Nenno, M.D. Pitt Co. Community Mental Health\nRobert Ratcliffe, M.D. Private Psychiatrist\nEverett Simmons, M.D. ECU Medical School Faculty\nJon Tinglestad, M.D. ECU Medical School Faculty\nWilliam Walker, M.D. ECU Medical School Faculty\nAlfred Youngue, M.D. Private Psychiatrist\nJudith Yongue, M.D. Private Psychiatrist\nAll of the physicians above were invited to visit an operating Charter Medical hospital. Some of them did go to visit Charter Ridge Hospital, Lexington, Kentucky which was developed by Charter Medical Corporation in a joint effort with the University of Kentucky Medical School. It is anticipated that a similar close affiliation will be developed with the ECU Medical School once the facility is approved by the state.\nActive involvement with the project development has been and is being solicited from the area\u2019s Community Mental Health Services, Substance Abuse Services, School Systems, Courts, mental health professionals as well as psychiatrists, Nursing Schools, and similar interested groups.\nIt is apparent that, although it listed a substantial number of names in response to the question on the application, Charter\u2019s response contained absolutely no indication that any of the listed professional groups and individuals from the primary and secondary service areas had ever expressed any support for the proposal. Heffner testified that, because he was unable to find any documentation for Charter\u2019s assertions of support, he deemed the application incomplete in that respect. Along with his requests for additional information relating to multiple other areas which had been inadequately addressed in the application, Heffner requested the following information:\nPlease provide letters of support. Letters should be provided from physicians, hospitals, community mental health services and substance abuse services providers, school systems, courts, as well as mental health professionals, nursing schools, and similar groups.\nCharter contends that Heffner, by requesting letters of support, improperly created a new review criterion in violation of the Administrative Procedure Act (APA), CON law, and the Code of Federal Regulations. Citing the case of Comm\u2019r of Insurance v. Rate Bureau, 300 N.C. 381, 269 S.E. 2d 547, reh\u2019g denied, 301 N.C. 107 (1980), Charter argues that Heffner acted upon unlawful procedure by establishing the letters of support requirement without DHR\u2019s having promulgated it as a regulation under the APA. In Rate Bureau, the Supreme Court held that although the Commissioner of Insurance had the statutory authority to require that data submitted in an insurance rate-making case be audited, he acted upon unlawful procedure by attempting to establish such a rule without properly promulgating it under the procedures of the APA.\nIn our view, the facts of the present case so distinguish it from Rate Bureau that the holdings in that case are not disposi-tive of the issues in this appeal. In Rate Bureau, the Commissioner of Insurance attempted to establish and apply the rule requiring that data be audited by finding and concluding that unaudited reports were unreliable and by denying rate increases based upon the failure of the applicants to comply with the Commissioner\u2019s unpromulgated rule. On the other hand, Mr. Heffner, by requesting that Charter provide letters of support, was not seeking to impose an administrative rule or requirement that such letters be submitted with a CON application. His request was not a rule at all. Rather, he was seeking, after reviewing the somewhat elusive response which Charter provided with respect to the relationship between its proposed facility and the existing health care delivery systems in the area, to obtain the information originally requested and to substantiate that support for the proposed facility actually existed. The hearing officer, therefore, concluded:\n9. When the review process disclosed clear lack of support, or opposition, from some of the health care community, the Certificate of Need Section was required to seek to document or refute the application\u2019s unsupported assertions of compliance with the network, continuum of care, and other health community relationship criteria and standards; the lack of support (from Mental Health Centers, courts, drug programs, etc.) and evidence of opposition (from the local hospital, medical school, etc.) in the record compel the conclusion that the project application does not conform with applicable criteria; the immediate or long-term success of the project is in doubt.\nThe specific issue of whether a request by DHR for letters evidencing support for a proposal imposes a requirement in excess of its statutory authority or amounts to an agency action based on unlawful procedure has not previously been addressed by appellate decision in North Carolina. However, our opinion in Hospital Group of Western N.C. v. N.C. Dept. of Human Resources, 76 N.C. App. 265, 332 S.E. 2d 748 (1985) is indicative that such letters may constitute evidence of the existence or nonexistence of statutory factors determinative of need. See G.S. 131-181(3) (1981). In Hospital Group, DHR requested letters in support of petitioner\u2019s hospital from \u201cphysicians, community mental health centers, schools, churches, the court systems and other groups/individuals. . . .\u201d Hospital Group at 269, 332 S.E. 2d at 752. Eight letters were received, none of which were from schools or courts, and all of the letters received were from only one county out of a twenty-nine (29) county area. Based on those letters, this court upheld DHR\u2019s determination that there was insufficient support for the proposed hospital.\nWe hold that Heffner\u2019s request for documentation of Charter\u2019s alleged support was entirely reasonable and within DHR\u2019s authority in order to obtain the necessary information to properly review the application. See 10 NCAC 3R .0309(c) (1983). This assignment of error is overruled.\nCharter next contends that DHR erred as a matter of law and denied it due process of law by excluding critical evidence on the issue of support and by failing to give Charter proper notice of the support requirement. Again, we disagree.\nCharter attempted to introduce: (1) evidence of other applications which were approved by the CON Section without the type or quantity of letters of support required of Charter; (2) evidence that the basis of Pitt County Memorial Hospital\u2019s opposition to Charter\u2019s proposal was not legitimate; (3) evidence that the expectation of letters of support is unrealistic and unnecessary; and (4) the \u201cDraft Criteria and Standards for Short-Stay Alcohol and/or Drug Abuse Intensive Treatment Beds\u201d showing that a requirement of letters of support had been deleted from those regulations before they were promulgated. This evidence would have been relevant only upon the issue of whether Heffner\u2019s request for letters of support was an action taken upon unlawful procedure or was in excess of DHR\u2019s statutory authority. In view of our holding that Heffner\u2019s request for letters was within Heffner\u2019s statutory authority and was procedurally permissible, we can conceive of no possible prejudice occasioned to Charter by the exclusion of such evidence. We note also that the excluded evidence was outside the scope of permissible subject matter at a contested case hearing as defined in 10 NCAC 3R .0408(c) (1983) and 10 NCAC 3R .0420 (1983). Additionally, Charter received adequate and particular notice of DHR\u2019s need for additional evidence on the issue of support through Heffner\u2019s notice of incompleteness. These assignments of error are overruled.\nCharter further contends that DHR\u2019s findings and conclusions on the issue of support are \u201cunsupported by substantial evidence ... in view of the entire record as submitted.\u201d G.S. 150A-5K5) (1983). The applicable standard of review, prescribed by the foregoing statute, is the whole record test. Under the whole record test, the reviewing court must consider all the evidence to determine whether the agency\u2019s decision is supported by substantial evidence. \u201cSubstantial evidence is such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.\u201d Comm\u2019r of Insurance v. Rating Bureau, 292 N.C. 70, 80, 231 S.E. 2d 882, 888 (1977). In determining the substantiality of the evidence, the court must consider all the evidence, including that which contradicts the agency\u2019s decision. The court may not substitute its judgment for that of the agency \u201ceven though the court could justifiably have reached a different result had the matter been before it de novo.\u201d Thompson v. Board of Education, 292 N.C. 406, 410, 233 S.E. 2d 538, 541 (1977). A proper application of the whole record test takes into account the expertise of an administrative agency. High Rock Lake Assoc. v. Environmental Management Comm., 51 N.C. App. 275, 276 S.E. 2d 472 (1981).\nAfter review and consideration of the record as a whole, we acknowledge that it contains considerable evidence from which, if this case were before us de novo, we might justify a different result. Under the whole record test, however, we must determine only whether DHR\u2019s decision has a rational basis in the evidence presented. In re Rogers, 297 N.C. 48, 253 S.E. 2d 912 (1979). We find that it does.\nIn his proposal for decision, adopted by DHR as its Decision and Order, the hearing officer made, among others, the following findings of fact on the issue of support.\n(34) The response to the incomplete notice provided no letters of support from any hospital, community mental health service, substance abuse services provider, court, or nursing school, and there was no other documentation to corroborate the application\u2019s indications of support or assistance from these organizations.\n(35) The response did provide one letter of support from a physician, three from schools, and several from mental health professionals.\n(36) In denying the Charter Pines application, the Certificate of Need Section specifically found that the project lacked the necessary support from the health care community and thereby was Non-Conforming with Review Criteria (a)(5), (a)(6), (a)(7), (a)(21), and special criteria in 10 NCAC 3R .2505(b) and .2506.\n(37) At hearing the proponents produced a great volume of petitions and other documents and extensive testimony showing local support from some health professionals and parts of the business community, and they produced evidence of support from some psychiatrists and some schools, but except for the unsubstantiated assertions of employees of Charter Medical Corporation that support would be developed after construction of the project, there was still no evidence of support from local mental health centers, substance abuse service providers, courts or court personnel, local hospitals, or medical education facilities.\nThe hearing officer subsequently made, among others, the following conclusions.\n12. This project was denied, not for lack of letters, but for lack of support; there is no requirement that proponents produce letters of support, but where allegations of support are questioned and contradicted in the review process, unless support or other positive indications of the questioned health community participation are demonstrated by letters, other documents, independent testimony, or similar reliable evidence, the proponents\u2019 project must be found Non-Conforming.\n13. The Charter Pines project is Non-Conforming with Review Criteria (a)(1), (a)(5), (a)(6), (a)(7), and (a)(21), and with special criteria .2504(a), .2505(b) and .2506. (emphasis original)\nWe find substantial evidence in the record to support these findings and conclusions. We acknowledge, as did the hearing officer, Charter\u2019s efforts to demonstrate local support for the project through personal letters, public petitions and the live testimony of medical professionals. We must, however, defer to the expertise of CON analysts in determining the sufficiency of the support evidenced in Charter\u2019s application and its level of conformity with CON review criteria. See, State ex rel Utilities Comm. v. Duke Power, 305 N.C. 1, 287 S.E. 2d 786 (1982). Heffner testified that although he ultimately did receive some documentation of support for Charter\u2019s proposal, it was not representative of all the counties Charter proposed to serve, and did not include indications of support from most of the facilities specified in the notice of incompleteness.\nAfter an exhaustive review of the record, we, also, find no evidence of support from local mental health centers, substance abuse facilities, courts, local hospitals, or medical education facilities \u2014 entities from whom expressions of support were specifically requested in the notice of incompleteness and whose support Heffner stated was crucial to the success of such a project. In addition, the record discloses substantial evidence of active opposition to the proposal from key health care facilities and professionals in the area, including letters of opposition from several doctors listed on Charter\u2019s application as supporters of the proposal.\nWe conclude that substantial evidence exists in the record as a whole to support the agency\u2019s findings and conclusions that Charter\u2019s proposal lacked support. These assignments of error are, therefore, overruled.\nII\nCharter next contends that DHR, through project analyst Heffner, erroneously determined that Charter\u2019s psychiatric bed proposal exceeded psychiatric bed need in HSA VI. Charter argues that DHR\u2019s conclusion that there is a need for only 37 psychiatric beds, 7 beds fewer than Charter\u2019s 44 bed proposal, is based upon unlawful procedure, violates the APA and CON law, and denies Charter due process of law and equal protection under the law. Charter further argues that DHR\u2019s findings and conclusions on bed need are not supported by substantial evidence. We reject these arguments.\nCharter first asserts, notwithstanding its assignments of error related to the methodology of computing bed need, that there is no real issue between the parties as to bed need because Charter is willing to accept an approval by DHR for seven (7) fewer beds than proposed in the application. Unquestionably, DHR is authorized to approve projects for fewer beds than are proposed by an applicant. G.S. 131482(b) (1981). The power to make such conditional approvals is discretionary, however, and not mandatory. See In re Humana Hosp. Corp. v. N.C. Dept. of Human Resources, 81 N.C. App. 628, 345 S.E. 2d 235 (1986).\nWe are not persuaded that the evidence presented in the present case would support an approval conditioned on Charter\u2019s acceptance of seven (7) fewer beds. Charter presented no evidence in its application or at the contested case hearing which indicated a willingness to accept a certificate of need for fewer beds than those proposed. Moreover, Charter\u2019s proposal was for a minimum total of 65 beds. That total, including 21 addictive disease beds and 44 psychiatric beds, was presented in Charter\u2019s initial proposal as the minimum number of beds which would \u201callow the facility to achieve the necessary economies of scale that will result in both improved patient care, financial viability and cost control.\u201d There being no evidence in the record to indicate that Charter\u2019s proposal was economically feasible with fewer beds, we find no basis in the record for such a conditional approval, and we cannot say that DHR abused its discretion by failing to approve a certificate of need for seven (7) fewer beds.\nCharter next argues that Heffner departed from the SMFP bed need methodology and, in effect, created his own methodology for determining the psychiatric bed need in Charter\u2019s service area. Charter asserts that Heffner\u2019s computation of psychiatric bed need was fatally flawed because his methodology used different assumptions in calculating need and inventory of psychiatric beds while the SMFP methodology requires the use of the same assumptions in calculating need and inventory of psychiatric beds. Charter further argues that DHR, by refusing to scrutinize Heffner\u2019s methodology as compared to other methodologies proposed by Charter, created an irrebuttable presumption that Heff-ner\u2019s methodology was correct, resulting in a complete denial to Charter of any review of the need for its proposed project. We disagree.\nUnder G.S. 131-181(a)(1) (1981), DHR is required to consider the relationship of a proposed project to the SMFP. Promulgated as a CON regulation, the SMFP provides bed need projections for use in determining whether proposals for additional beds and services can be approved under the CON program. 10 NCAC 3R .1003(a)(4) (1983). The SMFP also adopts methodologies for use in determining the need for particular health services such as psychiatric beds.\nUnder CON regulations, the \u201ccorrectness, adequacy, or appropriateness of criteria, plans, and standards shall not be an issue in a contested case hearing.\u201d 10 NCAC 3R .0420 (1983). At the contested case hearing, Heffner testified that he utilized the 1983 SMFP methodology to compute psychiatric bed need in HSA VI and in Charter\u2019s proposed service area. As a result, the hearing officer concluded:\n17. The methodology used by the Certificate of Need Section to determine the 37-bed need is from the 1983 SMFP, and like the HSA need determination, it is also not subject to review for correctness. 10 NCAC 3R .0420.\nIt follows, therefore, that no presumption, irrebuttable or otherwise, was created or applied by the acts and conclusions of the hearing officer. Rather, he properly concluded that the use of the methodology required by the SMFP was an issue specifically not reviewable at the contested case hearing. Heffner\u2019s application of the SMFP methodology to Charter\u2019s proposal was, however, open to scrutiny at the contested case hearing for analytical, procedural and mathematical correctness.\nCharter presented evidence that Heffner\u2019s application of the SMFP methodology to Charter\u2019s proposal was analytically flawed. Ronald T. Luke, Ph.D., an expert in the field of health planning, testified that he reviewed Heffner\u2019s analysis of Charter\u2019s proposal and the psychiatric bed need in the proposed service area. He testified that Heffner utilized inconsistent assumptions in his SMFP analysis which resulted in a showing of inadequate need for Charter\u2019s psychiatric bed need proposal. Dr. Luke testified that Heffner projected the need for state psychiatric beds by assuming that the utilization of state psychiatric beds for Charter\u2019s proposed service area is the same as that for the entire HSA. However, in determining the inventory of existing state psychiatric beds in Charter\u2019s proposed service area, Heffner calculated, and used, the actual utilization rate, rather than the assumed utilization rate, of state psychiatric beds within Charter\u2019s proposed primary service area. Dr. Luke found a \u201cgross and fatal inconsistency\u201d in Heffner\u2019s analysis which was \u201cindefensible by logic, by the state plan\u201d or by any plan he \u201ccould imagine.\u201d He testified that the analysis was further flawed by Heffner\u2019s failure to visit or contact existing psychiatric facilities for observation and study of their interaction. Luke concluded that the SMFP methodology, if applied correctly, yielded an unmet bed need of at least 44 psychiatric beds in Charter\u2019s service area and not 37 beds as computed by Heffner.\nAlso testifying as an expert in health planning, Heffner acknowledged the inconsistencies alleged by Charter and stated that they were the result of his application of the SMFP methodology on a sub-HSA level. He further testified that he adopted the sub-HSA approach in order to accurately account for local circumstances, and that the use of a sub-HSA approach was an acceptable methodology for computing bed need.\nAfter hearing the testimony of both experts, the hearing officer concluded:\n18. It is appropriate to apply the 1983 SMFP methodology at the sub-HSA level because it is the best and most reliable methodology available, and it is a flexible methodology, as is indicated by reference to specific adjustments for special local circumstances. 1983 SMFP, Part IV, Data Analysis, and Description of the Psychiatric Bed Need Methodology. The proponents\u2019 implied suggestion, that the great volume of quality professional effort that produced the SMFP methodology be passed over for some other methodology either from another state with vastly different demographic characteristics or from some national organization, is rejected.\n19. The calculations under the 1983 SMFP methodology were done properly, and they were not invalidated by inconsistent assumptions or flawed logic as suggested by the proponents at hearing.\n* * *\n23. The Charter Pines proponents have not demonstrated an unmet need for psychiatric beds in the proposed service area that is as great as their proposed project\u2019s 44 beds; the need is less than that proposed.\n24. Because the number of proposed psychiatric beds exceeds the unmet need for the service area, the project is Non-Conforming with Review Criteria (a)(1), (a)(3), (a)(5), (a)(6), (a)(12), (a)(17), (a)(19), and (a)(21), and special criteria .2504(a) and .2508(a).\nWe hold that the hearing officer\u2019s findings and conclusions on the issue of bed need are supported by substantial evidence. The parties presented conflicting expert testimony concerning the proper application of the 1983 SMFP methodology. The record shows that all the evidence was fully considered by the hearing officer.\nNorth Carolina is in accord with the well-established rule that it is for the administrative body, in an adjudicatory proceeding, to determine the weight and sufficiency of the evidence and the credibility of the witnesses, to draw inferences from the facts, and to appraise conflicting and circumstantial evidence if any.\nDuke Power, supra, at 21, 287 S.E. 2d at 798. The hearing officer was empowered to use his own best judgment in evaluating the weight and credibility of the evidence in light of his administrative expertise. He was not bound by the testimony of Charter\u2019s expert, nor was he required to accept it as true. His determination that Heffner properly applied the 1983 SMFP methodology to Charter\u2019s proposal for psychiatric beds required the use of his administrative expertise in judging the credibility of the expert testimony presented. We cannot second-guess the exercise of that expertise and, finding substantial evidence in the record to support DHR\u2019s findings and conclusions, overrule these assignments of error.\nHH H-1\nFinally, Charter contends that DHR\u2019s determination that Charter\u2019s proposal did not conform to CON criteria, standards, and plans was arbitrary and capricious. Charter argues that DHR demonstrated an irrational unfairness by treating Charter differently than other similarly situated applicants and by violating all of the standards set out in G.S. 150A-51. We disagree and overrule this assignment of error.\nAgency decisions are arbitrary or capricious when they are \u201c \u2018whimsical\u2019 because they demonstrate a lack of fair and careful consideration; when they fail to indicate \u2018any course of reasoning in the exercise of judgment,\u2019 or when they impose or omit procedural requirements that result in manifest unfairness in the circumstances though within the letter of statutory requirements.\u201d Rate Bureau, supra, at 420, 269 S.E. 2d at 573 (citations omitted). In light of our resolutions of the other issues in this case, we do not find that DHR acted \u201cwhimsically\u201d or unfairly in its disapproval of Charter\u2019s proposal. To the contrary, we find that Charter\u2019s application was given a careful and thorough review according to the applicable criteria, standards, and plans of the CON law. DHR\u2019s decision is amply supported by substantial evidence and reflects reasoned decisionmaking on the part of the agency officials involved. Charter\u2019s remaining assignments of error are therefore overruled.\n>\nIn summary, we hold that DHR\u2019s findings, conclusions, and decision to disapprove Charter\u2019s application for a certificate of need are supported by substantial evidence and are unaffected by other error of law. The decisions of the Department and the Superior Court are\nAffirmed.\nChief Judge Hedrick and Judge WELLS concur.", "type": "majority", "author": "MARTIN, Judge." }, { "text": "Judge Wells\nconcurring.\nI find the majority opinion to be correct in law and I therefore concur. But, in concurring, I must say two things. One, if I had the power of de novo review in this case, I would vote to reverse and to approve Charter Pine\u2019s application. Second, I find the administrative review process in the case to be characterized by bureaucratic nit-picking, especially on the issue of support for the proposed facility. This aspect of the matter must be very frustrating for those who are interested in providing additional facilities to accommodate the public need for mental health care.", "type": "concurrence", "author": "Judge Wells" } ], "attorneys": [ "Attorney General Lacy H. Thornburg, by Assistant Attorney General Barbara P. Riley, for respondent appellee North Carolina Department of Human Resources.", "Sanford, Adams, McCullough & Beard, by Hern\u00e1n R. Clark and Renee J. Montgomery; and King & Spalding, by Richard L. Shackelford, for petitioner appellant.", "Hollowell & Silverstein, P.A., by Edward E. Hollowell and Robert L. Wilson, Jr.; and James T. Cheatham, P.A., by James T. Cheatham, for intervenor appellee Pitt County Memorial Hospital, Inc.", "Poyner & Spruill, by J. Phil Carlton and Susan K. Nichols, for intervenor appellee Community Hospital of Rocky Mount." ], "corrections": "", "head_matter": "In The Matter of: CHARTER PINES HOSPITAL, INC., A North Carolina Corporation, Petitioner-Appellant v. NORTH CAROLINA DEPARTMENT OF HUMAN RESOURCES, Respondent-Appellee, PITT COUNTY MEMORIAL HOSPITAL, INC., Intervenor, and COMMUNITY HOSPITAL OF ROCKY MOUNT, Intervenor\nNo. 8510SC1081\n(Filed 4 November 1986)\n1. Hospitals \u00a7 2.1\u2014 proposed psychiatric hospital \u2014 certificate of need \u2014 letters of support properly required\nRespondent\u2019s request for additional information, including its request that petitioner provide letters of support from various health care professionals and service groups for a proposed psychiatric hospital, did not amount to the establishment of a criterion for review of petitioner\u2019s application for a certificate of need and was therefore neither unlawful nor improper.\n2. Hospitals \u00a7 2.1\u2014 proposed psychiatric hospital \u2014 certificate of need \u2014 evidence of support \u2014 notice of support requirement\nThere was no merit to petitioner\u2019s contention that respondent erred by excluding critical evidence on the issue of support for a proposed psychiatric hospital and by failing to give petitioner proper notice of the support requirement, since all of the excluded evidence would have been relevant only upon the issue of whether respondent\u2019s request for letters of support was an action taken upon unlawful procedure or was in excess of respondent\u2019s authority, neither of which was the case; the excluded evidence was outside the scope of permissible subject matter at a contested case hearing as defined in applicable regulations; and petitioner received adequate and particular notice of respondent\u2019s need for additional evidence on the issue of support through a notice of incompleteness from the health planner in the certificate of need section of respondent.\n3. Hospitals \u00a7 2.1\u2014 proposed psychiatric hospital \u2014 lack of support from health care community\nSubstantial evidence existed in the record as a whole to support respondent\u2019s findings and conclusions that petitioner\u2019s proposal to construct a psychiatric and substance abuse hospital lacked the necessary support from the health care community where there was no evidence of support from local mental health centers, substance abuse facilities, courts, local hospitals, or medical education facilities \u2014 entities from whom expressions of support were specifically requested in respondent\u2019s notice of incompleteness and whose support, according to respondent, was crucial to the success of such a project; there was substantial evidence of active opposition to the proposal from key health care facilities and professionals in the area, including letters of opposition from several doctors listed on petitioner\u2019s application as supporters of the proposal; and though respondent ultimately did receive some documentation of support for petitioner\u2019s proposal, it was not representative of all the counties petitioner proposed to serve.\n4. Hospitals \u00a7 2.1\u2014 proposed psychiatric hospital \u2014 no approval of fewer beds than proposed \u2014 no error\nRespondent did not abuse its discretion by failing to approve a certificate of need for seven fewer beds than petitioner requested in its application, since petitioner presented no evidence in its application or at the contested case hearing which indicated a willingness to accept a certificate of need for fewer beds than those proposed; and petitioner\u2019s proposal was for a minimum number of beds which would \u201callow the facility to achieve the necessary economies of scale that will result in both improved patient care, financial viability and cost control.\u201d\n5. Hospitals \u00a7 2.1\u2014 proposed psychiatric hospital \u2014 need for beds \u2014 application of methodology proper\nUse by respondent\u2019s health planner of the State Medical Facilities Plan methodology to compute psychiatric bed need in the subject health systems area and in petitioner\u2019s proposed service area was an issue specifically not reviewable at the contested case hearing, but application of the SMFP methodology to petitioner\u2019s proposal was reviewable; the hearing officer\u2019s findings and conclusions on the issue of bed need were supported by substantial evidence.\nJudge Wells concurring.\nAPPEAL by petitioner from Bailey, Judge. Judgment entered 26 June 1985 in Wake County Superior Court. Heard in the Court of Appeals 7 April 1986.\nIn February 1983, petitioner Charter Pines Hospital, Inc. (Charter) made application, pursuant to G.S. 131-180 (1981), repealed and recodified at G.S. 131E-182 (Cum. Supp. 1985), to the North Carolina Department of Human Resources (DHR) for a certificate of need (CON) to construct a psychiatric and substance abuse hospital. Charter proposed a sixty-five (65) bed freestanding psychiatric hospital with twenty-one (21) beds designated for addictive disease treatment and forty-four (44) beds designated for psychiatric care. The project was to be located in Greenville, North Carolina, in Health Systems Area VI (HSA VI), a health planning area designated by the State Medical Facilities Plan (SMFP) encompassing twenty-nine (29) counties in eastern North Carolina. Charter\u2019s application was assigned for review to John C. Heffner, Health Planner, DHR CON Section.\nUpon receipt of a CON application, CON regulations provide for a fifteen (15) day period within which the application is given a preliminary review for completeness. Additional material may be requested and received by the CON Section during that period. Applications are deemed incomplete if they contain insufficient information to conduct the CON review. 10 NCAC 3R .0305 (1983). On 18 February 1983, Heffner notified Charter that he deemed its CON application to be incomplete and he requested additional information.\nOn 24 February 1983, Charter furnished the additional information. Charter\u2019s application was deemed complete for review on 28 February 1983, and the CON Section thereafter began its review of the application on 1 March 1983.\nThe Project Review Committee of HSA VI recommended disapproval of Charter\u2019s application on 13 April 1983 and E.C.H.S.A. [Eastern Carolina Health Systems Agency], the federally created health planning body for HSA VI, recommended disapproval for the following reasons:\n1. It is inconsistent with the philosophy, goals and objectives of the HSP [Health Systems Plan]. The philosophy of the HSP in regard to mental health services is that they be deinstitutionalized and provided throughout the area by community hospitals and community mental health centers. This application is specifically inconsistent with Goal #2, Objective #2 of the Adult Mental Health Section which calls for the development of short term psychiatric beds in local hospitals, especially in the Lenoir, Onslow, Roanoke-Chowan, Pitt and Albemarle catchment areas. This application proposes to take 63% of the psychiatric beds available to all of NC HSA VI and would preclude development in the other high priority areas. (Criteria #1)\n2. There are alternative, less costly means of providing the proposed health service, specifically community hospitals. (Criteria #5)\n3. The applicant does not have sufficient support from existing health and social service providers in the area to be served by the facility to assure necessary or appropriate referral, back-up and support services. (Criteria #8) (emphasis original)\nOn 13 June 1983, pursuant to 10 NCAC 3R .0309(c) (1983), Heffner again requested additional information from Charter, responses and answers to which were received on 28 June 1983. Based upon Heffner\u2019s review, and in consideration of the recommendation of E.C.H.S.A., the CON Section subsequently determined that Charter\u2019s proposal \u201cdid not conform to applicable plans, standards, and criteria\u201d and, by letter of 28 July 1983, notified Charter that its application was not approved. Charter thereafter requested, and was granted, a contested case hearing.\nPitt County Memorial Hospital, a hospital located in Green-ville which currently provides psychiatric bed facilities and plans to expand its existing facilities, and Community Hospital of Rocky Mount, a hospital located in Rocky Mount with plans to construct psychiatric beds, were granted leave to intervene in the contested case hearing. After receiving voluminous evidence, the Hearing Officer issued a Proposal for Decision recommending disapproval of Charter\u2019s application, concluding that Charter\u2019s proposed project failed to conform with applicable criteria, standards and plans in the areas of adequate support from the health care community, bed need, and duplication of facilities and services. The proposed decision was adopted as the final decision of the Division of Facility Services, DHR, by I. 0. Wilkerson, Director, on 24 August 1984.\nCharter petitioned for judicial review of the decision in Wake County Superior Court pursuant to Chapter 150A of the General Statutes. Charter appeals from a judgment affirming the final agency decision.\nAttorney General Lacy H. Thornburg, by Assistant Attorney General Barbara P. Riley, for respondent appellee North Carolina Department of Human Resources.\nSanford, Adams, McCullough & Beard, by Hern\u00e1n R. Clark and Renee J. Montgomery; and King & Spalding, by Richard L. Shackelford, for petitioner appellant.\nHollowell & Silverstein, P.A., by Edward E. Hollowell and Robert L. Wilson, Jr.; and James T. Cheatham, P.A., by James T. Cheatham, for intervenor appellee Pitt County Memorial Hospital, Inc.\nPoyner & Spruill, by J. Phil Carlton and Susan K. Nichols, for intervenor appellee Community Hospital of Rocky Mount." }, "file_name": "0161-01", "first_page_order": 189, "last_page_order": 207 }